PRECIOUS-Gold firms as dollar dips, coronavirus concerns grow

By Eileen Soreng

Oct 30 (Reuters) – Gold prices rose on Friday, as the dollar

retreated, supported by worries of soaring coronavirus cases in

the United States and Europe as well as uncertainty over the

upcoming U.S. presidential election.

Spot gold rose 0.5% to $1,875.76 per ounce by 357

GMT, but was on track for a third straight month of declines.

U.S. gold futures were up 0.5% at $1,877.

The dollar index fell 0.2% against a basket of

currencies, making bullion cheaper for holders of other

currencies.

"The dollar rebound appears to have run its course," said

Edward Moya, senior market analyst at OANDA.

"The virus spread is going to provide additional pressure on

the Congress to deliver more support… That's just going to

bolster the stimulus trade going forward."

The White House virus task force warned aggressive steps

will be needed to curb the outbreak, with the U.S. breaking its

single-day record for new infections on Thursday.

 

Europe has moved back to the centre of the global pandemic,

with Germany and France ordering a second lockdown to curb the

spread of infections.

"Leading into the U.S. elections I see it (gold) staying

weak," said Michael Langford, executive director at corporate

advisory and consultancy firm AirGuide.

"Regardless of whoever wins the election, there is going to

be some form of stimulus program and that's positive for gold."

Gold is up nearly 24% this year as unprecedented stimulus

measures globally boosted the precious metal's appeal as a hedge

against inflation and currency debasement.

The U.S. presidential election is set for Nov. 3 and opinion

polls show Democrat contender Joe Biden with a significant edge

nationally, but with a tighter lead in the battleground states

that play a decisive role in the final result.

Silver climbed 1% to $23.51 per ounce. Platinum

and palladium were up 1% at $855.77 and $2,213.71,

respectively.

David

Gold Demand Trends Q3 2020

29 October, 2020

Q3 gold demand 19% lower y-o-y at 892t

Strong growth in global investment demand for gold in Q3 partly offset weakness elsewhere as COVID-19 remained in the driving seat.

Demand for gold dropped to 892.3t in Q3 – its lowest quarterly total since Q3 2009 – as consumers and investors continued to battle the effects of the global pandemic. At 2,972.1t year-to-date (y-t-d) demand is 10% below the same period of 2019.

Although jewellery demand improved from the Q2 record low, the combination of continued social restrictions, economic slowdown and a strong gold price proved onerous for many jewellery buyers: demand of 333t was 29% below an already relatively anaemic Q3 2019.

By contrast, bar and coin demand strengthened, gaining 49% y-o-y to 222.1t. Much of the growth was in official coins, due to continued strong safe-haven demand in Western markets and Turkey, where coins are the more prevalent form of gold investment. Q3 also saw continued inflows into gold-backed ETFs, although at a slower pace than in the first half. Investors globally added 272.5t to their holdings of these products, taking y-t-d flows to a record 1,003.3t.

Central banks generated small net sales of gold in Q3, the first quarter of net sales since Q4 2010. Sales were generated primarily by just two central banks – Uzbekistan and Turkey – while a handful of banks continued steady albeit small purchases.

Demand for gold used in technology remained weak in Q3, down 6% y-o-y at 76.7t. But the sector saw a decent quarterly improvement as some key markets emerged from lockdown.

 

The total supply of gold fell 3% y-o-y in Q3 to 1,223.6t, despite 6% growth in gold recycling, with mine production still feeling the effects of the H1 COVID-19 restrictions.

While the pace slowed from H1, sustained inflows in Q3 demonstrated the motivation of investors globally to add to their holdings.

Weakness caused by COVID-19 was compounded by record gold prices: Q3 demand fell 29% y-o-y to 333t.

Retail investment was particularly strong in western markets, China and Turkey, in contrast with continued sales in Thailand

This was the first quarter of net sales since Q4 2010, as smaller purchases were outweighed by sales from mainly two central banks.

 

Highlights

Quarterly inflows of 272.5t took global holdings of gold-backed ETFs (gold ETFs) to a new record of 3,880t. While the pace slowed a little from H1, sustained inflows throughout Q3 demonstrate the continued motivation of ETF investors to add to their holdings.

