Gold Silver Desk

By Neils Christensen
May 29, 2024

Although gold has found solid resistance around $2,400 an ounce, investors should not expect to see any major correction any time soon, according to one market strategist.

Insatiable central bank demand has transformed the gold market, providing solid support for the precious metal. In an interview with Kitco News, Nitesh Shah, Head of Research at WisdomTree, said he expects this demand to stay strong for a while.

Shah expects the gold market to form an interesting pattern in this environment. He explained that while central banks aren’t necessarily concerned with prices, they can still make strategic purchases.

“My guess is that every price dip they see, they’ll be buying. Maybe they slowed down the purchase a little bit in response to the high prices, but they know if they want cheaper prices, they need to load up now before the end of the year,” he said.

Along with central bank demand, Shah expects robust demand from Chinese retail investors will also provide solid support at current levels. He added that it’s not surprising that Chinese consumers are buying gold nearly as fast as central banks, as they have no other options.

“Even if gold is expensive, it is still going better than equities and the housing market,” he said.

While Shah remains bullish on gold through the rest of the year, he also noted that the broader market lacks a catalyst to spark another run to all-time highs… at least for now. Shah explained that the Federal Reserve’s monetary policy stance is keeping investors out of the gold market.

Shah said that he sees the floodgates opening when the U.S. central bank signals that it is ready to lower interest rates and start a new easing cycle. So far, the Federal Reserve has been reluctant to signal any rate cuts as inflation remains stubbornly elevated. According to the CME FedWatch Tool, markets are not expecting interest rates to remain unchanged through the summer. Markets see a 50/50 chance of a rate cut in September.

Although the Federal Reserve is not ready to cut rates anytime soon, Shah said that he expects easing to start by the end of the year. He added that the central bank will be forced to lower interest rates as the U.S. economy slows.

However, until then, gold prices remain caught in a new consolidation channel. He added that, according to his modeling, gold prices are seen as a little rich in this environment.

Along with gold, Shah also sees solid potential for silver as industrial demand continues to dominate the marketplace.

Shah noted that even if the global economy slows, demand for silver will remain resilient because it is a critical metal within many different sectors.

While silver is essential in the solar power sector, Shah explained that the growing electrification of the global economy will need more silver.

“The more electronic contact points you have in any application, the more silver you need. And we have this AI revolution going on. As we move our energy consumption away from burning oil, coal, and gas to wind and solar, we will need more electrical contact points, so we need more silver,” he said.

Renewed investor interest in silver has finally propelled it out from under gold’s shadow. Silver prices are trading near an 11-year high, above $32 an ounce. A 4% rally at the start of the week has helped push the gold/silver ratio to 73 points, its lowest level in nearly three years.

While the environment remains favorable for silver, Shah said the market still gets most of its momentum from gold. Although silver can withstand a slowing economy, Shah said it doesn’t do well in an environment of increased geopolitical risks.

He added that gold remains the go-to safe-haven asset when there is a lot of fear in the marketplace.

“It’s hard for silver to shake its gold correlation. So the gold correlation will be the most dominant thing driving prices,” he said. “Rate cuts are going to be the next catalyst for prices to move. On the back of that, we’ll see the gold rally first, and then silver will follow in a similar way to what we’ve seen.”

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May 29, 2024

What is happening with gold and silver is truly remarkable.

A Golden Year For Gold: Central Banks Continue Stockpiling

May 29 (KWN) – Gerald Celente:

Gold’s price has rocketed up 33 percent since 2023 began, recently topping $2,450 an ounce last week.

The surge in demand has not come from individual retail investors; gold-focused exchange-traded funds have seen net outflows of investment over the past three years.

The big buyers have been central banksters, grabbing about 2,200 tons, valued at around $170 billion at current prices, since the third quarter of 2022, according to the World Gold Council (WGC)…

Central banks account for more than 20 percent of global demand for the metal, the council said. In particular, six central banks—China, India, and Turkey most prominent among them—account for all of the net additions since mid-2022, WGC data shows.

China has bought 10 million ounces since November 2022, boosting its gold pile by 16 percent. China now holds about 5 percent of its asset reserves as gold, compared to 3 percent in 2022.

The splurge by financial authorities was sparked by Western sanctions on Russian assets after Russia attacked Ukraine. About $300 billion in Russian assets stored abroad remain frozen and there has been talk of seizing those assets to fund Ukraine’s defense or to rebuild the country.

