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Gold and Silver Prices
Gold gained great momentum on Friday and scored its first weekly gain in seven weeks after the U.S. dollar weakened in the wake of a speech from Fed's Charmain Powell.
"The U.S. dollar weakened sharply, providing support for dollar-denominated gold prices, as Powell, at the annual Fed symposium in Jackson Hole, Wyo., said gradual U.S. interest-rate hikes remain appropriate and there was no risk to the economy overheating. He also said he was prepared to do 'whatever it takes' if inflation becomes unanchored to the upside or downside 'or should crisis threaten again.'
"'The dollar giveth and the dollar taketh' and with the pullback in the U.S. dollar index Friday, 'gold is soaring,' Michael Armbruster, managing partner at Altavest, told MarketWatch.
"Gold prices rose even as stocks looked to finish at fresh records... Meanwhile, some analysts eyed market mechanics in making their next call for gold.
"'We have seen gold do well following previous spikes in short interest,' said Shree Kargutkar, portfolio manager at Sprott Asset Management. 'With over $25 billion of gold being shorted, any meaningful short covering should produce a significant price appreciation in gold.'" ("Gold rallies to score first weekly gain since early July," Myra P. Saefong, Market Watch, 08/24/18.)
Gold ended the week up $20.70, closing at $1,205.30. Silver ended the week flat closing again at $14.77.
Silver Is 'The Best Buy' Right Now- Wells Fargo - Golubova
Wells Fargo sees current silver prices as a good deal and believes the dollar will likely fade into year-end.
"After a major sell-off, precious metals are a cheap buy for long-term investors, according to Wells Fargo Investment Institute, which highlighted silver as the best investment choice at the moment.
"'At the top of our commodity buy list are metals, especially precious metals. Silver looks to be the best buy,' Wells Fargo Real Asset Strategy head John LaForge said in a note to clients.
"'[Silver] is down ... and has a good fundamental backdrop ... For long-term investors, accumulating silver in the $13-$14 range, looks like a 'good deal,' in our view,' LaForge said last week.
"Wells Fargo is of the view that the U.S. dollar rally, which has been weighing heavily on all precious metals, will subside by the end of the year, lending the much needed helping hand to the struggling metals.
"'We should note that Wells Fargo Investment Institute (WFII) believes the dollar's strength likely will fade into year-end,' LaForge wrote. 'This matters because commodity prices tend to move opposite the U.S. dollar, primarily because most commodities are priced globally in U.S. dollars ... We anticipate these developments should help commodity prices to bounce.'
"The U.S. dollar has been partly driven by the escalation of trade tensions between the U.S. and China this summer, Wells Fargo pointed out. But, the institute also noted that the fears of the U.S. dollar strength making precious metals more expensive and weighing heavily on future demand are taken out of proportion.
"A strong U.S. dollar often makes commodity purchases more expensive for a country that has its own currency. If the dollar strengthens too much, the result can be fewer commodity purchases," LaForge explained. "Commodity markets appear to be worried about such a demand slowdown, particularly from the massive commodity importer, China. Investors already were worried about slowing Chinese growth, but WFII believes that those fears may be overblown." ("Silver Is 'The Best Buy' Right Now - Wells Fargo," Anna Golubova, Kitco, 08/21/18.)
Top Money Manager Warns a 70% Chance For the Next Recession In 5 Years - Cao
High profile experienced Chief Investment Officer at Pimco believes now is the time to prepare for the next recession.
"This summer marks the ninth year of the S&P 500 index's steady growth since the 2008 Financial Crisis ended, making it the longest bull market the U.S. economy has ever seen. While many on Wall Street celebrate this historic milestone, others in the financial sector have begun to ponder the obvious: When will this bull market end?
"According to Marc Seidner, chief investment officer of non-traditional strategies at Pacific Investment Management Co. (Pimco)-a Newark, Calif.-based asset management firm overseeing $1.7 trillion of investments, including the world's largest actively managed bond fund-now is the time to prepare for the next economic recession.
"Seidner is a high-profile generalist money manager in the asset management space with over 30 years of experience. Before Pimco, he was the chief of U.S. bond investment for Harvard University's $37 billion endowment, the largest in the nation.
'"If you are thinking about global investing and global portfolios, you have to enter in a possibility of a recession in the next three to five years,' Seidner, who previously headed bond investment for Harvard University's endowment, said at a conference this week in Sydney, Australia.
"More precisely, he predicted a 70 percent chance for a recession to hit the world economy in the next five years, as governments from the U.S. and Europe look to tighten the ultra-loose monetary policy that has fueled economic growth for nearly a decade.
"'Quantitative easing was a tide that lifted all boats,' Seidner explained. 'If we were trying to look for historic analogues to the current environment in terms of monetary policy and possible unwind in the period to come, there are none.'
"While some economists have varying opinions as to whether there is a recession in sight at all, in a recent CNBC survey of the ten top economists on the near-future outlook of global economy, four expressed similar views to Seidner's. All agreed that the future market direction hangs on the Federal Reserve's timeline of raising interest rates.
"Seidner warned that investors should expect increased volatility in public markets as a result of tightened monetary policy (higher interest rates) and advised finding shelter in private-market investments. One promising area, he recommended, is private credit, such as direct lending, corporate bonds and real estate-based loans in the U.S. and Europe." ("Top Money Manager Warns a 70% Chance For the Next Recession In 5 Years," Sissi Cao, Observer.com, 08/23/18.)
