Hedge Funds Pile into Gold and Silver

Hedge funds almost doubled their gold net-long position in the past three weeks

gold silver 1-15-18

According to a recent article on Kitco, hedge funds are finding gold and silver appealing in the new trading year and are continuing to pour cash into the precious metal sector. A Commitments of Traders report for the week ending January 2 showed long positions in Comex gold futures rose by 40,708 contracts, bringing gold’s overall net length to 148,174 contracts. Commerzbank pointed out that hedge funds have almost doubled their net-long position in gold over the past three weeks.

Author of the article, Neils Christensen, says gold continued its gains during the survey period, rising more than 2% in that time to break through the key $1,300 level. According to analysts, the dollar’s decline played a large part in money managers’ decision to move into gold – the greenback, which recently sunk to a three-year low, continues its downhill trajectory over concerns regarding weak inflationary pressures.

The article reports that, although Trump’s tax plan finally materialized after months of speculation, market participants are doubtful that the reform will achieve the desired inflationary effect, said Bart Melek, head of commodity strategy at TD Securities. Should inflation remain, Melek believes the Federal Reserve won’t be able to proceed with its plans to hike interest rates several times this year. Lower interest rates will reduce the perceived opportunity cost of owning precious metals, making them more attractive to investors.

The picture for the U.S. dollar in the coming months remains bleak as the European Central Bank looks to apply a tighter monetary policy, which would lower the dollar’s value against the euro writes Christen. Further losses for the dollar would likely translate to prolonged upwards momentum for gold, as the metal has already enjoyed considerable gains since the start of the year.

The article also reports that despite gold’s solid performance in the opening weeks of the year, silver managed to impress even more, especially when considering the spot it was in during the closing days of 2017. Having come close to ending the year on a bearish note with hedge funds increasing their short positions, Christen says the silver market managed to rebound in the new year both in terms of sentiment and price gains.

The same report showed money-managed net short silver positions fell by 17,169 contracts in the period to reach 38,501. Meanwhile, long positions rose by 5,821 contracts, bringing silver’s total net length to 15,803 contracts. Like gold, silver continued its gains amid the sentiment shift, rising by 3.6% as prices breached the important $17 level.

Noting that this is the second time in the last six months that funds didn’t hold onto their short silver positions, head of commodity strategy at Saxo Bank Ole Hansen added that last week’s buying of 23,000 lots marks the biggest purchase since May 2015.

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ABC Bullion Economist Predicts a Breakout in Gold in 2018

 

Analyst Jordan Eliseo sees multiple reasons gold could reach $1,400 next year

gold to breakout in 2018

According to ABC Bullion’s chief economist Jordan Eliseo, gold is scheduled to break out of its bear market and post significant gains in the new year. In an interview with Kitco, Eliseo said that the yellow metal’s recovery will continue, with prices moving between $1,375 and $1,425 an ounce in 2018.

Among Eliseo’s chief reasons for a breakout in gold are U.S. equities, the dollar and the Federal Reserve. The analyst notes that the performance of stocks has been a major headwind for gold – 2017 was not only a year of records for equities, but also one of the only years where each month was positive for the stock market. Coupled with low volatility in the market thus far, gold had little opportunity to recapture its luster.

The article notes that some have already cautioned that the bull run in stocks is coming to a close, and Eliseo believes that even a partial correction in the stock market would greatly benefit gold. Another boost could come by way of the U.S. dollar, which Eliseo expects to decline in 2018 – a further plunge in the greenback would be a major catalyst for higher gold prices, said the analyst.

While many are looking towards the Federal Reserve’s next move, Eliseo doesn’t think the central bank has a lot of room for maneuvering. While successive rate hikes would, in theory, curb gold prices, Eliseo doesn’t see the Fed assuming a hawkish stance in 2018. The low level of core inflation, said Eliseo, should combine with concerns about growth to keep Fed policy mild throughout the year.

