Gold climbs more than 2% to a record above $1,900


Gold futures hit their highest level on record Monday, as investors continued to fret over the state of the COVID-19 battered global economy and weakness in the U.S. dollar, and amid concerns over the sticking power of stock gains.

August gold
GC00,
+1.86%

GCQ20,
+1.86%

surged $40.30, or 2.1%, to $1,937.80 an ounce after trading as high as $1,941.90. That took it past the record most-active intraday level of $1,923.70 an ounce from Sept. 6, 2011.

On Friday, the contract climbed $7.50 to settle at $1,897.50 an ounce on Comex, after trading as high as $1,904.60. That action took out a most-active contract settlement record of $1,891.90 from Aug. 22, 2011, based on records going back to November 1984, according to Dow Jones Market Data.

Last week, prices rose 4.8%, the biggest weekly percentage climb since the week ended April 9 and some analysts say the never-before-seen level of $2,000 an ounce is within reach. U.S. stocks closed lower on Friday, with the heavy Nasdaq Composite
COMP,
+1.02%

marking its first back-to-back decline since mid-May.

Read: Gold rides to a record, with prospects for $2,000 an ounce stronger than ever


‘With concerns about further pandemic-related lockdowns, the U.S. dollar decline, real rates continuing to plummet, and rising U.S.-China tensions, it is the entire list of fundamental drivers to get us there getting delivered up in one package…’


— Stephen Innes, AxiCorp

“With concerns about further pandemic-related lockdowns, the U.S. dollar decline, real rates continuing to plummet, and rising U.S.-China tensions, it is the entire list of fundamental drivers to get us there getting delivered up in one package today,” said Stephen Innes, chief global markets strategist at AxiCorp, of that $2,000 level in a note to clients.

The ICE U.S. Dollar Index
DXY,
-0.78%

slid 0.8% to $93.64, having lost 3.8% for the month so far.

“Given the slumping view toward U.S. economic prospects and ideas that Europe will open a significant macroeconomic edge over the U.S., it is not surprising to see the dollar forge yet another lower low for the move and, in turn, contribute to the upward extension in precious metals prices,” analysts at Zaner Metals wrote in a Monday note.

“Not surprisingly, investors also added to the bullish environment with news that Friday saw 1.76 million ounces purchased by gold [exchange-traded funds], with a more astonishing purchase of 9.1 million ounces of silver by silver ETFs,” they said.

The gold market “continues to get a tremendous amount of bullish press coverage and that is likely to embolden the bull camp further, and is likely to result in a an even wider cross section of small investors learning about precious metals ETFs for the first time,” the Zaner Metals analysts said.

In Monday dealings, the gold-backed SPDR Gold Trust
GLD,
+2.03%

traded 2.1% higher.

“Another bullish force is a ratcheting up of expectations for U.S. central bank action, as soft U.S. data and the unending infection threat is starting to sink sentiment, and we suspect the [Federal Reserve] is now very keen to cushion against renewed shutdown fears,” analysts at Zaner Metals said.

The Federal Open Market Committee will make an announcement on monetary policy on Wednesday.

And in China, the U.S. says it has closed its consulate in Chengdu, a move ordered by Beijing after the closure of the Chinese consulate in Houston last week.

Virus outbreaks and the effect on global economies has also seen investors flocking to gold. While investors have been consumed by concerns about outbreaks across the southern U.S. states, Spain emerged as a fresh worry amid a resurgence of the virus, notably in the northeast region of Catalonia. The U.K. government put Spain back on a list of countries it deemed unsafe for travel and ordered travelers to isolate for 14 days upon return from the popular holiday destination.

“There has been a lot of talk about the $2K hurdle, which has been my long-term target too,” said Fawad Razaqzada, market analyst at ThinkMarkets, in a market update. “Obviously, there is no guarantee gold will get there or indeed stop there, but that target is only $55 away from the overnight high.”

Meanwhile, the September silver contract
SIU20,
+6.74%

climbed $1.66, or 7.3%, to $24.51 an ounce, on track to tally the highest most-active contract settlement since August 2013, according to FactSet data.

September copper
HGU20,
+0.06%

traded unchanged at $2.8925 a pound. October platinum
PLV20,
+1.53%

added 1.3% to $968.70 an ounce and September palladium
PAU20,
+4.32%

traded at $2,397.80 an ounce, up 4.5%. 



