Gold’s recent rise occurred as a series of stair steps

Just over one week ago, on Tuesday, July 7th, gold prices broke and closed above $1800 per ounce for the first time since November 19, 2011. Over this last week there have been two occasions when gold pricing on an intraday basis dipped below $1800. However, in both instances’ gold closed above that key psychological and technical price point.

In fact, gold has remained above $1800 on a closing basis for the last seven consecutive trading days. While this is not enough time to say with certainty that the former level of resistance has now become the new level of support, at least for now it

seems that that assumption has a high probability of becoming correct.

There have been mixed interpretations of whether or not recent price action can be construed as bullish or bearish. The majority of analysts including myself have viewed this recent price move is extremely bullish. However, one gold analyst interpreted the recent price action with gold around the $1800 level as possibly “looking a little tired”.

Our technical studies indicate that nothing could be further from the truth. Gold has staged a dynamic rally which began at $1450 during the middle of March in response to the global pandemic which was just beginning. From mid-March to the first week of April gold gained over $300 per ounce, taking pricing to $1788, its highest value of the year.

Following that rally there was no real strong correction, as gold became range bound trading between $1680 and $1760 through April, May and the first week of June. The only possible way of Interpreting this sideways trading range is to acknowledge that gold prices were consolidating from the recent run-up.

On June 3rd, gold traded to $1675 the low of its range, and on June 23nd, broke above the highs of the trading range ($1766) and closed at $1781. Once again gold prices traded in a narrow and defined range, however on this occurrence the range was above the prior bounds. In other words, gold has been gaining value in a slow and methodical stairstep manner.

In other words, recent gains in gold pricing have occurred in a stairstep manner. Moving higher, followed by a period of consolidation and sideways trading action before returning to rally mode and higher pricing. The fact that recent gains were not accomplished through a parabolic rise indicates price stability.
 

Wishing you as always, good trading,

 

By Gary Wagner

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Rick Rule says gold 'overpriced' near-term; still 'wildly bullish' long-term

The recent gold price rally may have gone "too far, too fast," said Rick Rule, president of Sprott U.S.

"I think [gold] might be, in the near-term, overpriced. The truth is that gold bull markets, historically, have been extraordinarily volatile. It wouldn't surprise me to see gold go to $1,900, it wouldn't surprise me to see it go to $1,650," Rule told Kitco News.

In the intermediate term, Rule maintains a bullish stance.

"If you asked me my gold price outlook over the two-year or three-year term, I'm bullish to the point of being wildly bullish," he said. "If you asked me my gold price outlook over the next two months, my suspicion is that it might have come too far, too fast."

Near-term price movements are typically determined by mass psychology, which is not always indicative of an asset's fundamental value, Rule said.

"[Warren] Buffet famously says in the near-term, markets are voting machines; they measure psychology. In the long-term, markets are weighing machines; they measure value. The value of gold relative to the U.S. dollar, I think in the next two to three years, can only go higher."

Rule considers gold as fitting his definition of a safe haven asset due to the metal's ability to provide liquidity and volatility simultaneously.

"I look at gold as volatility but good liquidity. So for me, in the context of the way I construct my portfolio, gold is a safe haven asset. There will come a time, when its price escalation relative to competing assets, will make it less of a safe haven. Ironically, at that point in time, more people will regard it as a safe haven because its price has gone up," he said.

Rule will be discussing more about the gold sector and the junior mining space at the upcoming 2020 Sprott Natural Resource Symposium.

 

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Gold market is starting to resemble elephants trying to fit 'through a really small door'

The relatively small size of the gold sector could lead to out-sized investor gains, said Vrify CEO Steve de Jong.

De Jong sat down for a podcast on Friday with mining reporters Neils Christensen, Michael McCrae and Paul Harris.

Before founding Vrify, which produces virtual mine tours, de Jong had a huge success in the mining space at another firm. He headed Integra Gold, which was acquired by Eldorado Gold in 2017 for $590 million. De Jong advanced the Lamaque project towards production.

