Gold solidly down Thursday, following sell off in U.S. equities

Gold prices are posting solid losses in midday U.S. trading Thursday and were near daily lows, following the U.S. stock indexes lower as they also extended daily losses. Bullish outside markets today–a lower U.S. dollar index and sharply higher crude oil prices—offered no support to the precious metals. Some more profit taking in gold and silver from the shorter-term futures traders is featured today. June gold futures were last down $18.00 an ounce at $1,696.50. May Comex silver prices were last down $0.18 at $14.98 an ounce.

Thursday’s weekly jobless claims report, which has become the focal point of the marketplace in recent weeks, showed a rise of 3.84 million in new claims. The number was forecast to be 3.5 million. The report is a reminder of the dour state of the U.S. economy. The U.S. stock market lost its overnight gains after the release of this report.

Global stock markets were mostly firmer in overnight trading. Some upbeat news Wednesday on a drug trial that lessens the effects of Covid-19 and a big rebound in crude oil prices prompted some better trader and investor risk appetite as April winds down. Many U.S. states are now partially reopening their businesses.

In other news, the European Central Bank left its monetary policy unchanged at its regular meeting Thursday. However, the ECB also painted a very bleak picture for the Euro zone economy. The Euro zone gross domestic product contracted by 3.8% in the first quarter from the fourth quarter of 2019, and was down 14.4%, year-on-year, it was reported overnight. Those numbers are a record for the 14-nation bloc. The year-on-year decline in Euro zone GDP was much greater than the 4.8% drop in U.S. GDP in the same period, and reported on Wednesday.

A Reuters (Refinitiv) survey just released shows global jewelry fabrication volumes, which typically account for around 55% of total physical demand for gold, fell 40% in the first quarter, year-on-year. Investment demand was mixed, with retail investment, which consists of bars and coins, posting an 11% year-on-year drop. Physical gold demand fell to 753 metric tons in the first quarter, the lowest levels since 2009 as higher gold prices led to a drop in consumption. The biggest declines were recorded in Asia at down over 43% year-on-year. Chinese demand recorded a 62% decline in jewelry fabrication in the period.

The important outside markets see Nymex crude oil again solidly higher and trading around $17.50 a barrel. The U.S. dollar index is solidly lower today. The greenback bulls are fading fast this week, partly on notions other major countries’ economies are coming back to life faster than that of the U.S. The 10-year U.S. Treasury note yield is trading around 0.6% today.

Technically, June gold futures scored a bearish “outside day” down on the daily bar chart today. The bulls still have the firm overall near-term technical advantage amid a six-week-old price uptrend still in place on the daily bar chart. Gold bulls' next upside near-term price objective is to produce a close above solid technical resistance at the April high of $1,788.80. Bears' next near-term downside price objective is pushing prices below solid technical support at last week’s low of $1,666.20. First resistance is seen at $1707.80 and then at $1,725.00. First support is seen at today’s week’s low of $1,687.50 and then at 1,675.00. Wyckoff's Market Rating: 7.0

May silver futures also scored a bearish “outside day” down on the daily bar chart today. The silver bulls have the slight overall near-term technical advantage. However, a four-week-old uptrend on the daily bar chart has stalled out. Silver bulls’ next upside price objective is closing prices above solid technical resistance at the April high of $16.30 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $14.00. First resistance is seen at $15.25 and then at $15.50. Next support is seen at today’s low of $14.795 and then at $14.56. Wyckoff's Market Rating: 5.5.

May N.Y. copper closed down 285 points at 234.60 cents today. Prices closed near the session low today on profit taking after hitting a six-week high early on. The copper bulls still have the overall near-term technical advantage. Prices are in a five-week-old uptrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 250.00 cents. The next downside price objective for the bears is closing prices below solid technical support at last week’s low of 214.95 cents. First resistance is seen at today’s high of 240.80 cents and then at 243.00 cents. First support is seen at Wednesday’s low of 233.40 cents and then at 230.00 cents. Wyckoff's Market Rating: 6.0.

