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Gold and Silver Prices
Gold closed higher on Friday and tallied its fourth weekly gain as sharp declines in the stock market continued.
"Gold jumped to a more than three-month peak on Friday as investors rushed to the safety of the bullion, driven by a plunge in stock markets around the globe.
"Spot gold rose 0.20 percent to $1,234.29 an ounce having earlier risen nearly one percent to $1,243.32, its highest since mid-July... The precious metal is on course for a fourth week of gains, the longest winning streak since January.
"'We continue to see money flows out of riskier equity markets into safe-haven asset classes. That is one of the main drivers of this (gold) market,' said David Meger, director of metals trading at High Ridge Futures.
"'If they (stocks) continue to fall, that will give support to gold. You'll then have trend buyers coming in and supporting the price,' said Alasdair Macleod, head of research at GoldMoney.com.
"Investor flows into the bullion, considered a safe store of value during times of financial, economic and geopolitical uncertainty, can be seen by the rise in holdings of physically-backed exchange traded products." (Gold jumps as stocks slide triggers flight to safety," Reuters, CNBC, 10/26/18.)
Gold ended the week up $6.30, closing at $1,232.80. Silver ended the week up $0.05, closing at $14.65.
This Could Push Gold To $1,500- Analyst - Golubova
Several factors including weakness in equities, the Fed's monetary policy tightening and geopolitical concerns all point to positive moves for gold.
"Gold prices could be in store for the 'mother of all short-covering' rallies, said one analyst, citing CFTC short positioning and the yellow metal's strength in the face of higher U.S. dollar.
"Even $1,500 is not out of the realm of possibilities, according to ThinkMarkets chief market analyst Naeem Aslam, who sees the latest CFTC data as a positive sign for gold prices.
"'The recent CFTC data showed that hedge funds have decided that it is about time for them to start scaling back from their short position. This sends a strong bullish signal for the metal,' Aslam wrote in a report published on Monday.
"Making things even more favorable for gold prices is the 'capitulation factor' in case the Federal Reserve changes its mind on how aggressive it wants to be when it comes to monetary policy tightening.
"'After all, Donald Trump has criticized the Fed several time about hiking the interest rate so many times this year. It is important to emphasize that back in 2015 when speculators had net long positions, it triggered a 30% move in the gold price. A similar move would help the price to move to $1,500,' Aslam added.
"Another sign that things are looking up for gold is the metals' strength in the face of higher U.S. dollar.
"'During the past few weeks, we have seen a positive correlation between the dollar index and the gold price. This shows that gold price has become immune to rise in the dollar index. This simply means if we see any kind of pullback in the dollar index, the odds are higher for a mammoth move in the gold price,' Aslam explained.
"On top of that, recent weakness in global equities and concerns around global economic growth have been helping the yellow metal.
"'Anxieties around the trade war started to impact the sentiment and this triggered the profit warning by Wall Street analysts. On top of this, we also had the IMF coming out with a downward revision of the global economic growth. The bearish sentiment since then has picked strength and more and more hedge fund analysts have started to believe that there are more chances for the markets to face serious correction than a bull run,' Aslam pointed out.
"The geopolitical environment is also finally lending a hand to gold prices, with investors looking towards risk-off assets with safe-haven properties like gold. 'The geopolitical tensions have started to make investors seriously worried about their portfolios and if we factor in the growth concerns over in China in the same equation, it becomes clear why the speculators have started to scale back from their short positions,' the analyst said.
"On Tuesday, gold prices rallied, hitting a three-month high and trading above the $1,240 an ounce level, due to increased safe-haven demand amid rising geopolitical uncertainty." ("This Could Push Gold To $1,500- Analyst," Anna Golubova, Kitco News, 10/23/18.)
Stock market drops again, wiping out 2018 gains for the Dow and S&P 500 - Shell
The sharp and continuing drop in equities are causing fear and concerns of how it will look like.
"The stock market sell-off on Wall Street intensified Wednesday, knocking the Dow down more than 600 points and wiping out the gains for the year for the blue-chip average and the broad Standard & Poor's 500 index.
"Technology stocks, which had been the best-performing part of the market earlier in 2018, suffered the biggest declines. The Nasdaq composite, home to many of the market's most popular tech stocks, plunged 4.4 percent, pushing it down 12.3 percent from its late August high and deeper into official "correction" territory.