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Gold settles at a nearly 9-year high and silver scores highest finish since 2014 on fiscal stimulus moves


Gold futures climbed Tuesday to settle at a nearly nine-year high and silver rallied to prices not seen since 2014, with the precious metals lifted by an agreement on a fiscal rescue plan by European leaders and expectations for additional spending by the U.S. government.

European Union leaders ended a grueling four-day summit with an agreement on a €1.8 trillion ($2.1 trillion) budget and rescue-fund package aimed at shoring up the worst-hit economies in the wake of the COVID-19 pandemic.

See:EU nations agree to $2.1 trillion budget and coronavirus relief plan after marathon summit

The EU deal also lent support to equities, with U.S. benchmark stock indexes headed higher on Wall Street. However, gold, a traditional haven asset, was also boosted on expectations fiscal stimulus efforts could stoke inflation and lead to a weaker U.S. dollar.

A weaker dollar can be a positive for commodities priced in the currency, making them cheaper to users of other currencies. In Tuesday dealings, the ICE U.S. Dollar Index
DXY,
-0.79%

traded down nearly 0.8% at 95.10, the lowest level since March.

“Clearly, the passage of the EU recovery fund combined with the beginning of negotiations on another U.S. stimulus package provides a solid backdrop for the bull camp,” analysts a Zaner Metals wrote in a daily note, adding that the dollar, overnight, broke down to the lowest level since March 10. “Currency forces should be poised to add to the bull track.”

Gold for August delivery
GC00,
+1.48%

on Comex rose $26.50, or 1.5%, to settle at $1,843.90 an ounce, after touching a high of $1,844.80. Prices based on the most-active contracts, haven’t traded or settled at levels this high since September 2011, according to Dow Jones Market Data.

Silver also surged, with the September contract
SIU20,
+7.02%

up $1.37, or 6.8%, to end at $21.557 an ounce after a high at $21.63. Most-active silver futures marked their highest settlement since March 2014.

Read:Silver logs highest finish since 2014 and is up more than 80% from 2020’s low

“Silver spot prices have outperformed gold so far this month, an interesting reversal of the norm,” said Cailin Birch, global economist at The Economist Intelligence Unit. “We believe that this reflects growing market optimism around the outlook for global industry, given silver’s many industrial uses.”

“Several factors are probably contributing to this recent optimism, including the approval of a broad stimulus package by the EU commission and steadily improving economic and industrial activity in China, the main source of demand growth of industrial metals,” she said in emailed commentary.

Silver prices had settled early last week, and again on Monday, at the highest since September 2016.

Read:Why silver is trading at a nearly 4-year high

Also see:Why gold have become a ‘weapon of choice’ for investors

“In the early stages of the precious metals bull market, gold leads the way with silver being pulled up slowly by the rising gold price,” said Peter Spina, who is president of GoldSeek.com and SilverSeek.com, providers of news and analysis for the precious metals. “At a certain point, the relative value of silver versus gold gets more noticed and investors start to accumulate the ‘poor man’s gold’.”

“Now we are entering into the next phase of the bull market where silver is getting recognized for its deep discount as a precious, monetary metal,” Spina gold MarketWatch.

But it’s “all relative,” he said. “Investors are looking for safety in gold and silver’s ability to also provide a low-risk store of value,” and that “builds stronger investment inflows,” feeding the price climb.

Meanwhile, Europe’s fiscal package “comes on the back of vast monetary support from the European Central Bank, as well as other major central banks around the world. In the U.S., talks are about to kick off on the next virus relief plan, which could see at least an additional $1 trillion added to the previous stimulus measures – especially as some of the existing measures are about to expire,” said Fawad Razaqzada, analyst with ThinkMarkets, in a note.

Other metals climbed as well, with platinum and palladium moving up sharply. October platinum
PLV20,
+7.13%

rose 7.1% to $918.90 an ounce and September palladium
PAU20,
+4.65%

added 3.7% to $2,188.20 an ounce, for the highest settlement since late March. September copper
HGU20,
+1.59%

rose 1.5% to $2.958 a pound.

“The platinum and palladium markets have begun to show very positive sensitivity in sync with gains in gold and silver prices,” said analysts at Zaner Metals.



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Gold, silver futures settle higher to tally a sixth weekly gain in a row


Gold futures on Friday registered a sixth weekly gain in a row, buoyed by a combination of rising expectations for additional fiscal stimulus in Europe and the U.S. as well as uncertainty over the global economic outlook as the COVID-19 cases continue to rise.

