Gold and Silver Prices
Gold prices moved lower on Friday but remained in positive territory on continued safe haven buying.
“While the turmoil in global equity markets is weighing on the industrial metals this month, gold is benefiting from a revival of safe- haven demand, said research firm, Capital Economics on Thursday. Over the past month, precious metals’ performance diverged sharply, with gold the only metal ending the month higher despite the U.S. Federal Reserve hiking interest rates in December. Gold and silver are benefiting from safe- haven demand on the back of the fall in global equity markets, exacerbated by the recent oil price declines and escalating tensions in the Middle East said Julian Jessop, commodity economist for the U.K-based firm.” (“A Revival of Safe-Haven Demand Is Lifting Gold Prices – Capital Economics,” MSN Money. 1/21/15.)
Gold ended the week up $9.20, closing at $1,099.00. Silver prices closed at $14.10, up $0.09.
Investing in Gold “One of the Smartest Decisions” – Money Morning
Money Morning contributor Diane Alter told readers that chaos in the U.S. and global markets require every investor to include gold in their portfolio.
“Gold prices were slightly lower today (Thursday) as markets calmed, but we still see gold prices soaring in 2016. In fact, investing in gold is one of the smartest decisions investors can make during this extreme market volatility…
“Global financial market turmoil this year has rekindled interest in gold, which is a very popular safe-haven investment.
The chaos in global markets is also expected to prompt the U.S. Federal Reserve to pause on its interest rate tightening path. That's bullish for gold.
And a string of recent economic reports showing that U.S. economic growth is sputtering is another catalyst for gold prices.
“’Weak or falling productivity is traditionally gold-friendly,’ HSBC said in a note to investors Wednesday. ‘Although prices may pull back near term, we look for the gold rally to continue above $1,100/oz.’ U.S. markets are having the worst start to a year since 1929, the year that spawned the Great Depression… Meanwhile, gold prices are up 4.41% as investors flee riskier assets.
“’Millions of investors are looking for the exits and a reliable safe haven,’ Money Morning Resource Specialist Peter Krauth said. ‘And with Middle East tensions flaring and perpetual uncertainty over Chinese markets, millions more are sure to follow. But… all that bad news on the markets is terrific news for gold – and everyone holding it.’” (“Why Gold Prices Will Soar in 2016,” Money Morning, 1/21/16.)
Gold to $2,000; Antidote to Economic Turmoil – Ing
John R. Ing, President & CEO at Maison Placements Canada Inc., highlighted the current threats to the U.S. economy which will spur gold prices to $2,000 per ounce.
“There’s a whiff of the Thirties in the air. Global markets had their worst start ever. But the market is confusing coincidence with causation. In a déjà vu moment there are concerns that oil’s collapse is America’s next sub-prime disaster... The other concern is about China’s stock market meltdown that after a 150 percent gain, somehow will trigger a global collapse…
“The main factor is that the US economy once thought to be most powerful, is collapsing under the weight of trillions of printed dollars... At home and abroad, investors have lost faith in the markets, and fear that central banks have lost their grip on the economic levers, wasting the seven years not with reform but senseless money printing… However the collapse in oil, markets and currencies are indicators that the problem is not in China, emerging markets nor Europe. It’s in the U.S…
“There are spreading signs that Black Swans are everywhere, a consequence of this politicized era, from Britain going to the polls on Brexit this year, to America’s multi-billion presidential election, to China’s revamp of its economy, to Europe’s stagflation, to the tide of refugees created by a sinking Middle East. All are signs of shifting tectonic plates in the global economy exacerbated by attempts to shift government led stimulus (QE) to private-sector led growth that only heightens investor risk…
“Today, mammoth oil and gas defaults threaten Wall Street’s banks and private equity players in a repeat of 2008, aggravated again by derivatives. Unless these problems are addressed, geopolitical risk premiums can only grow. Gold will be a good thing to have…
“History shows that gold always retains its value. And with the world’s assets largely denominated in a fiat paper currency, our view is that the US dollar’s days of acting as haven are limited by ironically, the upswing in interest rates and the growing concern among central banks of its value, particularly during an unpredictable election year… That will be good for gold, but bad for the dollar. Consequently, we believe that gold bottomed last year and expect a run to $1,170 an ounce in the near term but importantly, see a resumption of the bull market which will see gold topping $2,000 per ounce.” (“Gold: The Road To Hell Is Paved With Good Intentions,” Gold-Eagle, 1/21/16.)
Gold Production Has Peaked; Bullish For Prices – CNBC
CNBC reported that gold production has peaked, limiting supply and fueling higher prices.
“Gold output has peaked in this commodities cycle, according to mining industry leaders and analysts who say few big projects will reach the point of production amid falling prices. The lack of new assets and declining output at existing mines is expected to curb gold supply, a glimmer of hope for surviving producers of the precious metal in an industry coming to terms with a rush of investment when prices were far higher.
“Kelvin Dushnisky, president of Barrick Gold, the world's largest gold miner by annual output, said: ‘Falling grades and production levels, a lack of new discoveries, and extended project development timelines are bullish for the medium and long-term gold price outlook…’
“[CEO of Polymetal Vitaly] Nesis said: "The fourth quarter last year was in my opinion the peak quarter for fresh global mine supply. ... I think supply will drop by 15 to 20 per cent over the next three to four years.’” (“Gold miners say output has peaked for this commodities cycle,” CNBC, 1/17/16.)
Debasement of Dollar Positive for Gold - Pomboy
Economist Stephanie Pomboy, whose firm provides macroeconomic research and commentary to the institutional investment community, told Barron’s why she is bullish on gold.
Q: People have criticized you for being bullish on both gold and Treasuries at the same time. After all, Treasuries are a bet that inflation will be tame, and gold is often viewed as an antidote to rising inflation.
A: Yes, I have been criticized but that’s a very old-fashioned way of thinking. I guess I view gold as becoming a currency rather than a commodity. And the dollar is being debased.
Q: But the dollar has been gaining value relative to other currencies and inflation has been weak. Many think that the dollar will hold up and gold will continue to fall.
A: When you look at the dollar versus the euro and the yen, the dollar is clearly the cleanest dirty shirt. But in the meantime if you look at a chart of purchasing power of the dollar since the day the Federal Reserve was instituted, it’s a straight line down. So there is no question that there is a debasement of the currency. The purchasing power is being eroded. The problem is that waters are muddied by the fact that we’ve got so much other competition in this debasement race from other currencies.
Q: Given that gold and the dollar have had such a powerful inverse relationship over time, it would seem that you can’t be bullish on gold unless you are bearish on the dollar?
A: Precisely. Which brings me to the call that I made last year, and I’m even more emphatic on today: that the dollar is wildly overowned. I think there is zero chance that the Fed continues to raise rates this year and as those expectations come out of the market, that will work to the detriment of the dollar and to the benefit of gold.” (“Stephanie Pomboy: Stocks Are Overvalued; Buy Gold and Oil,” Barron’s, 1/19/16.)