"The latest swoon, which knocked the S&P 500 down more than 3 percent Wednesday, signaled to many Wall Street pros that the decline was entering a new, more dangerous phase. There's growing concern now that this decline is more than a garden variety pullback, or drop of 5 percent to 9.99 percent, and could morph into a drop of 10 percent of more for the broad market.
"'With the big sell-off today, the market may have moved from pullback into correction territory,' says Nick Sargen, chief economist and senior investment advisor for Fort Washington Investment Advisors.
Fears about economy, earnings
"The sharp, swift decline has been sparked by fears that the U.S. economy and corporate earnings will start to slow due to trade disputes, more interest rate increases from the Federal Reserve and slowing growth in China, the world's second-largest economy.
"'This is a correction,' said Bruce Bittles, chief investment strategist at money management firm Baird. 'The question is does it lead to a bear market,' or a decline of more than 20 percent.
"Technology stocks and media and communications companies accounted for most of the selling. AT&T sank after reporting weak subscriber numbers, and chipmaker Texas Instruments fell sharply after reporting slumping demand. Banks, health care and industrial companies also took heavy losses.
"Disappointing quarterly results and outlooks weighed on the market, stoking investors' jitters over future growth in corporate profits. Bond prices continued to rise, sending yields lower.
"'You've seen more discouraging (company) commentary this quarter than you have the last two,' said Tom Martin, senior portfolio manager with Globalt Investments. 'You're really starting to get more of a groundswell of caution. There's some concern about the fourth quarter and what that's going to look like.'
"Even so, traders are concerned about future growth amid rising inflation, interest rates and uncertainty over trade. Some companies, including Caterpillar and 3M, have reported disappointing results and warned of rising costs related to tariffs related to the U.S.-China trade dispute.
"Among the big companies slated to release quarterly results this week are Microsoft, Amazon and Colgate-Palmolive.
"The Commerce Department said sales of new U.S. homes plunged 5.5 percent in September, the fourth consecutive monthly drop. The report is the latest sign that the housing market is cooling amid rising mortgage rates...
"Bond prices rose, sending the yield on the 10-year Treasury note down to 3.11 percent from 3.16 percent late Tuesday. The slide in bond yields came as traders sought out assets traditionally viewed as safe havens.
"Investors may also be betting that the Federal Reserve may elect to take a more measured approach to raising interest rates should the economy show more signs of slowing.
"'That's been driving a good bit of the move in the 10-year lately, expectations about how many rate increases there are going to be in 2019,' Martin said. ("Stock market drops again, wiping out 2018 gains for the Dow and S&P 500," Adam Shell, USA Today, 10/24/18, updated 10/25/18.)
'Shaky' Global Stock Markets Trigger Bid For Gold- Sprott - Golubova
Gold is boosted as equities drop and most stock markets in the world are in a bear market.
"Volatility in global stock markets is boosting demand for gold, which has stood 'the test of time,' said Eric Sprott, billionaire precious metals investor and founder of Sprott Inc.
As central banks around the world stepped up gold purchases, shouldn't investors follow suit, Sprott was asked during the company's Weekly Wrap-Up segment.
"'In India, the central bank bought some gold for the first time in over a decade. Hungarians increased their gold [tenfold to 31.5] tons. Poland also made purchases,' Sprott said. And that's aside from continued purchases of Russia and China, he added.
"In the meantime, physical demand is also picking up, with India importing 95 metric tons of gold in August, Sprott added.
"These are all positive numbers that investors should be paying attention to because there's significant risk in the markets and gold is a proven safe-haven asset, he explained.
"'There are lots of reasons to think that the Federal Reserve will have to change. It is uncertain what the Fed will do. You should not automatically count on four rate increases next year,' Sprott said.
"On top of that, most stock markets in the world are in a bear market, he pointed out.
"'Look at China, [the stocks] was down 32% this year. There are a lot of liquidity issues in a lot of markets, and when you're the last man standing, [investors] are going to be selling American stocks first, because they're the ones that are theoretically liquid,' he said. 'The structure of markets is very risky ... [And] as things get shaky here in the markets, you see the safe-safe-haven bid coming into gold,' Sprott said.
"On Tuesday, equities dropped for the fifth consecutive session. The Dow Jones Industrial Average is seeing its worst monthly decline in three years and the S&P 500 is seeing its worst monthly performance in seven years, according to reports.
