Big buying opportunity’: Gold price to rebound as U.S. faces ‘lingering damage’

Big buying opportunity’: Gold price to rebound as U.S. faces ‘lingering damage’

Anna Golubova Friday June 05, 2020 15:37

Kitco News

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(Kitco News) Gold might be down but a rebound is on its way and investors should view this setback as a buying opportunity, according to analysts.

Gold surprised investors with a loss of $50 in the span of just two hours on Friday as markets rallied on shockingly upbeat employment news in the U.S.

Hope that the U.S. economy is recovering quicker than expected led to an immediate rally in the stock market. At the time of writing, the Dow was up more than 2.5% after jumping more than 700 points. Gold was sharply down with August Comex gold futures last trading at $1,686.80 an ounce, down 2.35% on the day.

“The COVID premium has probably started to be priced into the market. We had 8-10 weeks of it and it could be falling away into the background,” Rhona O’Connell, head of market analysis for EMEA and Asia regions for INTL FCStone, told Kitco News on Friday. “The employment numbers in the U.S. are going to put pressure on the gold market.”

All of that points to more of a risk-on environment, which is why we are seeing gold come off, O’Connell added.

But has this risk-on optimism ran ahead of itself? Some analysts warned of tough times still ahead. “While we do expect a continued surge in hiring in the coming months, the need for continued physical distancing well into the future suggests there will still be lingering damage in some industries, with the unemployment rate remaining elevated for years,” said Capital Economics senior U.S. economist Michael Pearce.

Many analysts are also questioning just how far this equity rally can go and more importantly whether it can even last.

“Longer term, we still got geopolitical risks as the trade tensions that not gone away. We’ve got underlying risk in the economic and financial environment,” O’Connell pointed out. “Do we know if the recovery in China and the early shoots the U.S. will cascade through to Europe? It is questionable whether the equity markets are reflecting the genuine potential for recovery in the next three-to-six months or whether they have gone too far.”

The rally in the equity space is unlikely to last, said TD Securities head of global strategy Bart Melek.

“This equity surge is a surge only for a little while. At some point, there may be a correction,” Melek said. “The reality is that we will still have massive unemployment, economy will be massively under potential and that means central banks and governments will have to continue to add stimulus. I suspect that central banks will allow inflation to move above 2%. At the same time, we are producing massive amount of debt.”

The U.S. economic recovery will not be smooth and quick. “There will be some structural issues … The first phase of the recovery is the easy stuff,” Melek added.

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Virus Sparks Round-the-Clock Rush to Fill U.S. Gold Vaults



Virus Sparks Round-the-Clock Rush to Fill U.S. Gold Vaults


Elena Mazneva and Jack Farchy
Virus Sparks Round-the-Clock Rush to Fill U.S. Gold Vaults
Virus Sparks Round-the-Clock Rush to Fill U.S. Gold Vaults

(Bloomberg) — The scramble to jump on one of the hottest gold trades in years — by shipping bullion to New York — has sparked what may be one of the largest ever physical transfers of the metal.

“The flows into New York are unprecedented,” said Allan Finn, global commodities director at logistics and security provider Malca-Amit. His company’s teams in New York have been working 24 hours a day to cope with demand while navigating lockdowns, flight disruptions and social distancing.

Gold flooded into the U.S. in recent months as traders rushed to profit from an arbitrage caused by dislocations in the market triggered by the pandemic. Since late March, some 550 tons of gold — worth $30 billion at today’s price and roughly equal to global mine output in the period — have been added to Comex warehouse stockpiles. Hundreds of tons of that was imported.

While tens of billions of dollars of gold change hands every day in financial markets, a much smaller amount tends to physically move between vaults in trading hubs like London, Zurich and New York.

But that started to change as the Covid-19 crisis affected the supply chain. When planes were grounded and Swiss refineries closed in late March, traders were worried they wouldn’t be able to get gold to New York in time to deliver against futures contracts. That caused futures, which typically trade in lockstep with the London spot price, to soar to a premium of as much as $70 an ounce.

That created an opportunity for enterprising traders: buy gold somewhere in the world at the spot price, sell futures, and benefit from the difference by shipping the metal to New York.

The scale of the trade has been revealed in exchange reports, import and export data and comments from some of the leading precious metals shipping and vaulting companies. On Thursday, traders declared their intent to deliver 2.8 million ounces of gold against the June Comex contract, the largest daily delivery notice in bourse data going back to 1994.

