Gold and Silver Prices
Gold prices jumped significantly this week, at one point surpassing $1300 to hit a two year high, fueled by the Federal Reserve’s decision to defer an interest rate hike and the growing belief that the U.K. will leave the European Union.
“Gold prices rose in London Friday, as a softer dollar encouraged demand for the precious metal… Gold rallied to its highest level since August 2014 at $1,315.61 an ounce on Thursday, as the U.S. Federal Reserve held interest rates and rising expectations that the U.K. could exit the European Union bolstered demand ahead of the referendum on June 23. Gains tapered off, however, after the referendum campaign was paused later on Thursday following the killing of 41-year-old Labour Party lawmaker and Remain campaigner, Jo Cox, in northern England….” (“Gold Prices Rise as Softer Dollar Lifts Demand,” WSJ, 6/17/16.)
Gold ended the week up $24.80, closing at $1,299.10. Silver prices closed at $17.57, up $0.19.
Gold May “Explode” if UK Leaves EU – Business Insider
Analysts from the banking giant HSBC believe the United Kingdom’s exit from the European Union (the so-called “Brexit”) would cause a dramatic rally in gold.
“Gold prices are likely to explode if Britons vote to leave the European Union when they go to the polls next Thursday, gaining as much as 10% in a short space of time. Gold is seen as a haven for cash. It does not pay a coupon like a bond, and it does not pay a dividend from a stock, but it does mean you own ounces in a physical precious metal that you can hold onto.
“And it is for this reason that chief precious metals analyst James Steel and his team at HSBC say that the precious metal will take off after a Leave vote in the UK's European Union referendum when market turmoil will reign supreme…
“Pretty much everyone in the markets right now is predicting that if Britain does vote to leave, what will follow will be a period of immense stress with virtually all assets taking a hammering. Morgan Stanley on Tuesday predicted that markets will get devastated within six months, while Bernstein Research argued that Britain's financial sector would take a hammering following an ‘Out’ vote. That volatility, HSBC argues, would send investors flooding into gold…
“While Steel and his team see gold going sky high in the event of Brexit, should Britain vote to remain, the opposite may not necessarily be true. Here is the key quote … ‘We believe gold is well placed to withstand any repercussions of a vote to remain in the EU….’” (“HSBC: Gold will explode if Britain votes for a Brexit,” Business Insider, 6/15/16.)
Fed Pause on Interest Rates is Green Light for Higher Gold Prices - MarketWatch
MarketWatch explained why the Federal Reserve’s decision to keep interest rates unchanged may be a signal for a rally in gold prices.
“Did the Federal Reserve clear the way for a push higher by gold? Fed officials left interest rates unchanged Wednesday and cut their expectations for rate hikes in the next two years, brightening the outlook for gold and prompting prices to tap a high of $1,300 an ounce in electronic trading…
The Federal Open Market Committee’s “move to lower their long-term rate forecasts more in line with the market’s expectations highlights a clear road higher for gold,” said Brien Lundin, editor of Gold Newsletter. ‘With so much of the world now operating in a negative-rate environment, and now the path to higher rates in the U.S. being moderated, the outlook for gold is very bright…’
“Ned Schmidt, editor of the Value View Gold Report, said the $1,300 level may become a ‘new floor’ for gold next week. The ‘FOMC just gave gold a brilliant, green light’ with no possibility of a rate increase before September, he said. Prices may even top $1,900 in early 2017 if the dollar falls dramatically over the next six months… Higher interest rates lift the appeal of holding dollars… But a weaker dollar and unrest sparked by the potential disruption of a British exit from the EU, ultimately offers a bullish path for gold to rise.” (“Gold just scored a ticket to ride higher from Fed’s Yellen,” MarketWatch, 6/16/16.)
Perfect Storm for Higher Gold Prices – Forbes
Forbes reported that the current financial and political climates are positive for gold’s bull run.
