Author: Priority Gold

(Kitco News) – Goldman Sachs Group upgraded its gold forecast for the first time this year, upping its 3-month and 6-month projections to $1,575 and $1,600 an ounce in light of escalating trade war tensions.

Gold prices were solidly above $1,500 an ounce on Monday — a level that was hit last week for the first time since 2013.

After rising nearly 4% last week, gold’s rally is far from over, according to analysts at Goldman, who see more upside in the yellow metal.

“Gold prices have increased further as a weaker CNY sparked substantial U.S. and global growth fears. With growth worries likely to persist, gold could rise further, driven by an increased ETF allocation from portfolio managers, who continue to under-own gold. We raise our 3, 6, 12 month gold price forecasts from $1,450, $1,475, $1,475/toz to $1,575, $1,600 and $1,600/toz, respectively,” Goldman analysts said in a note.

The U.S.-China trade war has entered stage two this summer as U.S. President Donald Trump announced a 10% tariff on the remaining $300 billion worth of Chinese imports starting September 1, the note said.

“With the U.S. and China taking a harder line on trade, our economists no longer expect a trade deal before the 2020 president election—a fundamental change in view,” the analysts including Sabine Schels wrote on Wednesday.

A currency war with depreciating CNY plays a key role in trade war tensions and Goldman’s outlook for the precious metals.

“Previously, China opted for stability and defended its currency in order to facilitate the ongoing trade negotiations in the background. Now, FX appears to be playing an increasingly central role in the trade tensions,” the analysts said. “We estimate that a 10% depreciation of CNY vs USD would spell as much as 13% downside to the S&P GSCI industrial metals sub-index.”

Weaker CNY, in this case, means higher gold prices due to increased global growth fears, added Goldman.

“The depreciation of the CNY led to an increase in ‘fear’, lower long term U.S. rates, and thus a higher gold price. Thus, a substantial depreciation of the CNY could lead to more ‘fear’ regarding U.S. and global growth akin to early 2016 and should be bullish gold,” the analysts stated.

Gold’s ETF demand is also on a strong uptrend, with Goldman upping its 2019 forecast from 300 tonnes to 600 tonnes.

“Now with the DM CAI persistently low, the trade war escalating, global equities selling off and volatility spiking, it looks like our risk scenario is playing out. Indeed, gold ETFs have recently built momentum almost as strong as in 2016 and we believe that can be maintained in the short term,” the analysts said.

By Anna Golubova

Source: Kitco News

Gold prices rose on Friday and were on course for its best week in over three years as negative yielding debt around the globe, dovish central banks and escalating U.S.-China trade tensions kept prices hemmed close to $1,500 level.

Spot gold was up 0.3% at $1,503.69 per ounce after it surpassed $1,500 for the first time since April 2013 earlier this week. U.S. gold futures rose 0.4% to $1,515.20 an ounce.

“Gold is where it is right now because it seems to be the perfect environment for it between central banks cutting interest rates and negative yielding debt,” OANDA senior market analyst Craig Erlam said.

“Gold has gone up so much and is going to reach a point where people will start questioning whether it is overbought … and whether correction is on the cards.”

German long-dated bond yields tumbled to record lows in negative territory on Wednesday, while Dutch 30-year and Irish 10-year yields turned negative for the first time on Monday.

The central banks of New Zealand, Thailand and India stunned markets with a series of interest rate cuts, pointing to policymakers’ dwindling ammunition to fight a downturn.

The U.S. Federal Reserve also cut its benchmark interest rate for the first time since 2008 last week.

“The trade spat is driving the market crazy. We don’t rule out technical corrections, but $1,500 is now the new normal unless trade relations take a turn in a right direction,” said Jigar Trivedi, commodities analyst at Mumbai-based Anand Rathi Shares & Stock Brokers.

Bullion has risen 4.4% so far this week – the biggest since April 2016 – and about 17% for the year, gaining more than $100 in the past week.

On the technical front “if we can go past the pivotal $1,520-$1560 region, it would start to a look a lot bullish. … For it to move that far ahead we need to see more convincing sign for something darker on the horizon,” OANDA’s Erlam added.

On the investment side, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, has gained about 1.8% this week and about 7.3% in 2019.

Precious metal funds recorded the fourth-largest inflows ever in the week to Wednesday and investment-grade funds sucked in money, Bank of America Merrill Lynch said on Friday.

Elsewhere, silver rose 0.8% to $17.03 per ounce and was on course for a weekly gain of nearly 5%. Platinum gained 0.4% to $863.65, while palladium climbed 0.6% to $1,430 an ounce.

Source: CNBC

KEY POINTS

• Wednesday marked the first time since April 2013 that gold traded above $1,500, bringing its 2019 gains to more than 18%.
• That return is higher than the S&P 500′s 14.3% year-to-date gain.
• Gold got a boost amid worries over the global economy U.S.-China trade war intensified while several central banks around the world cut interest rates.

