Year-end surprise in store for gold? 3 weeks left in 2020

Gold is in recovery mode but is this a start of another bull run or just a reaction to an oversold drop in November? This is exactly what Kitco News asked the analysts this week and the optimists prevailed.

Just a bit of background here, gold rose back above $1,800 an ounce in December and even attempted to hit a key level of $1,850 several times. Analysts say that once that level is breached, gold could be ready to approach $1,900. After that, the key resistance level becomes $1,925, which would then clear the path towards $1,975.

Triggers to watch are raging coronavirus numbers, stimulus talks, equities performance, and the Fed meeting next week.

Standard Chartered said that despite some short-term obstacles, gold will return to its peak of $2,000 in the next couple of months. It added that vaccine and economic recovery will not be felt until the second half of next year.

TD Securities told its clients the meltdown in gold is likely over, adding that gold will keep rising north of $2,000 in 2021.

Another major topic this week was bitcoin and the debate whether it is stealing attention away from gold.

Singapore's United Overseas Bank wrote in a report that bitcoin's massive surge in popularity could be PARTLY to blame for gold's drop in November, but it is far from being the only reason.

JPMorgan Chase went even further, saying that bitcoin's wider adoption is having a direct impact on gold. And this could trigger a major shift in institutional allocation between the two assets.

JPMorgan strategists said: "The adoption of bitcoin by institutional investors HAS only begun … If this proves right, the price of gold would suffer from a structural headwind over the coming years."

In other news, Wells Fargo examined the role of cash in a portfolio and asked whether some are holding too much of it? The bank defined cash as "a temporary parking place for funds" and warned that it does not work long-term.

 

By Anna Golubova

For Kitco News

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Billionaire Thomas Kaplan – Silver prices can 'absolutely' hit triple digits – Kitco News Exclusive

More than 20 years ago famed investor Thomas Kaplan made his first fortune in silver, buying options and turning that investment into one of the biggest zinc-silver mines in the world.

In an exclusive interview with Kitco News, the CEO of The Electrum Group says that he is now back in silver after going public with a new silver mine in Mexico. Last month Kaplan’s commodity investment fund went public with Gatos Silver (NYSE: GATO, TSX: GATO) with its producing Cerro Los Gatos Mine in Northern Mexico.

"I never really left silver. I just left the public domain. Coming back to silver just essentially means that we are, as it were, coming forward with assets that we have been nurturing for years," he said.

Kaplan said that Gatos Silver raised $170 million in its IPO and was one of the first precious metals companies to be listed directly on the New York Stock Exchange.

Kaplan has a second venture, a company that is developing the historic Sunshine Mine in Idaho, which produced in 100 years more than 360 million ounces of silver. Since buying it in bankruptcy a decade ago, the Electrum Group has managed to increase the mines resource from around 30 million to about 200 million inferred resources, Kaplan said.

"When we acquired it out of bankruptcy over a decade ago, the general zeitgeists was that it was burnt out," he said. "We think we have just scratched the surface. I have no doubt that this mine will produce silver again."

Kaplan said that his long term plan is to take the Sunshine Mine public; however, he added that he is not in any hurry.

"When you have a great project time is always on your side and we have a great project," he said.

Looking at silver prices he remains bullish on the precious metal.

"I always say that silver is gold on steroids and I'm wildly bullish on gold," he said.

Not only does he see silver prices pushing back to its record highs above $50 an ounce, but Kaplan said that there is no reason why the metal can’t get to $100 an ounce, especially as gold prices continue to rally.

"Once silver stabilizes and gold is going up as some monetary metals, silver then starts to follow gold and then it gets octane and it surpasses gold," he said. "That's what happened during the financial crisis and we are starting to see that again.

Not only is silver benefiting as a monetary metal as central banks around the world continue to pump liquidity into financial markets, but Kaplan said that the metal will also benefit as the global economy recovers from the COVID-19 pandemic.

Looking at gold prices Kaplan noted that the precious metal was in a bull market before the world was hit by the coronavirus and he added that it will remain in a bull market after the virus is dealt with.

