QCP Capital crypto market update – June 08, 2020

Friday's incredibly positive US Non-Farm Payrolls number has led to the largest divergence between Gold and S&P 500 prices since the March lows (Orange line & Red line respectively in the chart below) – with Gold lower and Equities higher. The big question for us is which will BTC follow? Or will it get stuck in the cross-current?

Since end-April, BTC (Beige line) has tracked Gold much closer than it has Equities. So assuming this NFP number was not a fluke and this Gold lower/Equities higher move continues, we can expect some downward pressure on BTC price (and could possibly range below the near-term top that was formed last week with immediate support for BTC at 9250 and ETH at 233).

From the standpoint of the growth of BTC as an asset class, we regard this closer correlation to Gold as something positive. We think that BTC filling the role as a safe haven asset would lead to more adoption and development than if BTC were just a high-beta risk play

On the options front, the end-June half-year expiry is shaping up to be an exciting one with enormous OI (2x of the huge one in end-May). A large part of this is in calls, reflected in the overwhelming Call OI on CME.

By QCP Capital

David

Gold price has room to move lower after market rocked by Friday’s employment data – analysts

The gold market is seeing some stability at the start of the new trading week as prices try to recover from Friday's roughly 3% selloff.

August gold futures last traded at $1,689.50 an ounce, up 0.39% on the day.

The precious metal took a significant hit Friday. It saw a substantial break below critical support at $1,700 an ounce after employment data showed that the U.S. economy created 2.5 million jobs in May. The data were a massive surprise as economists were expecting to see job losses of 7.5 million.

Although some investors see Friday's drop as a buying opportunity, analysts are warning that prices could continue to fall as equity markets and bond yields continue to move higher.

Given Friday's selloff, many analysts are expecting gold prices to test the next major support area between $1,645 and $1,650 an ounce.

"Our base case is that the yellow metal is in a $50 range on both sides of $1700. It frayed the upper end in mid-May, but it has now fallen for three consecutive weeks and finished last week at six-week lows. There is little to hang one's hat on until the $1650 area," said Marc Chandler, chief market strategist at Bannockburn Global Forex in a note Sunday.

Chandler added that momentum indicators continue to point to lower prices in gold in the near-term. He also said that gold's correlation to equities has turned negative as risks-off sentiment flows through financial markets.

In a report published Saturday, Nick Cawley, strategist at DailyFX.com, said that he is also watching $1,645 level for gold. He added that bond yields and resilient strength in the U.S. dollar could dull the precious metal's luster.

"Gold has been a major beneficiary of a weak dollar and low U.S. interest rates over the last three weeks and this looks likely to change in the short-term. The yield on the 10-year U.S. benchmark is nearing 1%, up from 0.65% a week ago, dulling the appeal of the precious metal, while the U.S. dollar basket may have found a temporary base around 96.50 after having fallen by four big figures since mid-May," he said.

However, Cawley added that there is enough market uncertainty to support gold's long-term uptrend.

"Relations between the U.S. and China continue to sour and look set to get worse… while the economic impact of the COVID-19 virus will be felt for years to come. These market negatives are not expected to disappear any time soon and will underpin gold in the weeks and months ahead," he said.

Martin Murenbeeld, president of Murenbeeld & Co., is also looking past gold's selloff Friday. Despite the significantly better-than-expected employment report, he said that nothing has radically changed for the economy.

"No central bank will reduce its stimulus on account of these first signs of economic bottoming," he said. "Second, no government is even remotely thinking of pulling back on its fiscal stimulus, regardless of how good the economic data might be in the coming months," he said. "In short, the good news for gold is that monetary and fiscal stimulus will carry on regardless of the state of the economy for the rest of this year and next. This then sets up the possibility that inflation will finally pick up one or two years hence."

By Neils Christensen

For Kitco News

David

Gold continues to trade lower as U.S. Labor Department releases May jobs report

This week the two important jobs reports were released. Both reports had a profound and bullish impact on U.S. equities, and had the exact opposite effect on the safe haven asset gold, taking prices dramatically lower.

On Wednesday ADP released their report which indicated that private sector employment decreased by 2,760,000 individuals in the month of May. While that number might be considered high when compared to the recent months it is one of the best indications that the economy in the United States is beginning to reignite. Economists and market technicians that were surveyed were looking for that number to be approximately 8.9 million individuals that lost their job in May. The fact that numbers came in so much lower than expected indicates that the worst might be over in reference to the global pandemic of Covid-19.

