Gold looks like an attractive buy at the moment, with investor sentiment reaching the bottom in the marketplace, according to one European fund manager.
In a recent interview with Kitco News, Ronald-Peter Stoeferle, fund manager at asset-management firm Incrementum AG and author of last month’s latest In Gold We Trust annual report, said that from a risk-reward perspective, gold looks extremely attractive. He added that he sees several factors that will lead to higher prices by the end of the year.
“I think we have seen the lows in gold for the year,” he said.
Stoeferle’s comments come as the gold market has managed to bounce off its 12-month lows and is currently trading below the initial resistance of $1,260 an ounce. August gold futureswere last at $1,256.40 an ounce, up 0.24%.
The most significant factor driving gold prices higher is falling momentum in the U.S. dollar, said Stoeferle,noting that interest in the greenback is starting to wane as the Federal Reserve moves closer to the end of its interest rate hike cycle.
Gold and silver prices are moderately higher in early U.S. trading Tuesday, on some short covering in the futures markets and perceived bargain-basement buying in the cash markets. Gold hit a 12-month low overnight and silver scored a 6.5-month low on Monday. The key “outside markets” are also in a bullish daily posture for the precious metals markets today, as the U.S. dollar index is lower and crude oil prices are higher. August gold futures were last up $7.10 an ounce at $1,248.80. July Comex silver was last up $0.14 at $15.975 an ounce.
Reports overnight said Monday’s trading in gold exchange traded funds saw the largest outflow of money from those funds since late March. Gold and silver bulls remain stymied by their metals’ inability to rally in the face of the threat of a global trade war and some fresh instability in the European Union.
World stock markets were mixed to higher overnight. U.S. stock indexes are pointed toward higher openings when the New York day session begins.
European stock markets were assuaged today on news that German Chancellor Merkel has apparently avoided a political crisis by coming to agreement with other German lawmakers regarding immigration laws.
In other overnight news, the Euro zone’s producer price index in May was reported up 0.8% from April and up 3.0%, year-on-year. Those numbers were a little higher than expected.
* Dollar near 6-1/2 month peak
* Italy crisis sparks stock sell-off
* China says ready to fight back if U.S. ignites trade war
* SPDR gold holdings rise 0.35 pct on Tuesday
By Karen Rodrigues
BENGALURU, May 30 (Reuters) – Gold prices edged down on
Wednesday as a robust U.S. dollar weighed on the market, but
concerns about political turmoil in Italy and Sino-U.S. trade
conflict limited losses.
Spot gold was 0.2-percent lower at $1,296 per ounce
by 0736 GMT.
U.S. gold futures for June delivery were down 0.3
percent at $1,295.40 per ounce.
“The stronger dollar is the most significant headwind,” said
Stephen Innes, APAC trading head at OANDA.
“With the yellow metal’s sensitivity to the U.S. dollar on
full display, it is unlikely gold will move significantly higher
until we reach the EU ‘Crisis Zone’ which we are nowhere near at
this stage.”
The dollar index , which measures the greenback
against a basket of six major currencies, hovered near its 6-1/2
month peak touched in the previous session.
Investors fear that repeat elections in Italy – which could
come as soon as July – may become a de-facto referendum on
Italian membership of the currency bloc and the country’s role
in the European Union.
“People are really worried about what’s happening in Europe
and the U.S.-China trade tensions … we also see U.S. bond
yields drop,” said Richard Xu, a fund manager at HuaAn Gold,
China’s biggest gold exchange-traded fund.
U.S. benchmark 10-year Treasury yields on Tuesday registered
their largest one-day drop since Brexit nearly two years ago.
Meanwhile, China on Wednesday lashed out at Washington’s
unexpected statement that it still holds the threat of imposing
tariffs on $50 bln of Chinese goods, saying Beijing was ready to
fight back if Washington was looking to ignite a trade war.
“That (U.S.-China conflict) is driving down risk appetite,
hence the stock markets are tanking,” Xu said.
Asian stocks extended a global sell-off on Wednesday as
Italy’s political crisis rippled across financial markets.
Holdings of SPDR Gold Trust , the world’s largest
gold-backed exchange-traded fund, rose 0.35 percent to 851.45
tonnes on Tuesday.
In other precious metals, spot silver was down 0.6
percent at $16.28 an ounce.
Platinum fell 0.4 percent to $900.45 an ounce, while
palladium was 0.2-percent lower at $977.31.
Will Gold Keep Reacting to US-China Trade War Jitters?
By Meera Shawn
9 hours ago
Trade war jitters?
Among the four precious metals that we’ll be discussing in this series, only gold saw gains on Wednesday, April 4. Gold prices for April futures were up 0.23% and closed at $1,335.8 an ounce. Silver was down 0.84% to close at $16.2. Platinum was down 1.4% and was the biggest loser among the four precious metals. It ended the day at $912.1 an ounce. Palladium was also lower by 1.1% and closed at $918.9 per ounce.
The rise in gold was most likely due to the ongoing unrest in the markets due to the US and China trade war. China said that it would impose additional tariffs on $50 billion worth of US imports. The tariffs would include products ranging from cars, chemicals, tobacco, and whiskey. This made markets jittery, which led the US dollar to fall and pushed gold higher. The sentiment didn’t provide a substantial impact on the other three precious metals.
Correlated moves
The above chart compares the performance of gold to the volatility index (or VIX). It is a barometer for overall uncertainty in the market. The higher chances that we could see weak markets led to a rise in this index.
We have seen that gold has a strong relationship with market unrest (VIXY) (VXZ). The higher the tensions in the market, the higher the demand for gold. As gold is famous as a safety asset, investors often jump to this reserve-for-safety. Though the short-term relationship between gold (IAU) and VIX can diverge in a more extended run, we can expect the two to track each other.