The US dollar gold price rose to a record high of US$2,067.15/oz in early August. This was followed by a correction with the price closing the quarter around US$1,900/oz. Record high prices for gold were also seen in various other currencies, among them the rupee, the yuan, the euro and sterling.

Bar and coin investment jumped to222.1t in Q3 – up 49% y-o-y. Most major retail investment markets saw strong growth though the largest volume increases were seen in Western markets, China and Turkey. This contrasted with continued strong sales in Thailand.

The pandemic further impacted the jewellery sector. Weakness caused by COVID-19 was compounded by record gold prices: Q3 demand fell 29% y-o-y to 333t. While China and India accounted for the largest volume declines, weakness was global.

Central banks generated modest net sales of 12t of gold in Q3. This was the first quarter of net sales since Q4 2010, primarily due to concentrated sales by two banks. Buying continues at a moderate pace, driven by the need for diversification and protection amid the negative rate environment.

David

Inflation is coming, preserve your wealth with gold – Degussa chief economist

 

Consumer prices may be showing muted inflation pressures as the world continues to feels the effects of the COVID-19 pandemic but a major inflation threat is looming on the horizon according to one chief economist.

Thorsten Polleit, chief economist at Degussa

In a telephone interview with Kitco News, Thorsten Polleit, chief economist at Degussa, said that instead of focusing on consumer inflation, investors need to pay more attention to the growing money supply as this is what is going to general higher inflation for years to come.

Polleit’s comments come as governments and central banks around the world continue to flood capital into financial markets to support the beleaguer global economy. In a recent report, the International Monetary Fund said that $12 trillion has been pumped into the global economy. Data published last week showed the Federal Reserve’s balance sheeting hitting a new record high above $7 trillion.

“People continue to ask: ‘Where is the inflation,” he said. “But you just have to look at equity markets, real estate and bond prices. At the moment inflation is impacting asset markets. But the increase in the quantity of money that has been printed in the U.S. as well in the Euro area inflation will sooner or later also push up consumer prices.”

“It may take a while for inflation in asset markets to show up in consumer prices it will eventually happen,” he added.

Polleit said that there are two major issues the global economy has to deal with when it comes to all the money that has been printed by governments and central bank.

The first issues is currency debasement and the loss of purchasing power. Polleit said that wealth is being destroyed as currencies lose their purchasing power. He added that the create of more money doesn’t make people wealthy.

“Money is just a means of exchange. The wealth of a nation comes from the products it produces, the apples it grows and the homes that it builds,” he said. “More money doesn’t make a nation wealthier.”

In the current environment, as the pandemic has reduced production output among many nations, Polleit said that now the growing money supply is chasing fewer products. As governments look to initiative new lockdown measures as the COVID-19 pandemic see a new upward swing, Polleit added that people and businesses are now almost completely reliant on government money.

“Right now there is very little production so very little wealth is being created,” he said.

The second significant issues being created is the growing disparity between the rich and the poor. Investors with diverse portfolios are seeing their wealth grow as inflation drives financial markets higher; meanwhile consumers who don’t have investment accounts see more hardships as their dollars by fewer and fewer goods.

“Inflation benefits some at the expense of others,” he said. “As the quantity of money rises, it has various effects, but eventually it will make the great majority of people poorer.”

Although government deficits and central bank balance sheets are rising, Polleit said that the current financial system can continue to function without hitting a critical tipping point; however, he added that there is a simple solution faced by the global economy: give people the freedom to choose their currency.

“The root of the problem is our current monetary policy and the use of unbacked currencies. We have created a global economy of debt and that is driving inflation,” he said.

Polleit added that when it comes to creating a currency that preserve’s its purchasing power, gold is the best asset. He noted that it has a 1000 years of history as a store of value.

Because it’s mined and produced, gold can’t be easily devalued. As to whether or not the gold market is big enough to represent a new global currency, Polleit said that he doesn’t see that as a major hurdle.

Polleit added that the evolving digital currency market means that there is technology available to make gold a global monetary asset.

However, until gold is a recognized global currency, Polleit said that it is an asset that investors need to have in their portfolio.

“Holding gold is the best way of getting a risk reduction and return enhancement in your portfolio,” he said. “Holding gold, especially at current prices, is a wise thing to do.”

