Warren Buffett was drawn to Barrick Gold for all the usual reasons

Barrick Gold's moat makes the company a natural fit for Warren Buffett and his investment philosophy, said Kitco's special correspondent Paul Harris during the Kitco Podcast recorded on Friday.

Harris was joined by Kitco editor Neils Christesen and mining audiences manager Michael McCrae. Special guests were the executive team from American Pacific Mining (CSE:USGD), CEO Warwick Smith and president and director Eric Saderholm.

Buffett has long been drawn to company's that have a structural advantage–businesses that can escape competition and demand higher prices.

Harris said Barrick doesn't have a classic moat, but rather put itself "within its own realm" with its decade-long production pipeline, high margins, and strong assets in stable mining jurisdictions like Nevada.

"It does have a moat where it differentiates itself from other companies and makes itself a very investable proposition," said Harris.

The panel also talked gold volatility, the coup in Mali, strategic metals at Pebble and junior-miner partnerships.

 

By Michael McCrae

For Kitco News

David

Should you be buying dips in gold price, silver price?

The U.S. dollar rally has been stealing the attention from gold and silver, making the recovery in precious metals prices more difficult, according to analysts. But can this dollar rally be trusted? Or should investors be focusing on buying the current dips in gold and silver instead?

The dollar-gold correlation will be one of the primary drivers for the precious metal in the short term, MKS PAMP Group said on Thursday. “The correlation between the USD and gold remains intact to dictate price action over the near-term, with the DXY index holding toward 93.00.”

The U.S. dollar index saw a boost after the Fed published its FOMC meeting minutes, which created some confusion.

“At least half of the downturn … in gold was attributable to the evening publication of the minutes of the FOMC meeting on 29 July. They contained no indication of any imminent yield curve control. This is likely to have prompted some market participants who had been betting on this happening to square their positions,” said Commerzbank analyst Carsten Fritsch.

In response, the U.S. dollar began to rise, weighing on gold. "The USD [found] a solid short-covering rally, having its best one-way gain since 30 March (on the USDX),” wrote Pepperstone head of research Chris Weston.

After the Fed minutes were released, the market continued to be concerned with what could potentially be introduced at the upcoming September Fed meeting.

From a trade perspective, the question is whether the markets can trust the current rise in the U.S. dollar?

Weston looked at the daily charts and next week’s Jackson Hole Symposium for answers.

“One point I will make here is on the daily charts, we’ve seen some key day reversal play out in USDJPY, AUDUSD, with EURUSD printing a lower high and a lower low,” he said on Thursday. “I feel the Fed will remain dovish, there is little doubt about that when Congress can’t agree on fiscal [spending], but with the market questioning the September meeting and a definitive change of policy here, will the market alter its short USD position accordingly. It leads us to think next week’s Jackson Hole Symposium will be one to watch and a volatility event.”

This year’s Jackson Hole Symposium, titled 'Navigating the Decade Ahead: Implications for Monetary Policy’, will be held online.

Any additional comments from the Fed chair Jerome Powell will be key next week as questions around yield curve control and inflation targeting are still creating confusion.

“There seems little consensus in the Fed collective to adopt an inflation-targeting regime, which is what so many have positioned for and why I would argue is a factor behind the USD selling of late,” Weston added.

Analysts have cited unlimited money printing, loose monetary policy, weaker U.S. dollar, and currency debasement fears as the primary drivers behind gold’s historic rally this summer, which saw prices hit new record highs above $2,000 an ounce and near $2,100.

So, can this short-term dollar rally and gold price-reversal last?

The dollar rally is looking like a simple recovery from a crowded short-dollar trade, which has dominated the past few months, Phoenix Futures and Options LLC president Kevin Grady told Kitco News. “A lot of people were shorting the dollar. Right now, we are seeing a correction in the market,” Grady said.

However, that does not change the long-term picture, where gold is heads higher and the U.S. dollar lower.

“I don’t think the picture for gold really changed. You continue to see sharp rallies in gold after price pullbacks,” Grady pointed out. “There is a lot of retail players in the gold space right now, trading the micro contracts and playing with short-term speculation. Those are the guys that are moving the market.”

The U.S. dollar is also likely to weaken further once the new U.S. stimulus package is finally approved, he added.

