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Gold prices rose on Friday to end the week in positive territory. Prices were bolstered by a weaker US dollar and growing concerns about a weak Chinese economy.
“Gold rose on Friday and was on track to post a weekly gain, supported by an easing dollar and weaker than expected Chinese trade data which stoked global growth concerns… ‘We have (China’s) trade data out this morning which disappointed mainly on the import side, suggesting the Chinese economy is still struggling,’ said Julius Baer analyst Carsten Menke. ‘This provided fuel to the growth worries, so that’s why gold as a safe haven is benefiting.’
“China’s exports fell in June as the United States ramped up trade pressure, while imports shrank more than expected, pointing to further strains on the world’s second-largest economy. Also helping gold was the dollar index, which eased for a third straight session as stronger-than-expected U.S. inflation data failed to shake convictions that the Federal Reserve will start cutting interest rates this month….” (“Gold edges up on weaker dollar, China data fuels growth concerns,” Reuters, 7/12/19.)
Gold ended the week at $1,416.60/oz. Silver closed at $15.30/oz.
David Roche, president and global strategist at Independent Strategy, has forecast gold to reach $2,000 per ounce by the end of 2019.
“Gold prices can continue to climb even after they hit a multi-year high last week, a global investment strategist said Monday. In fact, prices are set to ‘reach $2,000 by the end of the year,’ predicted David Roche, president and global strategist at London-based Independent Strategy…
“Gold prices have been on an upward trend amid recent expectations of a Federal Reserve interest rate cut and heightened geopolitical concerns — conditions that might weigh on the stock market, according to Roche. ‘I actually believe financial markets are now poised to crumble like a sand pile,’ he told CNBC’s ‘Squawk Box...’
“… Roche projected gold prices would continue going up, partly because international trade tensions will add to the negative sentiment of stock market investors. ‘I think the trade conflict with the United States is a much far, wider-reaching, global conflict, which will undermine growth expectations in equity markets,’ he said. Given that outlook, Roche recommended investors hold gold in their portfolios….” (“Gold prices could reach $2,000 by the end of the year, strategist says,” CNBC, 7/8/19.)
Writing for the Barron’s, technical analyst Andrew Addison told readers that gold has entered a new bull market with substantially higher prices ahead with a target of $1600.
“It’s gold’s time to shine. The price of gold has gained 9.6% to $1404.30 an ounce this year, and my work projects the precious metal will move substantially higher from current levels as it starts a new bull market. The fundamentals and technicals are aligned for gold to maintain its upward trend in the coming months.
Let’s start with the fundamentals. Federal Reserve policy continues to be accommodative… Middle East tensions have risen, and Turkey is awaiting delivery of Russian S-400 missiles (which will compromise NATO’s military defense systems).
And then there’s the U.S. dollar, which is on the verge of declining. While the U.S. Dollar Index is down less than 2% from its high, my work confirmed a sell signal... Pausing at initial $1425-$1435 trendline resistance, the next resistance is $1485. Long-term, my work projects a $1600 objective….” (“Gold Is In a New Bull Market – and Its Heading a Lot Higher,” Barron’s, 7/12/19.)
A Wall Street Journal commentary explained why President’s Trump’s nominee to the Federal Reserve is correct in stating the gold standard is a reputable and superior form of monetary policy.
“Though money can't talk, people can't stop talking about it. With the nomination of Judy Shelton to the Federal Reserve Board, the discussion has tilted to gold. Gold is money, or a legacy form of money, Ms. Shelton contends, and the gold standard is a reputable, even superior, form of monetary organization. The economists can hardly believe their ears. The central bankers roll their eyes. How can this obviously intelligent woman be so ignorant? Let us see about that…
“The true-blue standard was sweet and simple. Participating nations defined their money as a fixed weight of gold. Citizens could exchange currency for gold, or gold for paper, as they chose. Gold moved freely across national borders. It went where interest rates and business opportunities beckoned. Gold was base money; over it rose the superstructure of credit.
“Fixedness was one defining feature of the classical gold standard. Trust in the workings of supply and demand -- in the "price mechanism" -- was a second. Belief in individual responsibility for financial outcomes was a third…
“A 20th-century scholar, reviewing the record of the gold standard from 1880-1914, was unabashedly admiring of it: ‘Only a trifling number of countries were forced off the gold standard, once adopted, and devaluations of gold currencies were highly exceptional. Yet all this was achieved in spite of a volume of international reserves that, for many of the countries at least, was amazingly small and in spite of a minimum of international cooperation ... on monetary matters. This remarkable performance, essentially the product of an unusually favorable combination of historical circumstances, appears all the more striking when contrasted with the turbulence of post-1914 international financial experience and remains, even today, a source of some measure of fascination and indeed of puzzlement to students of monetary affairs…’
“In the gold-standard era, the stockholders of a commercial bank were responsible for the solvency of the institution in which they held a fractional interest. The Ph.D. standard brought the age of the government bailout and too big to fail.
“While gold-standard central bankers set short-term interest rates, they did not seek to control longer-term rates, much less drive them to zero. In today's monetary regime, some $13 trillion of debt securities worldwide are priced to deliver a yield of less than zero. There's been nothing like it in 4,000 years of recorded interest-rate history. And if gold could once be brushed aside as an anachronistic form of money, that time is no more, with private companies competing to bring digital gold to the blockchain.