Swiss gold exports to the U.S. have surged, reaching 111.7 tons in April, the highest on record. American import data for April isn’t yet available, but already in March gold imports topped $3 billion, according to the Census Bureau, the highest in at least a decade. Refineries as far away as Australia have ramped up output of kilobars — the form typically delivered on the Comex — to ship to New York.

For Brink’s Ltd. Managing Director Mark Woolley, the spike in demand to ship gold to New York has been unlike anything he’s seen in 20 years in the market.

“The amount of metal that we’ve successfully moved into New York is pretty significant,” he said Thursday on a webinar hosted by the London Bullion Market Association. “It’s probably not far off the total amount of metal that’s been mined in this period.”

CME Group Inc., which owns Comex, responded to the recent market dislocation by introducing a new contract allowing the delivery of 400-ounce bars, the type traded in London. Still, “other changes need to be at least considered,” according to LBMA Chairman Paul Fisher.

The enormous movement of gold has been a boon for logistics companies, but also a challenge. Not only have passenger flights — on which shipments are typically transported — been grounded, but New York City, where many Comex warehouses are located, has also been a hotspot for the virus.

To deal with flows, Loomis International U.K. opened up additional vault capacity. Malca-Amit considered using airports in Boston and Philadelphia, but hasn’t needed to yet, Finn said.

While large volumes and virus-related restrictions at vaults and airports caused some delivery delays, much of the spike in the premium for futures contracts in March — which left some banks nursing sizable losses — was driven by perception rather than reality, Finn said.

“My own personal opinion is that any assessment on the inability to get gold in was ill-informed at the time and was made on assumptions rather than fact,” he said.

Still, the bonanza for precious metals shippers may last a while. Large deliveries have seen June Comex futures drop to a discount to spot prices this week, but later dated futures are still at a premium. And as investor interest in other precious metals picked up, futures for silver and platinum have also traded at premiums to spot.

“The guys in New York have done a great job,” said Brian Hayward, head of Loomis International U.K. “We’re seeing a lot of silver head that way right now.”

(Updates with LBMA chairman’s comment below second chart. An earlier version corrected the Y axis in the first chart)

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Gold thrives on flight to safety; palladium jumps

By Brijesh Patel

(Reuters) – Gold jumped more than 1% on Monday to its highest since October 2012 after a batch of weak data knocked hopes for a speedy global economic recovery while auto-catalyst palladium surged to a three-week high.

Spot gold was up 0.8% at $1,754.62 an ounce by 1238 GMT. U.S. gold futures rose 1% to $1,758.90.

“The market continues to speculate about negative interest rates in the U.S. and extremely low interest rates and cheap money all over the world,” said Commerzbank analyst Eugen Weinberg.

“Also, fears of economic crisis are unfolding given the very weak data in the United States and elsewhere.”

Data published on Friday showed U.S. retail sales and industrial production both plunged in April, with the coronavirus crisis continuing to pummel the U.S. labour market.

Data in Japan, meanwhile, confirmed that the world’s third-largest economy slipped into recession in the first quarter.

Gold, which tends to appreciate on expectations of lower interest rates, has risen more than 16% this year as central banks have rolled out a wave of rate cuts and other stimulus measures to limit economic damage caused by the virus-outbreak.

Federal Reserve Chairman Jerome Powell over the weekend said that a U.S. economic recovery could stretch deep into next year and a full comeback could depend on a coronavirus vaccine.

“Dovish comments from the Fed and concerns about the stock market have lifted bullion,” ActivTrades chief analyst Carlo Alberto De Casa said in a note.

“It is clear that investors are continuing to buy bullion as insurance in case there are any further corrections on stocks.”

Indicative of sentiment, SPDR Gold Trust holdings, the world’s largest gold-backed exchange-traded fund, rose 0.8% to 1,113.78 tonnes on Friday – its highest in more than seven years.

Markets are also keeping a wary eye on China’s trade relations with the United States.

Among other precious metals, palladium was up 4.8% at $1,992.21 an ounce after gaining more than 9% in early trade.

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Germans pile into gold…..

Economic uncertainty in Europe and fear of a Greek default are turning people to buy gold bars and coins

Gold bars from the vault of a bank are seen in this illustration picture taken in Zurich
Germans are stocking up on gold bars Photo: Reuters

By , Commodities editor

9:59AM BST 14 May 2015

German investors have piled into gold bars and coins in the first quarter of the year as a hedge against European Central Bank policy and the threat of a Greek default bringing down the eurozone.

Latest figures from the World Gold Council show that Germans increased their buying of gold coins and bars of bullion by 20pc to 32.2 tonnes in the last quarter, the highest rate of purchases seen in a year.