 

By Neils Christensen

For Kitco News

David

Gold ticks up ahead of the EU session

Gold moved higher during the Asian session after the greenback lost some ground. Once again the yellow metal starts the EU session trading around the $1900 per ounce level. After the rout in stock markets in the US session, the Asian bourses held up pretty well. The ASX was the main laggard falling 1.70% but the Nikkei 225 (-0.04%), Shanghai Composite (0.10%) and Hang Seng (-0.75%) showed broad-based mixed sentiment.

Silver is trading 0.89% higher, while platinum has also pushed 0.91% in the black. After falling heavily copper has stabilised at $3.07 per pound. In the FX market, the Canadian dollar has performed well but this is mainly due to a small retracement the CAD came under some pressure yesterday following the oil price drop.

The main story from late US leading into Asia was from the US fiscal stimulus saga. According to sources, US congressional committees have reportedly made progress but not enough to make the stimulus deal anywhere near imminent. Sticking with the US Amy Coney Barratt has been confirmed as a supreme court judge after a closely contested 52 vs 48 vote.

Virus cases around the world continue to rack up. The French government are reportedly looking into a full lockdown in the Paris Lyon and Marseille regions. UK COVID-19 cases continue to rise too as yesterday 20,890 cases were reported vs 19,790 the previous day. Keep an eye on today's results as there always seems to be a weekend effect on the numbers.

On the corporate front, today we will get hear from some major banks in the EU. HSBC and Santander are due to report earnings. On the data front, the market will get the latest US core durable goods data, US CB consumer confidence and there could be more Brexit headlines. BP, Eli Lily and Pfizer are also due to provide updates.

 

By Rajan Dhall

For Kitco News

David

Fed Chair – 80% of global central banks considering digital currencies

At a panel hosed by the International Monetary Fund earlier this week, Federal Reserve Chair Jerome Powell said that 80% of central banks around the world are exploring the idea of issuing central bank digital currency (CBDC), although the U.S. Fed has not made a decision to follow suit at this time.

Powell’s statement echoes a research report released by the Bank for International Settlements (BIS) in January which stated that currently 80% of central banks are engaged in developing in CBDC, up from 70% last year.

Earlier in October, the ECB has issued statements saying that it is considering using a digital euro to supplement a cash-based euro.

“A digital euro would preserve the benefits that the euro provides to all of us. It would help to deal with situations in which people no longer prefer cash,” the ECB said in a written statement on their website. “It would help cushion the impact of extreme events – such as natural disasters or pandemics – when traditional payment services may no longer function. It could also be crucial if people were to turn to foreign digital means of payment, which might undermine financial stability and monetary sovereignty in the euro area.”

Fabio Panetta, Member of the Executive Board of the ECB, wrote in a blog post that central banks, including the ECB, should be prepared to adapt to a cashless system, which is the direction that society is headed.

“The report concludes that we should be ready to issue a digital euro if and when developments around us make it necessary. This means that we already need to be preparing for it. In the coming months, we will listen and experiment so that we are in a position to take a fully informed decision on the possible development and launch of a digital euro,” Panetta said.

David Erfle, founder of JuniorMining.com, said that the ECB has no choice but to issue digital, or alternative currencies, because there is still a large amount of debt in the Euro Area that needs to be consolidated.

“I just know that the financial situation that they find themselves in as far as debt is concerned, leaves them no choice,” he said. “Now, they’re basically forced to, because they realize that there’s no possible way that governments of these major economies can continue to borrow at these ridiculously low levels of interest rates, but the greater problem is that all the past debt cannot be continuously rolled over because there’s no buyers.”

 

By David Lin

For Kitco News

David

SIDEX tripled its assets investing in this mining jurisdiction

SIDEX is a fund that invests exclusively in junior exploration companies in Quebec, Canada. Since inception, the fund has grown by nearly three times.

“The $50 million that was injected 20 years ago by our limited partners…since then we’ve returned $16 million, leaving a net money at play of $34 million, and our fund today is valued at about $95 million,” said Paul Carmel, CEO of SIDEX.

The fund has two primary mandates.

“For 20 years, we’ve had this dual mandate of number one, earning a return for our investors, which we have, and also providing some oxygen to the exploration companies,” he said.