“In 1989 Ms. Shelton published "The Coming Soviet Crash," a brilliant and courageous analysis of the weakness of an overrated collectivist economy. She could be just the woman to remind the Fed's doctors of economics how monetary capitalism works.” (“The Fed Could Use a Golden Rule, WSJ, 7/11/19; emphasis added.)
Mark Mobius, founding partner of Mobius Capital Partners, an emerging and frontier markets asset manager, believes that all investors should include gold in their portfolio. Dr. Mobius also sees gold possibly reaching $1500 per ounce.
“Veteran investor Mark Mobius says that gold’s set to push higher, potentially topping $1,500 an ounce, as interest rates head lower, central banks extend purchases, and uncertainty surrounding geopolitics and cryptocurrencies fans demand. ‘I love gold,’ Mobius, who set up Mobius Capital Partners LLP last year after three decades at Franklin Templeton Investments, told Bloomberg TV in an interview. “He added that bullion should always form part of a portfolio, with a holding of at least 10%. ‘As these interest rates come down, where do you go?’
“Gold has rallied in 2019, rising to the highest level in six years, as investors contemplate slowing economic growth, prospects for easier monetary policy in the U.S. and Europe, and festering trade frictions… ‘Interest rates are going so low, particularly now in Europe … What’s the sense of holding euro when you get a negative rate? You might as well put it into gold, because gold is a much better currency…’ Gold is highly sensitive to interest rates and a lower chance of a cut would increase the opportunity cost of holding the non-interest-bearing bullion.” (“Mark Mobius: Have at Least 10% Bullion in Your Portfolio,”| Newsmax.com, 7/5/19; emphasis added.)
The World Gold Council issued its mid-year report stating that gold prices are expected to move higher on strong demand.
“Financial market uncertainty and accommodative monetary policy will continue to support gold investment demand in the short term, a study published Thursday by the World Gold Council (WGC) shows. In its mid-year gold outlook for 2019, the industry body says that price momentum (gold is up 11% so far this year) and structural economic reforms in India and China will also be key drivers of demand for the precious metal.
Signs of increasingly-dovish monetary policy from central banks across the globe has significantly supported gold as of late. Aside from the 247 tonnes those institutions have bought directly through May, market expectation that the US Federal Reserve will lower interest rates two or three times later this year should continue encouraging demand, the WGC reports…
“Gold has already become one of the best-performing assets this year… Together with flagging signs of a worsening global economic slowdown, the WGC identifies a number of risks that could emerge in the coming months to force policymakers to loosen policy. These include increasing trade disputes between the US and its trade partners, especially with Iran, as well as the impact of Brexit and other economic and political issues in Europe….” (“World Gold Council expects metal demand, prices to stay strong,” Mining.com, 7/12/19; emphasis added.)
Robert Baillieul, Editor-in-Chief of IncomeInvestors.com, wrote that Wall Street has moved into gold, recognizing the yellow metals as one of the best performing investments.
“Last year, I pounded the table about the benefits of investing in gold and gold mining stocks. The industry, I argued, represented a huge bargain and patient investors would soon be rewarded. That thesis has started to play out. Over the past year, gold prices have rallied 15%. That makes the commodity one of the best-performing investments in the world right now. And now it seems that even Wall Street has caught on.
For example, last month, billionaire hedge fund manager Jeffrey Gundlach made a startling announcement. ‘I am certainly long [on] gold,’ Gundlach explained during an investor webcast… And he’s not the only one. Just recently, legendary investor Paul Tudor Jones said that gold is his favorite trade for the next year or two… Other hedge fund managers, including Ray Dalio, David Einhorn, and John Paulson, have also started building gold positions…
“Gold remains cheap, first off. After a five-year bear market, the commodity trades at its lowest price relative to the Dow Jones Industrial Average since the tech bubble in the 2000s. The last time this happened, gold investors earned triple-digit returns over the next five years… Bottom line: For the past year, I’ve called gold one of the last cheap assets. And now it seems that Wall Street has started to catch on. I suggest giving this industry a look right away. (“Billionaire Jeffrey Gundlach Is Pouring Millions Into This Investment,” IncomeInvestors, 7/8/19; emphasis added.)
Online new magazine Globalnews.ca wrote that one of the most reliable economic indicators is warning that we are approaching a major recession.
“An economic indicator that has predicted every major recession since the 1960s is sending another warning. It’s called the U.S. Treasury yield curve and, when inverted, is considered to be the most reliable indicator of an upcoming recession. As of July 2019, the curve has been inverted for an entire fiscal quarter.
“The yield curve model was originally developed by Canadian economist Campbell Harvey while he was completing his dissertation. In the three recessions since his dissertation was published, including the 2008 financial crisis, the curve was inverted before each one. Harvey is ‘very confident’ the current inverted curve could be indicative of another recession on the horizon…
“With the stock market at an all-time high and record-low unemployment rates, it can be difficult to fathom that the market is on the verge of a recession. However, Harvey points out that this is what the economy looked like a year before previous recessions as well. ‘The key thing is, that’s exactly what it looks like before all recessions a year or a year and a half in advance so this is not surprising at all. This signal delivers a nine- to 18-month advance warning, historically,’ he said… However, other economists caution consumers not to disregard other economic indicators entirely in favour of the yield curve….
“[Harvey] adds that because he considers the curve to be an accurate forecaster, this also gives people the opportunity to lessen the impact on their personal and corporate wealth ahead of a recession that is likely to take place anyway.” (“Model that predicted 2008 financial crisis suggests another recession is coming: expert,” Globalnews.ca, 7/5/19; emphasis added.)