"Epic" Gold Market is Staring

Release Date:  Friday, June 21, 2019
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Gold Tops $1400 This Week

Gold prices topped $1400 as the Fed signaled lower interest rates. This key resistance level hasn't been breached since 2013.

"Gold is back in favor. Prices have galloped this month, passing $1,400 an ounce for the first time since 2013. It's become easy to find reasons to be bullish. Everything from dovish central banks, technical indicators, negative-yielding bonds and fears of a military strike between the U.S. and Iran are all working in favor of higher bullion prices. 'There has been a dramatic change in sentiment,' said Adrian Day, president of Annapolis, Maryland-based Adrian Day Asset Management...

"Why gold has turned bullish?

The Federal Reserve opened the door to reducing interest rates this week, leading to a slump in the dollar. Central banks in Europe and Australia also shifted the tone to easy policy ahead.

More bond yields are turning negative, meaning there's greater appeal in gold over other assets.

  • Geopolitical tensions are heating up. The U.S. called off military strikes against Iran on Thursday night that were approved by President Donald Trump.
  • Money is pouring into the market. Exchange-traded funds backed by gold have seen inflows jump since late May.
  • Central banks including Russia and China have been on a gold buying spree."

("Gold Posts Best Week in Three Years, With Price Near $1,400," Bloomberg, 6/21/19.)

Gold ended the week at $1,400.00/oz. Silver closed at $15.42/oz.

"Epic" Gold Market is Staring - Durden

Efficient-markets analyst Tyler Durden identified a number of factors which will send gold prices to new record highs.

"An epic gold bull market is on the menu for 2019. I'm not talking about a garden-variety cyclical gold bull market, but rather one of the biggest gold manias in history. This gold mania will be riding the wave of an incredibly powerful trend... the re-monetization of gold.

The last time the international monetary system experienced a paradigm shift of this magnitude was in 1971. Then, the dollar price of gold skyrocketed over 2,300%. It shot from $35 per ounce to a high of $850 in 1980.
When you take a step back and look at the big picture, the implications for gold are clear:

  • Basel III moves gold toward officially being money again.
  • Central banks are buying record amounts of gold.
  • Excessive U.S. sanctions have pushed countries to use gold.
  • China's "Golden Alternative" allows for large-scale, oil-for-gold trades.
  • The Fed's dramatic reversal and the return of easy money bode well for gold's strength against the dollar.
  • The takeover frenzy in the gold mining industry is bullish for the price of gold.
  • President Trump favors returning to the gold standard and is stacking the Fed with pro-gold people.
  • The Democrats' embrace of socialism guarantees more currency debasement.
  • Gold-backed cryptos make owning and using gold easier than ever.

Any one of these catalysts alone would be great news for gold.

But the fact they are all converging at the same time means an epic gold bull market is on the menu for 2019. And the time to get positioned is now..." ("8 Reasons A Huge Gold-Mania Is About To Begin," Zerohedge, 6/19/19; original emphasis.)

"Monster" Run May Send Gold Prices to $1600 - Citi

"Gold has been on a monster run since the Federal Reserve hinted Wednesday that it could cut interest rates in the coming months. As gold is seen as a defensive play, while it doesn't pay a dividend or interest, it's more appealing as an alternative lower-risk asset to hold when interest rates are low and investors are turned off by bonds.

"That brings us to our call of the day from Citigroup analysts who say this 'bullish gold fever is justified,' and say the metal could reach between $1,500 to $1,600 an ounce in the next 12 months, and $1,500 by end-2019 in the most optimistic of their new predictions for the metal.

"Here's what needs to happen: monetary policy expectations hit the zero lower bound level — when central banks cut interest rates to zero and have to find other ways to stimulate the economy — financial markets start pricing in expectations of more quantitative easing by those banks, and real U.S. interest rates sink into negative territory, says a team of analysts led by Aakash Doshi. The analysts are generally upbeat on gold, which they see supported by worries about the global economy and trade and possible equity downturns..." ("Gold's monster run could reach $1,600, say Citi analysts," 6/21/19.)

Gold Above $1500 Within 12 Months - ANZ

Multinational banking and financial services company ANZ believes gold may rise above $1500 within the next twelve months fueled by several key factors.

"ANZ analysts point out that gold has benefitted from its safe haven status amid deteriorating macroeconomic outlook and see prices settling above USD1,400/oz, with a reasonable chance of breaking USD1,500/oz over the next 12 months... 'A macro backdrop is emerging that will see gold prices remaining resilient. With the Fed ending its hike cycle and turning dovish with signals of rate cuts, the backdrop is turning supportive in 2H and beyond. A likely rate cut amid slowing economic growth will limit the upside in the US dollar and also lower the opportunity cost for holding non-yielding assets like gold.