"All the pandemic has served to do is to make people now understand that the question of money and what is money when clearly it can be printed at will, he said. "The debasement of currencies is obviously very, very bullish for gold."

By Neils Christensen

For Kitco News

 

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Gold plummets as stimulus negotiations stall and vaccine headway

Gold prices tumbled in active trading today, with the most active February 2021 Comex contract trading to a low of $1828 before recovering. As of 5:04 PM EST gold futures are currently fixed at $1842.90 after factoring in a net decline of $32 (-1.71%).

Today the Wall Street Journal reported that the United States is about to begin, “one of the most daunting public-health efforts in generations: swiftly distributing a Covid-19 vaccine across all 50 states, each of which will determine who gets priority.”

The WSJ also reported that the FDA announced that the first Covid-19 vaccine being considered for use in the United States has, “met the prescribed success criteria in a clinical study, paving the way for the agency to green-light distribution as early as this weekend.” This report also stated that “Pfizer is seeking what is known as an authorization for emergency use, a kind of interim clearance the FDA grants during pandemics to speed up the use of urgently needed medicines.”

The Covid-19 vaccine developed jointly by Pfizer pharmaceutical and BioNTech is awaiting a decision by the Food and Drug Administration to begin vaccinations and grant this vaccine emergency authorization. Data suggests that this vaccine has a 95% efficacy rate and was well tolerated in a trial composed of 44,000 individuals.

A statement by Pfizer’s Chief Executive Albert Bourla said, “Filing in the U.S. represents a critical milestone in our journey to deliver a Covid-19 vaccine to the world and we now have a more complete picture of both the efficacy and safety profile of our vaccine, giving us confidence in its potential,”.

Concurrently the bipartisan fiscal stimulus proposal has been met with opposition, however, according to Reuters, “U.S. Senate Majority Leader Mitch McConnell said on Wednesday that lawmakers were still looking for a path toward agreement on COVID-19 aid, as the U.S. House of Representatives prepared to vote on a one-week funding bill to provide more time for a deal.”

Reuters also reported that both Speaker of the House Nancy Pelosi and Senate minority leader Chuck Schumer rejected McConnell’s offer and warned that the Republican Trump administration's $916 billion proposals “must not be allowed to obstruct” the bipartisan talks.

The lack of any real progress which would lead to a fiscal stimulus package acceptable by the House, Senate, and current administration has certainly diminished the bullish market sentiment for gold, which led to today’s strong price decline along with vaccine approval being one step closer. Most analysts including myself are still working under the assumption that it is not if a fiscal stimulus package can be approved. Rather it is how much capital will be allocated and when and aid package can be passed.

 

By Gary Wagner

Contributing to kitco.com

 

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Gold dips as equities climb on vaccine cheer – stimulus hopes support

Gold prices eased on Wednesday as encouraging vaccine developments pushed investors towards riskier equities, although hopes for more U.S. stimulus kept bullion near two-week highs hit in the previous session.

Spot gold fell 0.3% to $1,865.46 per ounce by 0309 GMT, after hitting its highest since Nov. 23 at $1875.07 on Tuesday, while U.S. gold futures eased 0.3% to $1,870.20.

"Gold still has some firepower from all the stimulus, despite the fact that the vaccines are being rolled out… (stimulus) will provide gold with a lot of tailwind going into the year-end," said ED&F Man Capital Markets analyst Edward Meir.

The Trump administration on Tuesday proposed a package worth $916 billion including liability protections and state and local government aid, which leading Democrat and Republican lawmakers deemed as progress in the ongoing stimulus talks. Gold is seen as a hedge against inflation that might result from the unprecedented stimulus pumped into the economy this year.

Buoying Asian shares to record highs, Johnson & Johnson said it could obtain late-stage trial results of a single-dose COVID-19 vaccine it is developing earlier than expected. Pfizer Inc cleared the next hurdle in the race for its emergency vaccine approval in the United States after a regulator released documents that raised no new issues about its safety or efficacy. Stimulus measures will be key as it will weaken the dollar and generate more liquidity that will move into gold, said Michael Langford, executive director at corporate advisory and consultancy firm AirGuide.

Markets are hoping a stimulus will come through by next week and gold could move towards $1,900 by the end of the year, he added.