The strong buying of gold - which is traditionally seen by investors as a safe-haven asset – was seen across Europe amid growing uncertainty over central bank policy and the standoff between Athens and its creditors.

“This was the strongest start in Europe for gold coins and bars that we have seen since 2011,” Alistair Hewitt, head of market intelligence at the World Gold Council told The Telegraph. “German investors are fretting over the ECB, Greece and Ukraine.”

On the wider market, the World Gold Council revealed that total demand in the first quarter fell 1pc to 1,079 tonnes compared with the same period last year.

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Currency Turmoil Makes Precious….


  • What does the first two months of 2015 mean for precious metal?
  • Investors are now paying for the “privilege” of lending to broke governments.
  • Will the Fed chicken out on rate hikes?

The first two months of 2015 have seen turmoil in the currency markets extend from Russia and Ukraine to the heart of Europe.

“Central Banks Now Open 24/7 Fighting Currency Wars and Deflation,” blared a February 12th Bloomberg headline. Against this backdrop, precious metals have been on the rise in terms of all currencies except the Swiss franc and the U.S dollar.

In January, the Swiss National Bank shocked markets by announcing that it would de-link its currency from the euro. The move came one week ahead of the European Central Bank’s $1.1 trillion Quantitative Easing announcement. Swiss officials decided it would be too costly to keep accumulating depreciating euros in order to maintain the currency peg. The Swiss franc surged by the most ever in a single day.

With the exception of Switzerland, all other countries in Europe (and many others around the world) are trying to depreciate their currencies.

Since January 1, the following central banks have announced interest rate cuts or other monetary easing measures: European Central Bank, Reserve Bank of Australia, Reserve Bank of New Zealand, Monetary Authority of Singapore, and the central banks of India, Canada, Denmark, and Sweden.

Read Full Article Seekingalpha

2015 1 oz Silver Birds of Prey Series Red Tailed Hawk Coin

2015 1 oz Silver Birds of Prey Series Red Tailed Hawk Coin

The Royal Canadian Mint launched the newest release from its Canadian Birds of Prey 99.99% pure silver bullion coin series with a majestic tribute to the Red-Tailed Hawk. This iconic ruler of North American skies is dramatically portrayed on a 1 oz. bullion coin that is sure to appeal to a wide range of customers for both its theme and signature purity.

The Birds of Prey – Red-Tailed Hawk is 99.99% pure silver bullion coin has a theme whose appeal and relevance transcends borders and expected to shine a new light on the diversity of our investment products.”

The 2015-dated, “Red-Tailed Hawk” 99.99% pure silver bullion coin is the third of four coins in the Mint’s exciting biannual bullion series featuring Canadian birds of prey.

Its reverse design features a captivating illustration by acclaimed Canadian illustrator Emily Damstra of a Red-Tailed Hawk in descending upon it’s prey. This 99.99% pure silver coin is crafted with the Mint’s signature bullion finish is limited to only one million coins world-wide. 

In keeping with a distribution model common to the world’s major issuers of bullion coins, the Mint does not sell precious metal investment products directly to the public. Interested buyers are encouraged to contact a reputable bullion dealer to order this new coin. 

Mint: Royal Canadian Mint Composition: 99.99% pure silver Weight (g): 31.39 Diameter (mm): 38 Face Value: 5 dollars (CAN) Finish: Bullion Edge: Serrated/Reeded Limited Mintage: 1,000,000 Artist: Emily Damstra

Orders of 25 Coins will be sent in their original Canadian Mint Tube.

It Seems Like Hedge Funds..

It Seems Like Hedge Funds Are Jumping Into The Gold Market


  • The popular narrative is that the gold market is currently quiet and dead and there is very little investor interest.
  • That is not supported by the large amounts of volume that we’re seeing in the gold mining and leveraged gold mining ETFs.
  • The volume has increased to the largest levels in history and it seems to be hedge funds who are getting into the market.
  • Since most of the interest seems to be on the short side this may provide a good opportunity for patient gold mining investors.

The dominant narrative in the gold market has been that investors have fled the sector in search of better returns in the rest of the markets as the Fed has stabilized the system. In other words, the gold bubble has popped and the last investor needs to shut off the lights when they are done.

Read Full Article At SeekingAlpha

Currency traders eye Swiss..

Currency traders eye Swiss vote on gold holdings


A referendum that would force the Swiss central bank to hold a fifth of its assets in gold could rock foreign exchange markets, analysts have warned.

On the 30th November, voters in Switzerland will head to the polls to decide whether the Swiss National Bank (SNB) should boost its gold holdings and refrain from any further selling of Swiss gold.