"'The yellow metal was boosted by safe-haven demand amid keener geopolitical uncertainty in the marketplace. Gold prices did back off their daily highs as the U.S. stock indexes moved up from their daily lows,' said Kitco's senior technical analyst Jim Wyckoff..." ("'Shaky' Global Stock Markets Trigger Bid For Gold- Sprott," Anna Golubova, Kitco News, 10/24/18.)
Gold Strengthens as equities give up 2018 gains or fall - Williams
If equities continue to decline and the Fed reverses its course, gold may be up for a major boost.
"A stronger dollar is keeping the gold price under control in the $1,230s, but for how long? U.S equities have continued to decline with the Dow just moving into negative territory for the year, while the S&P 500 and NASDAQ have both given up virtually all of any 2018 gains and remain only fractionally above where they were at the beginning of the year. That brings gold's performance year to date - down 6% - into perspective, particularly as gold appears to be in an uptrend, while equities are still coming down...
"With major European and Asian markets all down between 8% and 20% year to date, the equities markets falls seem to be across the global board which makes the gold price in most other currencies look even better, particularly given most exchange rates against the dollar have fallen over the year...
"Should U.S. equities markets continue their downwards path - Asian markets continued to move sharply downwards overnight and European ones are opening mixed today (FTSE 100 down but DAX and STOXX 50 slightly up) - then there has to be a chance that the U.S. Fed (under pressure also from President Trump) could delay, or cease, future interest rate rises which would give gold a major boost should this happen.
"... if the Wall Street decline should be seen to start turning into the oft-predicted crash, then a change in Fed policy has to be on the cards. We have suggested here in the recent past that the gold price is likely to see some recovery by the year end - perhaps not to the $1,400 plus level which many analysts were predicting at the beginning of 2018, but to north of $1,300 again - but if equities continue to fall and the Fed reverses course, even the more optimistic of the early year predictions could come into play.
"Key to future gold price recovery probably remains the strength of the dollar. Once the impact of the President Trump-initiated tariff wars, particularly those affecting Chinese imports, starts to impact U.S. domestic prices and margins, which they undoubtedly will, this could tip the U.S. economy into recession. Should this happen equities markets would likely start to spiral downwards, the dollar's strength would weaken again and this could all force the Fed's hand. It wouldn't want to see the blame for any downturn movement in equity prices being attributed to its interest rate policy. But that could be a reaction too late. Past history seems to be littered with U.S. recessions following Fed tightening patterns. Could we see this happening again? If so the gold price, in U.S. dollars at least, could be a major beneficiary." ("Gold strengthens as equities give up 2018 gains or falls," Lawrie Williams, Sharps Pixley, 10/25/18.)
The stock market loses 13% in a correction on average, if it doesn't turn into a bear market - Franck and Rooney
Stock market losses and no sign of bounce back cause worries of a bear market and possible recession.
"The average correction for the S&P 500 since World War II lasts four months and sees equities slide 13 percent before bottoming, according to analysis at Goldman Sachs and CNBC.
"The broad market index fell into correction Friday and is 10.5 percent below the all-time intraday high it clinched on Sept. 21, 2018; the index is down 2.7 percent for the session. The Dow Jones Industrial Average, meanwhile, is more than 8 percent off its own record high and fell more than 500 points Friday at its lows. Wall Street defines a correction as down more than 10 percent from a high.
"Bear markets - defined as a 20 percent fall in stocks - average a loss of 30.4 percent and last 13 months; it takes stocks 21.9 months on average to recover.
"'It's a bad sign that oversold markets not bouncing,' Michael Hartnett, Bank of America Merrill Lynch's chief investment strategist, wrote. 'The inability of oversold markets to bounce suggests investors worried by either systemic financial market event or recession.'
"Tech has been especially slammed this week. The Nasdaq Composite dropped 1.7 percent Friday, led lower by Amazon and Google parent company Alphabet, which dropped 6.7 percent and 2.2 percent, respectively...
"'Asset carnage is cross-market and has infected U.S. tech leadership,' Hartnett pointed out, adding that the asset class is oversold. He also named lower oil and wider credit spreads as recession "tells" and reasons to stay bearish.
"Hartnett warned last month that the 'Great Bull' market that began at the bottom of the financial crisis is dead..." ("The stock market loses 13% in a correction on average, if it doesn't turn into a bear market," Thomas Franck and Kate Rooney, CNBC, 10/26/18.)