Silver slipped 0.7% to $24.38 an ounce, while platinum rose 0.6% to $1,028.17 and palladium was up 0.1% to $2,311.87.

(Reporting by Nakul Iyer in Bengaluru; Editing by Ramakrishnan M.)

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Bitcoin is challenging gold – Gold price outlook is 'no longer overwhelmingly bullish,' says UOB

Why has the gold price rally stalled, and is bitcoin to blame? Singapore's United Overseas Bank (UOB) says the massive surge in crypto's popularity could be partly responsible, but it is far from being the sole cause.

One of the reasons why November was such a difficult month for gold was a clear loss of interest in the precious metal, especially when it came to ETFs, which saw a hefty reverse in inflows.

"Heavy redemptions have replaced the strong inflows, cumulating in the heavy outflow of about 4 million ounces of gold from the ETF tonnage across November. This drying up of gold ETF demand was seen as a key reason for gold price weakness across November," UOB head of markets strategy, Heng Koon How, and markets strategist, Quek Ser Leang, wrote on a report on Monday.

Gold ETFs witnessed an impressive rise in demand this year, which seems to have peaked in October, the strategists said.

"The COVID-19 pandemic … boosted the safe-haven demand for gold … From just a minuscule 4% of total demand in 4Q19, gold ETF demand jumped to as high as 55% of total demand by 2Q20," they said. "Unfortunately, total gold ETF tonnage appears to have topped out just above 110 million ounces by late October this year."

A possible explanation behind this drop in ETF demand could be bitcoin's record-high rally, which intensified last month with the cryptocurrency hitting a new record high of $19,850 on November 30.

"There is an increasing challenge from bitcoin as the 'new digital gold'," the strategists pointed out. "From its low of around the USD 10,000 level in early Sep, Bitcoin double in value to just under USD 20,000 by late Nov."

Wider acceptance and a surge in demand from investment managers have been driving the recent rally in the cryptocurrency.

"As Bitcoin rallied from strength to strength, various commentators have started to declare that Bitcoin is the "new digital gold" and suggested that investors switch their investments from gold to Bitcoin. We do not know for sure the precise amount of this allocation switch into Bitcoin, but this may well be one possible explanation for the contraction in gold's ETF tonnage in recent weeks," the strategists explained.

On top of the bitcoin distraction, central banks have put their gold buying on pause in the last few months, which UOB describes as a "disturbing development" that could be impacting the overall sentiment.

"From a net purchase of 120 and 111 tons each across 1Q20 and 2Q20 respectively, global central banks net purchase of gold flipped into an unexpected net sale of 12 tons in 3Q20," the report said. "This may well be due to the higher gold price over the past few years. In addition, with the broad USD weakness, central banks, particularly from EM and Asia, may well revert to more USD allocation in order to limit the extent of appreciation of their respective domestic currencies."

Longer-term, however, UOB projects to see a resumption in buying as central banks need to periodically allocate some reserves into gold for diversification.

In light of all of this, UOB has lowered its 2021 price outlook for gold to just $2,000 by the end of next year. Earlier, the bank projected to see $2,200 gold by the second quarter of 2021.

“Our updated gold forecasts are now USD 1,850 / oz for 1Q21, USD 1,900 / oz for 2Q21, USD 1,950 / oz for 3Q21 and USD 2,000 / oz for 4Q21,” the bank said.

However, UOB still describes its outlook as a positive one in the medium term but does admit that it is "no longer overwhelmingly bullish."

The macro drivers are still supportive of higher gold prices, which include loose monetary policies around the world.

"The U.S. Federal Reserve and other leading global central banks continue their ultra-easy monetary policy, aggressive quantitative easing, and unprecedented expansion of their balance sheets. This is a very important positive medium-term driver for gold and it will not go away anytime soon," the strategists reminded their clients.

From a technical perspective, a steeper drop to $1,670 support seems to be ruled out for now as gold prices managed to rebound back $1,860 an ounce on Monday. But, it is still uncertain whether or not gold can hold here. At the time of writing, February Comex gold futures were trading at $1,866, up 1.41% on the day.

