Solid gains for gold on bullish charts, some safe-haven buying

Gold prices are solidly higher and near this week’s nine-month high in midday U.S. trading Thursday. The technical traders continue to flow to the long side of the gold market due to bullish charts. Some modest safe-haven demand may be surfacing due to worries about the U.S. government going into default on its debt. February gold was last up $13.40 at $1,920.50 and March silver was up $0.048 at $23.695.

The U.S. Treasury Department said it is poised to take defensive action to prevent a default that could do "irreparable harm" to the economy, reports said.

Global stock markets were mixed but mostly lower overnight. U.S. stock indexes are lower at midday. The U.S. stock index bulls were derailed Wednesday when U.S. retail sales data came in weaker than expected, which revived notions the U.S. economy could slip into recession in 2023. The U.S. government debt concerns are also limiting buying interest in stocks.

 The world could run out of gold by 2050 as demand grows to keep up with evolving society, says researcher

The key outside markets today see the U.S. dollar index slightly lower. Nymex crude oil futures prices are higher and trading around $81.00 a barrel. Meantime, the yield on the benchmark U.S. 10-year Treasury note is presently fetching around 3.38%percent. U.S. Treasury yields have dropped in the wake of a tamer U.S. producer price index report on Wednesday and the weaker U.S. retail sales report.

Technically, February gold futures prices hit a nine-month high Tuesday. Bulls have the solid overall near-term technical advantage. A 2.5-month-old uptrend is in place on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at $1,950.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,870.00. First resistance is seen at this week’s high of $1,931.80 and then at $1,950.00. First support is seen at $1,900.00 and then at $1,885.00. Wyckoff's Market Rating: 8.5

March silver futures bulls have the overall near-term technical advantage. However, they have faded recently as a four-month-old uptrend on the daily bar chart has turned into sideways trading. Silver bulls' next upside price objective is closing prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at $22.50. First resistance is seen at $24.00 and then at $24.50. Next support is seen at the January low of $23.26 and then at $23.00. Wyckoff's Market Rating: 6.5.

March N.Y. copper closed down 40 points at 423.05 cents today. Prices closed nearer the session high today. Prices Wednesday hit a 6.5-month high. The copper bulls have the solid overall near-term technical advantage. However, the bulls are short-term exhausted. A three-month-old uptrend is still in place on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 450.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 400.00 cents. First resistance is seen at today’s high of 426.85 cents and then at 430.00 cents. First support is seen at today’s low of 416.80 cents and then at this week’s low of 411.05 cents. Wyckoff's Market Rating: 7.5.

By Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Strand said that he sees gold prices gaining 20% in 2023.

Along with gold, Strand expects the precious metal mining sector, which has underperformed compared to the commodity, will attract new momentum in the new year.

"Gold miners are today historically cheap relative to gold, something that will revert and overshoot in the coming secular bull market," he said. "Gold miners have a very low correlation with the broad stock market and are becoming more interesting for larger investors looking for possible/alternative return drivers and that may result in strong capital flows, which will then take equity prices higher."

Along with the AuAG ESG Gold Mining exchange-traded fund, HANetf also manages a second environmental and social governance (ESG)-focused fund: The Royal Mint Responsibly Sourced Physical Gold ETC (LSE: RMAU). Last year RMAU saw growth of 130%, bucking the global downtrend in the ETF market.

According to the survey, wealth managers see a potential premium for ESG-focused funds, with 36% of fund managers expecting a dramatic increase in transfers to gold funds with strong ESG credentials while 54% of respondents see a slight increase in switching.

By Neils Christensen

For Kitco News

David

Gold, silver kick off 2023 in style

After a well-earned break, we are back in action… and what a time to be covering precious metals! Gold and silver are starting the year off on the front foot, with gold ending the first full trading week of the year at a nine-month high above $1,920 an ounce and silver prices solidly back above $24 an ounce

Gold prices are actually up nearly 5% since the start of the year, and while the year has only just started, the bullish sentiment in the marketplace is almost palpable. We have only just broken above $1,900 an ounce, but some investors and analysts have already set their sights on the $2,000 target.

Some heavyweight market players are jumping on the gold bandwagon as prices have risen $300 from November's two-year lows.