Today the U.S. Labor Department released the jobs report for May. The numbers showed an incredible jump of 2.5 million individuals that were added to payrolls and a drop of the unemployment rate to 13.3%. These two reports were the necessary fuel to ignite U.S. equities too much higher values. It also was the underlying cause for gold to lose a little over $60 on the week. Breaking below the key $1700 level.

As of 5 PM EST gold futures basis the most active August contract is currently at $1688.60. Today’s decline was even sharper than Wednesday with gold giving up $38.80, which is a net decline of 2.25%.

As upbeat and optimistic as the most recent jobs report have been, there are many analysts, including Martin Baccardaxi of TheStreet believe that the unemployment level will rise to a rate of nearly 20%. This would be the highest rate of unemployment in the United States since the Great Depression.

The key to these two reports regardless of how quickly our country recovers is that the first signs of a turnaround have indicated that the worst of this global pandemic might in fact be over. That is great news on all levels.

However there still is one caveat that we will need to resolve, and that is how we deal with the massive debt that the Federal Reserve and the U.S. Treasury Department have accumulated to help aid American citizens through this difficult time.

We have not begun to even consider how we will deal with the massive economic fallout, but at least for today we can put that aside as people genuinely embrace some news that is uplifting, giving hope to those who have been affected by this pandemic.

By Gary Wagner
Contributing to kitco.com

David

Gold and silver rates today tumbles in Bangalore, Hyderabad, Kerala, Vizag

Gold HIGHLIGHTS Gold and Silver rates in India fell today following the sharp losses of the previous session.

Gold and silver rates today 05 June 2020: Gold and Silver rates in India fell today following the sharp losses of the previous session. On MCX, August gold futures fell 0.18% to Rs. 47,510 per 10 gram after tumbling in the previous session. Tracking gold, silver rates also edged lower. On MCX, July silver futures fell 0.9% to ₹48,500 per kg. Silver had declined about ₹1,500 in the previous session. An appreciation of rupee against US dollar also put pressure on domestic gold prices. Gold prices in India include 12.5% import duty and 3% GST.

Gold and silver rates dipped today as equity markets continued to rally on optimism over reopening of economies. However, protests in the US and a soft dollar has led to the downfall of gold.

Going by the gold rates at metro cities, the gold rates in silicon city Bangalore declined by 250 to Rs. 43,550 and Rs. 690 decreased to 47,510 per ten gram of 22 carat and 24 carat gold respectively.

The ten gram of 22 carat gold in the Hyderabad market has decreased by Rs. 120 to Rs 44,560 and the gold rate for ten gram of 24 Carat also decreased by Rs. 140 to Rs. 48,640

While in Kerala, the gold rates have decreased by Rs. 100 per ten gram of 22 carat gold at Rs. 42,800 and Rs. 46,800 per ten grams of 24 carat gold with a hike of Rs. 100.

In Visakhapatnam, the same trends followed with with decline of Rs. 120 to Rs. 44,560 per ten gram of 22 carat while the ten gram of 24 carat gold is down by Rs. 140 to Rs. 48,640.

– 05 June 2020 Pavan Kumar Bandari Hans News Service

David

PRECIOUS-Gold slips 2% as recovery hopes bolster risk appetite

* Gold hits lowest level since May 7

* Private payrolls drop by 2.76 mln in May vs 9 mln forecast

Gold fell more than 2% on Wednesday as risk sentiment improved on hopes of a faster recovery from a coronavirus-driven economic slump, with investors largely overlooking civil unrest in the United States.

Spot gold fell 1.6 % to $1,699.37 per ounce by 1:05 p.m. EDT (1705 GMT), having earlier hit a near one-month low of $1,688.89.

U.S. gold futures fell 1.75 % to $1,703.50 per ounce.

“There is a strong risk-on sentiment right now… U.S. equity markets are breaking out,” said Phil Streible, chief market strategist at Blue Line Futures in Chicago.

A gauge of global equity markets rose and the euro gained against the dollar on Wednesday as easing lockdowns and hopes for more monetary stimulus boosted investor confidence.

Sentiments were also bolstered by data showing U.S. private payrolls fell less than expected in May, suggesting layoffs were abating as businesses reopen.

Also, data from Institute for Supply Management showed U.S. services industry activity pushed off an 11-year low in May.

“It (latest economic data) shows that maybe things are coming back faster than expected,” said Bob Haberkorn, senior market strategist at RJO Futures.

