Official currencies are no longer a store of value says analysts

Investors should brace for the reality that as currencies race to the bottom, the only way to preserve wealth is to buy gold and silver, said analysts at Degussa in a report Thursday.

“For long-term oriented investors, gold and silver should be considered not only as liquid but also as risk-reducing and return-enhancing components for the asset portfolio; especially so in times of an unfolding big short in official currencies,” the report said.

Gold has rallied to all-time highs, and silver has climbed more than 100% since its March lows; both of these rallies signify that fiat currencies are losing their value, the report said.

“While you may well say that the prices of gold and silver are on the rise, it would actually be more meaningful to state that „the purchasing power of official currencies vis-à-vis gold and silver is on the decline,” the report said.

Degussa said that it is not only precious metals that are rallying; other assets like stocks, bonds, and real estate have also been appreciating. This is further evidence that currencies are just becoming cheaper relative to real assets.

“This means that you can buy fewer and fewer stocks, bonds, and houses with a given official currencies unit. From this perspective, you can rightfully conclude that a true and broad-based debasement is going on as far as the world’s major official currencies are concerned,” the report said.

This debasement of official currencies is not a recent phenomenon and has been going on for decades, Degussa noted.

However, currency debasement has recently picked up speed.

“The monetary debasement has gathered speed due to the consequences of the politically dictated lockdown crisis,” the report said. “Central banks around the world print up ever greater amounts of money to make up for lost incomes and profits, in particular in the United States of America and Europe.”

The trend has built a case for shorting reserve currencies, Degussa said.

The analysts at Degussa noted that a sharp rally in metals prices could be followed by a retracement, but the inevitability of inflation means that investors would still be wise to hold silver and gold in the long-term as an inflation hedge.

By David Lin
For Kitco News

David

An impending equity bear market will ultimately push gold price to $4,500 â Bloomberg Intelligence

An impending equity bear market will ultimately push gold price to $4,500 – Bloomberg Intelligence

The Federal Reserve has pumped trillions of dollars to stabilize the U.S. economy and financial markets devastated by the COVID-19 pandemic. With that trend expected to continue for the foreseeable future, one market strategist said the best way not to fight the central bank is by investing in precious metals.

In an interview with Kitco News Mike McGlone, senior commodity strategist at Bloomberg Intelligence, said the gold market is looking a little stretched. Prices have pushed to a record high and within striking distance of $2,000. He added that fundamentally, gold is nowhere near overvalued levels as the U.S. central bank continues to pour money into financial markets.

McGlone said that he would recommend investors look to buy gold on dips as the price could continue to hover around $2,000 through the U.S. November elections.

"In the short term, we have gold about 21% above its 52-week mean, that's the most since the peak in 2011," he said. "You don't want to be the first buyer at these levels. Anytime gold gets this high above its 52-week average, you got to expect consolidation."

Although gold investors should be a little more strategic with their buying, McGlone said that they shouldn't lose sight of the bigger picture, which is materially higher gold prices. McGlone reiterated his call that gold will needs to get “stupidly” expensive before this rally ends and that could mean prices above $4,000 an ounce.

"Basically, after 2008, gold dropped around $700 and then it rallied around three times to the peak in 2011," he said. "So just a simple rhyme of history means we get to near $4,500 and it's about time. You just have to look at debt to GDP, look at central bank balance sheets, and they're just on an upward trajectory."

As to what gets gold to those levels, McGlone said that investors should continue to watch equity markets. With bonds providing investors with no yield, a bear market in equities would drive gold's safe-haven appeal, he said.

"Now the rock is beating stocks. There's a sense in the market that the bull market in stocks is over… and gold should take off," he said. "That, to me, is the next big trade."

Although the Federal Reserve's unprecedented monetary policy measures are artificially driving stocks higher, McGlone said this factor is seeing diminishing returns. He added that it's only a matter of time before the effects of the Fed's money printing wears off.

"The S&P 500 is almost up 200%, 300% over the last ten years. It just can't continue to do that. Not without strong, solid economic growth earnings," he said. "Yes, we're getting a bid from monetary, fiscal stimulus, but that is dicey and that's not going to last."

By Neils Christensen
For Kitco News

David

Does current gold price make sense? McKinsey warns these sectors destroyed permanently

As gold prices breached new all-time highs, confidence in the yellow metal signals to investors a desire to break away from the U.S. dollar, said Ken Hoffman, senior expert at McKinsey.