TREND FORECAST:

Despite our trend forecast that 2024 would be a Golden Year for Gold and despite our Top Trend forecasts being sent across the global media spectrum on January 2nd, they have ignored our on-trend gold and other forecasts. Instead they are selling the bullshit from mainstream “analysts” who never saw the gold trend coming that are saying the hike in gold reserves provides a cushion if China invades Taiwan and incurs sanctions as a result. 

China is buying gold because Beijing understands the rise in geopolitical tension in the Ukraine War and Israel war that will escalate WWIII and the economic dangers ahead as the global debt crisis worsens and Dragflation persists.

Its population also understands what in the world is going on as China’s consumer demand for bullion is #1 in the world, overtaking India as the public buys up more gold jewelry, with sales up 10 percent from 2022 according to the WGC.

What About Silver?

“We think gold can continue to make new highs,” states UBS’s Precious Metals Strategist Joni Teves.

“Silver has been arguably even more interesting—finally it managed to enjoy some decent catch up with gold,” Nikos Kavalis, managing director at precious metals research consultancy Metals Focus, told CNBC via email. He elaborated that as the market gets more comfortable and convinced of gold’s bullish run, more of these investors are turning to silver.

Silver rallied past $31 per ounce to over a decade high last Wednesday amid surging investor interest and supply challenges. It is currently trading at $31.6 per ounce.

“We think [silver is] actually the best-placed precious metal to really benefit from higher gold prices. There’s a very strong correlation there,” said Teves.

She added that when the Fed eases, silver is in a “good position to really outperform gold,” especially as supply and demand fundamentals remain tight.

“Slower mine production growth and strong industrial demand suggest supply is lagging demand, which will keep the market in a structural deficit,” said Daniel Hynes, senior commodity strategist at ANZ.

Silver is used extensively for industrial purposes and commonly incorporated in the manufacturing of automobiles, solar panels, jewelry and electronics.

Metal Focus’s Kavalis said that other precious metals like platinum, palladium and rhodium are all in deficits this year, and hence should see supportive prices.

Ultra-Wealthy Moving into Physical Gold

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By Ernest Hoffman
April 22, 2024

Gold is rallying after the U.S. housing market surpassed all expectations and showed surprising strength in March, according to the latest government data.

New home sales shot up 8.8% last month to a seasonally adjusted annual sales rate of 693,000 homes, well above March’s downwardly revised rate of 637,000, which was originally reported as 664,000, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development announced on Tuesday.

The data was far better than expected, as consensus forecasts looked for a 2.7% increase to a sales rate of 668,000 homes.

After spending the overnight and much of the morning in negative territory, gold prices have rallied in the wake of the housing data release. Spot gold last traded at $2,329.55 an ounce, up 0.08% on the day.

The U.S. housing sector has struggled since the Federal Reserve’s aggressive monetary policy pushed mortgage rates to multi-year highs, while a low supply of new homes is keeping prices elevated.

The report said the median sales price of new houses sold in March was $430,700, while the average sales price was $524,800.

Looking at the inventory of homes for sale, the report said there were an estimated 477,000 new houses for sale at the end of March, representing 8.3 months of supply at the current sales rate.

By Ernest Hoffman

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By Neils Christensen
April 22, 2024

Billionaire investor Ray Dalio has had a mixed relationship with the U.S. dollar over the last few years, and it appears he is once again raising doubts about the health of the greenback.

In a commentary posted to LinkedIn on Thursday, the former Bridgewater Associates CEO said he is holding gold as a hedge against a potential debt crisis and higher inflation.

The comments come as the U.S. government’s burgeoning debt comes into greater focus. The U.S. national debt has surpassed $34.5 trillion. However, this is not just a United States-based threat.

During its annual spring meeting in Washington, D.C., the International Monetary Fund said in its Fiscal Monitor that China and the U.S. will drive global public debt over the next five years.

The IMF projects that public debt in the world’s two largest economies could double by 2053. They also singled out the U.K. and Italy as two nations that face significant fiscal risks as their government debt rises.

“History and logic show that when there are big risks that the debts will either 1) not be paid back or 2) be paid back with money of depreciated value, the debt and the money become unattractive,” Dalio said in his commentary. “Since debts are promises to pay money, when a government has too much debt to be paid, its central bank is likely to print money. This prevents a big debt squeeze from happening by devaluing the money (i.e., inflation).”

