Gold’s bull run isn’t over as prices consolidate above $1,800 – analysts

The gold market is consolidating above $1,800 an ounce and although bullish sentiment has fallen from record levels, market analyst and retail investors remain bullish on prices next week, according to the latest Kitco News weekly gold survey.

Although gold has struggled to push off support around $1,800 an ounce, analysts have said that the market still has a lot of technical momentum and strong fundamental support.

“Dips continue to be bought and that shows there is underlying strength in the marketplace,” said Bob Haberkorn, senior commodities broker with RJO Futures. “Right now gold is consolidating but we can see higher prices next week.”

This week, 16 Wall Street professionals who took part in this week’s poll, 11, or 69%, called for gold prices to rise. One analysts, or 6%, predicted lower prices. Meanwhile four votes or 25% expected prices to trade sideways.

A total of 1,642 votes were cast in an online Main Street poll. Of these, 977 respondents, or 60%, looked for gold to rise in the next week. Another 348, or 21%, said lower, while 317 voters, or 19%, were neutral.

Although the majority of Wall Street analysts are bullish on gold next week, sentiment has dropped from last week’s record high of 88%. Both Wall Street and Main Street were expecting to see gold push higher for a sixth consecutive week. As of 1 p.m. EDT on Friday, Comex August gold futures last traded at $1,810 an ounce, up 0.4% compared to the previous week.

Adrian Day, chairman and CEO Adrian Day Asset Management said he expects momentum to continue to push gold prices higher.

“Since people are buying gold as an insurance or hedge, the price become less important, so gold can move significantly higher,” he said.

According to many analysts, the one factor that will continue to drive gold prices higher in the near term is further weakness in the U.S. dollar as the current embarks on a new downtrend.

Charlie Nedoss, senior market strategist with LaSalle Futures Group, said that growing expectations that the U.S. government will announce new stimulus measures to support the faltering economy, as the COVID-19 pandemic continues to run rampant through the country, will weigh on the U.S. dollar and support gold prices.

“I think you need to be bullish on gold as the market rallies off the cheap money being released in to the economy,” he said.

Darin Newsom, president of Darin Newsom Analysis, said that not only is a weaker U.S. dollar supporting gold prices but so is the record rally in equity markets.

“Right now there is no reason to buy the dollar,” he said. “So money continues to flow into gold as a safe play to protect against the push higher in equities. Right now you can’t find the trend, so I see gold prices moving higher.”

Chris Vecchio, senior currency strategist at IG Group, said that not only does gold have a strong technical outlook but it is benefiting from a strong fundamental backdrop.

Although there is strong sentiment in the marketplace, some analyst have noted that a correction would be healthy following break above long-term support.

“I see gold range bound, but increasingly in need of a correction to attract fresh interest. On that basis while I remain bullish I see it lower next week,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Colin Cieszynski, chief market strategist at SIA Wealth Management, said that he is neutral on gold as the market waits for a new catalyst.

“After three central banks (BOJ, ECB, BOC) maintained monetary policy at their latest meetings, there was no new stimulus to propel gold higher in the short term. At the same time, the underlying tailwind for gold from monetary stimulus remains intact,” he said.

 

By Neils Christensen

For Kitco News

David

Price of Gold Fundamental Daily Forecast – Sideways to Better as Investors Await More Stimulus

MeasuresGold seems poised for a return of volatility, but we’re not likely to see it unless there is more stimulus or COVID-19 is brought under control.

After experiencing some early session weakness and putting its weekly winning streak in jeopardy, gold futures are trading higher at the mid-session on Friday. This puts it in a position to post its sixth consecutive weekly gain.

The catalysts providing support are flat demand for higher risk assets, lower Treasury yields and a weaker U.S. Dollar. The hope of more global fiscal and monetary stimulus is helping to generate the most buying interest in my opinion.

At 17:18 GMT, August Comex gold is trading $1809.90, up $9.60 or +0.53%.

Since hitting a new contract high on July 8, gold has been struggling to maintain its upside momentum. The support is there with longer-term investors buying every significant dip since April, but the short-term trade has been mostly sideways as traders grapple with strong demand for higher-risk assets and the occasional rally in the U.S. Dollar due to renewed safe-haven demand.

Ultimately, it’s the direction of Treasury yields that determines the direction of gold prices because they are competing assets. Usually, government debt is the more attractive safe-haven investment. Not only is it guaranteed, but it also pays interest. However, the closer yields move to zero percent, the stronger the demand for gold, which pays nothing to hold it.

Saying that the surge in coronavirus cases is driving gold demand is not necessarily a valid statement. It may be the easiest headline to write, howeve

The way I see it, a jump in coronavirus cases leads to speculation that some U.S. states and foreign countries will partially shut down again, raising fears the economy and labor market will continue to struggle.

A setback in the economy and labor markets will increase calls for more fiscal assistance from governments and more monetary assistance from central banks. That’s what bullish gold traders are betting on.

The long-term bullish factors driving gold prices remains intact with real interest rates low. The short-term factors are enough to support gold and prevent a price collapse, but it’s going to take the announcement of new stimulus measures to send prices higher.