“If another stimulus package comes out, it will weaken the dollar. A lot of people are looking for stimulus and it didn’t come yet, which is also why we are seeing a short-term dollar rally.”

The fundamentals for precious metals remain bullish. “Gold should be above 2,000 by year-end. Trade talks with China are not seeing anything definitive. Also, the amount of stimulus that has gone into the markets and low interest rates will keep a bid in gold,” Grady said.

At the time of writing, December Comex gold futures were trading at $1,953.50, down 0.85% on the day.

Another important point to keep in mind is that weaker U.S. dollar does not necessarily mean that the dollar’s status as the world’s reserve currency is in jeopardy.

“A lot of people are saying that the U.S. dollar is losing its status as the world reserve currency. I disagree with that. A lot of countries have pushed out stimulus packages. The U.S. has just been more aggressive. It will help bring economies out of recession quicker. I don’t see a change in the currency regime,” Grady noted.

In its latest report, Capital Economics also concluded that weaker U.S. dollar does not mean it loses its status.

“Although it has stabilized a bit over the past couple of weeks, the dollar has fallen by about 7% on a trade-weighted basis since its peak in March. And in July it recorded its largest monthly fall against other advanced economy currencies on a trade-weighted basis in more than a decade,” said Capital Economics senior economist Jonas Goltermann.

“While we think the U.S. dollar will weaken a bit further this year, suggestions that its role as the world’s primary reserve currency is in jeopardy are wide of the mark in our view,” Goltermann added.

 

By Anna Golubova

For Kitco News

 

 

David

Jim Rogers gives the best investing advice you’ll hear, talks next big market crash

Jim Rogers, chairman of Rogers Holdings and co-founder of the legendary Quantum Fund, said that the next financial crash could be even worse than what we saw this year.

“This certainly has been the worst in my lifetime. We’ve had a huge rally because governments everywhere have printed and spent staggering amounts of money, but it just means that the next time it’s going to be worse still,” Rogers told Kitco News.

While monetary stimulus may have provided short-term relief to the financial markets, the enormous amount of debt created as a result will create negative consequences for the economy in the long-term, Rogers said.

Rogers’ comments come as the S&P 500 climbed to new all-time highs on Wednesday, with gold prices falling on the trading day.

The S&P 500 last traded at 3,398.34 while spot gold traded at $1,966 an ounce.

The rally in equities since March was largely due to the debt build-up from quantitative easing, Rogers said.

“Six months ago the United States was the largest debtor nation in the history of the world. Never has anybody been so deep in debt. Since then the U.S. has increased its debt by trillions more. If you give me a few trillion dollars, I will show you a very, very good time,” he said.

On gold, prices still have a lot of room left to climb, Rogers said, adding that Warren Buffett did not enter the gold market too late with his recent purchase of Barrick Gold shares.

“If I’m right, gold is going to go much, much, much higher before this is over. Gold may well turn into a bubble. I hope it doesn’t, because if it turns into a bubble, I’ll have to sell it and I never want to sell it. I want my children to have my gold and silver someday,” he said.

Rogers draws on his decades-long investing experience, from his early days on Wall St. to his successes with the Quantum Fund, to give candid advice to any investor looking to win in the long haul.

“You want to know how to be a successful investor, stay with what you know,” he said.

Rogers launched the Quantum Fund in the 1970s with partner George Soros. Over the next ten years, the fund returned 4,200% while the S&P climbed 47% during the same period.

While Rogers never had a formal business education at a business school, he was able to excel on Wall St. after graduating from college by digging deeper into his analysis than his peers.

“I started realizing that if [a key for me] was to find something cheap that was changing and I realized it by the numbers,” he said. “I was once working on reading an annual report and doing a spreadsheet and an experienced guy walks in the room and said ‘people still do that? Nobody looks at spreadsheets anymore.’ He laughed at me. I was embarrassed but I kept doing it,” he said.

Rogers is a long-term value oriented investor, preferring to buy companies that are relatively cheap, while also on the cusp of positive change.

“If you can find something that is cheap and has a positive change, you’re probably going to get very rich,” he said.

His last advice to investors? This is a tough game, he said.

“I want to emphasize again, it’s not easy. This is not an easy way to make money or to even make a living, so it takes a lot of work, like most things in life,” he said.

