A scenario to end gold's bull run looks increasingly unlikely – Invesco

The gold market, as it continues to hold critical support, above $1,900 an ounce, is in no danger seeing its current uptrend ending anytime so according to one investment firm.

In a commentary published last week, Talley Léger, Investment Strategist at Invesco, said that the fundamental outlook for gold that has driven prices to nearly double since the lows in late 2015 isn’t going away anytime soon.

December gold futures last traded at $1,957.10 an ounce, up 0.71% on the day.

Léger said that for the gold market to lose its current momentum, the U.S. economy would have to overheat enough to force the Federal Reserve to drastically raise interest rates, which in turn would boost the U.S. dollar. A rise in interest rates would also put the current economic recovery, which is benefitting from low interest rates, in jeopardy.

Léger said that it would be difficult “to identify a catalyst that would bring about such a scenario at this vulnerable stage of the nascent economic recovery.

“In our view, the Fed seems determined to protect this budding upturn by keeping interest rates low for the foreseeable future,” he added.

Although gold’s bull run doesn’t appear to end anytime soon, Léger also said that there are risks to watch. He warned gold investors to keep an eye on consumer sentiment. He explained that rising consumer sentiment could foreshadow impending economic growth.

“According to the latest Surveys of Consumers, challenging economic times are expected to persist not only in the year ahead, but most consumers don’t see a return to uninterrupted growth over the next five years,” he said.

Léger added that Invesco’s base-case scenario is for prolonged, low-altitude recovery alongside lingering fears about the coronavirus, which will be a healthy environment for gold.

As the U.S. looks for meager growth for the foreseeable future, Léger said that the Federal Reserve will continue to maintain low interest rates, which will weigh on the U.S. dollar.

He also said that the threat of rising inflation as the Fed keeps nominal interest rates low could lead to lower real interest rates, “a welcome development for the price of gold.”

 

By Neils Christensen

For Kitco News

David

Dollar strength and U.S. equities under pressure are supportive of gold and silver

Considering today’s extremely strong U.S. dollar, coupled with a major decline in U.S. equities, the fact that both gold and silver are trading higher on the day is extremely impressive. Currently the dollar is up just over 0.75%, which is a net gain of 70 points, taking the dollar index to 93.425.

As of 3:48 PM EST gold futures basis the most active December contract is trading $6.70 higher, a net gain of +0.34%, and fixed at $1940.70. The most noteworthy aspect of today’s trading range was the low which occurred earlier in the trading session when gold futures traded to a low of $1911.70 before recovering. The 50-day moving average for gold futures currently resides at $1912.50. This indicates at least on a technical basis that there is solid support at the 50-day moving average. It also indicates that in terms of short-term market sentiment it remains solidly bullish as long as gold can remain above that key level of support.

Silver futures are also exhibiting moderate gains on the day. Currently the most active December 2020 contract of silver is at $26.825, which is a daily gain of about $0.12, or +0.44%. The only precious metal trading lower on the day is palladium which is currently down by 1.54% and fixed at $2,307.00.

On many occasions when U.S. equities have a meltdown like today, gold and silver prices would be dragged along with them lower. As many traders liquidate holdings to cover margin calls.

The NASDAQ composite lost -395 points (-3.49%), and is at 10,917.90, with six minutes left in trading. The S&P-500 sustained a drawdown today of -2.23%, and after factoring in a decline of just over -79 points sits at 3,347.77. The Dow Jones industrial average is down well over -2% and is presently at 27,520.98, after factoring in today’s decline of well over -600 points.

On a technical basis we currently show support for gold futures at $1,912.50 the 50-day moving average, and major support at $1,900 per ounce. Short term resistance occurs at the high achieved today, which was at $1,948.30, with the next level of resistance occurring at $1,975 per ounce, and major resistance occurring at $2,000.

Our technical studies also indicate the first level of support for silver occurs at the 23% Fibonacci retracement level at $25.66, with major support occurring at $25 per ounce. The first level of resistance in silver occurs just below $28 at $27.85.

Considering dollar strength, all the gains seen in gold and silver today are 100% due to market participants bidding the precious metals higher.

Wishing you as always, good trading,

 

 

By Gary Wagner

Contributing to kitco.com

 

David

All eyes on the ECB and potential currency devaluation rate

Although new stimulus measures from the ECB would boost the U.S. dollar and, in turn, drive gold prices down, analysts have said that investors should look past this short-term volatility and focus on the bigger picture: a new lap in the global race of currency devaluation.

Marc Chandler, chief market strategist at Bannockburn Global Forex, said that technical indicators point to continued consolidation in the near-term. However, he does not expect to see any significant correction.

