Gold prices gain as euro strength pressures the dollar


Gold futures climbed on Thursday, poised to score a third straight session gain, as strength in the euro in the wake of the European Central Bank’s decision to leave its policy unchanged pressured the U.S. dollar.

The European Central Bank left its policy unchanged at minus 0.5% and its refinancing rate at 0%, while reaffirming it plans to leave rates at present or lower levels until inflation rises to converge with its target at 2%.

In a news conference, ECB President Christine Lagarde said the Governing Council “extensively” discussed the recent strength of the shared currency, but reiterated that the bank doesn’t target the exchange rate. A Bloomberg report, meanwhile, said that members of the council had agreed to not overreact to euro strength.

“The ECB has confirmed that there is no further need for additional help,” said Naeem Aslam, chief market analyst at AvaTrade, in a market update. “For traders, the ECB’s confidence in the Eurozone’s economy is a good thing and this is the reason that we have seen the EUR/USD moving higher.”

In Thursday trading, the euro
EURUSD,
+0.80%

 traded at up 0.8% at $1.19, but that helped pull the ICE U.S. Dollar Index
DXY,
-0.45%

 down by 0.5% to 92.802. A weaker dollar can provide support for assets priced in greenback, making them less expensive to overseas buyers.

December gold
GCZ20,
+0.87%

GC00,
+0.87%

was up $18.60, or 1%, at $1,973.50 an ounce, following gains in each of the last two sessions.

December silver
SIZ20,
+1.98%

SI00,
+1.98%

traded 54 cents, or 2%, higher at $27.62 an ounce after climbing 0.3% in the previous session.

In U.S. economic news Thursday, the number of American who applied for unemployment benefits through state and federal programs in the week ended Sept. 5 was unchanged at a seasonally adjusted 884,000, the Labor Department said. Still, continuing jobless claims, the number of people already receiving benefits rose by 93,000 to a seasonally adjusted 13.39 million in the seven days ended Aug. 29.

“The mixed bag of economic data confirms that there is gradual recovery for the U.S. economy,” said Aslam. “However, things are not improving and this is the reason that we are seeing improvement in the gold price. It is likely that the bottom is in for the gold price and it is likely to continue to move higher.”

Other metals traded on Comex also moved higher Thursday. December copper
HGZ20,
+0.04%

traded at $3.0545 a pound, up 0.1%. October platinum
PLV20,
+1.89%

 added 2% to $943.50 an ounce and December palladium
PAZ20,
+1.19%

 climbed 1% to $2,342 an ounce.



Original source link

Gold prices inch higher, but aims for first monthly loss in 6 months


Gold futures inched higher on Monday as the U.S. dollar weakened slightly, but prices still looked to end lower for the month, in the wake of five consecutive monthly gains.

Overall, bullion continues to be viewed as a haven in the face of the COVID-19 pandemic, and the precious metal drew increased attention last week after the Federal Reserve said it is shifting to a policy of average inflation targeting which would effectively see policy makers end the practice of pre-emptively hiking interest rates to stave off inflation. That setup is viewed as a bullish one for gold, which is viewed as a hedge against rising inflation.

Read:Fed’s Clarida says new inflation-fighting strategy has roots in failure of old approach

Expectations for a low-rate regime in the U.S., and in much of the developed world, and softness in the U.S. dollar also has boosted appetite for gold, experts say.

“Gold will continue to be one of the best beneficiaries of the dollar’s weakness so expect to see a retest above $2,000 in the upcoming weeks,” wrote Hussein Sayed, chief market strategist at FXTM, in a Monday note.

December gold
GCZ20,
+0.02%

GC00,
+0.02%

was up $6.20, or 0.3%, at $1,981.10 an ounce. Gold’s latest move comes as the U.S. dollar was off 0.3%, as measured by the ICE U.S. Dollar Index
DXY,
-0.26%
,
a gauge of the buck against a half-dozen currencies.

The most-active December silver contract
SIZ20,
+2.06%

SI00,
+2.73%
,
meanwhile, added 52 cents, or 1.9%, at $28.31 an ounce.

Hope for some pickup in economic activity, amid optimism over potential coronavirus treatments, also has boosted appetite for silver, which is viewed as both an industrial and precious metal. China’s official gauge of business activity expanded faster in August, with the nonmanufacturing purchasing managers index rising to 55.2, compared with 54.2 in July.

For the month, gold was trading down about 0.3%, while silver surged roughly 16%, according to FactSet data.

Investors are “deferring to a slowing in the pace of growth improvement and U.S. election uncertainty coming into keen focus as the reason to own gold and remain short the dollar,” said Stephen Innes, chief global markets strategist at AxiCorp, in a market update.

“I suspect this week’s jobs data could be a lively affair,” he added. U.S. August nonfarm payrolls data are due Friday.