Both gold and silver traded up for the sixth straight week, trying to “establish a base” around $1,800 for gold and around $19 for silver, said Fawad Razaqzada, market analyst at ThinkMarkets.

Investment demand for the metals “should offset any weakness for jewelry purchases, due to ongoing economic uncertainty and, more to the point, a prolonged period of zero or sub-zero interest rates,” he said in a market update. “What’s more, the U.S. dollar remains out of favour despite bouncing here and there.”

Given that, “noninterest-bearing and buck-denominated gold and silver stand ready to benefit further,” said Razaqzada. Meanwhile, “silver, which is also and industrial material, could experience relatively higher demand compared with gold as the world economy recovers from the pandemic.”

Gold for August delivery
GC00,
+0.63%

on Comex rose $9.70, or 0.5%, to settle at $1,810 an ounce, while September silver
SIU20,
+0.90%

added 19 cents, or 1%, at $19.764 an ounce.

Gold logged a nearly 0.5% weekly rise and was up 18.8% for the year to date after hitting its highest level since 2011 earlier this month and moving within striking distance of its all-time high. Silver ended more than 3.7% higher for the week. Most-active gold and silver contracts logged a sixth straight weekly rise, according to FactSet data.

“Gold prices are steadily rising as investors start to raise their stimulus expectations on coronavirus second wave fears,” said Edward Moya, senior market analyst at Oanda, in a note. “Gold is also starting to benefit from election risk, as Wall Street can’t ignore the polls anymore and is starting to price in the risk of a Biden presidency,” given presumptive Democratic nominee Joseph Biden’s lead over President Donald Trump in the polls.

The White House and lawmakers face increasing pressure to come up with an additional fiscal stimulus plan ahead of the expiration of supplemental unemployment benefits at the end of the month. Meanwhile, European Union leaders on Friday kicked off a two-day summit aimed at reaching an agreement on a €750 billion recovery fund.

Read:European Union leaders say they are far apart on COVID-19 bailout deal

Christopher Louney, analyst at RBC Capital Markets, argued that gold’s gains have been fueled in large part by the “inherent uncertainty” that has accompanied volatility in equity markets.

“Risk overlays are playing a role in the stickiness of recent moves in gold flows and prices, but in our view, it is uncertainty that brought investors to the gold space in size this year and it is likely what is going to keep them there,” he said, in a note.

Among other Comex metals, September copper
HGU20,
+0.10%

rose 0.1% to $2.9045 a pound and ended the week about 0.2% higher. October platinum
PLV20,
+1.51%

rose 1.5% to $849.60 an ounce, up around 0.4% for the week, while September palladium
PAU20,
+1.26%

ended at $2,071.70 an ounce, up 2.3% for the session and posting a weekly rise of 3.9%.



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Gold timers have rarely been more bullish than they are today — that’s a bad sign


A big test for contrarian analysis is brewing in the gold pits. That’s because bullishness among gold market timers has rarely been higher than it is today. Since 2000, which is when I began tracking the average recommended exposure level among such timers, optimism about gold was higher on just 0.7% of the trading sessions.

That bodes ill for gold’s
GC00,
+0.02%

near-term prospects, according to contrarian analysis. Historically gold and gold-related investments have on average performed markedly better when the gold timers were far more skeptical of the yellow metal.

This in turns suggests that the gold bulls need to be patient in their expectation that gold will soar in the next couple of weeks to a new all-time high. That record high is close to $1,900 per ounce.

The gold timers’ average recommended gold exposure level is what is tracked by my firm’s Hulbert Gold Newsletter Sentiment Index, or HGNSI. The accompanying chart plots the HGNSI since the beginning of 2018, along with the VanEck Vectors Gold Miners ETF
GDX,
+3.93%

. The shaded zones at the top- and bottom of the chart represent HGNSI readings that are above and below the 90th and 10th percentiles of the historical distribution.

Notice in the chart how the HGNSI over the last couple of days has risen to well within that top decile. Notice also that, in the immediate wake of other such occasions over the last several years, the VanEck Vectors Gold Miners ETF has proceeded to lose ground.

Yet contrarians are still betting that gold will struggle over the next several weeks. That’s why I say the next month will constitute a big test of contrarian analysis.

The incredible correlation between gold and real interest rates

One counter to the contrarians’ argument is based on today’s low inflation-adjusted (or real) interest rates. Currently, for example, 10-year Treasury Inflation Protected Securities (TIPS) trade at a yield of minus 0.76%. That’s one of the lowest rates ever registered for these bonds, which began trading in the late 1990s.