Bloomberg | Bloomberg | Getty Images

The referendum, proposed by the ultra-conservative Swiss People’s party, will also require the bank to repatriate all Swiss gold holdings currently held outside of Switzerland if passed.

The ban on selling gold would go into effect immediately and the SNB would have five years to reach the 20 percent requirement.

Foreign exchange markets are likely to be most affected by the move. Three years ago the SNB pledged to ensure the country’s competitiveness by keeping the Swiss Franc at a set level at 1.20 francs per euro. Any move to bolster gold holdings could put this “floor” under pressure and will likely trigger further euro weakness – which would make Swiss exports more expensive.

“Investors could use the poll as an excuse to challenge the EUR/CHF floor and the market would then start to speculate on an SNB rate cut to negative interest rates, especially as short-term rates are lower in the euro zone than in Switzerland,” said senior currency strategist at Societe Generale, Sebastien Galy.

Over the five-year period, the SNB would have to sell part of its currency reserves, or theoretically print money to finance the gold purchases, Galy said.

“Currently this amounts to selling $68 billion, mainly by selling euro and dollars, to buy 1,783 tons of gold,” he added.

The central bank has said such measures would be detrimental to Switzerland as it would undermine the independence of the central bank and such large scale purchases of gold would prove very costly.

The latest polls showed 44 percent of respondents were in favour of the vote. Governing board member of the SNB Fritz Zurbruegg said he was taking the measures “extremely seriously” at a conference in Geneva last week.

Read full article at CNBC



Gold fear spike may be on its way

By Michael A. Gayed

“Never be afraid to sit a while and think.” – Lorraine Hansberry

Gold is sometimes a tricky asset to figure out. Traditionally, the yellow metal trends nicely in negative real-rate environments, whereby inflation is higher than nominal interest rates. The argument goes that negative real-rate environments result in money positioning into the metal as an inflation hedge given its historical behavior as a way of preserving wealth in the pre-fiat economic system.

Sometimes gold acts like a “risk on” asset which rallies with equities like the S&P 500 SPDR ETF SPY +0.37% . Sometimes, it rallies with Treasurys in a “risk off” period where behaviorally deflationary trades tend to do better. This makes the absolute price movement of gold — repped here by the SPDR Gold Trust ETF GLD +0.17%  — somewhat difficult to predict because its behavior changes in different market regimes. This holds true independent of whether you view gold as an investment, trade or hedge. Contrast this changing behavior to that of more traditional sectors of the stock market like utilities, consumer staples and health care, which our equity-sector ATAC Beta Rotation Fund BROTX -0.35%  can position fully into during periods of heightened volatility.

Where gold is perhaps most interesting, in my opinion, is in its relationship to black gold, oil. During volatile periods for equities, gold tends to do fairly well relative to oil. Interestingly, this behavior somewhat tracks the VIX index, which itself rises during heightened fear periods for the stock market.

Take a look below at the price ratio of gold ($GOLD) relative to light crude oil ($WTIC) in the reddish line, and the spot VIX index in black behind it. As a reminder, a rising price ratio means the numerator/gold is outperforming the denominator/oil. A falling ratio means underperformance.

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The Coming Gold Rush….

  • U.S. deficits can only be solved as they always have been: reflation and debasing the dollar.
  • World demand for good and services is escalating, and will only continue to escalate in the coming months and years.
  • Vehicles for participation in gold’s coming rise.
  • Positive technical behavior of GLD and gold in the past: $3,000 gold = 295-300 GLD.

In definition, gold is:

  • A combination of a reflection and hedge against U.S. and world inflation.
  • A form of money or currency, accepted worldwide.
  • A store of value.
  • A protection and hiding place against economic and political world problems and uncertainties.
  • A contra investment against an overbought stock market, especially in a low-interest-rate environment. The market has been overbought to these levels only three times in history: 1929, 2000, and 2007. (Nobel prize winner Robert Schiller).

The deficits caused by governments’ excessive and wasteful spending, including those caused by wars since and including WWII, have always created screaming commentary similar to what we read today:

Just how is Washington and the nation going to cure the enormous deficits we have created? They are a serious percentage of our GNP and foreign governments are effectively in potential control of our country by way of their large investments made in our government bonds.

Our history shows we have solved this problem not by shrinking these deficits in actuality, but by reducing their percentage of our GDP and debasing our dollar in so doing. This has been done by reflating (see former prices): $0.17 per gallon of gas, $2.00 for a carton of cigarettes, $850 for a Chevrolet deluxe, and $15,000 for a 2,000-square-foot suburban home are just a few examples. Wages and income have kept pace with price inflation nearly on par.

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