Physical demand should remain stable in 2018, states the article, with Western demand continuing to recover. Eliseo predicts that this year’s strong buying from Europe will pour over into the next year, along with the traditionally strong demand from India and China. Central banks will continue in their role as major drivers of physical gold demand, said Eliseo, with at least a few hundred tons being bought by nations worldwide in 2018.

Jim Rickards Predicts Gold Could Hit $10,000 an Ounce

Famed author believes the Fed could push the metal into a major rally

gold to hit $10,000

Gold’s price fluctuations have long been tied to the Federal Reserve’s actions – the perceived tone of Fed officials in public statements and meetings and expectations of rate hikes both tend to impact the price of gold, sometimes regardless of the Fed’s decision.

Expectations are high for a rate hike this month, and many even see a 100% chance of the Fed following through. Yet famed author and investor Jim Rickards is among those doubting the Fed’s ability to go through with the forecasted hike.

Talking to Kitco, Rickards pointed out the oft-overlooked factor of inflation goals. To Rickards, the Fed’s duty lies in job creation and price stability. With the former all but taken care of, the real issue becomes whether the central bank can meet its inflation targets year-on-year.

The article notes that, finding energy and food prices too volatile, the Fed tends to focus on Personal Consumption Expenditures, or PCE, in order to gauge whether inflation standards are being met. As Rickards points out, the PCE index continues to present a problem for the Fed due to its nine month-long decline, falling from 1.9% to 1.3% in that span.

Rickards says the threat of disinflation immobilizes the Federal Reserve and makes a December rate hike unlikely despite market expectations. Should the declining PCE stay at 1.3% or fall lower, there is no chance of a rate hike happening this month.

The article then recognizes Rickards’ opinion goes in line with the summary from the Fed’s latest policy meeting. In it, Fed officials noted that inflation might remain below the targeted 2% longer than expected, with some acknowledging that policy firming should be halted until inflation returns to the desired path. Some participants of the meeting also expressed concerns that following through with the planned rate hike before the end of the year could further subdue inflation expectations.

This discourse already helped gold come close to recapturing the $1,300 level, stopping just short at $1.295 an ounce. Rickards, however, believes that the motion around the $1,300 level is less important compared to what’s coming.

The author expects the Fed’s renegation of the December rate hike to have a massive impact on the markets, which will take a 180-degree turn. As a result, the dollar and bonds will fall while gold will rally further.

His long-term prediction is that gold will go as high as $10,000 an ounce.

While this level might sound exorbitant, Rickards stresses that the forecast is realistic as having such a price of gold is the only way to avoid deflation.

Why TD Securities Expects Gold Prices to Head Higher in 2018

 

Several analysts expect 2018 to be a bullish year for gold

gold headed higher in 2018

In spite of the possibility of successive rate hikes by the Fed, several analysts express in a recent TheStreet article that they expect 2018 to be a bullish year for gold. Among the primary reasons listed are the Fed’s potential reluctance to follow through with the planned rate hikes, geopolitical triggers, improved physical demand in key buying nations and investment demand as a hedge against stocks.

In the article, Bart Melek, head of commodity strategy at TD Securities Inc. (TDS), says he believes gold will benefit from a dovish Federal Reserve policy that will see a maximum of three rate hikes by the end of next year with real rates staying low. Aside from making gold a more attractive investment, lower rates also undercut the dollar, giving gold yet another boost. While there is a chance for multiple hikes next year, Melek sees a strong possibility for only a single hike by the end of 2018.

Expecting President Trump’s nominee for the next Fed leader to carry out a similarly dovish policy, Melek also listed the likelihood of a major correction in stocks and higher demand in India and China as further tailwinds for gold.

“I think 2018 is going to be a good year for gold, and it should shine bright in the New Year,” said Phil Flynn, senior analyst with Price Futures Group. More than merely acting as a hedge, Flynn explained in the article that the flimsy-footed run stocks have rendered gold “undervalued”, which could lead to purchases of the metal. Besides a potential price inflation coming from an improvement in overall commodities, Flynn also listed the launch of bitcoin futures as a boom for gold, stating that it will highlight the yellow metal’s role as an alternative currency.