Gold appears to be gaining interest in the broader investment community with the precious metal hitting fresh, multi-year highs.

"Sometimes we forget how small sector actually is," said de Jong. "You can take everything that we do and combine us together and we're almost one Google."

De Jong said there is nearly a perfect setup to add another thousand dollars to the price of gold. There is a lot of money out there that is "…coming into a very, very small sector."

"This is what happens when you try to herd elephants through a really small door," said de Jong.

This week gold miners started publishing their Q2s, so the impact from COVID-19 disruptions could be weighed. Kirkland Lake kept production in Q2 at the same levels as Q1, just about 330,000 ounces. Mines in Australia and Ontario helped, which side-stepped fewer suspensions. Eldorado Gold powered through COVID-19 disruptions. The company announced yesterday that its 2020 preliminary production was 137,782 ounces of gold, a 50% increase over Q2 2019.

Despite mine suspensions in Quebec, operations at Eldorado's Lamaque were higher in Q2 2020 compared to Q1 2020 due to higher grades and an increase in tonnes mined per day enabled by the recently received Certificate of Authorization from the Quebec Ministry of Environment.

"I think I've gotten a dozen emails in the last 24 hours saying 'why did you sell that thing?'," said de Jong.

 

 

By Michael McCrae

For Kitco News

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Precious gift- $1,800 gold, and higher silver ahead

Gold investors on the long side got a precious gift this past week: $1,800 gold!

That means gold has gained 17.9% year-to-date, 29.1% in the last twelve months, and is at 9-year highs last seen in late 2011.

Now that’s momentum. And the drivers for this rise have all the hallmarks of a sustained bull market.

Let’s look at what some of these drivers are…

According to the OECD, global unemployment will reach the highest levels since the Great Depression in the 1930s, nearly a century ago. As well, the World Gold Council reported that investment demand for gold has been extremely robust. Gold ETFs enjoyed the seventh straight month of inflows, up by 104 tons in June, to reach a new all-time high of 3,621 tons.ETF gold buying in just the first half of 2020, 655.6 tons worth an impressive $39.5 billion, has already surpassed the previous record full-year increase in 2009.

Central bank money-printing has been stratospheric.

Notice how in September 2019, total assets were $3.7 trillion. By June 2020, they had nearly doubled to $7.2 trillion. Let me repeat…in just 9 months, the Federal Reserve almost doubled its balance sheet, adding on an astounding $3.7 trillion.

The Fed buying U.S. Treasurys, and now even corporate bonds and ETFs, helps explain why the stock markets are rebounding so strongly. But these historic levels of money-printing, along with record low interest rates, explain why gold is rallying.

As well, Covid-19 support payments and tax breaks to individuals and businesses around the globe are lighting the flames of support for much higher gold. Last year, nearly 70% of Americans said they had just $1,000 or less in savings.

And while inflation has seemed low for some time, the fact is it has been up by a whopping 44.2% since 2000, and that’s according to the St. Louis Fed.

So gold’s clearly been fulfilling its role as a safe haven. Silver’s, on the other hand, has been lagging behind to some degree.

It’s true that the gold to silver ratio, at 97 currently, is down considerably, but that’s from its recent all-time high above 125. The previous high was just over 100, set back in 1991. The cheaper precious metal is likely to keep climbing, especially relative to gold. And that, historically, has been a good sign for gold as well.

Between 2003 and 2011 there were two major reversals in the gold to silver ratio. Both of those saw silver clock gains of over 300%. I think, given the current economic environment and that we’re coming off the highest gold to silver ratio ever, silver likely has major gains ahead.

From a technical perspective, gold prices have broken out of a sideways consolidation. The range of $1,675 to $1,775 held between April and late June.picAnd interestingly, both the RSI and MACD momentum indicators do not look overbought, while gold is solidly above both its 50-day and 200-day moving averages

We see a similar pattern for gold stocks.

