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Rising tensions in the Middle East and global economic concerns sent gold prices to 14-month highs this week.
"Gold hit its highest since April last year on Friday as intensifying political concerns in the Middle East and weak economic data from China and the United States ... Prices have risen 1.1% so far this week, keeping the metal on track for its fourth consecutive weekly gain... 'In people's minds there is a sense of a deeply darkening macroeconomic backdrop, in particular the likelihood that the U.S. will drop interest rate quite soon,' said Ross Norman, chief executive at bullion dealer Sharps Pixley.
"Investors are getting ahead of the curve by buying gold in expectation that the U.S. Federal Reserve will have to reverse its previous tightening policy, by extension pressuring the dollar and lifting gold, Norman said. China's industrial output growth slowed to a more than 17-year low of 5% in May, the latest sign of weakening demand in the world's second-largest economy as the U.S. ramped up trade pressure... 'Gold is set to shine as investors sprint to safe-haven assets,' Lukman Otunuga, research analyst at FXTM, said in a note. 'Gold bulls are in the driver's seat...'" ("Gold hits 14-month high on growth woes, Middle East tensions," Reuters, 6/14/19; emphasis added.)
Gold ended the week at $1,342.10/oz. Silver closed at $14.94/oz.
Speaking to Bloomberg News, Paul Tudor Jones, the billionaire fund manager for Tudor Investment Corp., said gold is the best trade for the next 12 to 24 months.
"I'm a macro trader ... so for me one of the best trades is going to be gold. If I had to pick my favorite trade for the next twelve to twenty-four months it would probably be gold... I think if gold goes to $1400 it goes to $1700 rather quickly. It has everything going for it in a world of rates that are conceivably going down in the United States going to zero, it has everything going for it.
"Remember, we've had 75 years of expanding globalization and trade. We've built the machine around the belief that this is the way the world is going to be. Now all of a sudden it's stopped and we're reversing that. When you break something like that, the consequences may not be seen right away - it would be seen one year, two years, three years later. That would make one think that it's possible we go into a recession; it would make one think that rates in the United States go back down to the zero bound level and of course in that situation gold is going to scream..." ("Gold Is Paul Tudor Jones's Favorite Trade for Next 12-24 Months," Bloomberg, 6/12/19; emphasis added.)
Bank of America Merrill Lynch believes gold prices will move above $1400 this year, fueled by the trade war with China.
"Gold could be one of the big winners as the trade war between the U.S. and China continues to escalate with no end in sight, according to one American bank. Analysts at Bank of America Merrill Lynch reiterated their call that gold prices could push through $1,400 an ounce this year as geopolitical and trade uncertainty weighs on global economic growth.
"Although the U.S. economy is faring better compared to China in the trade war, the analysts noted that the more prolonged it becomes, the bigger the toll it will take. At the start of the month, BoAML downgraded its U.S. growth forecast for the year ... This is the second downgrade the bank has made on the U.S. economy; the analysts noting that trade tensions are expected to get worse before they get better...
"The analysts added that with Congress now gridlocked, they are not expecting government fiscal policies to provide support for a weakening economy...In the current environment, the analysts said that low-risk assets, like gold and U.S. Treasuries, perform well. The comment comes as gold prices hold on to most of their recent gains after seeing their best one-week performance in more than a year." ("Gold Wins With No End In Sight To U.S-China Trade War - Bank of America," Kitco, 6/12/19; emphasis added.)
In an interview with Reuters, Spartan Capital chief market strategist Peter Cardillo explained by gold may rise to $1400 by the end of this Summer.
"There are other problems out there and I think the big problem that the market is worried about is are we headed to a real economic slowdown in economic growth possibly even a recession in 2020...