“Gold shone brightly for a few days this week before running out of steam, but if anyone thinks gold has done its best for 2016 they’re not looking at what’s driving [gold]. A heady mix of financial, political and economic forces are behind the latest gold revival and none of them are short-term events…
“Credit for this week’s rise in the gold price to a two year high of $1314.87 an ounce was shared by confirmation that U.S. interest rates will be lower for longer and that British voters might agree with a proposition that their country should quit the European Union… And then there’s the biggest uncertainty of all, the gorilla in the room … what will the U.S. economy look like in the first year of President Trump should he be elected in November.
Gold loves situation like this. It is the ultimate fall-back investment for a time when everything else has failed or when the yield on conventional investments makes zero-interest bullion look good…
“The importance of Brexit to gold cannot be over-stated because while it might only involve one reluctant member of the E.U. opting out, the potential for a domino effect could be catastrophic with other Euro-skeptic countries joining Britain at the exit.” (“Gold Can Only Go Up As A Perfect Storm Of Brexit And Trump Presidency Loom Large,” Forbes, 6/17/16.)
Global Panic and $10,000 Gold – Rickards
Bestselling author and financial analyst Jim Rickards told CNBC that a new financial crisis may be coming in 2018, potentially sending gold prices to $10,000 per ounce.
“As gold continues to rally in 2016, one of Wall Street's most closely followed commodities watchers says we could be in the early days of a historic rally for the precious metal. However, the catalyst for gold's gains could stem from a nerve-wracking sequence of events.
“’We should expect the next global financial panic soon,’ said Jim Rickards… ‘We have imploded twice in the last 16 years so get ready for the third one.’ Rickards explained that, given the consistency of a financial panic every 10 years, investors should brace for another disaster in 2018. Yet, this time around, Rickards believes that its the U.S. government itself that may trigger the next crisis…
“’In 2018, who's going to bail out the Central Banks? … The bailout money is going to come from the IMF [International Monetary Fund] as they have the only clean balance sheet left.’ This occurrence, Rickards believes, will drive gold higher—to $10,000, to be exact. That eye-popping sum ‘is not a made up number,’ Rickards insisted. ‘It is the implied non-deflationary price,’ he reasoned… Rickards' scenario, of course, is a hypothetical value based on a number of theoretical occurrences that would need to happen in the global economy….” (“Is $10,000 gold on the horizon? One commodities expert says yes!” CNBC, 6/12/16.)
Investors Should Value Gold as Standalone Wealth – Seeking Alpha
Seeking Alpha contributor ValueWalk sees a growing respect for precious metals as large investors rush to gold.
“You didn't come here today for bad news. There's plenty of that everywhere you look, and even where you don't look. So here's the good news. A new rush to gold has begun…
“Beltway insider Jim Rickards, among others, says gold could hit $10,000 per ounce and higher. Silver specialist Ted Butler believes bullion banks are quietly reversing course, positioning for the inevitable resumption of the precious metals bull… No less than former Bank of England chief Mervyn King has joined Alan Greenspan in praising gold, effectively criticizing their own obvious failures to rule the world with massive paper printing…
If the money masters truly mean to steal all the world's wealth, it's reflected in the rush to gold. They are the ones rushing the fastest. Reports everywhere say the mega-wealthy - individuals, investment firms, corporations and governments - are piling into gold…
“The lesson we should have learned by now is to value precious metal as standalone, private wealth, not dependent on paper money games played during drunken plots of money masters.
Rising gold and silver simply means the dollar's influence is falling. Paper dollars may not disappear in your lifetime, but the value of that paper is vanishing every minute of your life through government-planned inflation. Does good news for gold signal bad news everywhere else? Hyperinflation? Worldwide chaos? Maybe. But if so, then it's seriously bad news for those who have no gold or silver, or not enough….” (“The Rush To Gold: A New Respect Is Growing,” Seeking Alpha, 6/16/16.)