Gold equities, however, are moving closer to overbought according to the RSI. This suggests some caution in the near term.

And looking at the gold stocks to gold ratio, the equities have been in a massive power higher since collapsing in March. A rest in the next days and weeks should not surprise.

A retest for GDX down to the $32 level is possible, and would make for a great buying opportunity.

Meanwhile silver has gained an astounding 50% from its March low near $12.

What’s more, we’ve just gotten a golden cross signal with silver’s 50-day crossing above the 200-day moving average. And the RSI and MACD have room to rise.

Silver supply has been down dramatically in recent months, due mostly to Covid-19 mining shutdowns in Mexico and Peru, the world’s No.1 and No.2 largest producers respectively. So with annual silver supply down dramatically in 2020, coupled with record silver ETF demand at 65 million ounces so far this year, silver’s could be in for strong gains in the second half.

For both gold and silver, there are multiple drivers in place. That could mean an abnormal summer which could skip the doldrums this year. But given the incredible strength of both metals since their March lows, my view is to move forward with caution in the near term.

Still, I expect gold will take out its previous all-time high near $1,900 in the second half of this year, with ease. That’s just 5% higher from current levels.

As for silver, which is near a four-year high, I expect it will surpass its July 2016 peak of $20.29 and go well beyond that in the latter half of this year.

2020 is setting up to be a big breakout year for precious metals. Stay tuned…

 

By Peter Krauth
Contributing to kitco.com

David

Gold and silver see healthy pullback, platinum fails at resistance

Thursday's action in gold and silver was very bullish. Pullbacks in bull markets are really buying opportunities. If you always remember one thing in up trending markets: buying support is the best trade. It's just like selling rallies or resistance is the best trade in down trending markets.

This morning gold and silver are rallying again and should reach their resistance levels before seeing another pullback. Based on the recent rallies, we would expect to see consolidation before the next breakout to the upside. Gold and silver are in bull markets and should be played accordingly until that changes.

Platinum also failed on Thursday, but it remains in a bear market. Although it looks like platinum was trying to reverse and enjoy the bull market of the rest of the metals is still in a downtrend. Obviously, markets never announce themselves in this pattern can change, but for now, by gold and silver, sell platinum.

Saturday Micro Mini Recording: Saturday did a great webinar on our micro mini futures portfolio models. I have attached the recording for your viewing pleasure.

 

 

 

By Todd 'Bubba' Horwitz
Contributing to kitco.com

 

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Silver – not a secondary metal

Since the middle of March 2020, the iShares Silver Trust (NYSEARCA: SLV) has already seen rallies of more than 57%.

It is now clear that these incredible moves have come as a decisive response to the market’s assessments of the global economic outlook post-coronavirus era.

Ultimately, the recent rallies in SLV suggest precious metals assets still hold the top position as the most important safe-haven instruments.

One of the many misconceptions about the proper way to trade in silver markets lies in the fact that so many investors view silver assets as nothing more than a secondary precious metal. However, recent trend movements in the iShares Silver Trust (NYSEARCA:SLV) suggest that these long-term views might be ready for a revision.

In recent weeks, market uncertainties revolving around the destructive coronavirus pandemic have inspired incredible rallies in this space, as SLV has posted gains of more than 57% since March 18th, 2020. As we will see, several key events occurred on this day and all of this new bullish activity lends credence to SLV as a true value play that is also capable of posting sustained gains as long as macroeconomic disruptions continue to devastate global markets.