“The world is trying to get away from the dollar. You’ve seen a number of Chinese sources talk about the ‘de-dollarization’ and as the world tries to look for another currency besides the U.S. dollar, gold makes a lot of sense,” Hoffman told Kitco News.

The outlook for the global recovery following the COVID-19 pandemic looks promising for some sectors, but grim for others.

In a recent report published by McKinsey, the healthcare, information services, and technical service sectors will be the fastest to recover, while the arts and entertainment, hospitality, and educational services sectors will take the longest, with a recovery to pre-COVID levels taking place only by 2024-2025.

Mining, quarrying, and oil and gas extraction will also take a few years to recover fully.

Hoffman said that this is due to the oil companies that have been grouped into this category.

“Energy is a big part of that bucket, and energy has been impacted tremendously, particularly in travel…vehicle travel, air travel, ship travel, etc. That is the one area that we think is going to have a long-time recovery. Coal, in particular, may never see a recovery to pre-COVID levels,” he said.

Metals miners are seeing a mixed picture when it comes to a recovery, Hoffman noted.

“From a supply side, it’s been very spotty which industries have been hit by COVID and which have not. In particular, you’re seeing in South America a number of various sort of hits. Most notably is iron ore in Brazil, and copper Chile, has been quite hit as well,” he said.

By David Lin

For Kitco News

David

Gold price path to $2,000 -Â ‘There is no quick solution to U.S.-China tensions’ â analysts

Gold price path to $2,000 – 'There is no quick solution to U.S.-China tensions' — analysts

Gold is on a mission: to reach its all-time high of $1,920. And aside from looking like a very probable outcome for next week, analysts say that there is little to stop the precious metal from rising further and getting close to $2,000 an ounce.

Rising tensions between the U.S. and China, weaker U.S. dollar, falling yields, additional fiscal stimulus and still climbing COVID-19 cases have all been some of the significant drivers behind gold's massive move up this week.

At the time of writing, August Comex gold futures were trading at $1,899.80, up 0.52% on the day. In just five trading days, gold gained more than $80 and saw its seventh weekly gain in a row.

In terms of what's next for gold, the majority of analysts Kitco News spoke to on Friday said that the trend upwards remains intact and more price gains are likely. The main reason behind such bullish outlook is that gold's supportive elects are here to stay … for now.

"I don't see a quick solution to escalating tensions between the U.S. and China, I don't see a quick solution to the pandemic problem, and I don't see a quick solution to the global worries that come from increased stimulus and increased debt," RBC Wealth Management managing director George Gero told Kitco News. "The trend is my friend, according to traders in gold. They will remain buyers on dips."

Hitting higher levels is the outlook for both gold and silver, Gero noted.

U.S.-China tensions: 'U.S. dollar on its knees'

The U.S.-China tensions saw another escalation Friday when China retaliated for Houston's consulate closure by ordering the U.S. to close its consulate in the city of Chengdu.

"The U.S. move seriously breached international law, the basic norms of international relations, and the terms of the China-U.S. Consular Convention. It gravely harmed China-U.S. relations," China's foreign ministry said in a statement.

This rise in tensions, along with a weaker U.S. dollar, is creating a very gold-supportive environment for traders.

"The U.S. dollar is pretty much on its knees, political tensions between the U.S. and China are at their highs. And the Middle East is seeing a very bad time right now. Everything is pointing to much higher safe-haven demand," said Afshin Nabavi, senior vice president at precious metals trader MKS SA.

The weaker U.S. dollar is also helping international buyers acquire gold and silver, which in turn, boosts the price, highlighting Gero.

Anna Golubova

David

Will King Dollar Be Overthrown?

The Fed is counterfeiting trillions of dollars. The government has created mass unemployment and is spending way beyond what it takes from us in taxes. While the livelihoods of the American citizens are destroyed, government refuses to shrink. More promises that can't be kept are being made. Gold is starting its engines and heading to record highs. Are the ideas of omnipotent government and central planning finally on their way out?

David

Gold stages the highest weekly closing price on record at $1899.80 an ounce

History was made today when gold pricing closed near the highest daily level since August 22, 2011. In fact, as of 5:50 PM EDT gold futures basis the most active August contract is currently settling at approximately $1900.30. On a weekly chart gold closed at a new record price for the highest weekly close.