Societe Generale’s metals analyst Robin Bhar thinks that gold could benefit if the planned U.S. tax cuts do not materialize, as this would make the Fed even more dovish. In the article, Bhar says conflict in the Middle East and terrorist threats around the world may continue to provide support, as will the likelihood that central banks remain net buyers of gold.

In terms of forecasts, the article shows that TDS sees gold reaching an average of $1,313 an ounce next year, with an average of $1,325 in the fourth quarter of 2018, compared to their expectation of $1,257 for 2017. Meanwhile, Flynn says gold will average $1,400 an ounce next year, with the potential to reach $1,500. Macquarie, a financial institution, agrees, stating in a recent report that gold will hit $1,400 for the first time in five years driven largely by a weakening dollar and political issues in the U.S.

Gold on Track to Go Higher says Rickards

Next breakout in gold could start in late November

gold 1350-1

How long before the next breakout in gold? According to Jim Rickards in a recent Marketslant article, the next upwards movement will start in late November or early December. While this seems to coincide with the expected December rate hike by the Federal Reserve, Rickards doesn’t think the Fed is in a position to hike rates even once.

Using data that shows disinflation over the past nine months and a weakening employment picture, Rickards argues that the only way the Fed can reach its targeted inflation rate of 2% is by delaying rate hikes indefinitely and weakening the dollar as a result. While a weaker dollar happens to be a major tailwind for gold prices, Rickards says this is only the start of gold’s strong fundamental picture.

Geopolitical risks from North Korea, Syria, the South China Sea and other parts of the world continue piling up. The most menacing of these is the conflict between the U.S. and North Korea, which Rickards believes will culminate in a U.S. attack on North Korean military bases by mid-2018.

The article states that quieter tensions are also supporting gold prices, as the deteriorating relationship between the U.S. and Russia will accelerate Russia’s efforts to diversify its reserves away from the dollar and into gold – unlike the greenback, gold is immune to asset freezes and seizures by the U.S.

Rickards writes that China, another top buyer of gold, might be looking to lead the world back to some form of gold standard by allowing oil exporters to convert the yuan they receive from China into gold on the Shanghai Gold Exchange. Closer to home, a major market correction might be in the works as markets realize that the Trump tax cuts will not materialize.

All of this is overlapped by what Rickards sees as a major supply squeeze going forward. He writes that gold refiners are already struggling to meet demand, and private bullion continues to move from bank vaults into nonbank ones, reducing the floating supply available for unallocated sales of the metal.

Rickards points to a flash crash in June that came on the back of an instantaneous sale of gold futures equal to 60 tons of physical gold, adding that the largest bullion banks in the world couldn’t source this much gold with months to do it.

To him, the yellow metal’s current levels mark a last stop before a move to $1,350 and then $1,400. However, that might only be the start of gold’s next upwards trend. The article features a chart compiled by gold analyst Eddie Van Der Walt that shows gold prices move across two trends, one lower and one higher.

This pattern has become more pronounced since 2015, and the chart shows that another breakout to the upside or the downside is imminent. With nearly all of the evidence charting an upwards move, gold prices could be on their way to $1,800 an ounce. Regardless of what high gold reaches in the near future, Rickards advises investors to have their bullion ready before the next breakout begins.

Gold Twin Maples Distributed Exclusively with Birch Gold Group

A successor that captures everything the Gold Maple Leaf has to offer with a modern touch.

gold twin maples canadian from birch gold group

First minted in 1979, the Canadian Gold Maple Leaf’s first issue covered a span of only three years. However, due to its immense popularity, the Canadian Parliament decided to continue its production through the Royal Canadian Mint (RCM), and the coin became a widespread token of value available in a variety of different sizes.

Given its reception, a successor that captures everything the Gold Maple Leaf has to offer while adding a modern touch was expected. Today, Birch Gold Group proudly announces that it has secured the rights to exclusive distribution of the next great coin from the RCM, the Gold Twin Maples.