Some of the mining companies that also increased on Wednesday with gold include Cia De Minas Buenaventura (BVN), Eldorado Gold (EGO), Alacer Gold (ASR), and Coeur Mining (CDE). They were up 2.4%, 2.5%, 1.5%, and 2.3%, respectively.
I believe in free trade, but I still understand why President Trump is imposing tariffs on steel, aluminum and a range of Chinese products. America’s industrial workers have suffered for a long time, and Mr. Trump is fighting to create middle-class jobs.
Achieving that will take more than righting the last administration’s wrongs on taxes and regulation, a task already well under way. Blue-collar prosperity was eroded along with American manufacturing. From 2000-10, U.S. manufacturing employment shrank by a third after holding steady for 30 years.
PHOTO: ISTOCK/GETTY IMAGES
President Trump has rightly blamed bad trade deals, particularly those with Mexico and China, for contributing to this meltdown. But the Federal Reserve deserves a share of the blame, too, since its inflationary policies priced out U.S. manufacturers from global trade. Since 2000, their prices have risen nearly 50%, compared with about 25% for German competitors—mirroring the domestic inflation rates in each country. As a result, manufacturers fled the U.S., much the way American families have fled high-tax states.
The solution is to take control of the money supply away from the Fed and give it back to the American people—in other words, to return to the gold standard. Gold gets a bad rap in some history books because of its misuse during the 20th century. This ignores its peacetime record of high growth and nil inflation between 1834 and 1913.
Clouding the historical picture are two fake gold standards. The Depression-era gold standard was constructed to make prices fall toward the levels that prevailed before World War I, with the disastrous result of deflation. Then, under the Bretton Woods version after World War II, only foreign central banks could convert dollars into gold. This deformity caused inflation, which skyrocketed after the Fed gained total control of the money supply in the early 1970s.
Since then the U.S. has seesawed between too much and too little money in the economy. The Fed has the impossible task of guessing the market’s demand in real time. Its performance worsened in the 2000s because the Fed began to grade itself by how its money creation boosted the financial markets. Today many people are so disillusioned with the dollar’s prospects that they have embraced cryptocurrencies like bitcoin.
My constituents in West Virginia get little of the upside from the Fed’s money creation and most of the downside. They don’t benefit from speculative investment returns, but they do lose their jobs and homes when the local plant decides to close because it’s too expensive to compete from the U.S.
The current Federal Reserve system benefits elites. The gold standard is equitable and puts “we the people” in control of the money supply. That’s why it was part of America’s founding and has been a key to the country’s long economic success.
On Thursday I introduced a bill that would return the dollar to the gold standard—the first such attempt since Jack Kemp’s Gold Standard Act of 1984. Under this legislation the Fed would still exist, but it would administer the money supply rather than dictate it. Instead the market would be in charge, the supply and demand for money would match up, and prices would be shaped by economics rather than the instincts of bureaucrats.
Like President Trump, I believe that success is again possible for Americans who go to work every day and build things. Mr. Trump’s vision of how the American economy could and should work resonated with voters in 2016. Returning to the gold standard is a way for the president to deliver on his promise of American working-class prosperity.
Mr. Mooney, a Republican, represents West Virginia’s Second Congressional District.
Mr. Seth A. Klarman has been one of the most successful value investors over the last thirty years. His opinion is highly sought after. Recently he wrote a letter to his investors cautioning them about a Trump Presidency and what that may mean for the market.
“While Mr. Klarman clearly is hoping for the best, he warned, “If things go wrong, we could find ourselves at the beginning of a lengthy decline in dollar hegemony, a rapid rise in interest rates and inflation, and global angst.”
While gold investment is not explicitly mentioned in this article, it’s interesting that another article has emerged today in The Wall Street Journal about investors seeking refuge in gold. Read the whole article here at the NYT.
Remember this riddle from the school yard: What’s heavier, a pound of bricks or a pound of feathers? The answer is obvious to us now. They are the same. A similar question can be asked of fine gold coins. What’s the difference between a 1 oz Canadian Maple and a 1 oz American Eagle? The answer though, is not so obvious. Let’s take a closer look.
A Canadian Maple, as well as the Chinese Panda coins are .999% pure (24K) but the American Eagle and the South African Krugrand are 91.7% pure (22K) yet they all contain the stated weight of one ounce of gold. So, while all 1 oz gold coins contain 1 oz of gold, not all 1 oz coins weigh 1 oz. Share this riddle with your co-workers to see if they can figure it out. Then ask them what was the color of George Washington’s white horse.
Ever wonder what gives gold its value? The simple answer is: Us. Since 4000 B.C. people began to value gold as a decorative fashionable object. Gold’s value and place in our societies and cultures has evolved over thousands of years. Enjoy this wonderful (and brief!) overview of gold and its relationship to civilization. Here is an excerpt:
” 58 B.C. After a victorious campaign in Gaul, Julius
Caesar brings back enough gold to give 200
coins to each of his soldiers and repay all of Rome’s
debts.” The History of Gold
The history of gold is rich and remarkable, stretching back thousands of years and a major player in shaping the economy we know today. Perhaps some of the gold given to one of those Roman soldiers ended up in a beautiful piece of jewelry you are wearing today.
In a recent interview with Kitco News, Ronald-Peter Stoeferle, fund manager at asset-management firm Incrementum AG and author of last month’s latest In Gold We Trust annual report, said that from a risk-reward perspective, gold looks extremely attractive. He added that he sees several factors that will lead to higher prices by the end of the year.
* Dollar near 6-1/2 month peak
Mr. Seth A. Klarman has been one of the most successful value investors over the last thirty years. His opinion is highly sought after. Recently he wrote a letter to his investors cautioning them about a Trump Presidency and what that may mean for the market.