Considering that this massive rally began in the middle of March in response to a epidemic becoming a global pandemic with gold trading at approximately $1450 per ounce. In this short time span of four months traders have witnessed gold prices rise dramatically from the mid-March lows to close today within pennies of $1900.

The global pandemic has touched every country in the world. According to John Hopkins University the total number of reported cases worldwide is now at 15,628,936, resulting in the loss of 636,262 lives.

According to the CDC, in the U.S. alone 72,219 new cases of the Covid-19 virus were reported from the previous day, taking the total number of infected individuals in the United States beyond 4 million (4,024,492) individuals. Bring the total lives lost in the United States to 143,868 with 1,113 new deaths being reported today.

Our issues with China did not start with the Covid-19 virus which is believed to have begun in a Wuhan province. Prior to the pandemic our two superpowers were fully immersed in a trade war. The rally which began in March of this year came after the trade tensions between the United States and China had already run up the price of gold.

At the end of 2019 gold was trading somewhere around $1300 an ounce after climbing from about $1040 when the multiyear correction concluded at the end of 2015. Roughly 2 years later America and China would begin trade negotiations which resulted in a trade war.

cording to Reuters, it was September 24, 2018 when the 10% tariffs on the $200 billion worth of Chinese imports was actualized and enforced, and on the very first day of 2019 China responded by taxing $60 billion of U.S. goods. Unknowingly this issue would be put on the back burners as the world’s greatest superpowers were unable to move past a phase-1 agreement, which at this point is still unresolved.

The current focus in the United States and globally is on mitigating the damage caused by the coronavirus. This has been a huge component creating bullish market sentiment for gold. The recent tensions between our two superpowers have escalated the conflict and was the final push needed to take gold to $1900.

Whenever this pandemic begins to subside countries globally will have to deal with the economic fallout that most certainly will follow. If the economic fallout is combined with heightened tensions between the United States and China collectively these fundamental issues could take gold to $2000 or higher.

Wishing you as always good trading and good health,

By Gary Wagner
Contributing to kitco.com

David

Gold prices have risen more then 4% so far this week in global markets, their biggest weekly percentage gain in over three months.

After US ordered China to close its its Houston consulate this week, Beijing said the move had "severely harmed" relations and warned it "must" retaliate.

Also, the number of Americans filing for unemployment benefits unexpectedly rose last week for the first time in nearly four months, data showed on Thursday.

Gold is viewed as a safe-haven during times of political and financial uncertainty. The precious metal has also been supported by a weak dollar.

"Gold and silver may witness choppy trade as market players assess virus risks and geopolitical tensions against expectations of additional stimulus measures however the general bias may be on the upside due to weaker US dollar," Kotak Securities said in a note.

In the US, Senate Republicans are set to unveil their proposal for a fresh round of coronavirus stimulus next week, including more direct payments to Americans. Earlier this week, Europe approved a massive stimulus of over $850 billion.

Coronavirus cases continue to rise, with more than 1.54 crore people across the world have been reported to be infected by the virus while 6.3 lakh people have lost their lives. (With Agency Inputs)

David

Gold and silver continue to move higher, faster, than forecasted by analysts

It was another day in which the precious metals ran strongly to higher pricing. Initially both gold and silver spiked strongly in mid-March when the coronavirus epidemic grew into a global pandemic. Gold gained almost $300 as it traded from $1450 to $1788.

Gold futures basis the most active August contract closed up $23.70 (+1.28%) and is currently fixed at $1867.50. Silver gained 7.92%, which is a gain of a $1.70. Currently September silver futures are fixed at $23.265.

The accelerated moves to higher pricing are based upon new fundamental events unfolding during the pandemic causing market participants to not only react to central banks flooding liquidity to reignite their contracting economies. The monetary policy of quantitative easing always results in a devaluation of the currency specific to that central-bank.

The recent acceleration of higher gold and silver prices are tied to heightened tensions which have escalated to a new level between the United States and China. China reported today that the U.S. had ordered it to close its Houston consulate, magnifying the existing tension between our two superpowers. China labeled the action by the United States as an “unprecedented escalation by the U.S.” this led China to threaten and retaliate if the decision isn’t reversed.

The recent breakdown and stalemate between China in the United States adds fuel to the fire created from the massive U.S. fiscal stimulus, as well the Federal Reserve maintaining a monetary policy that is very accommodative. The actions by the Federal Reserve have the potential to devalue the U.S. dollar, which is exactly what we have seen.