SIDEX is a long-only fund and does not use embedded hedging strategies.

On gold, the eventual dissipation of COVID-19 will ease the need for safe haven assets, but tailwinds from accommodative policy will still provide the balancing force, Carmel noted.

“The whole COVID thing plays into it. Once that gets settled, and it will, gold might take a breather but I think the structural forces underpinning gold will continue to march forward. I think gold’s in a long-term uptrend here,” he said.

Carmel noted that gold and the miners have already had a good run, and investors should be mindful of the sector’s cyclicality.

“After a long drought in the sector we’ve had a pretty good upward move, and I’ve been in the business long enough to know that it’s a cyclical business, it doesn’t go up forever, but there could be a bit of a breather. That’s not to say that it won’t continue or go much higher,” he said.

Additionally, deposits around the world, and in particular in Quebec, are dwindling, and it’s becoming harder to not only find economical deposits but also to mine them, Carmel said, while the demand for metals will continue to march higher.

“I think it leads, in my mind, that the next commodity cycle could be quite dramatic,” he said.

 

By David Lin

For Kitco News

David

Brent Cook’s top gold stock picks, and top risks to flag

Expanded margins have created an optimal environment to invest in miners, but investors should still watch for jurisdictional risks, including the inability for miners to access their sites due to the ongoing pandemic, said Brent Cook, founder of Exploration Insights.

“If the company can’t get to site, that drops them down in terms of our interest,” Cook said.

Cook’s top picks for mining companies include Bluestone Resources (TSXV: BSR.V), Westhaven Gold Corp. (TSXV: WHN.V), and Clean Air Metals (TSXV: AIR.V).

In addition, mergers and acquisitions activity have been slowed by COVID-19.

“Due diligence required to do mergers and acquisitions and such, has been put pretty much on hold. A lot of companies aren’t able to get out with their technical personnel to site to evaluate a property, to evaluate a management team,” he said.

While operating results are company-dependent, as a whole, the investors should expect a strong third quarter for gold miners as a result of this year’s higher gold price, Cook said.

“With these gold prices where they’re at right now, close to $1,900, [miners] are making a lot of money. Most of the major companies have been pretty conservative in upping their reserves, and the gold price they used for reserves, so we should see pretty good cash flow coming into the majority of mining companies,” he said.

Cook said that while margins have improved across the board in the industry, high margin projects still remain a top criteria on his stock screening radar.

“We are always about margin, and I think the major mining companies, you see what they’re using for their price tag for gold price: $1,250 to $1,400. They’re focused on margin too. Our experience, and philosophy is that we’re after, and the major mining companies are after, the highest margin deposits they can come across,” he said.

 

By David Lin

For Kitco News

 

David

Headlines get ahead of themselves

In this headline driven market, sentiment can easily overreact to any news story that talks about perceived optimism, or pessimism. In regards to whether or not the United States government will be able to pass fiscal stimulus legislation prior to the presidential election on November 3rd, and traders are hanging on each and every changing headline. Today market participants witnessed choppy trading in U.S. equities resulting in gains of just over ½ a percent in both the Dow Jones industrial average and S&P 500. While the NASDAQ composite scored gains today of just under 2/10 of a percent.

Many precious metals analysts have cited today’s sharp selloff in the both gold and silver as a result of U.S. dollar strength. However, it was selling pressure that had a cascading effect which began as markets opened up for trading in Australia last night. Within the first few hours of trading overseas gold prices already had begun to decline. It began with a modest sell off in Australia, which accelerated into Hong Kong. However even though gold prices were on the way down in Asian markets they were able to hold above the key psychological level of $1900 per ounce. Selling pressure magnified as it entered London, leading to a break below $1900.

Gold futures basis the most active December Comex (Globex) contract traded to an intraday low of $1894.20 by the close of trading in London. From there pricing began to slowly recover as New York markets opened and market sentiment shifted slightly from bearish to a more bullish demeanor. This on optimism from statements made by the speaker of the House Nancy Pelosi where she acknowledged that a fiscal stimulus deal was still possible before the presidential election. That headline helped move back above $1900 per ounce.

That being said gold did close with strong losses today. As of 4:25 PM EST gold futures are currently fixed at $1906.50, which reflects today’s decline of $23.00 (-1.19%). The decline in silver was steeper as the most active December 2020 contract gave up 1.65% (-0.416).