"Odds for a deeper decline towards the long-term support at $1,670 have diminished, but it is too soon to expect a major reversal," the report noted. "On a shorter-term note, $1,720 can be viewed as a strong support level. Overall, while we maintain our positive medium-term outlook for gold, we need to take note of near term challenges as well as the weaker technical outlook."

On the way to $2,000, gold will encounter several key resistance levels, including $1,899, $1,930, and $1,965, the strategists added.

 

By Anna Golubova

For Kitco News

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Raoul Pal sold his gold because 'bitcoin is eating the world' – $300k price in 18 months

Bitcoin is like a call option to the emergence of cryptocurrencies in the world, said Raoul Pal, CEO of Real Vision.

"I've never seen anything like what is going on right now. You have a limited supply asset that now is a globally recognized brand that everybody knows, but not everybody understands. What's happening now is institutions are coming into the space," Pal said.

Bitcoin has risen more than 150% year to date, having breached all-time highs in late November. Pal said that much more growth is expected now that an “enormous wall” of institutional money is flowing in.

“I use a number of measures. I use technical analysis, logarithmic charts, I use the stock-to-flow ratio…I use a whole number of different yardsticks, somebody sent me a report today that is written about Metcalfe's law and applying that, the adoption of bitcoin and putting it in price, they all basically come to the same thing,” he said. “They basically come to, we’re going to be somewhere between $500,000 and $1 million within 5 years, and we should be somewhere between $100,000 to $300,000 in the next 12 to 18 months.”

Bitcoin’s rise and fall comes in cycles. While 2017 exhibited mania levels, the surge to all-time highs this year does not share the same pattern, Pal noted.

“The world goes through these phases, and the more conservative people, the less risk takers, tend to be later to the party. So, I think the banks are late here, because they’re going to get disrupted somewhat,” he said, adding that for the first time, retail investors have had a chance to “front-run” institutions moving into the crypto space.

By David Lin

For Kitco News

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The heat is on, as lawmakers scramble to pass a relief legislation

In the words of Glenn Frey; “The heat is on … The pressure's high”

Unquestionably there is an immense amount of pressure for lawmakers to come to a understanding and pass a greatly needed fiscal stimulus package before the end of the year. It is critically important that aid is available to those 10 million American individuals who are unemployed with their benefits running out this month. Concurrently the moratorium eviction is coming to an end on December 31, unless it is extended.

These challenges are also in competition with a special budget stop gap bill to fund government service by December 11.

Statements made today by House Speaker Nancy Pelosi in conjunction with Senate Minority Leader Chuck Schumer have urged the Senate to agree upon this bipartisan proposal which contains $908 billion of fiscal stimulus. The hope is that this latest round of negotiations will lead a fiscal stimulus bill being passed and enacted by the end of the year.

The importance of passing a fiscal stimulus bill cannot be underscored. The pandemic continues to grow, which is continuing to deepen the current economic contraction. Those affected by the pandemic include both businesses as well as individuals. Currently there approximately 10 million Americans that are unemployed and require assistance in terms of unemployment benefits.

The challenge is that there is still a deep chasm between the three different proposals that are currently being reviewed. The sad truth is that many lawmakers are sticking to their partisan views. Which means that McConnell as well as Pelosi seem to be fairly dug into their current positions with very little wiggle room for compromise.

However, there is still hope. According to a report on CNBC, “Democratic House Majority Leader Steny Hoyer, D-Md., was set to speak to McConnell on Wednesday about a pandemic relief measure. Earlier, the No. 2 House Democrat told reporters he hopes the parties can strike a deal by the end of the weekend and pass it by next week.”

While House Speaker Pelosi along with Senate Minority Leader Chuck Schumer are hoping to pass the $908 billion bipartisan stimulus plan that was proposed recently. They have gone as far as urging Senate Majority Leader Mitch McConnell to endorse that stimulus plan. However, McConnell seems to be in favor of a $500 billion stimulus relief bill. Whether or not these two camps can both compromise and meet in the middle will determine the outcome.