Among other metals traded on Comex, December copper
HGZ20,
+1.12%

traded at $3.0475 a pound, up 1%, while October platinum
PLV20,
+0.40%

tacked on 0.2% to $942 an ounce and December palladium
PAZ20,
+3.29%

added 2.5% to $2,286.90 an ounce.



Original source link

Gold retreats, poised for first back-to-back loss in about a month


Gold futures fell early Wednesday, with the metal on track to record its second straight decline and its lowest settlement in nearly two weeks.

Weakness in the asset comes as yields for benchmark government bonds have risen firmly in recent trade, providing haven-seeking investors another alternative to bullion, which doesn’t offer a coupon.

The rise in U.S. yields “delivered a sledgehammer blow to precious metal markets on Tuesday,” said Craig Erlam, senior market analyst at Oanda, in a market update.

Gold prices have generally rallied over the summer as U.S. real yields have gone negative and continued to decline, so the sudden spike in yields over the last couple of days “triggered a rush for the exits in what has become an incredibly overcrowded trade,” he said.

The rise in yields has been attributed to a “slew of upcoming auctions and higher PPI numbers, he said. Bond yields continued to rise Wednesday, as data revealed that the U.S. consumer-price index rose in July for a second month in a row.

Most recently, the 10-year Treasury note
TMUBMUSD10Y,
0.677%

yielded 0.673%, up from 0.562% at the end of last week, according to Dow Jones Market Data.

In Wednesday dealings, December gold
GCZ20,
+0.32%

GC00,
+0.32%

fell $2.30, or 0.1%, at $1,944 an ounce. A settlement around this level would be the lowest for a most-active contract since July 30, according to FactSet data. It traded low as $1,874.20 Wednesday, the lowest intraday mark for a most-active contract since July 23.

Prices for the yellow metal dropped 4.6% Tuesday, which represented the steepest one-day dollar decline since April 15, 2013, and steepest percentage slide since March 13 of this year, based on the most-active contracts.

September silver
SIU20,
-0.47%

was off 58 cents, or 2.2%, at $25.465 an ounce, after the metal tumbled 11% in the previous session to register its sharpest daily dollar fall since Sept. 23, 2011 and largest daily percentage drop since March 16 of this year.

Prices for precious metals have surged to at or near records in recent weeks at least partly on the back of the economic damage wrought by the COVID-19 pandemic, and the potential for a vaccine has been considered a bearish factor for the precious metal that thrives on uncertainty. On Tuesday, reports of a vaccine being registered in Russia helped to spark selling in silver and gold, experts said.

Among other Comex metals Wednesday, September copper
HGU20,
+0.57%

shed 0.5% to $2.861 a pound. October platinum
PLV20,
-2.55%

lost 3.4% to $938.60 an ounce and September palladium
PAU20,

inched lower by 0.2% to $2,171.60 an ounce.



Original source link

Gold rising to $4,000 an ounce ‘would not be an unreasonable move,’ fund manager says


Stocks and bonds may be in an asset bubble, as record-low interest rates and a tremendous increase in the money supply have sent prices soaring this year.

Add gold, which has risen 35% to $2,049 an ounce Aug. 5, to the list.

But Michael Cuggino, CEO of the Permanent Portfolio Family of Funds, says gold can move a lot higher. It would “not be an unreasonable move” for gold to breach $4,000, he said in an interview.

Cuggino manages the Permanent Portfolio
US:PRPFX,
a $1.9 billion mutual fund that is conservatively run and rated four stars by Morningstar in the fund-research firm’s “U.S. Fund Allocation — 30% to 50% Equity” category.

A long wait for a big move

First, take a look at this chart showing how monthly prices for an ounce of gold
US:GC00
(per continuous gold contracts on the New York Mercantile Exchange) have moved over the past 30 years:


FactSet

You can see the triple bottom from the end of 2015 through November 2018.

“Ever since then, it has been gradual move up, then some down. It moves sometimes in big chunks, gives some back, sits around and does nothing, reacts to stimulus, inflation, the value of dollar and euro … but it has had an aggressive move this year,” Cuggino said.

Gold may extend gains as money is being pumped into the U.S. economy, the dollar is declining, and investors are fearful that inflation may return, he said.

Cuggino warned of sharp pullbacks even during a long-term move up, as did Nigam Arora, who wrote that gold is an appropriate hedge against stocks. Still, “gold is a very small market, and it can be easily manipulated by the governments,” Arora wrote on MarketWatch.

The case for gold being relatively cheap

When looking back at how gold and stock prices have moved over the very long term, Cuggino said gold is still trading at an inexpensive level when compared with stocks. This chart shows monthly prices of gold divided by closing levels for the S&P 500 Index
US:SPX
over the past 30 years:

The S&P 500 was up 3% for 2020 through Aug. 5, but it was also up 49% from its closing low March 23.

Despite that action, and this year’s 35% climb for gold, the metal was trading at 0.6 times the level of the S&P 500. It hasn’t been above 0.7 since 2014, and you can see looking further back that it was close to 1.7 times the S&P 500 in August 2011.