The totality of geopolitical and economic expenditures creates a perfect storm scenario in which we could see gold challenge and trade to a new all-time record high. Currently, gold is at a new all-time record high when paired against the Euro dollar, the Indian Rupee, the Canadian Dollar and many others.

According to MarketWatch, Boris Schlossberg, managing director of FX Strategy for BK Asset Management said, “Gold attracts flows when real interest rates compress and when political tensions rise, so the current market regime is a perfect recipe for a move higher over the intermediate term horizon.”

It is clear to many analysts including myself that gold and silver have rallied based on two primary reasons; U.S. dollar weakness and extremely bullish sentiment by traders and market participants.

Jeroen Blokland, senior portfolio manager at Robeco Asset Management believes that, “It seems the precious metal has been caught up in the perfect storm. Much of what’s driving silver also is driving gold — aggressive monetary policy financing of fiscal spending, which limits the ability of bond yields to rise. That is sending inflation-adjusted, or real, yields lower, which tends to boost precious metals.”

Unquestionably as long as central banks continue along the path of extremely accommodative monetary policies, they will devalue the currency of their country. However not since the end of World War II have so many central banks devalued their currencies through a process of quantitative easing. These actions can only have one outcome in regards to gold and silver pricing, and that is that they will continue to gain value, and traders will continue to fuel the demand for the safe haven asset grow substantially.

Wishing you as always good trading and good health,

By Gary Wagner
Contributing to kitco.com

David

Gold prices gearing up to take all-time highs, silver could reach $30 â Citi

Gold prices gearing up to take all-time highs, silver could reach $30 — Citi

Bullish sentiment in the precious metals space will take gold prices to their all-time highs, according to Citigroup Inc., which views the upward move up as “only a matter of time.”

“Nominal gold prices have already posted fresh records in every other G-10 and major emerging market currency this year,” Citigroup analysts said in a report. “It is only a matter of time for fresh [highs in USD-terms].”

The record-high price to beat is around $1,920, which was reached back in 2011. At the time of writing, August gold futures were trading near nine-year highs of $1,840.80, up 1.29% on the day.

Citi projects gold to reach its all-time highs in the next six-to-nine months, the report stated. On top of that, analysts see a 30% chance that the yellow metal tops $2,000 an ounce in the next three-to-five months.

The drivers pushing gold higher are loose monetary policies, low real yields, and increased allocation to gold.

Rising safe-haven demand will also continue to lift silver prices, analysts added, projecting for the precious metal to rise to $25 within the next six-to-twelve months and even possibly reaching $30 in a bullish scenario.

At the time of writing, September silver was up nearly 7% on the day and trading at $21.540 an ounce.

Tuesday, the market is focused on a potential agreement between the European Union leaders for a massive stimulus package that deals with the coronavirus-related economic fallout. Markets are optimistic that the 750 billion euro ($857.33 billion) recovery fund and its related 1.1 trillion euro 2021-2027 budget will help the EU economy recover after the COVID-19 pandemic.

In the U.S., investors are carefully watching their own stimulus talks. Senate Majority Leader Mitch McConnell, Treasury Secretary Steven Mnuchin and other key players, are scheduled to meet in the White House on Tuesday. Republicans are expected to propose a $1 trillion rescue package, which is much less than the Democrat’s proposal of $3.5 trillion.

By Anna Golubova
For Kitco News

David

Silver Versus Gold â A Sign of the Times

Silver Versus Gold – A Sign of the Times

QUESTION: Mr. Armstrong; I listened to one of your recent interviews and you said that silver may be better than gold going forward and that a gold standard was pointless because you cannot fix the price of gold while everything else floats. That was the best explanation I have ever heard. So my question is are you referring to common silver coins dated before 1965?

ANSWER: The silver to gold ratio peaked and has begun to turn. The problem with gold is that it rallied rather than making a strategic low, which would have set it up for a major slingshot. This failure to create the slingshot low will temper its advance which is what we are beginning to see now with the change in trend with respect to the ratio. Governments are hunting gold and imposing all sorts of restrictions. From a true barter perspective, silver coins will be easier to use if they end up canceling the paper currency. This is highly likely in Europe first, and then it will migrate to the USA.

by Martin Armstrong

Categories: Gold, Silver

David