This low rate is bullish, according to many gold bulls, because of the strongly inverse correlation between real interest rates and gold’s real price. According to a study circulated a few years ago by the National Bureau of Economic Research, this correlation is an extremely low minus 0.82 (with minus 1.0 being the lowest possible reading). This study was co-authored by Claude Erb, a former commodities portfolio manager at TCW Group, and Campbell Harvey, a finance professor at Duke University.

Correlation is not causation, however, and Erb and Harvey were unable to find persuasive evidence that low real interest rates are what causes high gold prices. In fact, they found that “it is equally possible to argue that causality runs in the other direction and that high real gold prices actually ‘cause’ low real yields.”

Even if it is low real rates that are causing high real gold prices, however, that doesn’t help us forecast the future. That’s because, in order to translate the historical correlation into a forecast, we need first to know where real interest rates will be trading in the future. Consider:

•        If the 10-year TIPS yield were to rise back to where it was in the fall of 2018, then an econometric model based on the correlation between real rates and gold would predict that gold would trade for around $1,000 an ounce.

•        If instead the 10-year real yield were to fall further, to minus 2%, the model would predict gold would trade for well over $2,000 an ounce.

•        If the real yield stays constant, the model would predict gold’s price would stay constant.

This is why gold market sentiment is more helpful than real yields than in forecasting gold’s near-term direction. So long as the gold timers are as bullish as they are now, history suggests that gold will struggle.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com

More:Why ‘safe haven’ gold and the stock market are now moving the same direction

Also read:  The No. 1 market-timer of the 1980s and 1990s has this message for today’s buy-and-hold investors



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Gold heads lower for a second session as stock-market gains dull haven appeal


Gold lost ground Wednesday, on track for a second loss in a row as strength in the U.S. stock market in response to easing COVID-19 lockdowns sapped the yellow metal of some haven appeal.

“With investor confidence improving, defensive havens have been knocked back on their heels,” including gold, said Colin Cieszynski, chief market strategist at SIA Wealth Management, in daily commentary.

August gold
GCQ20,
-1.04%

GC00,
-0.72%
,
which is now the most-active contract, fell by $18, or 1%, to $1,710.20 an ounce. Gold for June delivery
GCM20,
-0.72%
,
which is still among the most-active contracts, dropped $13.10, or 0.8%, to $1,692.50 an ounce.

July silver
SIN20,
-0.71%

was off 13 cents, or 0.7%, at $17.465 an ounce.

U.S. equities rose sharply on Tuesday and again on Wednesday morning, albeit off their best levels, as investors returned from a three-day holiday weekend, boosted by optimism over the easing of lockdowns and by fiscal and monetary stimulus efforts by governments and central banks.

The European Union’s new fiscal stimulus package “will likely be the beginning of another wave of stimulus that should help prop up risky assets,” said Edward Moya, senior market analyst at Oanda.

Still, “the new ‘Cold War’ between China and the U.S. will also likely drive a lot of demand for gold as tensions will remain in place leading all the way up to the presidential election,” he said in a market update. “Permanent damage to the economy will likely settle in over the next couple months and gold will see steady flows as unbalanced recovery takes form.”

Meanwhile, a loss of gold’s haven appeal could prove “fatal” for the yellow metal amid weak demand from other sources, said Carsten Fritsch, analyst at Commerzbank, noting data from the Swiss Federal Customs Administration on Tuesday that showed the country exported 131.8 [metric] tons of gold in April, the highest volume since last August.

However, a record 111.7 tons went to the U.S., likely to fulfill demand by exchange-traded funds, he said in a note, while exports to Asia collapsed almost completely.

“For the second consecutive month no gold at all was shipped to China; a mere 1 kilogram went to Hong Kong and 500 kilograms to India. This confirms what the Indian gold import figures and the bilateral gold trading data between China and Hong Kong had already indicated: gold demand has ground to a halt in China and India, traditionally the most important countries in terms of gold demand,” he said.

Among other metals Wednesday, July copper
HGN20,
-2.06%

traded at $2.3735 a pound, down 1.9%. July platinum
PLN20,
-0.20%

was little changed, down less than 0.1% at $872.70 an ounce, while September palladium
PAU20,
-0.69%
,
which is now the most-active contract, traded at $1,976.40 an ounce, down 0.5%.



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