Different crisis, different response

Cuggino said the quick and tremendous reaction to the COVID-19 pandemic by the federal government and the Federal Reserve was completely different from the actions taken during and after the 2008 credit crisis.

“In 2008, the fiscal policies didn’t matter much for economic gain. GDP didn’t grow because of stimuli. Monetary assistance from the Fed basically stayed in the banking system,” he said.

But now, because of programs meant to help small business, the payments made to individuals and families through the CARES Act and the loan payment deferral programs, stimulus is “much more targeted to get money out to consumers,” Cuggino said.

This points to a long-term concern and bullish possibilities for gold.

“Even though we have deflation now, [eventually] with excess raw materials, in a growing economy, the velocity of all that money can produce inflation risk,” he concluded.

Permanent Portfolio

The Permanent Portfolio
US:PRPFX
is designed to provide good long-term performance regardless of the economic environment, and to complement (and partially hedge) a broad portfolio by bouncing back more quickly during periods of market turmoil.

Here’s the fund’s broad asset allocation as of June 30:

Gold and silver made up more than 27% of the portfolio. Equities made up about 21%, with top holdings in that bucket including Texas Pacific Land Trust
US:TPL,
Freeport-McMoRan Inc.
US:FCX,
Facebook Inc.
US:FB
and Twilio Inc.
US:TWLO.

So the fund cannot be expected to outperform the S&P 500 over long periods. But because it bounces back more quickly, and because of the nature of the portfolio, it has outperformed the index so far this year:


FactSet

From a closing peak Feb. 21 through its trough March 20, the fund was down 21%. From its record closing high Feb. 19 through its closing low March 23, the S&P 500 was down 34%.

Here are long-term returns for the fund, compared with those of the S&P 500 — you’ll have to scroll to the right to see all the data:

Total return – 2020 through Aug. 5

Average return – 3 years

Average return – 5 years

Average return – 10 years

Average return – 15 years

Average return – 20 years

Permanent Portfolio Class I

11.7%

8.5%

7.9%

5.3%

6.6%

7.7%

S&P 500

3.0%

12.5%

11.9%

13.8%

9.1%

6.3%

Source: FactSet

So the fund didn’t capture the S&P 500’s extraordinary gains, led by the large tech companies that make up a major portion of its market capitalization. But if you go back 20 years, its average return has beaten that of the index.

Don’t miss:This $20 billion bond fund produced outsized returns by capitalizing on market turmoil, and is set to do it again



Original source link

Gold price declines, on the verge of snapping 9-session win streak


Gold prices headed slightly lower Thursday morning, retreating from a record rally that has seen the precious metal notch nine consecutive days of gains.

Bullion prices were supported Wednesday following the Federal Reserve signaling that it planned to keep the low interest rate environment in place for the foreseeable future as the U.S. economy recovers from COVID-19. Benchmark federal-funds futures rates stand at a range between 0% and 0.25%.

However, some analysts make the case that gold prices may be entering a period of consolidation following a historic run-up that has been at least partly prompted by the public-health crisis, but also exacerbated by a recent bout of weakness in the U.S. dollar and the low yields being offered by government debt.

One measure of the dollar, the ICE U.S. Dollar Index
DXY,
+0.08%
,
is hanging around its lowest level in two years and the yield for the 10-year Treasury note
TMUBMUSD10Y,
0.546%

is around 0.55%.

“The market has arguably overextended itself in the short term and gold is clearly overbought,” wrote Ross Norman, CEO at MetalsDaily.com, in a daily note.

“It is due a period of consolidation which would confer longer term strength in the price. That is assuming gold behaves in its normal, rational and sober manner,” he wrote.

August gold
GC00,
-0.62%

GCQ20,
-0.62%

was trading $14.70, or 0.7%, lower at $1,938.70 an ounce, after settling at a record on Wednesday, marking its ninth straight advance, which is its longest win streak since a 10-session climb ended in January.

However, global gold demand declined in the second quarter and first half of this year overall, but demand for gold as an investment climbed to a record as exchange-traded-fund holdings reached an all-time high by the end of June, according to a report from the World Gold Council published Thursday.

Meanwhile, September silver
SIU20,
-4.65%

tumbled $1.16, or 4.8%, at $23.175 an ounce, following a less than 0.1% gain on Wednesday.

In economic news, commodity traders digested important data on jobs and the U.S. economy’s GDP that could influence gold prices on Thursday.

A first reading on U.S. gross domestic product for the second quarter confirmed the pandemic pummeled the economy. GDP fell at a 32.9% annualized pace, the Commerce Department said, a bit better than the 34.6% annual decline forecast in a MarketWatch survey, but still the worst in history.

Separately, first-time claims for unemployment benefits rose slightly last week, to 1.43 million from an upwardly-revised 1.42 million, while continuing claims also rose to 17 million in the week ended July 18.



Original source link