Gold prices fell on Friday to end the week lower as investors locked in profits and considered riskier assets.
“Gold prices dropped Friday amid profit-taking and a higher risk appetite in the stock markets… The precious metal fell to a three-week low in the past week, as investor concerns over the state of the global economy have abated… Traders will be watching the release of the Federal Reserve’s policy statement next week after its July meeting. Expectations for a rate increase in September have grown since the release of strong U.S. home-building data this week, which showed that new home construction rose 4.8% in June from the previous month….” (“Gold Prices Fall on Profit-Taking,” WSJ, 7/22/16.)
Gold ended the week down $43.30, closing at $1,323.10. Silver prices closed at $19.69, down $0.61.
Gold Could Rise 500% In Repeat Of 70s’ Bull Market – TheStreet
TheStreet wrote that today’s economic climate is similar to the 70s’ gold bull market which saw gold rise dramatically.
“One doesn't have to be gold bug, think that a financial apocalypse is around the corner or know that predicting anything will increase 500% in value sounds a little crazy to think that history suggests that the precious metal's price could soar…
“Due to double-digit inflation, a weak dollar, political instability and an oil crisis, investors in the 1970s were nervous and fearful. This uncertainty drove more investors into gold, as they viewed the metal as a global currency and a store of wealth. By the end of the decade, there was a veritable gold rush. But sometimes history repeats itself. Today's gold market rally has a lot in common with what happened in 40 years ago…
“1. Crisis of confidence The specific economic problems are different now than they were in the 1970s. Today, low oil prices are a problem, deflation is looming and recession is very possible. But there are other broad parallels between the two decades… The current crisis of confidence extends all across the globe -- from Hong Kong to Paris to Washington…
“2. Central bank policy isn't working After the U.S. stopped using the gold standard in August 1971, the Federal Reserve started playing a more important role in the economy… So in the early 1970s when unemployment was rising, the Fed decided to print more money. But all the extra money didn't help… Right now, we are again in the midst of a grand central bank experiment with the global money supply. And it again doesn't seem to be working…
3. Similar price patterns It isn't that uncommon for price patterns to repeat themselves over time. And based on current performance, this might be happening with gold prices… Gold has climbed about 26% from its November low. This follows the pattern of gold prices of $132 an ounce in November 1976.
If what happened in the 1970s repeats itself, gold could reach $6,800 within the next three to four years… Whatever the case, though, it is prudent to hold gold investments … as part of a diversified portfolio, because when the global economy faces a crisis, gold offers great insurance.” (“Why a 500% Jump in Gold Prices Isn't Far-Fetched,” TheStreet, 7/18/16.)
Gold On Course For “Sizable Gains” – Forbes
A Forbes commentary explains why macroeconomic factors can send gold to $1500 per ounce.
“Following several years of significant price weakness, gold appears to be well-and-truly back! The yellow metal’s 12-year bull run came to a spectacular end in 2013, prompting many market experts to warn of a painful collapse in the years ahead. Gold had shed a third of its value during the course of 2013, but that was just the beginning…
“But metal prices are firmly back on the charge… The commodity has gained almost a quarter in value since the beginning of 2016. And many analysts believe bullion is yet to run out of steam. The boffins over at UBS, for example, have hiked their average price forecast for 2017… And they expect prices to keep charging through to the end of the decade, with averages of $1,450, $1,475 and $1,500 per ounce chalked in for 2018, 2019 and 2020 respectively.
“UBS cites rising macroeconomic risks, low real interest rates, and a decline in the dollar versus emerging market currencies as major price catalysts for gold… The potentially-seismic impact of Britain’s withdrawal from the EU; fresh signs of an economic ‘hard landing’ in China; and an uneven economic recovery in the States mean that ‘safe haven’ assets like bullion should continue to remain in vogue. And some commentators believe that the yellow metal is still looking historically underbought, leaving the path clear for further hefty gains… I wouldn’t rule out further sizeable gold price gains in the current environment.” (“Is Gold Set To Hit $1,500 Per Ounce?” TheStreet, 7/21/16.)
Gold Is In Major Bull Market – DBS Group Holdings
The foreign exchange strategist for DBS Group Holdings, a leading financial services group in Asia, told investors that gold has entered the fourth major bull market since the 1970s.
“Gold is in a major bull market and may surge to more than $1,500 an ounce as low interest rates buoy demand and the U.S. presidential election looms, according to DBS Group Holdings Ltd., which foresaw this year’s rally and is now advising investors to buy any declines. ‘Gold has seen four major bull markets since 1970: this is another one,’ Benjamin Wong, foreign exchange strategist at the Singapore-based bank’s Chief Investment Office, said in an e-mail. ‘The market has yet to deal with the political uncertainty going into the Nov. 8 presidential election…’
“Any dips to $1,296 to $1,300 would be opportunities to accumulate, said Wong. The next rebound may top resistance at about $1,380 and move prices toward $1,437 to $1,455, he added. ‘Longer term, if the full force of the inverse head-and-shoulders pattern is applied, there remains scope for $1,525.’” (“Gold, Trump and Rates: Bank That Foresaw Rally Flags $1,500,” Bloomberg, 7/17/16.)
Britons Buy Gold For Brexit Protection
Reuters reported that Britons are buying gold at unprecedented rates to protect themselves against the economic consequences of the UK’s departure from the EU.
“When Britain voted to leave the European Union, the thoughts of Yorkshire teacher Grace Hall immediately turned to her family's bottom line. Three days later, as UK stocks and sterling plummeted, she put those thoughts into action and deposited part of her life savings -- 25,000 pounds -- into gold.
“’My husband and I are both worried about bank failures and our cash getting swallowed up,’ she said. ‘I'm also worried about our kids' jobs and their future.’ Hall was not alone. Dealers are seeing an unprecedented amount of interest in gold, much of it from first-time buyers, to take advantage of its role as a safe haven in times of stress or unexpected ‘black swan’ events like Brexit…
“One London-based property developer said the current sense of panic over the UK financial system was unlike anything he had ever seen. ‘I just can't believe what's going on,’ he said, asking not to be named. ‘Projects that were meant to happen now haven't and the last thing I would do right now is buy another property.’ Instead, he has bought £350,000 worth of gold and plans to hold it for at least the next two years…
“Countries like Germany, with its experience of hyperinflation, have maintained a historical connection to gold as a tangible asset that can protect wealth against economic downturns and currency fluctuations. ‘In Germany's economic history between 1922 and 1961, some people lived through three or four expropriations or collapses of wealth, so there is an embedded sense of caution,’ said Brian Lucey, Professor of Finance at Trinity College Dublin. ‘The UK is not at that level at all but certainly continued gold retail buying is another indicator of the effect that Brexit has had,’ he said….” (“After Brexit, ordinary Britons warm to gold as safe haven,” Reuters, 7/20/16.)