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Gold and Silver Prices
Gold entered the New Year with a roar. Despite a drop on Friday, gold is on track to end the week above $1100 per ounce.
“Gold prices fell Friday after monthly U.S. payroll data showed surprisingly strong job gains, signaling continued improvement in the economy that could undercut the appeal of safe-haven investments… The $30 billion gold market got off to a strong start to the year, gaining more than 4% in the first days of 2016 amid a volatile mix of weak global economic signals, particularly from China, and geopolitical instability in the Middle East and North Korea. The gains burnished gold’s traditional role in the market as a defensive investment in times of turbulence.” (“Gold Down on Stronger Dollar,” 1/8/16.)
Gold ended the week up $43.60, closing at $1,105.60. Silver prices closed at $14.03, up $0.10.
Time to Buy Low; Gold to $2500 – Barisheff
Nick Barisheff, CEO of Toronto’s Bullion Management Group, told attendees of the Empire Club of Canada Annual Investment Outlook Luncheon why he believes gold will rise to $2500 in the near future.
“The market outlook for 2016 presents significant challenges and opportunities that we have not seen for 40 years. Since I began work on creating our first bullion fund in 1998, I have generally restricted my commentary to using precious metals for strategic portfolio allocation. Everyone agrees that investment portfolios should be diversified. Since gold is the most non-correlated asset class to traditional financial assets it provides important portfolio diversification. A strategic allocation of at least 10 percent reduces portfolio risk and improves returns over the long term…
“The "Buy Low" opportunity exists because gold has been in a cyclical correction for 3 years, and seems to have formed a bottom. Gold's strong fundamentals point to a bright future; and of course gold has always protected portfolios during market declines…
“Finally, to reinforce the "Buy Low" opportunity, a comparison to the cyclical gold correction from 1974 to 1976 and the subsequent price rise serves as a good example.
“At that time, after a 445% rise from 1971 gold declined 45%, gold sentiment was at record lows, and the media was full of negative gold commentary, as it is today. On March 26, 1976, the New York Times stated: ‘For the moment at least, the gold party seems to be over…’ After two years of declines, many investors sold their gold holdings and vowed never to invest in gold again. However, in the fall of 1976, gold began an ascent that saw it rise 750 percent, peaking at $850 an ounce three years and four months later. After a 3-year correction, the same opportunity to buy low exists today, just as it did in 1976…
“A lock-step relationship has existed between gold and U.S. debt for most of U.S. history. If the US debt continues to increase at the same rate as the last ten years, then it will reach $26 trillion by 2020. This is a good indicator for a gold price of at least $2,500 per ounce in the near future.” (“A Tactical Opportunity: Sell High, Buy Low,” Gold-Eagle, 1/8/16.)
Capital Economics Offers Three Reasons to Be Bullish on Silver
“After having struggled throughout 2015, and losing over 12% on the year, Capital Economics’ commodities economist listed reasons to be positive silver this year, so much so that it may even top gold.
“’While we acknowledge that U.S. monetary policy and the dollar will play a central role in determining the direction of prices, we expect silver to stage a partial recovery this year, outperforming gold slightly, for three key reasons,’ said Simona Gambarini in a research note Friday.
“For one, the analysts said that they expect gold prices to recover to $1,250 by year end, which would support silver prices as well… ’Second, after years of low prices, we expect cuts to capital expenditure across the industrial and precious metal industries to start taking their toll on silver supply, with output expected to fall by 3% in 2016…’
“Finally… a recovery in key consuming nations’ economies should revive demand for silver in industrial applications, particularly electronics… ‘we anticipate a much stronger outperformance of silver in 2017, with prices reaching $18 (from around $14 currently). This should bring the gold/silver ratio below 70…’ Despite this upbeat forecast, Gambarini said she remains cautious in that a sustained recovery in silver prices should only occur when sentiment towards emerging markets and industrial metals rebounds.” (“Three Reasons To Be Bullish Silver, May Outperform Gold in 2016: Capital Economics,” Kitco, 1/8/16.)
World Economy Facing Another 2008 Financial Crisis – Soros
Billionaire George Soros, who famously earned more than $1 billion betting against the British pound, warned the current global economy is facing a crisis similar to the 2008 crisis which lead to the Great Recession.
“Global markets are facing a crisis and investors need to be very cautious, billionaire George Soros told an economic forum in Sri Lanka on Thursday. China is struggling to find a new growth model and its currency devaluation is transferring problems to the rest of the world, Soros said in Colombo. A return to positive interest rates is a challenge for the developing world, he said, adding that the current environment has similarities to 2008.
“Global currency, stock and commodity markets are under fire in the first week of the new year, with a sinking yuan adding to concern about the strength of China’s economy as it shifts away from investment and manufacturing toward consumption and services. Almost $2.5 trillion was wiped from the value of global equities this year through Wednesday, and losses deepened in Asia on Thursday as a plunge in Chinese equities halted trade for the rest of the day.
“’China has a major adjustment problem,’ Soros said. ‘I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008.’” (“George Soros Sees Crisis in Global Markets That Echoes 2008,” Bloomberg, 1/6/15.)
World Bank Cuts 2016 Growth Forecast
“The World Bank slashed its growth forecast for the global economy in 2016 on Wednesday, citing ‘disappointing’ growth in major emerging-market economies like China and Brazil. The bank cut its June forecast for global economic expansion in 2016 by 0.4 percentage point to 2.9 percent, though that is still faster than 2015's sluggish 2.4 percent.
"’Simultaneous weakness in most major emerging markets is a concern for achieving the goals of poverty reduction and shared prosperity because those countries have been powerful contributors to global growth for the past decade,’ the World Bank said…
“Risks to the outlook included financial stress linked to the US Federal Reserve's launch in December of an interest rate hiking cycle, and heightened geopolitical tensions, the Bank said in its Global Economic Prospects report. ‘The simultaneous slowing of four of the largest emerging markets -- Brazil, Russia, China, and South Africa -- poses the risk of spillover effects for the rest of the world economy…’
“’Global growth in 2016 will be disappointing and patchy,’ IMF Managing Director Christine Lagarde warned in late December. ‘And the medium-term outlook has clouded over, too, because low productivity, aging populations and the fallout from the global financial crisis are putting the brakes on growth.’” (“World Bank lowers 2016 global economic growth forecast,” Yahoo! News, 1/6/16.)