Gold firms as dollar slides on dovish comments from Fed's Powell - Young and Desai
Following Fed's Powell's recent speech, market watchers believe the Fed is leaning more dovish and that is negatively affecting the U.S. dollar.
"Gold prices rose on Friday as the dollar came under pressure from clues about the direction of U.S. monetary policy from Federal Reserve Chairman Jerome Powell, which market watchers interpreted as dovish.
"The greenback weakened as Powell, speaking in Jackson Hole, Wyoming, said a gradual approach to raising rates remained appropriate to protect the U.S. economy and keep job growth as strong as possible with inflation under control.
"'It sounds like the Fed is starting to lean a little bit dovish and that is taking the wind out of the U.S. dollars sail now," said Shree Kargutkar, portfolio manager at Sprott Asset Management.
"Spot gold had increased 1.8 percent to $1,206.14 an ounce by 1:43 p.m. EDT (1743 GMT), heading for a 1.9 percent weekly gain...
"U.S. political uncertainty, heightened by the legal woes of two of U.S. President Donald Trump's former advisers this week, is keeping the dollar under pressure despite tighter U.S. monetary policy, analysts say.
"A weaker U.S. currency makes dollar-denominated gold cheaper for holders of other currencies, which could boost demand and prices.
"A Reuters survey published on Thursday showed analysts expecting U.S. rates to rise twice more this year and twice next year. The Fed next meets over Sept. 25-26. Higher rates raise the opportunity cost of holding gold, which can be costly to store and insure.
"'Investor appetite for gold has been in the doldrums in recent months. Rate hikes, low inflation, rising equity markets and a strong dollar have significantly diminished the appeal of gold,' ANZ analysts said in a note.
"'The fall in gold prices could invigorate a pick-up in physical demand. Overall we see gold prices stabilizing at current levels, with the probability of a short-covering rally increasing substantially.'" ("Gold Firms as dollar slides on dovish comments from Fed's Powell," Renita D. Young and Pratima Desai, Reuters, 08/24/18.)
Is Now The Time To Buy Gold As Six-Week Losing Streak Ends - Christensen
Analysts believe this may be the best time to buy gold as facts point to lack of support for the U.S. dollar moving forward.
"For some commodity analysts, this could be the perfect time to buy gold as it looks like U.S. monetary policy will be less supportive of the U.S. dollar going forward.
"Gold's four-month downtrend appears to have come to a halt following what economists are describing as neutral to dovish comments from Federal Reserve Chairman Jerome Powell. The yellow metal is seeing its best weekly gains since late-March, ending a six-week losing streak.
"Bill Baruch, president of Blue Line Futures, said that he has turned outright bullish on gold and looks for momentum to push prices to $1,250 an ounce before it starts to fade again. He added that his firm is recommending to their clients to go long gold aggressively and to monitor the position closely.
"'This is the move in gold we have been waiting for,' he said. 'We are telling clients to buy as much gold as they are comfortable with...'
Monetary Policy Expectations Are As Good As It Gets
"Gold's new rally was sparked after Powell provided little new guidance on future monetary policy. While he said that the U.S. economy has strengthened substantially, he was relatively neutral on the current pace of monetary policy. He noted that 'there does not seem to be an elevated risk of overheating.'
"David Madden, market strategist at CMC Markets, said that this could be as good as it gets for U.S. monetary policy. He added that he saw the speech as 'putting the brakes' on monetary policy expectations.
"'The message was: everything is steady as she goes and that could be good for gold,' he said. 'I think because of the strong economy, markets were expecting to see something more hawkish.'
"Simon Derrick, managing director of BNY Mellon, said that the latest comments from the head of the U.S. central bank add to an already shaky environment for the U.S. dollar. He added that the comments could signal a peek in the U.S. dollar and a bottom in gold prices.
Investors Are Just Waiting For The Spark To Ignite A Gold Rally
"Ole Hansen, head of commodity strategy at Saxo Bank, said it is going to take a material change in the U.S. dollar expectations to push gold prices higher. However, he added that when it happens, there won't be much to stop the yellow metal from propelling higher.
"'There is the potential for a $50 rally out there in the marketplace,' he said. 'I think $1,210 is the nut that needs to crack that will really push prices higher.' While many investors see critical resistance at $1,250 an ounce, some note that $1,236 is the first hurdle that needs to be crossed.
Cracks Starting To Appear In U.S. Economy
"Not only is the Federal Reserve starting to move to a more neutral stance on monetary policy but some economists are beginning to highlight growing weakness in the U.S. economy.
"David Rosenberg, chief economist and strategist at Gluskin Sheff, noted that as of Thursday, 14 economic reports so far this month have missed expectations... Hansen said that he is paying closer attention to the Citi Surprise Index. The latest data shows that U.S. economic data is deteriorating, while European economic data is strengthening, he said.
"Hansen added that the narrowing divergence between the two economies could support the euro against the U.S. dollar, which would help gold prices.
"Some economists have noted that while the U.S. economy has enough momentum to support two more rate hikes this year, the outlook is a lot more uncertain heading into 2019. Currently, markets are pricing in a more than 90% chance of a rate hike in September and a more than 60% chance of a fourth rate hike in December.
"However, the market sees a 50% chance of one rate hike by September 2019.
"Adding to growing unease is the ongoing trade dispute between the U.S. and China. Madden said that while global trade issues have not hindered U.S. economic growth just yet, it's an issue that investors can't ignore. The longer global trade issues hang around, the bigger the risks they will have on the U.S. economy, he said." ("Is Now The Time To Buy Gold As Six-Week Losing Streak Ends?" Neils Christensen, Kitco, 08/24/18.)