Gold rose to its highest level in more than six years on Wednesday as concerns about the global economy made the precious metal and other traditional safe havens more attractive than riskier assets like stocks. The metal also caught a bid as the amount of negative-yielding bonds keeps growing.

Gold futures for December delivery jumped 2.2% to trade at $1,522.70 per ounce. Wednesday marked the first time since April 2013 that gold traded above $1,500. The gains brought the metal’s gains to more than 18%. That return is higher than the S&P 500′s 14.3% year-to-date gain.

Investors turned to gold at a time when the amount of debt trading at negative yield increases. Currently, there is $15 trillion worth of bonds with negative rates. This makes gold more attractive since it retains its value even in times of slower economic growth.

Concerns over the global economy come as the U.S.-China trade war intensified with Chinese authorities allowing the country’s currency, the yuan, to depreciate against the dollar while several central banks around the world cut interest rates.

“That is the biggest factor because it introduces a whole new set of risks to the equation,” said Ryan Giannotto, director of research at GraniteShares. “What’s really playing into people’s fears is does the depreciation of the yuan signify a larger threat to the economy.”

On Monday, China allowed the yuan to weaken beyond 7 per U.S. dollar, marking the currency’s lowest level against the greenback in more than a decade. That move led to Wall Street’s biggest sell-off of 2019. The People’s Bank of China initially quelled escalation fears on Tuesday by pegging the yuan at a stronger-than-forecast level relative to the dollar. However, those worries reemerged after China set the yuan at a weaker-than-expected rate.

China’s currency moves came after President Donald Trump announced last week a 10% tariff on an additional $300 billion worth of Chinese goods. Investors are fearful about the tariff because the goods being targeted include consumer products ranging from apparel to Apple products like the iPhone.

Trade tensions have helped gold surge this month while stocks have lagged. The precious metal is up more than 5% in August. The S&P 500, meanwhile, has dropped more than 4%.

“Although gold futures remain near-term overbought, momentum is decidedly higher,” said Tom Essaye, founder of The Sevens Report, in a note. “Fundamentally, the sharp downtrends in bond yields firmly support the bullish case for gold.”

Concerns about the economy have also lifted gold prices while global yields fell.

Central banks in New Zealand, India and Thailand all cut interest rates overnight. New Zealand reduced its overnight rate by 50 basis points while India lowered its rate by 35 basis points. Thailand cut rates by 25 basis points.

The three central banks cited weaker economic growth in one way or another. India’s central bank noted inflation growth was mild and needed to boost the country’s economy. New Zealand’s central bank said lower rates were “necessary to continue to meet its employment and inflation objectives. ” The Thai central bank said it expected economic growth to slow.

The U.S. 10-year note yield fell to its lowest level since 2016, briefly dipping below 1.6%. In Germany, the 10-year bund hit a record low, reaching negative 0.6%.

“The flight to safety has continued across global financial markets,” said Ken Berman, CEO of Gorilla Trades. “Bulls are hoping that the recovery that started yesterday will continue, but volatility is likely to remain elevated.”

Jeffrey Gundlach, CEO of Doubleline Capital, sees further gains for the precious metal moving forward as yields keep falling.

“At this point, I think the way to think about it is, as long as the volume of negative interest rate bonds outstanding increases, it’s quite likely that gold moves higher in a similar vein,” Gundlach told Yahoo Finance.

Source: CNBC

The Gold markets initially pulled back during the week, but then found enough support at the uptrend line of the ascending triangle to turn things around and break above the crucial $1450 level.

The gold market has broken to the upside and above the crucial $1450 level, an area that has offered a lot of resistance as of late. The fact that we are up here now, tells me that we are ready to take on the $1500 level, an area that should be psychologically and structurally important. If we can break above that level, then the market is likely to go much higher. At this point, I believe that the market is going to come back and find buyers on any dip that occurs. There is a serious “risk off” attitude out there right now, and I don’t think that’s going to change anytime soon.

While I do recognize that $1500 is going to be difficult to break above, I think it does happen given enough time. Quite frankly, there’s far too many things out there to spook the markets to think that we are going to break down suddenly. Quite frankly, I think gold has entered a larger and longer timeframe bullish run. The recent consolidation has made the market digest the parabolic move previously, and now it looks like we are going to see more of the same. At this point, I believe the $1400 level should offer significant support. Any support in that area should continue to see people being interested in buying.

If we did break down below the $1400 level, then the next support level is the $1350 level. Quite frankly, at this point I would be somewhat stunned to see that level gets broken. I have no interest in selling.

Source: FX Empire

By Barani Krishnan

Investing.com – The gold rush ahead of the much-anticipated Federal Reserve rate cut is ringing the tills at the 11th hour for bugs of the yellow metal.

Gold prices rose for a fourth-consecutive session on Tuesday as international bond yields continued to fall in response to weak Japanese and European data, before the close of the Fed’s two-day policy meeting.

Spot gold, reflective of trades in bullion, traded at $1,430.66 per ounce by 2:35 PM ET (18:35 GMT), up $3.75, or 0.3%, on the day.