 

By David Lin

For Kitco News

David

Robert Kiyosaki – America headed for totalitarianism, will flee country with gold

The U.S. used to be a capitalist country, but is now becoming a Marxist society, said Robert Kiyosaki, best-selling author of “Rich Dad Poor Dad.”

Kiyosaki was a veteran of the Vietnam War who had seven uncles fighting in World War 2. “I fought for capitalism,” he said. “America is going Marxist.”

The evolution of socialism in the U.S. started with the anti-war protests following the Vietnam War, Kiyosaki said.

“When I came back [from Vietnam] the hippies were outside just like the protesters are today in Chicago. I got hit with rotten eggs, I got hit with stink bombs, I got spit on and all this, and those were the hippies. Some of them were my classmates: SDS (Students for a Democratic Society), Black Panthers, all of those guys. And what happened to the baby boom SDS members? They became school teachers. A lot of my peers are now teaching in the highest levels of academia,” he said.

Importantly, Americans are starting to lose their basic liberties due to "mob" politics, Kiyosaki said.

"The freedom of speech is gone. Freedom of speech, freedom of assembly, and also the freedom of religion," he said.

Kiyosaki has prepared for a time when he would have to leave the U.S., he said, by holding safe haven assets like gold and silver.

“Way back when I started storing gold in Switzerland and in Singapore, so in case I had to run, plus I had different passports. Gold and silver are flight capital, and as you know, the only people making money today in America are moving vans,” he said.

He added that bitcoin also qualifies as a safety asset because it’s “international currency; it operates outside the Fed and the Treasury.”

 

By David Lin

For Kitco News

David

Here is why gold price uptrend is intact – Standard Chartered

The selloff last week did not impact the longer-term uptrend in gold, according to Standard Chartered, which sees weaker U.S. dollar and lower interest rates as the two driving forces behind the gold price rally.

“Despite the steepest sell-off since April 2013, the longer-term outlook remains constructive for gold,” said Standard Chartered precious metals analyst Suki Cooper.

Before last week's jaw-dropping pullback of nearly $200, gold looked overbought and further price gains looked uncertain.

“It will be key whether this profit-taking materialises as short-term tactical liquidation, or increased vulnerability across gold-backed ETPs, prompting caution about upside risk. Open interest and net outflows suggest that investors have liquidated stale longs, not strategic positions,” Cooper wrote on Friday.

The downside risks for gold for the rest of the summer and fall are COVID-19 vaccine, swift economic recovery, weak physical demand for gold, an increase in recycling, and more ETP outflows on rising real yields, the analyst pointed out.

Important element in all of this is that investors do not appear fatigued by the price action in gold, following a massive summer move up towards $2,100 an ounce.

“Barring further profit-taking, we think the longer-term uptrend is intact given USD weakness and the scale of stimulus and as we expect interest rates to remain low or negative. Price dips are likely to be viewed as buying opportunities as the macro backdrop remains favourable for gold,” Cooper noted.

At the time of writing, December Comex gold futures were trading at $1,993.90, up 2.26% on the day.

All of the long-term drivers remain in place — negative real rates, weak U.S. dollar, and inflation expectations.

“Over the past two weeks, gold prices have signalled greater risk aversion than other assets that usually benefit from a flight to safety, partly as longer-term investors turn to gold as a diversifier. Some of the recent interest in gold has been spurred by expectations of further stimulus measures and concerns that balance-sheet expansion globally could lead to higher inflation,” Cooper said.

The weakest link is the physical demand out of Asia, which is still lacklustre. High gold price in local currencies as well as the coronavirus-related issues are all weighing on demand.

“The local gold price in India has eased from record highs above 56,000 INR/10g, but not by much. The local market has swung sharply back to a premium, but the increase has been driven by lower inventory rather than higher demand during the seasonally slow period for demand. Seasonal demand tends to materialise in September; even though the monsoon forecast should support a recovery in demand, high and volatile prices may offset this,” Cooper said.

Central bank gold buying has also slowed with some central banks proceeding with “modest sales,” the analyst added. “We expect net buying of 360t in 2020.”

Turkey is one of the central banks still buying gold this year, purchasing 220 metric tons year-to-date.

 

 

 

By Anna Golubova

For Kitco News

 

David

Gold price is gearing up: Here's the direction analysts are looking at

After shedding nearly $200 this week and consolidating around $1,950 an ounce, gold is looking to resume its rally, but how far can prices really go?