“If the major central banks are engaged in an uncoordinated effort to convince investors that they are serious about pushing inflation higher and that in part, it means lower rates for longer, it is difficult to envision a deep or sustained decline in gold prices,” he said.

Commodity analysts at Commerzbank said they also see the potential for higher gold prices as the ECB could spark a devaluation race.

Jonathan Butler, precious metals analyst at Mitsubishi, said that it’s not surprising to see government and central banks focus on boosting inflation pressures as they try to reflate the global economy. Since March, the global economy has been turned upside down to the COVID-19 pandemic.

“Govesrnments and central banks around the world are, more than ever, looking to raise inflation as they seek a return to growth, avoid a deflationary trap, and perhaps also inflate away the record levels of government debt incurred this year,” he said. “Negative interest rates and a global pandemic/economic crisis was the backdrop for gold’s solid underpinning through the last several months. We expect the macro environment will continue to be favorable to gold as an investment.”

By Neils Christensen

For Kitco New

David

Why juniors could trade higher, and what could hold them back

With all the money raised, juniors should have the means to post lots of drill results this fall, said James Kwantes, editor of Resources Opportunities.

Kwantes was joined by special correspondent Paul Harris; editor Neils Christensen; and mining audiences manager, Michael McCrae, to record a podcast on Friday. In recent months the financing tracker Oreninc noted some exceptional weeks for juniors raising funds on the back of higher precious metal prices and easy access to capital.

To create some buzz, exploration companies typically publish their drill results in the fall to coincide with some of the industry's key conferences, such as Beaver Creek Precious Metals Summit and Denver Gold Forum.

Kwantes, a former resource reporter for the Vancouver Sun, said there are a mix of factors that could help and hurt junior stocks. Some juniors won't have a lot to publish due to spiking demand for drillers and the logistical challenge that come from managing COVID-19 restrictions.

There's also the nature of the financings. Kwantes warns about a "flood of paper" potentially hitting the market, which could depress the sector later in the year.

"[Juniors] have raised a lot of cash in the last few months. Everybody's excited about the higher gold price," said Kwantes. "It will be interesting to see what happens when all the holds come off in the four-month paper. There's been a lot of money raised, quite a bit of drilling activity."

"Financings typically have a four-month hold placed on them. So if you buy into a private placement, you can't do anything with the stock for four months. Typically, the company will try to generate news or hopefully make a deposit–make a discovery."

The panel also discussed Barrick Gold, the world's second-largest gold producer, and AngloGold Ashanti Limited, and their decision to sell their combined 80% stake in the Morila gold mine in Mali to Mali Lithium (ASX:MLL) for cash consideration estimated at between $22 million and $27 million.

Paul Harris also noted the surprising uptick in copper production from Chile despite the pandemic.

 

By Michael McCrae

For Kitco News

David

MIT professor – this new battery could change the world, these metals needed

In order to transition towards a fully renewable energy-based economy, the problem of intermittency in non-fossil fuel electricity generation first needs to be solved, said Donald Sadoway, professor of materials chemistry at MIT.

“I wanted something that was versatile and could go wherever you needed to have the gap, bridge, when the sun isn’t shining and wind isn’t blowing,” Sadoway told Kitco News.

Sadoway, who was named one of Time Magazine’s “100 Most Influential People” in 2012, had worked on new battery technologies that would solve this problem; he and his team at MIT created a liquid metal battery to be used for stationary energy storage.

“When it comes to massive storage…we need something different [from lithium ion batteries], something that would operate at large scale safely without fear of fire, and it has to have long, long service lifetime and it has to be cheap,” he said. “So I set out to find a new chemistry and that led to the invention of the liquid metal battery.”

Sadoway envisions the liquid metal battery platform to be used to power large stationary electricity users, such as hospitals, manufacturing facilities, or even a subdivision of several hundred homes.

The affordability of this technology was crucial in the design aspect of this battery, Sadoway noted.

“For me, it’s all about giving people technology that enhances the quality of life and does so at a competitive price point. I’ve been very, very strict with my team about not inventing something that’s super expensive that's going to get you into the journal, but it’s never going to get you into customer hands,” he said.

The shift to a carbon-free economy needs to come from the private sector and from new technologies and inventions that outperform existing power generation methods, Sadoway said.

“I’m not comfortable with incentives in the form of these subsidies and rebates and so on. I think that the change should take place via market forces where the technology becomes superior and it becomes competitive to buy an all-electric vehicle versus the vehicle with a combustion engine,” he said.

The dominant battery today is still lithium ion, Sadoway noted.

“We hear talk about silicon and so on, but we’re not seeing a lot of penetration on that, so graphite is definitely going to be needed for the foreseeable future. And on the positive electrode, there are various combinations of nickel oxide, cobalt oxide, manganese oxide, aluminum oxide, people want to get rid of the cobalt and get the cobalt down to as low as they can,” he said. “There’s an increasing demand on nickel.”