In an exclusive interview with Kitco News' Michelle Makori, Nouriel Roubini, CEO of Roubini Macro Associates and Professor Emeritus at NYU Stern School of Business, said that investors will flock to gold as 10 "megathreats" threaten the global economy.

Roubini said that he sees gold prices rising to $3000 an ounce by 2028.

"Over the next few years, I would expect that gold could have high single-digits into low double-digits rates of return," said the renowned economist, also known as "Dr. Doom," in the interview. "I expect… rates of return around 10 percent per year over the next five years."

Along with Roubini, billionaire "bond king" Jeffrey Gundlach said he turned bullish on gold when prices pushed above $1,800 an ounce.

In a webcast Tuesday, the Doubleline CEO said that gold was one of his recommendations for 2023. "It's a reasonably good time to buy gold and own gold," Gundlach said.

Many investors stayed away from gold in 2022 as the Federal Reserve's aggressive monetary policy stance pushed bond yields to a 12-year high and the U.S. dollar to a 20-year high; however, analysts have said that that trend could be reversing in 2023 as the Federal Reserve is nearing the end of its tightening cycle.

Analysts have noted that U.S. bond yields are pricing in a terminal Fed Funds rate below 5%, which in turn has caused the U.S. dollar to fall to a seven-month low this week.

Many analysts have said that both bond yields and the U.S. dollar have peaked, supporting gold's rally.

But gold is more than just the sum of investment demand. Global geopolitical uncertainty continues to support the precious metal as a critical element in global currency markets.

This week, the People's Bank of China announced that it bought 30 tonnes of gold in December. This follows November's purchase of 32 tonnes of gold, the first officially-recorded purchase since September 2019.

BNP Paribas market analyst Chi Lo said in a recent report that gold will be a crucial element in China's plan to strengthen the yuan's international credibility and challenge the U.S. dollar's status as the world's reserve currency.

"Making the renminbi convertible into gold effectively turns the currency into a global investable asset for foreign renminbi owners, boosting their confidence in and demand for the Chinese currency," Lo said in his report. "A gold-backed petro-yuan does not require full renminbi convertibility to function, so it allows China to simultaneously retain control of its capital account and boost the internationalization of the renminbi."

By Neils Christensen

For Kitco News

Time to Buy Gold and Silver

David

Traders bid stocks, gold, and Silver higher, but is the optimism warranted?

Market participants continue to react to the bullish market sentiment created by yesterday's CPI report. Inflation came in at 6.5% year-over-year last month, which is the sixth consecutive month that inflation has diminished since the peak of 9.1% in June.

Accoring to the BLS, "The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.1 percent in December on a seasonally adjusted basis, after increasing 0.1 percent in November, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 6.5 percent before seasonal adjustment."

According to the report gasoline, "was by far the largest contributor to the monthly all items decrease, more than offsetting increases in shelter indexes. The food index increased 0.3 percent over the month with the food at home index rising 0.2 percent. The energy index decreased 4.5 percent over the month as the gasoline index declined; other major energy component indexes increased over the month."

The CPI core inflation (which strips out food and energy costs) climbed 5.7% year-over-year and is an increase of 0.3% when compared to the prior month. While inflationary pressures have diminished the core CPI is still roughly triple the Federal Reserve's target rate of 2%.

That being said, the optimism caused investors to be active buyers of US equities, gold, and silver. However, they were not basing market sentiment upon recent statements by Fed. The caveat is that the Federal Reserve has on multiple occasions reinforced its unwavering resolve to keep interest rates elevated throughout 2023.

Many analysts believe that the Fed is bluffing because current rates are not sustainable for the entire year. Others believe that their vow to be transparent simply no longer exists.

US equities, gold, and silver benefited from that sentiment resulting in strong rallies in both gold and silver, as well as moderate gains in the major stock indices. The Dow gained 0.33%, the S&P 500 gained 0.40%, and the NASDAQ composite gained 0.70%.