Trends in the gold/silver ratio have recorded massive reversals after reaching record highs on March 18th, 2020. This reversal occurred as the market’s underlying silver prices fell to $11.94 and one troy ounce of gold was worth nearly 127 troy ounces of silver. The gold/silver ratio has already fallen back into the 90s, so it is now clear that trend momentum favors a bullish outlook for SLV in comparison to the SPDR Gold Trust (NYSEARCA:GLD). Of course, we maintain a bullish viewpoint on both instruments but the potential for upside in the iShares Silver Trust remains clear given the underlying reversals we have recently seen in the ratios that guide GLD and SLV valuations.
Source: Author via TradingviewMarket performances during the second-quarter period seem to be validating these assertions and this adds even greater potential for SLV to outperform versus most of the fund-based trading instruments currently found in the commodities space. Macroeconomic correlations are significant here because they give traders an indication of which asset classes are likely to benefit from continued volatility in broader markets.

Fund flow activities largely support these assertions, as the iShares Silver Trust has benefitted from net inflows of $2.8 billion over the last one-year period. Here, it is important for investors to note the periods of strongly bullish activity (which are relatively widespread). The most significant bearish periods occur near the end of 2019 but this is a time frame that was characterized by rallies in stocks and a generalized sense of complacency throughout the financial markets. Of course, things quickly changed as we entered the year 2020 and this is when the iShares Silver Trust was able to resume with its prior bullish trends. This activity makes it more difficult for bearish investors to dismiss silver assets as an industrial metal that is incapable of posting rallies whence above-average levels of volatility become visible in stock markets.

Whenever investors are making an attempt to understand prevalent misconceptions in the financial markets, it is critical to analyze multiple asset classes and determine whether traditional correlations remain valid. In this case, it is quickly becoming obvious that SLV has an excellent opportunity to become something more than simply a “secondary” asset that always fails to receive as much attention as GLD. In reality, recent price rallies in the iShares Silver Trust have made it clear that long-term trends have reached extreme levels and are ready to reverse.

With recent trend reversals in the gold/silver ratio gaining in momentum, we could see SLV bulls in a strong position to outperform relative to many of their commodities counterparts. Since the middle of March 2020, the iShares Silver Trust has already experienced rallies that would have been thought of as impossible just a short time ago and we recommend that precious metals investors learn how to trade CFDs in silver markets. Bullish investors have been decisive in response to updated assessments of the global economic outlook for the post-coronavirus era and recent rallies in SLV show that all precious metals assets still hold a commanding position as the market’s most important safe-haven instruments.

 

 

By Richard Cox
Contributing to kitco.com

David

A ticket to a golden rally, will gold break its all-time record high?

For those investors, traders and market participants that actively trade or invest in gold, the last couple of trading days have truly been historic. Yesterday gold futures for the first time since 2011 closed solidly above a key psychological and resistance level which occurs at $1800 per ounce. That was followed today when physical or spot gold prices also traded above $1800 per ounce. Not since the historical run-up to the all-time highs in 2011 have we seen gold pricing trade above $1800.

The historical run in the middle of 2011 took gold pricing for a brief instant above $1900 to a record high of approximately $1920. However, that price point was unsustainable. In fact, on each of the two occasions during August and September 2011 gold traded above $1900, but closed below that.

During the historical run to the record price the highest close on record was $1898. What followed was a triple top at $1800 per ounce, with the third top occurring in October 2012. What followed was a multiyear correction taking gold pricing to $1040 per ounce at the end of 2015.

Gold’s historical climb to the record high occurred as a direct result of the actions of the Federal Reserve. In November 2009 the Federal Reserve responded to the recession created by the global financial crisis by initiating quantitative easing (called QE1). In order to stimulate the economy, the Fed began a program which added over $2 trillion to the money supply and at the time was the largest expansion of any economic stimulus program in history. The result was that the Federal Reserve’s balance sheet doubled from 2.106 trillion in November 2008 to 4.486 trillion by October 2014.

 

The recent rally which began in March when gold was trading for $1450 and took gold to $1800 per ounce is also a direct result of the actions of the Federal Reserve and the U.S. Treasury. In response to the global Covid-19 pandemic the Federal Reserve initiated quantitative easing for the first time since they ended QE3 in the last quarter of 2014.