 

By David Lin

For Kitco News

 

David

Global stocks falter as tech stays weak, dollar dips after three-day run

NEW YORK (Reuters) – A gauge of global stocks fell for a second straight day on Friday and marked its biggest weekly percentage drop in nearly three months, while the dollar ran out of steam, ending a three-day run higher, after a U.S. payrolls report painted a weaker economic picture.

U.. job growth slowed in August as financial aid from the government was depleted, with nonfarm payrolls increasing by 1.371 million jobs versus 1.734 million in the prior month. Expectations were for the addition of 1.4 million jobs. The unemployment rate fell to 8.4% from 10.2%.

“It points in the right direction, but still leaves some question marks as 8.4% of unemployment is still a high rate,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “They certainly point to recovery, but yet a weak recovery.”

For a graphic on Jobs fell off a cliff:

On Wall Street, stocks remained under pressure for a second consecutive session, as technology shares again played an outsized role. The tech sector dropped 1.34% and suffered its biggest two-day percentage drop in almost six months.

The Dow Jones Industrial Average fell 159.42 points, or 0.56%, to 28,133.31, the S&P 500 lost 28.13 points, or 0.81%, to 3,426.93, and the Nasdaq Composite dropped 144.97 points, or 1.27%, to 11,313.13.

U.S. markets are closed on Monday for the Labor Day holiday.

The pan-European STOXX 600 index lost 1.13% to close down 2.03% on the week. MSCI’s gauge of stocks across the globe shed 0.95% to end the week and give the index its biggest weekly percentage drop since mid-June.

The U.S. dollar gave back initial gains following the jobs report and turned lower late in the session to snap a three-day run of gains off of two-year lows. The euro edged lower to continue its decline after breaching the $1.20 mark on Tuesday.

The dollar index fell 0.047%, with the euro down 0.08% to $1.1839.

U.S. Treasury yields climbed on the heels of the jobs report.

Benchmark 10-year notes last fell 29/32 in price to yield 0.7148%, from 0.622% late on Thursday.

Oil prices continued to weaken on demand concerns and were on track for their worst week since mid-June.

U.S. crude settled down 3.87% at $39.77 per barrel and Brent was at $42.66, down 3.2%, on the day.
 

Reporting by Chuck Mikolajczak; Additional reporting by Sinéad Carew and Sagarika Jaisinghani in Bengaluru; Editing by David Gregorio and Leslie Adler

David

U.S equities move strongly lower, after hitting new record highs yesterday

After hitting new all-time record highs in both the NASDAQ composite and S&P 500, profit-taking and selling pressure today took all three major indexes dramatically lower. The largest drawdown today occurred in the indices that has performed the best of all three major indexes, the NASDAQ composite. After closing above 12,000 yesterday the NASDAQ composite opened at 11,859 this morning, and was at 11,458 by the close. The selling pressure in the NASDAQ composite took that index 598 points lower which is a decline of almost 5% (-4.98%).

The S&P 500 lost 3.51% in trading today, the total drawdown of 125.78 points taking that index to 3,455.06. The index that had the smallest percentage drawdown was also the index that did not trade to an all-time record high yesterday which is the Dow. The Dow Jones industrial average lost 807 points which is a net decline of -2.78%, taking that index to 28,292.73.

The catalyst for today’s dramatic selloff in U.S. equities is not crystal clear. However MarketWatch reported that Chris Zaccarelli, chief investment officer for Independence Advisor Alliance said, “In the absence of a specific catalyst, it’s easy to classify today’s swoon as profit-taking, noting that the “most-loved” parts of the market — the technology, consumer discretionary and communications services sectors — sold off the most.”

This report also cited a statement by Esty Dwek, head of global macro strategy for Natixis Investment Managers which said, “Tech stocks, and the overall market, hadn’t really had a bad day since June, so this is a healthy breather. It was never just going to be a straight line up. But the long-term structural support for technology has not changed and support for equities has not either,”.

Today’s selloff occurred in conjunction with positive economic data. New applications for unemployment benefits fell 130,000 to a seasonally adjusted 881,000. This was lower than the estimate which was looking for a seasonally adjusted number of 940,000. This data certainly suggests that although slow, a recovery has begun in the United States.

However, the most important data to be released this week will occur tomorrow when the U.S. Labor Department releases its jobs report for last month.

Lower U.S. equity pricing pressured the precious metals, and with the exception of palladium, all the precious metals sustained a wide loss in trading today. Silver had the largest percentage drawdown, which is logical due to its industrial component. Silver futures lost 2.32%, taking the most active December 2020 contract to $26.76, after factoring in today’s decline of almost $0.64.