While dollar strength did contribute to deteriorating gold and silver prices, the vast majority of today’s declines were the direct result of selling pressure. This can clearly be seen when viewing the KGX (Kitco Gold Index). On close inspection of the KGX dollar strength only accounted for $6.55 of spot gold’s losses, with the remaining decline of $12.65 directly attributable to selling pressure. The sum of these factors led to the $19.20 fall in spot gold which is currently fixed at $1905.10.
 

Wishing you as always, good trading,

 

By Gary Wagner

Contributing to kitco.com

David

Year-end forecast – gold stocks to rally 60%, $2,300 gold price – Chris Vermeulen

Gold stocks are showing short-term consolidation, but should they break resistance, another bullish leg could be sustained, pushing the VanEck Vectors Junior Gold Miners ETF (GDXJ) up to 60% higher in a few months, said Chris Vermeulen, chief market strategist of Technical Traders.

“If we were to extend these [price levels to this year’s lows], which is where this first major bull flag pole ran to, and now we’ve got a multi-month consolidation, it actually gives us the full-measured move of the upside target of the GDXJ, reaching potentially all the way to $98,” Vermeulen said.

The GDXJ last traded at $58.18.

he gold bullion is seeing similar price action, and chart patterns point to a $2,100 to $2,300 by year-end.

“Gold is continuing to hold its value because we really are in the perfect storm for precious metals. The more issues we have with the economy, the more bullish it actually is for metals because of stimulus and currency issues and all those things,” he said.

The key market risk remains COVID-19, Vermeulen said.

“It’s really going to come into COVID. If the second wave of COVID really wreaks havoc and locks down North America and Canada, and the U.S. gets really strict on their rules, that’s going to put us into a death spiral,” he said.

 

 

By David Lin

For Kitco News

David

Hurdles remain for a fiscal stimulus bill to pass

Featuring views and opinions written by market professionals, not staff journalists.

Commentaries & ViewsShare this article:

Although the House, Senate and White House are working feverishly to come to an agreement and pass fiscal stimulus bill before the election, it seems that the differences are split three ways.

Yesterday House Speaker Nancy Pelosi and the U.S. Treasury Secretary Stephen Mnuchin spent 53 minutes on a telephone conversation attempting to narrow the differences and agree on a compromise. Speaker Pelosi said that she “hopes that by the end of Tuesday there will be clarity on whether a coronavirus stimulus bill can be passed before the November 3 elections.”

However today in an interview with CNBC news Mark Meadows, White House Chief of Staff said that, “We are still billions of dollars away from a fiscal stimulus bill that can be passed before the election.”

The difference between the White House, Senate and Congress is the dollar amount that will be allocated for a stimulus bill and where that money will go to. The White House proposed a stimulus bill of $1.8 trillion to help Americans and small businesses who have been greatly affected by the pandemic. While the House of Representatives have proposed a bill that will require $2.2 trillion. The third proposal is by the U.S. Senate which is been labeled the “skinny bill” will require $500 billion and fund additional stimulus checks to American taxpayers and more funding for the paycheck protection program.

Senate Democratic leader Chuck Schumer said that the Republican plan abandons state and local governments in need and has inadequate funding for unemployment benefits.

One key difference between the House of Representatives and the Senate is whether or not there should be federal funding to states which are in great need of a capital infusion. However, the Republicans view this as a “blue state bailout”.

Yesterday Nancy Pelosi said there is only a 48-hour window left to pass a fiscal stimulus bill which means that there is now only 24 hours left.

Many analysts including myself believe that a new round of fiscal stimulus will be extremely bullish for the price of gold and concurrently bearish for the U.S. dollar as the budget deficit in the United States for fiscal year 2021 begins to balloon.

As of 4:24 PM EST gold futures basis the most active December 2020 Comex contract is trading down by $2.30 and currently fixed at $1909.40.

The current price of spot gold is $1905.80 with a net gain of $2.60 on the day according to the KGX (Kitco Gold Index). On closer inspection we can see that dollar weakness today accounted for a net gain of $6.85. Market participants however bid the precious metal lower by $4.25.

 

Wishing you as always, good trading,

 

By Gary Wagner

David