Will The Gold Price Hit $1,800 Again? – Morningstar

Release Date: 
Friday, November 10, 2017

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Precious metals are on pace for a positive weekly close for the first time in three weeks due to uncertainty among lawmakers in Washington over tax reforms.

Gold was trading higher as “uncertainty about the timing of the U.S. tax reform plan increased, pushing investors into the arms of the safehaven trade.” (“Gold just dropped in sudden mover low.” CNBC 11.10.17)

The legislative battle also weighed down the US Dollar, which help bolster gold prices as “a weaker dollar pushed [gold] prices…to a three-week high for the second time in successive days.” (“Gold rises on weak dollar; palladium dips from 16-year high.” Reuters 11.10.17)

Gold ended the week up $5.50, closing at $1,275.90. Silver prices closed at $16.96, down $0.06.

Will The Gold Price Hit $1,800 Again? – Morningstar
Old Mutial’s Ned Naylor-Leyland says UK investors in the gold price have seen returns inflated by currency – bit there is more profit to come.

“Wall: So, the first question is why is the gold price not higher considering the significant political turmoil we faced over the last year.

“Naylor-Leyland: Well, my first answer to that would be to point out to you that gold in sterling is actually doing very well particularly after what happened with Brexit a year ago. Obviously, sterling weakened and so the sterling gold price in fact is near its all-time highs. Investors always look at gold in dollars, but unless they are actually situated in the U.S. that’s probably not the right thing to do. So, gold is doing okay, but it is also important to say that gold doesn’t move based on geopolitics. So, you might think a bomb would go off and gold would go up.

“But actually, gold moves on the basis of real interest rates, or real yield so that’s the relationship between inflation and interest rates. If you are losing money holding cash, gold will go up or if you think you are gaining purchasing power holding cash, gold will go down and that’s really what moves the price.

“Wall: And so then interest rate rises as we saw in the U.K. last week and as we are expecting to see in the U.S. in December. That sort of thing should have an effect on the gold price.

“Naylor-Leyland: It absolutely will always have effects on the gold price, but its again always about the relationship. So, if we think inflation is going faster than expected and we think interest rates are going slower than expected, than gold will absolutely go up and vice versa. So yes, it’s the relationship between both those things that’s what drives gold up and drives gold down. But I do think gold should be in all portfolios anyway because it has a very obvious decorrelating effect on portfolios which is something people are looking for.

“Wall: And looking at U.S. dollar terms although we are situated in London the gold price is around $1,200 and something, it was $1,800 and something in 2011, 2012, 2013. Can you as an investor expect to see those kinds of prices again?

“Naylor-Leyland: Well in my view undoubtedly yes. And even more so with silver. In fact, if you look at gold and silver on an inflation adjusted basis over a very long timeframe you are going to find there is nothing else you can buy which is trading at a fraction of where they were 30, 40 years ago on an inflation adjusted basis. Really, these are absolutely countercyclical hedge assets. Now you may not have needed to own them for 40 or 50 years. But I'll tell you that cyclically this is a moment where you do need portfolio insurance, and so you are just getting it at a much cheaper price than you might otherwise have had three or four years ago.” (“Will the Gold Price Hit $1,800 Again?” Morningstar 11.07.17)

Silver’s Bullish Underpinning – It’s An Essential Metal For These 3 Growth Industries – MarketWatch
Prospects for tighter interest-rate policy, dollar strength and record-setting stock levels continue to push and pull the silver market that straddles the line between an investment asset and industrial necessity.

“Demand prospects were among the largely upbeat takeaways from a Silver Institute conference late last month.

“Steve Gehring, vice president of safety and connected automation at trade group Global Automakers, made a case at the conference for silver’s role in auto-industry trends, saying demand will be particularly boosted by safety upgrades in both human-powered and driverless autos. Rear cameras, night vision, rear-object detection and lane departure warnings are examples of auto technology that relies on silver.

“Meanwhile, silver’s continued use in solar power remains in flux, but change could be slow. Silver is used in panels via silver paste, which contains about 90% silver powder, with the remaining 10% comprised of mostly glass and binding agents.

“The industry is trying to reduce its silver reliance with alternatives but for now, ‘despite panel manufacturers actively working on ways to reduce silver loadings per cell, overall silver use is to increase at least through 2020 due to growing solar installations,’ driven in large part by expansion in China and the European Union, Larry Wang of Heraeus Photovoltaics told conference attendees.

“The cars of the future are also expected to have more solar panels on their exteriors to add power to the network, while fast-charging stations will have solar panels, again lifting demand for silver powder until an alternative is found.

“A third growth area is health care, hinging in large part on silver’s valuable property as a bacteria killer, including in silver-imbedded bandages and silver-coated catheters.

“Silver use in glass touch screens in the medical field is another notable application. Dr. Trevor Keel of Agility Health Tech explained to the silver group that “not only is the light transmission rate 98% for silver versus 96% for graphene and 91% for indium tin oxides, but the antibacterial properties of silver make it ideal for use in touch panels.

“On top of demand trends, there are supply factors in the industrial-use equation that are also supportive to prices.

“’The overwhelming consensus was that the current silver price is too low, given difficulties finding and developing new mines and increasing political risk — governments wanting bigger pieces of the mining revenue pie, such as what’s happening in Tanzania,’ said conference attendee Maria Smirnova, a senior portfolio manager at Sprott Asset Management LP, the lead portfolio manager of the Sprott Silver Equities Class and a co-manager of the Sprott Gold and Precious Minerals fund.

“’The current price environment is in large part due to investor perception that the U.S. economy is strong and the Fed will continue tightening monetary policy (raising interest rates) and President Trump’s promised tax cuts and fiscal stimulus will further boost growth,’ she said, adding she believes that view is overdone.” (“Silver’s bullish underpinning – it’s an essential metal for these 3 growth industries.” MarketWatch 11.09.17)