Gold sustained the smallest percentage drawdown giving up 0.38%, with the most active December 2020 futures contract closing at $1,937.40. Our technical studies indicate that the next strong level of support in gold occurs at $1,900 per ounce, with major support at $1,847 which is the 38% Fibonacci retracement level. Major resistance for gold continues to remain $2,000 per ounce.

 

By Gary Wagner

Contributing to kitco.com

David

Silver is now trading like a currency look for higher prices – Kootenay Silver CEO

Silver has seen significant momentum in the last two months as it is now outperforming gold. One mining executive said that all-time highs are not out of reach for the precious metal with this strong tailwind.

In an interview with Kitco News on the sideline of the Mines and Money Online Connect global virtual mining conference, Jim McDonald, CEO of Kootenay Silver, said that unprecedented loose monetary policy around the world would continue to drive precious metals higher. He added that silver's all-time high around $50 isn't even the full target.

"I don't think [$50 silver] out of reach at all. I firmly believe it's going to happen. I don't know what the timing is going to be," he said. "And I think it's going to overshoot that old price and maybe buy quite a bit. We've been waiting a long time for it to break that major psychological $20 barrier."

McDonald said that he could see the gold/silver ratio falling to 30 points in an over-corrective move after hitting an all-time high around 125 in March.

"That kind of ratio and the silver price would be close to a hundred," he said.

Not only is the silver market expected to rally higher, but McDonald said that he expects market conditions to sustain higher prices.

Although weak industrial demand was weighing on silver at the start of the year, causing the precious metal to underperform gold, McDonald said that those factors are now being outweighed by the massive stimulus measures undertaken to support the global economy, devastated by the COVID-19 pandemic.

"We're getting to see a silver start to trade, like a currency as well. That will be the overriding factor here in driving the silver price, not the economy," he said.

McDonald added that the rally in gold and silver has created a transformational shift in the marketplace. He explained that only a few years ago, Kootenay Silver had to beg for every investment dollar it could get.

"Fast forward to today. We announced our financing in the morning and the book was closed about an hour later on $5 million and we up-sized it to seven. So it's a very, very different environment," he said.

Kootenay Silver has one of the biggest portfolios of silver assets in Mexico. McDonald said that their focus now with their new capital is to continue to de-risk their projects, including their cornerstone property Columba silver project.

 

By Neils Christensen

For Kitco News

David

Silver's fundamentals are stronger than gold – Randy Smallwood

The gold/silver ratio continues to hover near its lowest level in a month as silver continues to play catchup within the precious metals markets.

On the sidelines of the Mines and Money Online Connect virtual mining conference, Randy Smallwood, president and CEO of Wheaton Precious Metals, said that now is silver's time to shine. It is only a matter of time before the metal follows in gold's footsteps and hit record highs above $50 an ounce, he added.

"There's just all sorts of benefits to silver," Smallwood said. "We've been saying for a long time, the fundamentals are much stronger, but silver always lags gold when gold starts moving. In the last two months, we've really seen silver totally outperform and claw its way back up. Now, we're not at record highs yet, but with the fundamentals behind silver… I'm confident that we will see record highs in silver over the near term."

Smallwood's comments come as silver prices push to a nearly two-week high. September silver futures last traded at 28.385 an ounce, up more than 2% on the day. Meanwhile, the gold/silver ratio is currently trading at 70, down significantly from March’s all-time high around 125.

Some analysts have said that silver prices have struggled in gold's shadow because of weak industrial demand due to the devastating impact of the COVID-19 pandemic; however, Smallwood said that along with being a monetary metal, silver's industrial demand is what makes it more compelling than gold.

He added that silver's industrial demand is only going to continue to grow. In a world that looks to be more energy-efficient, Smallwood noted that silver is the best conductor in the world, "better than gold, better than copper."

"Everything here feels like we're just building up from our foundations for our continued strong move up," he said.

Smallwood said that with gold and silver just starting what is expected to be a long-term bull market, he continues to see strong growth for streaming and royalty companies.

However, he also noted that higher gold and silver prices make deals a little more expensive and harder to come by.

"There are times to make deals and there's times not to," he said. "What we look for, of course, are opportunities where we can deliver value back to our shareholders," he said. "There's still a lot more development that needs to be funded in this industry. We haven't seen a lot of redevelopment invested in, and so I think that demand is going to be there and be strong."

Smallwood said that an area of growth he sees in the future is working with base metal producers, getting a streaming deal for precious metals produced as a bi-product.

"When they see the record high prices on the precious metal side, especially the gold space…there's a lot of consideration about whether they should crystallize some of that non-core byproduct value," he said. "So, we are seeing still some good, strong interest on the streaming side."

 

By Neils Christensen

For Kitco News

 

 

David