Gold futures for August delivery, traded on the Comex division of the New York Mercantile Exchange, settled up $9.30, or 0.7%, at $1,429.70. It hit a five-day high of $1,433.19 earlier in the session. Gold futures for December delivery, Comex’s designated front-month after the expiry of the August contract, settled up $1.10 at $1,433.30.

With fed funds futures pricing odds of the 25 basis point cut at 100%, attention has shifted to just how much resistance the move will receive from within the Federal Open Market Committee.

Market expectations for an even larger 50-basis-point cut soared mid-month, but have since pulled back in light of a series of positive economic data, including a slowdown in U.S. economic growth that was not as bad as forecast. Following Wednesday’s expected cut, markets still project another reduction in September with chances for a third decrease in December above the 50% mark.

Those long the yellow metal have enjoyed an extended run on the notion that the Fed may do more than the quarter-point cut.

Non-yielding bullion, which benefits from lower rates, has been steadily climbing in the run-up to the expected announcement.

“Investors are wondering whether the Fed’s expected 25-basis-point rate cut would be enough to keep the markets supported given that some people have been calling for a deeper rate cut at this meeting,” said Fawad Razaqzada, analyst at FOREX.com in London.

“This comes on the back of disappointment that Mario Draghi, the European Central Bank president, was not as dovish as the market had expected last week,” he added

Joseph Brusuelas, chief economist at consultancy RSM US LLP, said in a morning note the Fed vote on rates could yield surprises.

“Given the sharp differences of opinion among committee members on the efficacy of a rate cut now as opposed to reserving as much monetary firepower as possible for when the current business cycle ends, there will likely be at least one dissenting voice,” Brusuelas said.

Investing.com analyst Darrell Delamaide said that the Fed statement and Chairman Jerome Powell’s press conference will overshadow the rate cut itself.

“The market reaction this week depends a lot on how the committee phrases its consensus message and most of all on how Powell explains the thinking of policymakers,” Delamaide said.

“If he continues to emphasize headwinds and risks to the economy, especially from trade tensions, investors can maintain their belief that further cuts are in store.”

In other central bank news, the Bank of Japan made no changes to interest rates in its decision announced overnight. Although it did revise its inflation forecast lower, it refrained from extending the duration of its promise to keep rates at extremely low levels beyond spring of 2020.

European economic data also supported risk-off behavior to the benefit of the precious metal as German consumer confidence worsened for a third-straight month in August and business confidence in the wider euro zone in July hit its lowest in nearly six years. German inflation also fell further and French gross domestic product growth slowed to 0.2% in the second quarter.

All of that, coupled with mounting fears of a disruptive no-deal Brexit, sent French and German bond yields back down to test their all-time lows. The German 10-year benchmark yielded -0.40% by mid-afternoon in Frankfurt, while the French counterpart yielded -0.14%.

U.S. personal income and spending for June were in line with expectations although inflation data, in the form of the core PCE price index, came out lower than expected.

Source: Investing.com

Gold prices held steady on Monday on expectations of a rate cut by the Federal Reserve this week, while investors awaited cues on the future trajectory of monetary easing by the U.S. central bank.

Spot gold inched up 0.16% to $1,420.61 per ounce. U.S. gold futures was up 0.09% at $1,420.6.

“Clearly, the gold market is going to be somewhat on hold awaiting Fed commentary on Wednesday. We know that we are getting a 25 basis-point (bps) cut. (But) on Wednesday, the question will be what to look ahead for from there,” said David Meger, director of metals trading at High Ridge Futures.

Federal funds futures implied traders saw a 77% chance of a 25 bps rate cut at the U.S. central bank’s July 30-31 policy meeting.

“Much will also depend on what Fed Chair Jerome Powell says in the subsequent press conference: If he makes no mention of a cycle of rate cuts, causing gold to come under pressure, we would not see this as a trend reversal but as an attractive buying opportunity,” analysts at Commerzbank said in a note.

Lower interest rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar.

The dollar held close to a two-month peak against key rivals. A stronger greenback makes dollar-denominated assets such as gold costlier for investors holding other currencies.

“We have seen the dollar slowly gaining in the last couple of weeks. It has not caused any significant correction but had caused a pause in gold trading,” High Ridge Futures’ Meger added.

Market participants will also keep a close eye on the U.S.-China trade talks in Shanghai this week, as negotiators from both countries meet for their first in-person talks since a truce at G20 last month. Expectations are low for a breakthrough.

Gold is a preferred asset during times of economic and political uncertainties.

Hedge funds and money managers reduced their bullish stance in COMEX gold in the week to July 23, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

On the technical front, $1,400 will be the key downside support for gold, and beyond that, $1,380, OANDA senior market analyst Craig Erlam said.

“Bulls are very reluctant to let go just yet, but if we do see those levels break, we might see gold bulls head for the exits quite quickly.”

Among other precious metals, silver slipped 0.2% to $16.36 per ounce.

Palladium fell 0.7% to $1,524.59 per ounce, while platinum climbed 1.5% to $872.84.

Source: CNBC