As of 5:42 PM EST February gold futures are up $24.20 and fixed at $1923. March silver futures gained $0.41 or 1.71% and are fixed at $24.415

As I spoke about yesterday, I continue to believe that if the Fed stays the course it could lead to one of the greatest errors by the Fed in recent history. The days of the Fed being data-dependent seem only to matter when the data confirms their assumptions.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

The Fed's use of data-dependent decisions can't be applicable only when it supports their beliefs

Considering that as recently as June we had the highest level of inflation recorded in the last 40 years today’s CPI report from December was a welcome change as inflation continues to slowly dissipate. Just six months ago overall inflation peaked at an alarming 9.1%. The historical rise in inflation was a long process after coming in at 0.329% in April and 0.118% in May 2020.

Initially, inflation was slow to rise with inflation concluding in December 2020 at 0.812. It was January 2020 that had the highest monthly level of inflation of 2.487%. Still the average level of inflation that year was 1.234%. An action by the Federal Reserve was logical in that inflation was running substantially below its 2% target.

In 2021 inflation concluded with an annual average of inflation at 4.698%. In March of that year, inflation had breached the 2% target set by the Federal Reserve by 0.62% and began to steadily climb higher with almost each following consecutive month coming in hotter than the previous month. Inflation rose past 4% in April, close to 5% in May, and finished the year at an alarming level of 7.036%.

Yet the Federal Reserve did nothing maintaining the belief that the recent jump in inflation was transitory and as such would dissipate without any influence by the Federal Reserve. It was this incorrect assumption that resulted in a level of inflation add speak that had not been witnessed in 40 years. In January 2022 levels of inflation continue to elevate higher beginning at 7.48% in January and peeking just above 9% in June. Still, the Federal Reserve continued to falsely believe that a 40-year high and inflation would dissipate on its own. One of the greatest errors by the Federal Reserve in recent history in both their forward guidance and projections that resulted in the most inappropriate action possible is to do nothing as inflation continues to spiral.

I believe that the Federal Reserve is once again creating one of the greatest errors by the Federal Reserve in recent history. It wasn’t that long ago that the Federal Reserve when asked about their forward guidance would quickly refer to their goto response: our actions will be data dependent and determine our forward guidance to shape our decisions in regards to our monetary policy.

Since June when inflationary pressures peaked at 9.1% we have seen inflationary levels have a methodically consistent and consecutive decline reducing inflation by approximately one-third. While we still have a ways to go to reach the fed’s 2% target, it is evident that the recent action of the Federal Reserve has accomplished its intent and effectively lowered inflation. However, it has been an overwhelming consensus by Federal Reserve members that they will continue to keep interest rates elevated and possibly even implement another rate hike to reach their goal of just over 5.

Will the FED make a blunder by not following the data

Will the FED make a blunder by not following the data which reveals its time to slowly reduce rates? It seems obvious to this author that the Federal Reserve did not learn anything from its incredible mistake of waiting too long to raise rates because of its false narrative that inflation was temporary, not persistent. Now they are making another tremendous mistake disregarding the data as they used to believe that the best forward guidance they can offer is to maintain elevated rates when what is needed is rate stabilization and reduction during 2023. Members of the Federal Reserve are assumed to be experts in their field and to disregard the data is a tremendous blunder in judgment.

The doctrine of being data-dependent when it fits assumptions right or wrong and abandoning that technique when they’re convinced again that they are right is a mistake. Members of the Federal Reserve should know better.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

Nouriel Roubini says gold may be your best protection as the mother of all debt bombs & nine other megathreats are looming

Ten “megathreats” are hurtling towards the world including war, debt crises, and a demographic “time bomb” will make investors flock to gold, hence causing the yellow metal’s price to rise to $3k by 2028, according to Nouriel Roubini, CEO of Roubini Macro Associates and Professor Emeritus at NYU Stern School of Business.

“Over the next few years, I would expect that gold could have high single-digits into low double-digits rates of return,” he said. “I expect… rates of return around 10 percent per year over the next five years.”

Inflation, stagflation and a trend towards ‘de-dollarization’ will be the main drivers.

“If the rivals of the U.S. have to diversify away from dollar assets because we weaponize the dollar and sanctions can be imposed, then the only international reserve asset that cannot be seized by the U.S. and the West is not the dollar, Euro, yen, or pound,” he said. “It can only be gold.”