The supporting fundamentals for gold like lower interest rates and quantitative easing programs have not changed, Haberkorn said, adding, in longer term gold should go higher.

Lower interest rates reduce the opportunity cost of holding non-yielding gold, which also tends to benefit from widespread stimulus measures as it is often seen as a hedge against inflation and currency debasement.

U.S. protesters ignored curfews overnight as they vented their anger over the death of an unarmed black man at the hands of police.

Holdings of SPDR Gold Trust gold-backed exchange-traded fund rose to 1,129.28 tonnes on Tuesday, their highest since April 2013.

Elsewhere, palladium fell 0.3% to $1,943.14 an ounce, while platinum dipped 0.5%, to $834.78 per ounce.

Silver fell 2.3% to $17.68 per ounce.

By Eileen Soreng

David

'We expect a considerable drop in gold prices', says ABN Amro

Gold positioning remains very crowded, according to ABM Amro, which is why the Dutch bank is not recommending re-entering long gold positions at the moment.

“We continue to think that positions are too crowded and that prices are too high to recommend re-entering longs,” ABN Amro precious metals analyst Georgette Boele wrote in a report last week.

The bank is projecting a major drop in gold prices within the next three months, citing another risk-off wave in financial markets. ABN Amro’s outlook has gold ending Q2 at $1,725 an ounce.

“We also expect a considerable drop in gold prices,” Boele said. “Between now and 3 months we expect another risk-off wave in financial markets. We think that investors will close part of their positions (ETF and/or speculative positions) in gold, silver and platinum.”

At the time of writing, August Comex gold futures were trading at $1,750.30 an ounce, down 0.08% on the day.

Gold’s trading pattern this past month reveals resilience, with any price dips being bought up by investors and gold staying firmly above the $1,700 an ounce level, noted Boele.

“Each time there has been some price weakness it seems that investors are buying gold on dips. Gold ETF positions have made a new record and stand just under 100 million ounces. After some liquidation of speculative positions, speculators have also showed renewed interest in gold,” he said.

Long-term, ABN Amro is very bullish on gold, projecting the yellow metal to finish Q3 at $1,775 an ounce and Q4 at $1,800 an ounce.
 

By Anna Golubova

David

Gold investors are going to have some fun as prices run to $5,000 this decade – Incrementum AG

Gold is embarking on a broad-based, decade-long bull market, and it’s not a matter of if prices hit all-time highs but when it hits all-time highs, said one of the authors behind the annual In Gold We Trust report.

In an interview with Kitco News, Ronald-Peter Stoeferle, fund manager at Incrementum AG, said that a new monetary policy regime of low interest rates and high inflation is expected to drive gold prices to nearly $5,000 an ounce in the next 10 years.

“I'm pretty confident that we're at the beginning of the second stage of the trend, which is the so-called public participation phase. And this is the phase, which is the longest, and which is actually the most fun part of a bull market,” he said.

In the past two months, central banks and governments around the world have unleashed an unprecedented amount of liquidity into financial markets as the global economy ground to a halt because of the coronavirus. According to the firm’s 14th annual report, $21 trillion dollars have been pumped into the global financial markets.

Stoeferle, said the amount of stimulus used to combat the latest economic crisis represents about 23% of gross domestic product worldwide.

“You could buy all the, the annual gold production 120 times,” he said. “And this is just the beginning. It is basically impossible that we will see significantly higher real interest rates.”

Although the pandemic has created what could be the worst economic crisis since the 1930s’ great depression, Stoeferle said that it has only revealed growing issues in the global economy. He noted that cracks in the economy started to appear in 2019 as the Federal Reserve was forced to cut interest rates three times during the summer.

“The Corona crisis is only the straw that broke the camel's back. There were already lots of signs that the economy is getting weaker,” he said. “Global trade was falling by 0.5% in 2019; we only saw that in 1980.”

Stoeferle added that the response to the pandemic has only added to what was already a looming debt crisis. The only way to get out of this now is through inflation, he said.

In this environment, gold is going to be an important inflation hedge and play an important role in central bank monetary policy, he said.

But it’s not only the physical metal that investors should be looking at. Stoeferle said that a portfolio should a dedicated portion of the precious metal as an insurance and investors should look at the mining sector as an undervalued opportunity.

“I see tremendous value in the mining space. The companies have got much leaner and the leverage on higher gold prices is probably higher than ever,” he said. “But never make the mistake to mix up the virtues of physical goals with the risks and opportunities of mining stocks.”

By Kitco News

David