 

By Jim Wyckoff

 

David

Gold ETF demand sees 300% annual Increase in first quarter

Gold-backed exchange-traded products were the prevailing asset to own, driving global demand for the yellow metal in the first quarter, as the world economy was crushed by the COVID-19 health crisis, according to the latest research from the World Gold Council (WGC).

Thursday, in its first-quarter Global Demand Trends report, the WGC said that total gold demand increased to 1,083.8 tons between January and March, up 1% compared to gold demand in the first quarter of 2019.

 

The dominant theme in the gold market remains unprecedented investor demand for the yellow metal, through exchange-traded funds (ETFs). The report said that gold-backed ETFs saw inflows of more than 298 tons in the first three months of the year, which pushed global holdings in these products to a record high of 3,185 tons. The WGC said that ETF inflows in the first quarter were up more than 300% compared to inflows last year.

“The coronavirus outbreak, which swept the globe during the first quarter, was the single biggest factor influencing gold demand. As the scale of the pandemic – and its potential economic impact – started to emerge, investors sought safe-haven assets,” the analysts said in the report.

ETF demand, which hit its highest level in four years, helped to drive prices to a nearly 8-year high, the WGC said.

“Consequently, global gold demand in value terms reached US$55bn – the highest since Q2 2013,” the analysts said.

A rush into ETFs is pretty much the one factor that drove gold demand as key sectors saw significant declines.

The WGC said that bullion investment in coins and bars in the first quarter fell to 241.6 tons, down 6% from the first quarter of 2019. However, it was a tale of two markets as Western demand for bullion coins hit a three-year high of 76.9 tons, an increase of 36% from last year.

However, demand for gold bars dropped by 19% to 150.4 tons.

“Demand for small bars is far more prevalent in East Asian markets, which were among the earliest to be hit by the coronavirus and lockdown measures. Local record high gold prices in these markets also encouraged profit-taking at points during the quarter,” the analysts said.

Jewelry demand fell off a cliff in the first quarter

While investment demand was strong in the first quarter, the same could not be said for the jewelry market, the most significant segment of demand for physical gold.

“Almost without exception, jewelry markets across the globe recorded y-o-y losses as the impact of the coronavirus compounded the effect of high, and steeply rising, gold prices,” the analysts said. “Jewelry consumption plunged in Q1 as local gold prices in various countries rocketed and markets were shuttered in efforts to contain the coronavirus pandemic.

In total, global jewelry demand dropped to 325.8 tons, down 39% compared to the first quarter of 2019. Jewelry demand fell to its lowest level on record, the WGC said.

The report noted that China was the hardest hit, with jewelry demand falling 65% in the first quarter.

Looking at Indian jewelry demand, another essential gold market, the WGC said that demand fell 41% in the first quarter. They added that jewelry demand could get a lot worse.

“While Q1 demand was hard hit, we expect the impact of COVID-19 to be more severe in the second quarter, as the lockdown extends into May. This will impact gold demand during the key buying festival of Akshaya Tritiya, as well as wedding-related purchases,” the analysts said.

The WGC said that U.S. jewelry demand saw its first quarterly decline since the fourth quarter of 2016.

“The healthy growth in U.S. jewelry consumption over the last three years abruptly reversed in Q1. Demand slipped 3.7% y-o-y to 23.1t, the decline being almost purely COVID-related,” the analysts said.

Central bank demand totaled 145 tonnes in the first quarter, an 8% decline compared to last year. The WGC noted that only six central banks purchased more than 10 tons of gold between January and March.

“While central bankers around the globe were focused on the measures needed to contain the economic impact of COVID-19, the need for robust, liquid and diversified international reserves was apparent. And positive net purchases of gold confirm that it remains an important component of those reserves,” the analysts said.