He forecast gold to rise by 10 percent per year over five years, resulting in a gold price of over $3,000 per ounce, an overall return of 60 percent.

Roubini, also known as ‘Dr. Doom’ for his grim economic forecasts and for correctly predicting the 2008 financial crisis before it occurred, said that a “stagflationary depression” could begin in 2023, which would cause both stocks and bonds to decline.

“If I am right, that we will have a hard landing, that inflation is going to be persistent, and that central banks are in a dilemma, [then] both equities and bonds will do poorly,” he predicted. “Gold should do better because… it is a hedge against inflation. It is also a hedge against financial instability, and a hedge against social, political, and geopolitical stability.”

Roubini spoke with Michelle Makori, Editor-in-Chief and Lead Anchor at Kitco News.

Geopolitical threats

Roubini said that “revisionist powers” like China, Russia, Iran, and North Korea would challenge the U.S. and Europe for world dominance in the years to come.

He singled out Taiwan, a U.S. ally, as an example. Echoing U.S. navy chief Michael Gilday, he warned that China could attack Taiwan as soon as 2023, causing further tensions between China and the U.S.

“[China’s President] Xi came to power for a third term not because he wants to reform China, but because he wants to pass into history as the president that united mainland China with Taiwan,” Roubini claimed. “Recently, Biden has made statements that if China were either to invade Taiwan, or even impose a naval blockade, the U.S. will directly intervene in that conflict.”

He warned that such a conflict would escalate into a “fully nuclear war between the U.S. and China,” and if the United States were to renege on its commitment to Taiwan, it would lose credibility as a military ally.

“If you lose Taiwan, your credibility of committing to defend your allies like South Korea, Japan, Australia and others in Asia is going to fall,” he observed. “That is why Taiwan is important, not because of Taiwan, but because of the consequences on the hegemonic power of the U.S. in Asia.”

Fed tightening likely to pause

The Federal Reserve raised interest rates by 425 basis points last year in an effort to tame inflation, which reached a peak of 9.1 percent in June 2022.

Roubini said that the Fed would need to raise rates to at least 6 percent, but is unlikely to do so, given that this would cause a “severe” recession and debt implosions. He suggested that the Fed would pivot or pause its tightening cycle.

“You need to raise interest rates at least to six percent in order to push, over time, inflation towards two [percent], but interest rates at six percent are going to led to severe economic contraction,” he observed. “It is going to lead to even more credit distress…. There is so much debt in the system that an attempt to reduce inflation not only causes an economic crash, it causes also a financial crisis. They will feed on each other, and faced with an economic and financial crash, the Fed and other central banks are going to have to wimp out, blink, and not raise interest rates as much.”

However, Roubini said that this monetary policy response would then cause a “de-anchoring of inflation expectations,” leading to inflation of “at least” 5 to 6 percent over the medium term.

“We have inability in the public sector to increase taxes or cut government spending,” he said. “The temptation is going to be to wipe out the real value of long-duration government debt at fixed interest rates, but you can also wipe out the nominal value of private debt through a bout of unexpected inflation. That has already happened last year, and it is going to continue to happen. We’re going to use the inflation tax to deal with excessive amounts of private and public debt.”

Megathreats

In his new book, Megathreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them, Roubini identifies debt crises, deglobalization, a demographic time bomb, climate catastrophes, Artificial Intelligence and other factors as “megathreats” which imperil all of humanity, and could lead to a “dystopia.”

A key theme in the book is that fixing one problem can make another one worse. For example, Roubini writes that to fix climate change, massive investments in green energy are required, but such investments would require a reduction in people’s standard of living.

“The economic cycles and the financial cycles, the boom bubbles busting and crashing, are becoming more severe and more frequent for a number of reasons, including toxic leverage of the economy and financial system,” he said. “It’s a very different world from the one I grew up in with these megathreats, which I didn’t even hear about while I was growing up. Now each one of them is a material threat to our prosperity, to peace, and to progress.”

To find out which other investments are likely to withstand Roubini’s ‘megathreats,’ watch the video above

Follow Michelle Makori on Twitter: @MichelleMakori

Follow Kitco News on Twitter: @KitcoNewsNOW

By Cornelius Christian

For Kitco News

Time to Buy Gold and Silver

David