In response to the global pandemic the Federal Reserve added$3 trillion to their balance sheets with the purchases of mortgage-backed securities, U.S. treasuries bonds and corporate bonds. The U.S. treasury allocated an additional 3 trillion to fund the “Cares act”, an aid package passed by the House and Senate.

While the investment community has weathered many financial recessions, a response to the pandemic puts us in uncharted territory. While many parts of the world have seen the number of reported daily cases decline, total cases of the coronavirus in the United States has now surpassed 3 million. The top infectious disease expert in the United States, Dr. Anthony Fauci, yesterday warned that "It's a false narrative to take comfort in a lower rate of death,". In fact, he warned that we could still be in the first wave of this pandemic in the United States. That being said it is not unrealistic to believe that the optimism of a quick recovery which is fueled recent rally in U.S. equities is unsustainable. It is also not unrealistic to believe that there will be further stimulus by both the Federal Reserve and the U.S. treasury if the pandemic takes more time to contain than anticipated.

Until there is an effective vaccine this pandemic will linger. As such we could see gold challenge, and surpass the all-time record high.

For those who would like more information simply use this link.

Wishing you as always good trading and good health,

 

By Gary Wagner
Contributing to kitco.com

David

Kirkland Lake sells its gold for $400 oz higher compared to a year ago

Kirkland Lake Gold (NYSE:KL) said today that consolidated Q2 2020 production was 329,770 ounces, a 54% increase from 214,593 ounces produced in Q2 2019.

Kirkland seemed to escape any major falls in output due to the pandemic, which suspended operations in Q1 and Q2 at several miners. Kirkland said its production results were largely unchanged from 330,864 ounces produced in Q1.

Detour Lake Mine produced 131,992 ounces despite facing disruptions, said the company. Production at Fosterville was 155,106 ounces, a 10% increase from 140,701 ounces in Q2 2019.

Production at Macassa seemed to suffer the most with production totaling 41,865 ounces compared to quarterly production of 49,196 ounces in Q2 2019.

Gold sales totaled 341,390 ounces at an average realized price of $1,716 per ounce compared to gold sales of 212,091 ounces ($1,320 per ounce) in Q2 2019 and 344,586 ounces ($1,586 per ounce) the previous quarter.

“We had a very solid second quarter despite the impact of COVID-19 and the extensive measures we took to protect our workers, their families and our communities. In Australia, Fosterville continued to perform well, with tonnes processed increasing in the quarter and grades continuing to average around 40 g/t," said CEO Tony Makuch.

"At Detour Lake, the ramp up of business activities after the mine was placed on reduced operations in March due to COVID-19 commenced in early May and has gone very well. Detour Lake produced over 130,000 ounces in Q2 2020 even with lower average grades during the period of reduced operations due largely to processing stockpiled material. With improving operating performance, strong free cash flow generation and very encouraging exploration results from early drilling, our acquisition of Detour Gold is already emerging as a very successful transaction, with substantial value creation potential.

Lifting the hedge at Detour was a good move, said analyst Luis Reivera in a note about Kirkland's Q2

"The hedges on Detour that they paid roughly $30m to terminate was very well timed, as usual with this team. These hedges were in the $1300-$1490 range and the average realized price was $1714 in second quarter. A rough calculation on this maneuver when all is set and done will likely yield more than 2x their money," writes Rivera in his blog High Grade.

 

By Kitco News

 

David

RBC commits C$150 million to diversity efforts

Royal Bank of Canada (RY.TO) is committing C$150 million ($111 million) to racial diversity initiatives and aims to increase the proportion of non-white executives to 30% from 20%, Canada’s biggest lender said on Monday.

The bank pledged C$100 million over five years in small business loans to Black entrepreneurs and said it would invest C$50 million until 2025 to create opportunities for 25,000 Black, Indigenous and people of color.

RBC is also committing to have BIPOC youth represent 40% of all summer opportunities by focusing on recruiting from Black and Indigenous groups, it said in a statement.

Reporting By Nichola Saminather

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