Gold prices continued to see strong safe haven support in the aftermath of the UK’s Brexit vote to leave the EU while silver breached $19 for the first time since 2014.
“Gold rose 1 percent on Friday and was heading for its fifth weekly gain, supported by a weaker dollar and prospects for further monetary policy easing in the wake of Britain's vote to leave the European Union… The metal gained 8.8 percent in June, its biggest monthly rise since February.
“Gold's strength benefited silver, which breached the $19 an ounce level on Friday for the first time since September 2014. It rose as much as 3.8 percent to $19.40 and traded 2.6 percent higher at $19.18. Silver was on track for its best week since August 2013 having gained more than 8 percent so far. ‘For gold, the initial reaction was safe-haven demand due to the uncertain political situation in Europe, but then the latest move might be more of a reaction to comments from central banks that they are moving to an easing bias,’ Danske Bank senior analyst Jens Pedersen said….” (“Gold heads for fifth week of gains and silver jumps,” Reuters, 7/1/16.)
Gold ended the week up $26.30, closing at $1,342.90. Silver prices closed at $19.86, up $2.04.
Brexit May Be Start of Gold Bull Market – CNBC
CNBC reported that the UK’s decision to exit the EU may signal the beginning of a major bull market.
“Gold may stand at the start of a major bull market should the U.K.’s Brexit vote prove to be a forerunner of greater political and financial instability around the world, according to Evolution Mining Ltd.’s Jake Klein, a veteran of more than 20 years in the industry.
“With the rise in uncertainty, investors are coming back to the market, the executive chairman of Australia’s second-biggest producer said in an interview with Bloomberg Television. “It is an alternate currency, it’s performed that role” as a haven for over 2,000 years, he said. Gold has soared after the U.K.’s vote last week to quit the European Union as investors seek a haven from financial turmoil and contemplate the possible implications…
“Banks have also been raising their forecasts for bullion. Morgan Stanley boosted its 2016 outlook by 8 percent and 2017 view 13 percent, according to a report received on Tuesday. Goldman Sachs Group Inc. increased its three-, six- and 12-month targets by $100, citing flight-to-safety sentiment. Not everyone is convinced that bullion will prove to be the best bet. Veteran investor Jim Rogers told Bloomberg on Monday he’d rather seek haven in the dollar than gold, given that bullion had already rallied in 2016 before the vote…
““Uncertainty and political instability is not something that I’m personally in favor of,’ said Klein. ‘But from a gold investor perspective and a shareholder of Evolution perspective, it’s certainly been very positive.’” (“Gold Veteran Says Brexit May Be Start of ‘Major Bull Market’,” CNBC, 6/27/16.)
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$1500 Gold, Higher Silver By Early 2017 - Credit Suisse
Banking giant Credit Suisse revised its forecast for gold, now targeting $1500 by early 2017 based upon significant political uncertainty and increased gold demand.
“According to CS, gold and silver are now its top picks in the metals space: 'gold forecast to peak at $1,500/oz in Q1/17: We raise our gold price forecast by 8% in H2/16 to $1,413/oz and 10% in 2017 to $1,450/oz on prolonged macro and political uncertainty following the Brexit vote. We see an extended timeframe for a negative real rate environment in the US and abroad and continued gold buying by central banks and consumers to diversify wealth. Our silver price forecast increases by 12%, to $18.75/oz, in H2/16 and by 15%, to $19.03/oz, in 2017, following gold.’
“’A common argument we hear from gold participants is that gold is currently benefitting from a fear trade on Brexit, and that may indeed be the case. But we think this recent fear trade leads to something more enduring (similar to the 1Q-16 catalyst of China weakness and global implications). We forecast the gold price to increase through 2016 and believe the $1,500/oz mark could be tested by late 2016 or early 2017 as the macro implications of the Brexit vote are clarified, and the 8 November US election weighs on sentiment. Even before the Brexit vote, we saw positive price drivers: a strong chance of additional QE from the Eurozone, a 12-18 month period of negative real rates in the US and continued wealth diversification globally from central banks and consumers given the uncertain macro environment..
“’ Based on our multi-factor regression model, we have made upward revisions to our silver price outlook of 6% to 15% throughout our forecast period, primarily reflecting a stronger gold price forecast and lower expectations for mine supply growth. Most significantly, our LT price moves to $20/oz from our previous $17.9/oz….’” (“Credit Suisse Raises Gold, Silver Price Targets To $1,500; $18.75, Sees ‘Significant Physical Deficit’,” Zero Hedge, 6/30/16.)
Gold is Best Hedge – Forbes
A Forbes commentary explained why gold is a timely investment in light of the current global economic uncertainty.
“Looking at the global economy today, you can’t help but notice several worrying developments. On the one hand, we have currency devaluations and negative interest rate policies: on the other, slow-to-no economic growth in both developed and developing economies. Even experienced investors don’t know what to make of today’s financial markets.
“Given the ongoing turmoil and the potential fallout, where is your money safe? Here’s what investment legends James Grant and Grant Williams WMB +2.00% had to say at John Mauldin’s Strategic Investment Conference last month…
“Raising cash and reducing your exposure to volatile financial markets in turbulent times obviously make sense. The key, of course, is finding a safe, profitable investment opportunity to deploy your cash. The founder of Grant’s Interest Rate Observer believes gold may be that investment. In the interview, he went on to say, “Gold isn’t so much a hedge against Armageddon… as it is against monetary shenanigans.” He also noted he expects gold to continue moving up: “When the economic establishment encourages the idea that gold is ‘good for nothing,’ it’s almost always a good time to buy [gold].”
“History says that paper-based currencies will eventually fail. The clock is clearly ticking on the dollar. It has now been 45 years since the US dollar became a completely paper-based currency. Gold, on the other hand, has been a preferred medium of global exchange for over 5,000 years. That makes gold the ultimate hedge against monetary collapse. Despite its long-term record of stability, gold as an asset class still makes up less than 1% of the average investment portfolio. Negative sentiment from the public and media is a key reason why gold continues to be under owned and mispriced…
“Things will go bad when the general public finally realizes that global central bankers have lost control. When this happens, we will end up with either a sharp breakdown in financial markets or a slow-rolling panic. Either way, the price of gold will soar….” (“Loading Up On Cash And Gold Is The Only Way Out Of This,” Forbes, 6/28/16.)