Gold supply drops in Q1

While the gold market continued to see demand growth, the market also saw a decline in supply. The WGC said that total gold supply in the first quarter was 1,066.2 tons, down 4% compared to the first quarter of 2019.

The WGC noted that mine supply dropped 3% as miners had to shut down production last month as governments tried to slow the spread of the coronavirus, closing all non-essential businesses.

“The y-o-y decline in mine production in Q1 is somewhat unsurprising given the scale of disruption caused by the global coronavirus pandemic. Most industries have been affected by the spread of the virus, and mining is no exception,” the analysts said.

 

By Neils Christensen

For Kitco News

David

Trump victory in November is no longer base-case scenario, here’s why

The pandemic has made it more difficult for current President Donald Trump to be re-elected in November, this according to Matt Gertken, vice president of geopolitical strategy at BCA Research.

A Trump victory is no longer the base-case scenario, Gertken said, owing to the fact that a recession has traditionally made it difficult for an incumbent to be re-elected.

“President Trump was lined up to win the election,” Gertken told Kitco News. “We’ve got good data on [the elections], going back over a hundred years of very regular data. It shows that elections that are held during recessions are usually very negative for the incumbent. Trump will be trying to win and do something that has not been done since 1904, which is despite a recession, win re-election.”

As unemployment rises, he said, voter turnout will also rise proportionally.

However, voters will also take into consideration that the pandemic was not initially Trump’s fault.

“It’ll be important to see if his approval ratings continue to remain pretty firm in the wake of the crisis, but generally speaking you would expect that if unemployment goes up, the president’s approval goes down and he’s much less likely to win re-election,” he said.

Favor has now shifted in favor of the Democrats, Gertken said.

“I’d say the base case is that Biden wins simply because people look around in October…and they don’t have a job,” he said.

North Korea remains a major risk to global stability, Gertken noted. If North Korean leader Kim Jong-Un were to pass away, tensions on the Korean Peninsula could escalate.

“If he dies, if he is incapacitated, that is a threat to global stability, so that will inject a risk premium into assets in the region,” he said.

Importantly, China may step in to fill the void of North Korea should the need arise.

“Today, we’re in an environment in which the United States and China do not have stable relations. In that context, if you then lose the North Korean leader, you’d have a power vacuum,” he said.

 

By Kitco News

David

 

“Americans have become less likely to view stocks or mutual funds as the best long-term investment after U.S. markets dropped by more than a third as the economic implications of the coronavirus outbreak set in last month,” Gallup survey said.

 

Despite the drop, stocks or mutual funds remain the second best long-term investment choice.

Gold and savings accounts saw a rise in this year’s survey. Gold was chosen by 16% of Americans and savings accounts by 17%. “Roughly one in six Americans view savings accounts or CDs (17%) and gold (16%) as the best long-term investment,” they survey said.

For gold, this is a 2% rise since last year’s survey, which potentially points to a shift in Americans perspectives.

 

 

 

Increased interest in gold is also visible through its price gains over the past year. Spot gold is up nearly 35% since April 2019. At the time of writing, spot gold was trading at $1,725.60, down 0.23% on the day.

 

“It's possible that the economic fallout from COVID-19 could scramble Americans' preferences, with the stock market in peril and the real estate market's future unclear. In 2011, in the aftermath of the global financial crisis that caused both stock and housing values to plummet, gold was perceived as the supreme investment,” the survey said.

 

Back in 2011 and 2012 surveys, gold held the number one position as the best long-term investment. At the time, 34% of Americans said gold was the best long-term investment.

Gallup’s 2020 annual Economy and Finance survey was conducted between April 1 and April 14, polling 1,017 U.S. adults.