Gold's steepest daily correction in seven years was healthy for the market, according to analysts, who were highly anticipating it to happen.

“To lose $120 in a single session is some dramatic price action. But it was very healthy for gold to pull back down closer to $1,900. There is good support on the low end, which sets us up for more steady gains going forward into September and the fourth quarter,” Gainesville Coins precious metals expert Everett Millman told Kitco News on Friday.

An important sign from this week’s pullback was strong buying interest on dips, said RJO Futures senior commodities broker Daniel Pavilonis.

“We’ve already seen decent-sized bounce. Next week, we’ll begin to see some volatility and ultimately move higher. Don’t think the rally is done,” Pavilonis noted. “If you are on a big bullish momentum move, you will see pretty big selloffs followed by bounces up. It is good that we sold off quickly and support held — it is a test to how strong the trend really is. We can go higher now.”
 

On the radar: U.S. fiscal talks, U.S.-China tensions

The two biggest unknowns for next week is the U.S. fiscal package, which is still nowhere close to being passed, and the U.S.-China trade talks, which are restarting and could trigger some major volatility.

The U.S. President Donald Trump continued to blame the Democrats for holding up the coronavirus fiscal stimulus package. This comes a week after talks failed with congressional Democrats. The Republican-controlled Senate and Democratic-controlled House of Representatives are now back in an informal recess but party members can be recalled if a deal emerges.

“Stimulus package is a concerning item. Reality is that the Senate won’t convene for some time and it might be awhile before it gets through. For the moment that is a negative factor for market sentiment and negative for gold,” said TD Securities commodity strategists Daniel Ghali.

Once the deal is reached, it will end up being negative for the U.S. dollar and positive for gold, Blue Line Futures chief market strategist Phillip Streible stated.

“The U.S. dollar would take a whole leg lower if they approved the Democratic versions of the aid package. Meanwhile, the Republican version would see the U.S. dollar grind slowly lower,” Streible said. “If we can get some kind of deal, we should see inflation expectations rise.”

The U.S.-China trade talks are key for next week as traders are waiting to see some headlines before making a move, said RBC Wealth Management managing director George Gero.

However, on Friday Reuters reported that the U.S.-China trade deal review meeting has been delayed due to scheduling issues. The meeting was originally set for Saturday.

So far, China is really behind on its commitments in terms of buying U.S. exports to meet first-year targets.

“Should either [the U.S. fiscal talks or the U.S.-China trade talks] take a negative turn, traders may upend attempts to register new record equity highs, while paving the way for gold to rebound back above the $2000 mark,” said FXTM market analyst Han Tan.

 

Treasury yields and the U.S. dollar

Two major triggers for gold will continue to be the U.S. Treasury yields and the U.S. dollar. This week, the strength of both contributed to gold’s move down.

The biggest change this week has been nominal and real rates starting to rise, said Ghali.

“The environment that previously drove gold higher is now subsiding, but the buyers keep on buying the dips,” stated Ghali, cautioning that the price pullback might not be over. “The $1,850 level is where gold starts to get attractive again.”

As bond yields rise, gold’s appeal diminishes, said Millman. “I’m closely watching recovery in yields in the Treasury market,” he said.

FOMC meeting minutes

Another big item on the agenda next week is the Federal Reserve’s meeting minutes from July, which will be published on Wednesday. Investors will be paying close attention to any comments on yield curve control (YCC).

“Any hint at inflation targeting and YCC in the FOMC minutes next week should be USD negative,” ING strategists said. “Minutes of the July FOMC meeting are released on Wednesday and any suggestion of impending Average Inflation Targeting (AIT) or Yield Curve Control (YCC) would be a dollar negative. On balance we would prefer to back the latter story next week, meaning that the DXY could make a new low.”

Also, the meeting notes might reveal some discussion around the central bank’s review of monetary policy strategy.

Price levels

The price levels that analysts are watching vary from the high $1,800s to the low $2,000s.

Another major price pullback is unlikely next week, said Afshin Nabavi, vice president at precious metals trader MKS SA. “Psychologically, $1,900 and $1,925 is good support. On the upside, $2,000 is resistance.”

