Gold and Silver Prices
Gold remained well above the critical $1200 mark on Friday even after a drop due to profit taking. Gold prices have enjoyed a 12% gain in the past 30 days alone as investors rush to acquire the safe haven asset.
“Even the combined brains of the biggest gold dealers, refiners and investment bankers failed to imagine just how much the precious metal would soar this year.
Two months into 2016, prices have surged past three-quarters of the peak forecasts in a mid-January survey by the London Bullion Market Association, whose members operate in the largest spot market for the metal. Gold has outperformed every commodity this year, as well as most equity and bond markets, after falling for three straight years.
“Investors have been pouring into the precious metal in search of a haven as global equity markets tumbled and expectations for increases in U.S. interest rates were reined in… ‘I have been a mega-bear, but for me this is a change in trend,’ Georgette Boele, an ABN Amro Bank NV strategist in Amsterdam, said by e-mail Thursday. ‘Our forecasts are under review….’ (“Even Gold Bulls Underestimated 2016 Gain Now Topping Most Assets,” Bloomberg, 2/12/16.)
Gold ended the week up $64.40, closing at $1,238.90. Silver prices closed at $15.85, up $0.74.
Gold Bear Tells CNBC He Now Likes Gold
Options trader Dennis Davitt, a long time gold bear, now believes gold is an important hedge in today’s turbulent markets.
“Gold is gaining the favor of some long-time skeptics. The precious metal has outperformed other major asset classes this year, rising 12 percent in 2016. Gold has become increasingly useful to investors as stocks around the world have fallen, said options trader Dennis Davitt of Harvest Volatility Advisors.
“’If you're worried about your equity portfolio going lower, you buy gold as a hedge. If you did that January 1st this year, it's worked wonderfully,’ he said Tuesday on CNBC's ‘Power Lunch.’
“The commodity is looking even more attractive in the face of negative interest rates, Davitt said, especially as Treasury yields tumble. Under ultra-low or negative interest rates, holding cash in a bank should cost investors more money, Davitt noted. Despite the fact that gold also costs money to store, Davitt said it should still make a better investment than cash in these circumstances.
“’One of the assets that I never liked for my whole trading career was gold… But now ... if you have to pay money to store your assets somewhere, I'd rather store a hard asset like gold than something like paper currency.’” (“I’ve never liked gold—but I do now: Trader,” CNBC 2/10/16.)
Gold Prices May Double Soon – NDTV
India’s news channel, NDTV, reported that a veteran technical analyst believes gold prices may double due to a weaker U.S. dollar.
“Prices of the yellow metal have been rising steadily in global markets… Veteran technician Sushil Kedia says gold prices may correct to their recent support of $1,030-$1,040 an ounce, but he expects gold prices to almost double past $2,000 an ounce eventually.
“’Gold is a super asset and a super currency... In a panic case, the spike in gold can be faster," he said. Mr Kedia's bullish call on gold is a ‘brave’ one, considering the precious metal has logged losses for three consecutive years. But many other analysts are increasingly turning optimistic on gold.
“Sanjiv Bhasin, executive vice president (markets & corporate affairs) at domestic brokerage IIFL says weak oil prices, China slowdown and currency woes are factors that will help gold… Globally, analysts are betting on higher gold prices because of the increasingly dovish trend by global central banks. ‘We prefer gold,’ Lachlan Shaw of UBS told Reuters.” (“Gold Prices Have Hit Bottom, May Double Soon: Analysts,” NDTV, 2/8/16.)
Gold Rally Is “Real Deal” – Holmes
U.S. Global Investors CEO Frank Holmes penned a commentary setting forth the reasons why gold’s bull market has returned.
“[A] after posting three straight years of losses, [gold] looks ready to shake off this trend. Not only is the metal trading at seven-month highs, it’s also on course for its longest winning streak since the glory days of 2011. What’s more, it’s broken clean through its 200-day moving average, a key indicator of growth…
“In a recent report, HSBC suggests that we could be in the early stages of a new gold bull market, one that will ‘probably’ usher the yellow metal back up to at least $1,500. This ‘forthcoming market,” says the bank, ‘has the potential eventually to exceed the speculative frenzy seen in 2011.’
“Historically, gold has had a very low correlation with stocks, meaning that in times of equity pullbacks, the metal has tended to hold its value well. We’re seeing this unfold right now…
“2015 was a red-letter year for demand… In 2015, and so far in 2016, sales of gold coins in both the U.S. and Europe have been nothing short of breathtaking… I always say to follow the money, and right now American money managers and hedge funds are increasing their bets that gold prices will continue to climb…
“In December, the Federal Reserve bumped up interest rates 0.25 percent, the first time it had done so in nearly a decade. But that doesn’t mean it can’t reverse course, and there’s growing speculation that rates could be dropped below zero into negative territory… In a world where you’re charged interest to put your cash into government bonds, holding gold as a store of value suddenly becomes much more attractive. I’ve discussed many times in the past that the yellow metal shares an inverse relationship with real interest rates, which is what you get when you subtract inflation from the federal funds rate. Negative nominal rates in the U.S. might seem like a far-fetched idea, but the Fed has already hinted that banks should prepare for such monetary policy… It would be prudent for investors to do the same.” (“3 Reasons Why this Gold Rally Is the Real Deal,” Kitco, 2/11/16.)
Fundamentals Could Send Silver to Triple Digits
A panel of experts see a bright future for silver including forecasts of triple digit prices.
“Currently bullish on silver, analysts are saying the possibility of triple-digit prices for the grey metal is not beyond the realm of possibility. A panel of experts in the silver industry recently came together in Vancouver to discuss the prospects for the precious metal, sketching a somewhat positive outlook as underinvestment and growing industrial uses kept demand growing at a steady pace, while sagging base metals prices were removing secondary silver production from the market.
“Silver supplies were expected to decline as several base metal mines, responsible for producing about 75% of silver worldwide as a by-product, were being put on care and maintenance in anticipation of higher prices…
“Pan American Silver chairperson Ross Beaty described silver as being somewhat schizophrenic, because it was seen as both an industrial metal as well as a precious metal… ‘Demand for silver just keeps growing and, coupled with a turnaround in markets, [this] bodes well for the metal…’
“Trading at about 72% below its all-time high of $48.70/oz, panellists believed that silver had recently possibly put in its bottom at $13.58/oz. ‘We are past the bottom – the demand for silver is spectacular. India is a strong driver,’ said Hecla’s Baker.
“’If you look at the fundamentals, I believe in triple-digit numbers. We are consuming more silver than ever and neither Wall Street nor Bay Street has woken up to this fact,’ said Neumeyer.
“Cyclical analyst Bo Polny agreed, and saw a crash of the century taking place on October 2. This would not be a stock market crash, but a significant geopolitical event that would spell the end of fiat currencies and send gold and silver prices to record highs – triple digits, in the case of silver, before the year is out.” (“Triple digits forecast for silver as supply tightens,” Mining Weekly, 2/6/16.)