 

By Anna Golubova

For Kitco News

David

Gold needn't get any better to make investors a lot of money right now: Keec

The Resource Insider co-founder talked to Kitco today. "It is one of those rare times when investing in a junior company in some ways carries a lot less risk than a mining company or even a later stage development company," said Keech. Keech notes that there are high costs to keeping a mine on care and maintenance. "There's millions or hundreds of millions of dollars of equipment that needs to be cared for and maintained. "There's cyanide moving and percolating through heap leach pads. There are a huge costs associated with making sure that even if a mine is not running, that it is safe and well cared for," said Keech. Regarding Keech's investment strategy, he said there has been a big change, and he is looking at later stage companies, such as producing mining companies and royalty businesses. "This is very different than our typical strategy, which involves primarily investing through private placements in junior stage companies or in new companies–companies that are still private, which are typically about 12 months from going and going public. "So we're actually buying things on the market right now, and the main reason is that you're able to get cash-flow in companies that are long-term established businesses that we know are going to be able to survive a shutdown or be able to survive the pandemic. And hopefully be able to see a massive rebound." Keech is delighted with precious metal prices. "Gold does not need to get any better for people to be making a lot of money right now. Mining companies are a lot more valuable than they were even a year ago, and there's going to be a lot of projects that were sub-economic that are going to be able to print money at these valuations. Additionally, companies are starting to wake up and realize that their supply is constrained, especially in gold." Listen to our conversation with Jamie Keech.

David

Gold closes below $1700, despite dollar weakness

It may have been gone as soon as it appeared gold above $1700 per ounce was short-lived as market forces and a changing market sentiment took the precious yellow metal $37 lower today, with gold futures currently fixed at $1694.50. The first indication that gold futures might correct occurred on Tuesday, April 14. This was also the same day that gold futures traded to the highest level of 2020, when it traded to an intraday high of $1788.80. The indication which we spoke about on Tuesday, Wednesday as well as Thursday was the development of a three-day candlestick pattern called a “Three River Morning Star”.

On Monday gold futures had closed at $1760 the former highest price this year. This was until Tuesday when pricing opened above the close of Monday’s candle, and closed at approximately the same price point which formed a “Doji” star in the evening position. On Wednesday gold opened below Tuesday’s opening price creating a gap above the star above the highs of Monday and Tuesday.

These three candles collectively completed the pattern. The following day, on Thursday gold pricing resulted in a red candle that contained a lower low, and a lower high than the previous candle (star). Most candlestick technicians believe that on any short-term pattern one should wait for a confirming candle which gives the prior signal much greater weight, Thursday’s candle confirmed the pattern which began on Monday.

In a report from MarketWatch, Lukeman Otunuga, Senior research analyst at FXTM said: “Risk sentiment has been bolstered by U.S. President Donald Trump and reports suggesting a potential coronavirus treatment” from U.S. drug company Gilead Sciences Inc. “Market hopes around plans to ease lockdown measures are set to rise, especially after Trump set guidelines that allow social distancing rules to be lifted as soon as four weeks. While gold may sink lower on the good news, the downside will most likely be limited as disappointing economic data across the world drags investors back to reality.”

Today gold had the largest single day decline this week, which resulted in a lower weekly close. Many analysts including myself believe that this current price weakening will be short-lived at best, so the question becomes at what price point will gold find support.

Based on our technical studies, now that gold has broken below $1708 per ounce which is the 38% Fibonacci retracement, should gold continue to trade under pressure next week the most likely targets are the 50% retracement at $1682.90, with major support at the 61% Fibonacci retracement which occurs at $1657.

Wishing you as always good trading,

 

By Gary Wagner

David

Gold, silver bulls bask amid bullish charts, safe-haven buying

Gold futures prices are trading not far from unchanged on the day Tuesday at midday, after scoring a 7.5-year high early on, at $1,788.80, basis June Comex futures. Silver prices are sharply up and at a four-week high today. Gold bulls are enjoying the strong near-term technical advantage to continue to suggest more upside for the yellow metal in the near term. Safe-haven demand continues to boost gold, and to a lesser degree silver, as the global economy is still on very shaky ground. June gold futures were last up $0.10 an ounce at $1,761.30. May Comex silver prices were last up $0.503 at $16.04 an ounce.