The risks on the downside and upside are both symmetrical, said Millman. “I wouldn’t be shocked if we fell below $1,900 next week. Also, it wouldn’t take much to get to $2,000.”

Streible said he is looking at $1,900 and $1,874 for support with lots of potential new buyers coming in once gold climbs back up above $2,000 an ounce. “People would be much more conformable at re-entering the market north of $2,000 on the fear of missing out,” he noted.

First resistance for Gero is at $2,000 with $1,900 as major support, followed by $1,950. The fact that the U.S. elections are coming up will add more volatility and push gold towards $2,100 an ounce by year-end, Gero added.

Data to watch

Aside from the FOMC meeting minutes on Wednesday, lots of U.S. housing data will be on the radar.

On Tuesday, markets will be watching building permits and housing starts numbers. Thursday will see jobless claims and Philly Fed manufacturing data published. And on Friday, existing home sales and manufacturing PMI will be released.

“For the upcoming week, it is all about housing data, which should look good. We know mortgage applications are strong thanks to low mortgage rates with anecdotal evidence suggesting demand is led by older buyers looking for a second or vacation home. This story has been in play for around four months now and should help fuel transactions, which in turn has historically been well correlated with consumer spending on related sectors such as furniture, home furnishings, garden equipment and building supplies,” said ING chief international economist James Knightley.

 

By Anna Golubova

For Kitco News

David

Gold price and stocks both have upside; the biggest risks and opportunities to watch

While macroeconomic risks linger, the environment is constructive for both gold and risk assets, said Rob Haworth, senior investment strategist, U.S. Bank Wealth Management.

“What we’re seeing in recent times is real yields are finally starting to rise…which is pressuring gold as well, so it’s been time for a correction and we’re getting that now,” Haworth told Kitco News. “I do think that gold prices in particular would be further supported by continued growth in the Fed balance sheet.”

An economic recovery is taking place, but downside risks remain, Haworth noted.

“The challenge for us is the high frequency data has flattened out a bit, so if we look at travelling, whether it’s the TSA data, we look at open tables, who’s dining in restaurants, the improvements are starting to flatten out. So we’re not, in my opinion, back to pre-COVID levels of activity overall,” he said.

Haworth maintains a bullish stance on equities. His portfolio is balanced between stocks and bonds, and this balanced approach is attributed to several lingering unknowns in the market that are being tracked.

“I think the challenge for us is really that there’s a two-sided scenario as we look forward, and there’s an awful lot of risks to get through. One, we don’t yet have fiscal stimulus this side of the pond. Two, we need to get through the back to school season,” he said.

Haworth added that the elections present a major uncertainty to the markets.

U.S. Bank Wealth Management has been paying more attention to gold in recent times, and hold the yellow metal as a hedge against their equities positions.

“Gold’s getting attractive at this point, especially with the equities decline. The primary purpose of it is to provide some downside protection relative to our equities positions,” he said.

 

By David Lin

For Kitco News

David

Why did the gold price crash, and will it happen again?

Gold prices saw their worst daily drop since 2013 on Tuesday. This sharp pullback was due to profit taking and did not detract from the long-term bullish picture, said Gary Wagner, editor of TheGoldForecast.com.

“Personally, I do not believe it’s the end of a bull rally. We have entered some sort of a correction. The question I’m asking myself and the technical studies I’m looking at for the answers is whether or not this will be a shallow or short correction, or an extended correction,” Wagner told Kitco News Wednesday.

Gold fell nearly 6% on Tuesday; a single-day move of this magnitude has not always been possible, Wagner noted.

“Back in the early 1980’s when I began as a commodity broker, they had limit moves on gold, platinum, and palladium. They could only move so much, kind of like the S&P now with the circuit breakers, and they would stop trading for the day,” he said.

While the rally we saw in gold had macroeconomic undertones, like a weakening U.S. dollar and an accommodative Federal Reserve, but the correction this week was due mainly to profit taking and not to any fundamental shifts in the economy, Wagner noted.

“My sentiment is that it wasn’t a macro event, but rather the market getting too crowded,” he said. “I think the reason for the selloff yesterday was pure and simple market taking.”

Wagner added that many of his personal friends who are generalist investors have been inquiring about gold, signaling to him that we may have already seen a herd mentality in the space.

The charts, however, still tell a long-term bullish story.