"'Further, renewed trade tension has started affecting business sentiment and this will have a negative implication on corporate earnings. Such a backdrop can bring equity market volatility back, and a lower correlation of gold serves as a perfect risk diversifier to limit the portfolio losses. Supply-demand fundamentals are turning supportive as well with slowing mine-supply growth and improving physical take-off... ("Gold: Time to shine - ANZ," FXStreet, 6/21/19; emphasis added.)

Gold Train is Leaving the Station  - Sharps Pixley

Sharps Pixley, a part of Europe's largest gold dealer, advised investors that gold is preparing for significantly higher gains as it nears record prices in many major currencies.

"A wealthy Turkish client of Sharps Pixley recently recounted how financial crises evolve first hand - initially there is deteriorating market news, coupled with rising prices as the local currency falls; a sense of indignation and disbelief sets in.

As thing start to spiral one's mind turns to wealth protection and the option to move savings into gold. Hell, gold is already at an all-time high in Turkish Lira terms - gold has anticipated things and moved ahead of events in a stealth rally. He decides to hold off - who would buy at a record high ... and then things worsen and correspondingly gold accelerates away. The train has left the station and he is locked into watching his savings and other assets dissolve as inflation soared to over 20% ... and gold in Lira goes through the roof.

Much as we all like to think of ourselves as individuals ... our behaviours are all remarkably consistent ... the notion of us being frogs in warming water when trouble abounds, holds true.

Market observers have hitherto condemned gold for a lacklustre performance over the last few years, seemingly oblivious to the headwinds it has faced from a strong US dollar and a few other factors. That is to say simply that the US dollar price has not fared too well - yet in 72 currencies gold is now at or at least within a few percentage points of being at an all time high. We seem to forget that US citizens represent only 4% of the planet's population.

Perhaps most significantly, gold is only 2.5% from a record high in Indian rupee terms. This deeply important and highly price sensitive market should perhaps be the most keenly observed barometer of gold sentiment. Indians are canny - in gold, they are the 'smart money'...

And then there is Central Banking gold acquisition which is running at the fastest rate since 1967 - what do they know, that you don't ? It is our view that the whistle is blowing and the gold train is leaving the station ... are you on board because it is certainly not turning back for you." ("The Gold Train Is Leaving The Station," Sharps Pixley, 6/21/19; emphasis added.)

Gold Better Performer than $12 Trillion of Other Assets - Forexlive

Forelive wrote that gold is currently outperforming $12 trillion worth of bonds paying zero or negative rates, signally a major breakout for gold.

 "The main reason that assets are great to have is yield. If you own shares of something, you own a part of that company and it often pays a dividend. Returns are at the core of capital markets... Now here we are in a situation where bonds yield as little (or sometimes less) than gold. There are $12 trillion in bonds that pay no yield. Germany pays negative 32 basis points. This week France, Austria and Sweden hit zero.

"If the choice is between gold or a bond that yields 5%, that's one thing but the balance changes when it's gold versus something that yields nothing. Add on the chance of more QE, a currency war or a real war and gold looks better and better. It's not going to be a straight line but we're back in an easing cycle. The last easing cycle ended with gold at $1900. If central bank easing unfolds as expected, we will get back there. If there's a recession or war, it will go even higher..." ("Gold has a better yield than $12 trillion in assets (and other reasons to buy it)," Forelive, 6/20/19.)

Gold and Silver Volcano Ready to Erupt -

Silver is Bargain of the Century - Commodity TradeMantra

The financial website commodity trademantra.com wrote that silver's current prices offer the "bargain of the century."

"Silver is currently trading around $14.84 an ounce. This is around 30% of its 1980 all-time high of $50. However, this is an incomplete representation of what silver is really trading at, relative to US dollars. When you look at the silver price, relative to US currency (the amount of actual US dollars) in existence, then it is at its lowest value it has ever been ...

"Also, it is ridiculous that one ounce of silver cost $50 in 1980 when there were about 132 billion dollars in existence, whereas today it is only $14.84 at a time when there are 3 304 billion dollars in existence ... So, in terms of US dollars in existence, silver is trading at 1.24% (14.84/1193) of its 1980 high - it is the bargain of the century...

"Currently silver priced in the Dow is close to all-time lows. Economic conditions has been favourable to paper and debt-based assets. The bullish wedge is an indication that all this is about to change... Higher silver prices and declining stock prices will virtually guarantee (or represent) major economic pain over the coming years... A breakout of the current pattern will likely set off a massive multi-year silver rally." ("Buying Silver now is like Buying Silver back in 2003 - The bargain of the Century," Commodity Trademantra.com, 6/19/19.)