One such event is the European Union’s proposed stimulus package designed to kick-start the Euro Zone’s COVID-hit economies. Another is an additional stimulus package from the United States.

 

Short-Term Outlook

Over the short-run gold investors need to see some fresh stimulus to drive prices higher. Otherwise, prices could become rangebound, but not necessarily bearish as traders wait out the development of a vaccine to fight coronavirus.

The market seems to be poised for a return of volatility, but we’re not likely to see it unless there is more stimulus or COVID-19 is brought under control.

 

David

Gold and silver continue to gain value as pandemic lingers

Even with the intermittent drawdowns that both gold and silver pricing have experienced over the last few months, overall gains in both metals have been impressive and significant. Obviously higher pricing in both precious metals is the direct result of global central banks accommodative monetary policy, and in the United States the massive buildup of their internal balance sheet to implement quantitative easing. It is also obvious that these actions are the direct result of the pandemic which has dramatically affected economies worldwide.

Although we first learned about this new virus after a cluster of severe pneumonia cases were reported on New Year’s Eve 2019 in the city of Wuhan China, it was not until February 2020 that the first case of Covid 19 was detected in the United States. According to the CDC by mid-March, “all 50 states, the District of Columbia, New York City, and for territories at reported cases of Covid 19.” This novel coronavirus is a variation of an existing virus, however this variation had never been seen in humans.

Although this contagion was identified in the beginning of 2020 it was not until March 11 that the World Health Organization declared the outbreak a pandemic. By March 23 New York City had confirmed a total of 21,000 cases. Making the largest most densely populated city in the U.S. the epicenter of the outbreak in the United States. By the first week of April global infections had reached over 1 million individuals.

According to John Hopkins as of July 17, 2020, the total number of confirmed cases is almost 14 million with 13,926,747 cases reported. Among these infected individuals almost 600,000(593,209) people lost their lives. This pandemic has now plagued countries worldwide since the first part of this year, still new cases continue to emerge in various hotspots in the United States such as Texas, Arizona and Florida. Worldwide hotspots can be found mainly in the following countries; Brazil, Mexico, India, Columbia, Iran, Peru, Russia, South Africa and Iraq. As of July 17, the two largest hotspots were in the United States and Brazil. Concurrently many countries worldwide are working to “flatten the curve” reducing the number of new cases from one day to the next.

More importantly even when the pandemic has run its course and subsides, global economies will have to begin to figure out how to effectively deal with the enormous expenditures that were necessary to restart their economies, as well as the massive amount of capital expended through central banks and their highly accommodative monetary policies

It is for that reason that we have seen such dramatic gains in both gold and silver. Since the first week of June when gold traded to a low of $1671 to current pricing of $1812.10 today, an ounce of gold has risen roughly $125, which is a net gain of 6.9% in approximately 1 ½ months. Silver also gained dramatic ground as it traded from the approximate lows of $17.55 during the first week of June, and is currently fixed at $19.745 as of today’s close. Silver his gained $2.20 in the last seven weeks and gained 11.1% in value over this extremely short period of time, half that of golds rise.. The underlying fundamentals which have moved both gold and silver dramatically higher, have already created the necessary environment for both precious metals to continue to move higher and possibly trade above the record high of gold at $1920, and silver at the dollars per ounce.

pic

What is certain is that the global pandemic will most likely take a longer time to run its course unless a vaccine is created. It is also certain that once the pandemic has subsided the economic fallout which is a direct result of the massive expenditures by countries worldwide used to provide aid for its citizens, and economic stimulus to reignite their contracting economies will have percussions and ripple effects for years to come.

While we all wish for the best, we must prepare for the worst. It is for that reason that market participants and investors have turned to the safe haven assets of gold and silver as a viable means to address the economic fallout which is inevitable.

Wishing you as always, good trading,

 

 

By Gary Wagner
Contributing to kitco.com

David

Yamana Gold's Q2 production is lower due to COVID-19 suspensions

Yamana Gold (TSX:YRI) announced today gold production of 164,141 ounces and silver production of 2.01 million ounces.

The gold miner released preliminary production results.

Production was down compared to the previous quarter when gold production came in at 192,238 ounces and silver production was 2.73 million ounces.

The company said that overall production in Q2 from most mines exceeded plan and the production in the company’s annual guidance.

Costs were up in the quarter. All-in sustaining costs for the quarter were $1,125 per GEO sold due to higher production costs, such as the demobilization and ramp-ups of Cerro Moro and Canadian Malartic along with the implementation of precautionary safety measures related to COVID-19 across all operations.

Yamana expects to scale up production as the year progresses.

"Furthermore, in line with prior guidance, the Company expects to generate increasing production, improving costs and significant cash flows in the second half of the year, sequentially increasing over the third and fourth quarters. As previously guided, production is expected to weight into the second half of the year, with 54% of production expected in the second half compared to 46% in the first half," said the company in a statement.

 

By Kitco News

David

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

David

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.

 

David

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

David

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

 

David