Global stock markets were mostly higher in overnight trading. U.S. stock indexes are solidly higher at midday. More and more it appears North America and Europe have “turned the corner” on the Covid-19 pandemic. New York Governor Cuomo said Monday his state has seen the worst of the pandemic. Other hotspots in the U.S. have also showed signs of simmering down. Leading U.S. health officials are now saying the world’s largest economy can very likely begin to reopen in stages beginning in May.

The present Covid-19 situation appears to be a sweet spot for the precious metals. There is enough confidence in the marketplace for traders to want to trade markets, but the global economies are still in very bad shape and it’s uncertain when they will be fully operational or healed.

Major corporate earnings reports are now starting to be released, which will show the early impact of the Covid-19 pandemic, and be a sobering reminder of the tough economic times at present. JP Morgan’s results today were a testament of a crippled U.S. economy.

In overnight news, China, the world’s second-largest economy, saw its March exports down 6.6%, year-on-year, which was less than expected. Imports were down 0.9% in the period, also way less than expected. China watchers deemed this data as upbeat, showing the Chinese economy is recovering from the pandemic.

The important markets today see Nymex crude oil prices trading solidly lower, around $21.00 a barrel. Oil market bulls are sorely disappointed the weekend OPEC and other major oil producers agreement to restrict oil output did not boost crude oil futures prices. However, there is no consensus on how much oil production will be reduced. Some market watchers think 10 million barrels a day and the more optimistic bulls think 20 million. There is more agreement among analysts that worldwide oil demand has dropped by at least 20 million barrels a day.

Meantime, the U.S. dollar index is lower at midday. The 10-year U.S. Treasury note yield is trading around 0.735% today.

Technically, June gold futures bulls have the strong overall near-term technical advantage. More upside is likely in the near term. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,800.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,700.00. First resistance is seen at today’s high of $1,788.80 and then at $1,800.00. First support is seen at today’s low of $1,755.30 and then at $1,750.00. Wyckoff's Market Rating: 9.0

May silver futures prices were nearer the session high and hit a four-week high at midday. The silver bulls have the overall near-term technical advantage. Prices are in a four three-week-old uptrend on the daily bar chart. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $17.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $14.50. First resistance is seen at today’s high of $16.30 and then at $16.50. Next support is seen at today’s low of $15.655 and then at this week’s low of $15.385. Wyckoff's Market Rating: 6.5.

May N.Y. copper closed up 285 points at 233.10 cents today. Prices closed near the session high and closed at a four-week high close today. The copper bulls have the slight overall near-term technical advantage. A price uptrend is in place on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 250.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 220.00 cents. First resistance is seen at this week’s high of 235.25 cents and then at 238.00 cents. First support is seen at 230.00 cents and then at this week’s low of 226.35 cents. Wyckoff's Market Rating: 5.5.

 

 

By Jim Wyckoff
For Kitco News

David

Cracking the work from home code, this couple built a business empire out of it

In an environment where many small businesses are struggling to adapt to the mass quarantines around the world, one business is seeing demand rise.

BELAY, founded by husband and wife team Bryan and Shannon Miles, is a provider of virtual assistants.

“We definitely serve a lot of small businesses that have been impacted by the current crisis, so while the majority of our business is not only stable and moving forward, we have experienced loss with some of our clients, which has been really hard to see, they’ve had to shut their doors and therefore cancel, but not many. The new leads that we’re seeing come in, no longer ask the question ‘how does remote work?’” said Shannon Miles.

The inspiration behind the company came from rock climbing, as the founders sought to help small businesses advance with the aid of virtual assistants.

“Belay is a rock climbing term, and I’m a mountain climber,” said Bryan Miles. “We use the term belay to basically say, ‘it’s time for you to go ahead and climb higher.’ That’s what we do at BELAY, our virtual assistants, book keepers, and webmasters, essentially they act in a support role for our clients as they climb higher.”

 

By Kitco News
For Kitco News

David