Those familiar with the Canadian Gold Maple Leaf will find that the Gold Twin Maples coin has many of the traits that gave widespread recognition to the previous iteration. The physical perks of the coin provide an unprecedented amount of accessibility: weighing 1/4 ounces (7.7 grams) with a diameter of 20 mm (0.78 inches) and a face value of CAD $10, the coin can be held by investors big and small and makes a special addition to any collection. Its high gold purity of 99.99% will further ensure that the coin remains a sought-after commodity for years to come, and its compatibility with precious metals IRAs will provide immense versatility to anyone who acquires it.

As with several other coins produced by the Royal Canadian Mint, artist Celia Godkin was brought on to ensure a design that ages every bit as well as the coin’s value. Each of the Gold Twin Maples’ sides feature imagery that signals the highest status among precious metals coins: a portrait of Her Royal Highness Queen Elizabeth II on the obverse and a tribute to Canada’s unique sugar maple tree on the reverse. The addition of a micro-engraved twin maple leaf and precise radial lines during mintage give the coin unbeatable protection against counterfeiting while preserving its intricate design.

With how well the Gold Maple Leaf coin has been received by investors for several decades, and given the Gold Twin Maples’ flawless combination of assured value and unique design, Birch Gold Group has no doubt that the newest creation from the Royal Canadian Mint will prove to be everything that the predecessor was, and more.

Peter Reagan, financial market strategist with Birch Gold Group, is excited for the coin’s prospects. “It’s an honor for the Royal Canadian Mint to select us as the exclusive dealer for this beautiful coin. We believe that it will be extraordinarily popular among our customers and are excited to offer it to them.”

For more info on this striking coin, visit Birch Gold’s website at www.birchgold.com or call (800) 355-2116.

Gold Could Soon Hit Peak Output

 

Gold demand could be hard to meet in the future

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A large part of gold’s appeal lies in it being a finite resource and, as such, free from central bank manipulation. However, gold’s scarcity could soon become an issue – paving the way for record highs as miners find themselves unable to produce enough gold to meet global demand.

According to an article by the Economic Times, mining industry insiders and some market watchers have already voiced their concerns in regards to the available supply of gold. After price dips in recent years, miners were forced to cut back on production costs, which involved both reducing the number of active mining projects and severely limiting the exploration of new ore.

Now, with renewed interest in the yellow metal and with gold prices breaching key levels, supply could struggle to meet demand, leading to a further spike in prices. According to Danielle Bochove, author of the article, because mining projects take a long time to put into motion, miners won’t be able to adjust their production in accordance with market fluctuations. Randall Oliphant, chairman of the World Gold Council, is among those who believe that a supply glut will lead to significantly higher prices.

Talking at the 28th annual Denver Gold Forum, Oliphant said that gold could hit $1,400 an ounce in the next 12 months. He listed political risks in the U.S. as yet another driver behind heightened demand.

“It’s not clear how the whole U.S. political system will play out,” said Oliphant, via Economic Times. “All this uncertainty seems very fertile ground for people to get into gold.”

Production will fall even sooner as global political risks cause more people to turn to gold, with demand also supported by robust purchases from India and China, said the chairman.

The article notes that other attendees at the conference, which attracted 1,100 people this year, echoed Oliphant’s statements. David Harquail, chief executive officer of Franco-Nevada Corp., painted a concerning picture of the current state of the mining industry, saying that miners are merely using new projects to replace old assets as opposed to actual expansion.

Oliphant doesn’t see supply running out in the near future, but says it could happen sooner than people think writes Bochove. When newly-produced gold becomes scarce, a scenario Oliphant places in the medium term, gold will be in a prime position to pass its all-time high of $1,923 an ounce.

“We’re not going to fall off a cliff in the near term, but in the same time it’s really hard to see how we’re going to produce enough gold to meet all this demand,” he said.