"[Gold] has made some pretty good progress in the last month or so and my position remains that every portfolio should have some allocation into hard assets especially gold. And so with all of these problems that are out there, both geopolitical and, of course, the trade war, I think we can probably work our way higher there. We need to take out some technical levels ... that $1350 level needs to be penetrated on the upside and if that it happens I think we can be looking at $1375 to $1400 by the end of the Summer." (Gold could hit $1400 - Cardillo," Reuters, 6/12/19/; emphasis added)
CNBC reported that so-called "Bond King" Jeffrey Gundlach is going long on gold as he forecasts a weaker dollar and a growing risk of recession.
"DoubleLine CEO Jeffrey Gundlach is betting on gold. 'I am certainly long gold,' Gundlach said in an investor webcast Thursday. He added his trade is based on the expectation that the dollar will finish the year lower. When the dollar weakens, gold tends to appreciate as it becomes cheaper for investors holding other currencies...
"Gold prices hit a three-month high this month as investors flee to the safe-haven bullion amid escalated trade tensions. Meanwhile the dollar fell to a 11-week low on Wednesday as the market increasingly bet on a rate cut in the coming months...
"Gundlach now sees a 40% to 45% chance of a recession within six months, and a 65% chance in the next year. He pointed to several indicators that are flashing red lights, including the spread between consumer confidence expectations and current conditions, which is near all-time lows.
"The money manager also sounded an alarm on the 'soaring' U.S. deficit, which could get 'much, much worse in the next recession.' He noted that despite the low rates, U.S. debt interest as a percentage of GDP is expected to hit a record. Gundlach, a respected markets forecaster, oversees $130 billion of assets under management..." ("'Bond King' Jeffrey Gundlach bets on gold, sees rising recession chances, dollar decline," CNBC, 6/13/14; emphasis added.)
Kitco Commentator and technical analyst Clive Maund explained that gold is set to break through $1400 and begin a new bull market.
"It is measure of how fragile and precarious the situation is that the moment the markets looked like they were on the verge of crashing again, which of course they were, the Fed moved to head it off by saying that they would start cutting rates. How things change as it was only late last year that they were talking about raising rates three or four times this year. Basically what has happened is that they have lost control - they don't control the markets, the markets control them...
"This talk about cutting rates and the actual cutting of rates going forward is too little too late-the effects of the earlier higher rates against a background of massive debts and of the trade war are working their way through the system, are a destructive juggernaut that will not be stopped by tinkering around with already very low interest rates...
"Thus, a key point for us to appreciate here is that a new rate reduction program by the Fed will cause the dollar to drop hard... The Fed can't have its cake and eat it too-if it wants to go ahead and drop rates to rescue the stock market, fine, then the dollar will tank, and the stock market too into the bargain because a lot of overseas investors facing currency losses will pull their funds from the US.
"This is why gold is strong now and why it is soon going to break above $1400 into a major new bull market, and this is why we will be concentrating more and more on the still very undervalued precious metals sector going forward." ("Fed to Tank Dollar - And Will Not Save the Stock Market," Kitco, 6/10/19.)
U.S. Global Investors CEO and Chief Investment Officer Frank Holmes told investors they need to "trust in gold."
"Americans' trust in institutions, from the federal government to banks to the news media, has been deteriorating for decades. Sixty years ago, three quarters of Americans expressed faith in the government to do the right thing "most of the time" or "just about always." Today, only one in five people, a near-record low, believes our leaders make decisions in the country's best interest...
"As an investor, I continue to have great faith in gold as a store of value during times of economic and geopolitical uncertainty. It's behaved precisely as I expect it to. In response to heightened global trade concerns and weakening economic indicators, investors have piled into the yellow metal, pushing its price up for a remarkable eight straight days as of last Friday. We haven't seen such a winning streak since June 2014, when gold traded up for 10 straight days. Late last week, it was within striking distance of its 2019 high of about $1,356 an ounce, which should spur even more investors to get off the sidelines and participate..." ("Put Your Trust in Gold, U.S. Global Investors Frank Talk, 6/10/19.)