“On a technical basis, even yesterday’s exaggerated move did not cause any extended chart damage,” he said.

Trading activity has indicated to Wagner that this correction is likely going to be short-lived.

“What I’m seeing is even with a strong correction, and a really, really massive price decline, there were buyers willing to buy the dip, and that is what will make this correction short-lived,” he said.

 

By David Lin

For Kitco News

David

The overdue correction begins – How much can gold price, silver price fall?

The highly anticipated correction in gold and silver prices has begun. But don’t despair, says Commerzbank, projecting for the precious metals’ rally to resume after some profit-taking has taken place.

Gold has kicked off its downward trajectory after a failed attempt at a new record high on Monday.

“[The precious metal] made another attempt yesterday afternoon to reach the record high it posted at the end of last week, though it failed and only made it to $2,050. The price has been on a downward trajectory ever since,” wrote Commerzbank analyst Carsten Fritsch.

At the time of writing, December Comex gold futures were trading at $1,956.70, down 4.07% on the day.

It would not be surprising to see some significant profit-taking this week as prices saw extensive gains in the last few weeks — first breaching $1,920 an ounce, then rising above $2,000 an ounce, and even starting to eye $2,100 an ounce last week.

“The scale of the upswing over the past four weeks has been excessive. This was made clear by the extremely high RSI and the pronounced deviation from the 100-day moving average. Sentiment towards gold became positive in the extreme, with only a minority of participants sounding a note of caution,” said Fritsch.

Commerzbank is not ruling out seeing gold retreat to as low as $1,924 an ounce.

On top of everything else, the rally has been largely driven by investor interest, which might be enough to drive prices higher but not enough to sustain the uptrend.

“The price rise was almost solely attributable to robust investor demand, with all other demand components playing hardly any role. It is understandable that investors now appear to be taking profits,” Fritsch added. “This is also evident from the gold ETFs: they registered outflows on two consecutive days, which last happened in early June.”

However, a very significant correction like in mid-March is very unlikely, the analyst said.

Most importantly, this is not the end of the road for gold and silver prices, Fritsch noted, adding that the rally will resume after prices consolidate lower.

“The long-term outlook for gold and silver remains positive, however. Prices are likely to begin rising again as soon as the current correction has finished,” Fritsch wrote.

 

By Anna Golubova

For Kitco News

David

Gold rate today – Yellow metal falls as dollar rebounds; Support placed at Rs 53,700 per 10 grams level

Analysts suggest selling gold on the rise as they expect further profit booking.

US gold futures fell 0.6 percent to $2,028.10.

Gold rate today: Yellow metal falls as dollar rebounds; Support placed at Rs 53,700 per 10 grams level

Gold prices in India fell on the Multi Commodity Exchange (MCX) Tuesday tracking weakness in international spot prices on a strong dollar amid rising tensions between the United States and China, analysts said.

At 11:10 am, gold futures for October delivery fell 1.26 percent to Rs 54,255 per 10 grams as against the previous close of Rs 54,946 and opening price of Rs 54,750 on the MCX. Silver futures traded 1.64 percent lower at Rs 74,160 per kg. The prices opened at Rs 75,000 as compared to the previous close of Rs 75,394 per kg.

“Gold and Silver prices fell on profit booking as the dollar rebounded. We are witnessing a technical correction, however, undertone remains positive,” said Jigar Trivedi, Fundamental Research Analyst at Anand Rathi.

International gold fell on Tuesday as the dollar firmed after Beijing slapped sanctions on US officials in the latest flare-up in tensions between Washington and Beijing, with investors also keeping a close watch on negotiations over a US stimulus plan.

 

Spot gold was down 0.5 percent to $2,017.98 per ounce, moving further away from a record high of $2,072.50 hit last week. US gold futures fell 0.6 percent to $2,028.10.

According to Ajay Kedia, Director, Kedia Commodities, COMEX gold prices may fall near 1,980 levels going ahead. On MCX, if prices remain below Rs 55,000, then gold may test Rs 53,500 level, he said.

Analysts suggest selling gold on the rise as they expect further profit booking.

“Support for gold is placed at Rs 53,700 while resistance is seen at Rs 54,700-54,900 levels. For silver, support is seen at Rs 73,600-74,000 levels while resistance is placed at Rs 74,600-74,900 levels,” Trivedi added.

David