Gold futures bases the most active February contract gained approximately $14 in trading today and as of 6:11 PM EST is fixed at $1844.50. Silver also had a respectable gain with the most active March contract currently fixed at $24.185. Both metals were aided by dollar weakness which gave up almost ½ a percent and is currently fixed at 90.685.

On a technical basis gold’s current pricing is at its first minor resistance which is $1846.50. This number is derived from the 38.2% Fibonacci retracement level which uses a data set beginning in March when gold was trading at $1450, up to the record high price achieve the first week of August at $2088. We see the next level of resistance currently fixed at gold’s 50 day moving average which is at $1883, with the 100-day moving average at $1914 being major resistance.

Our studies also indicate that there is strong support at $1807 which corresponds to gold’s 200 day moving average with major support at $1771 the 50% retracement.

While there is no certainty that lawmakers will be able to agree and enact a stimulus package before the end of the year, I remain cautiously optimistic.

Contributing to kitco.com

David

 

Bipartisan stimulus package framework could be completed this weekend

In the words of the famous author Mark Twain, “If you don’t read the newspaper, you’re uninformed. If you read the newspaper, you’re misinformed.”

These words seem to resonate in regards to the current news about the ongoing negotiations to come up with a fiscal stimulus proposal that will be palatable to both sides of the political fence. If you have been following the current news, although you might be not be misinformed, you are certainly uninformed, or unaware out the outcome.

There are three proposals currently being considered. One a bipartisan $908 billion coronavirus relief package, this proposal is being considered in conjunction with two partisan proposals. One of which is being put forward by McConnell as the White House’s bid, and lastly a Democratic proposal supported by House Speaker Nancy Pelosi and Senate Democratic Leader Chuck Schumer.

Currently, both Treasury Secretary Steven Mnuchin and Fed Chairman Jerome Powell are supportive of the bipartisan proposal. Chairman Powell speaking at a Senate banking committee hearing said, “I look forward to reviewing with you the overall package. I do think that more fiscal response is needed.”

However, even though Treasury Secretary Mnuchin supports the bipartisan bill his caveat was whether or not President Trump would be on board, saying that President Trump would sign a narrower relief plan proposed by McConnell.

As reported by CBS News, “The president will sign the McConnell proposal he put forward yesterday, and we look forward to making progress on that, Mnuchin said at the Capitol before a hearing before a House committee.

Given that House Speaker Pelosi and Treasury Secretary Mnuchin have been deadlocked and at a stalemate unable to put a proposal together that both sides will agree upon. The upside is that they have resumed talks this week, this began with a telephone call between the two yesterday.

Even though it is unclear if a fiscal stimulus package can be agreed upon and enacted soon, it has created extreme optimism that the possibility of additional and greatly needed stimulus will be forthcoming this month. This optimism has led to extremely strong gains in gold yesterday, followed by moderate gains today.

As of 4:51 PM EST, the most active February gold futures contract is up to $15.70 and is currently fixed at $1834.60. Considering that on Monday gold traded to an intraday low of $1757, the last three trading days have resulted in gold gaining approximately $80. The primary question being asked by investors and market participants is whether or not we have seen the lows in gold, and if higher pricing is forthcoming. On a technical basis, a strong case can be made that the lows achieved on Monday, followed by the sharp rises yesterday, and moderate rise today suggest that we should see gold move higher. However, we must acknowledge recent gains have been headline-driven.

Lastly, the government will run out of money on October 11 if no stopgap budget proposal is enacted. This suggests that if a fiscal stimulus proposal can be agreed upon it will be somehow tied into the pending legislation needed to keep the government open.

We continue to be cautiously optimistic and truly hope both sides can agree and implement a round of fiscal stimulus that is so greatly needed in a timely manner.

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

 

By Gary Wagner

Contributing to kitco.com

 

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Peter Hug – Gold, silver prices bounce off support, can rally last?

Gold rose 2% on Monday, with silver up 5.5% on the trading session. Peter Hug, global trading director of Kitco News, said that fundamentals line up with this rally.

Equities also saw a bounce. Hug said that talks of a new round of fiscal stimulus is adding fuel to the risk-on sentiment while driving money to precious metals at the same time.

The U.S. dollar weakened on the trading session.

 

By David Lin

For Kitco News

 

 

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