“Gold, on the other hand, is a non-debt-backed form of money. It’s like cash, except unlike cash and bonds, which are devalued by risks of default or inflation, gold is supported by risks of debt defaults and inflation,” he added.

Dalio said that debt and other financial assets are only attractive when the financial system works well and governments can meet their debt obligations without having to print money.

“On the other hand, when the reverse is the case, gold is a good asset to own,” he said. “That’s the main reason that gold is a good diversifier and why I have some in my portfolio.”

In early 2020, Dalio made headlines across global financial markets as he declared in a LinkedIn post that “cash was trash” in a low-interest-rate environment.

However, in September 2023, Dalio declared that “cash is now good,” as the Federal Reserve pushed interest rates to their highest level in more than 40 years.

In his latest post, he said that gold is one of just a few examples of “good money” in the world.

“It is held by central banks and other investors for this reason,” he said. “In fact, gold is the third-most-held reserve currency by central banks, more so than the yen or renminbi. Cryptocurrencies are also non-debt monies. I don’t know of any other types of non-debt monies, though some people might argue that gems and art act similarly because they are non-debt, portable, and widely accepted storeholds of wealth.”

Rising levels of global debt are a big reason why many commodity analysts have turned significantly bullish on gold, with some looking for prices to hit $3,000 an ounce.

The gold market has seen broad-based gains to record highs against all major global currencies in the last few months.

By Neils Christensen

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By Neils Christensen
April 22, 2024

The gold market is seeing solid selling pressure afte failing to hold its ground at $2,400 an ounce. Although the market has room to fall lower during the summer, one market analyst says that the precious metal remains in a solid position to rally by year-end.

In an interview with K-News, Chantell Schieven, Head of Research at Capitalight Research, said that not only is gold technically overbought, but it has also started its historical seasonal weak period. In this environment, Schieven noted that she sees gold prices potentially falling back to $2,150 an ounce, representing the March breakout level.

Although Schieven is looking for a correction in gold in the next few months, she remains a long-term bull. She said she is raising her year-end price target to $2,500 an ounce, up from $2,400 an ounce.

The comments come as June gold futures start the week with a more than 2% loss, last trading at $2,349.10 an ounce.

At the start of the year, Schieven was the most bullish analyst who participated in the London Bullion Market Association’s annual price forecast.

“It’s been kind of surprising to see gold take out all these levels, and while I do think it goes higher, I do think we need to see a bit of a pullback,” she said. “I don’t think gold goes all the way back to $2,000 or below, but we could see $2,100 before the end of the summer.”

Schieven said that the most significant reason she has turned near-term cautious on gold is due to shifting interest rate expectations that are supporting higher bond yields and a stronger U.S. dollar. Markets are now pushing back the start of the Federal Reserve’s easing cycle until after the summer.

According to the CME FedWatch Tool, markets see less than 20% chance of a rate cut in June. At the same time, the chance of a rate cut in July has dropped below 50%.

“Gold has broken a bit away from its fundamental drivers, and I think we are starting to see these drivers come back into focus, which can be negative for gold,” she said.

However, Schieven added that the gold market has become significantly more nuanced than just following bond yields and the U.S. dollar. Although the Federal Reserve is not expected to cut rates during the summer, it’s unlikely to raise interest rates.

“The Federal Reserve will eventually cut rates this year. I expect to see them cut rates after the 2024 election, and that is when we will see gold prices climb higher and push towards $2,500 an ounce. The summer lows could prove to be a good time to buy for long-term investors.”

At the same time, Schieven said that she expects inflation to play a more critical role in gold’s price action. She pointed out that with the Federal Reserve holding firm on its monetary policy, higher interest rates mean that real rates will rise, lowering gold’s opportunity costs as a non-yielding asset.

“Ultimately, the Fed, even with their hawkish comments, continue to leave themselves room to lower interest rates,” she said. “They will be lowering interest rates even as inflation remains stubbornly above the 2% target. The Federal Reserve can’t afford to maintain higher interest rates because of rising debt levels.”

Looking beyond U.S. monetary policy, Schieven said that she expects gold to remain an attractive safe-haven asset. Although the global economy has seen relatively better-than-expected growth so far this year, Schieven said she has not entirely dismissed the threat of a recession.

She added that rising U.S. debt will strangle economic growth as more money is thrown at just servicing its debt. In March, economists at Bank of America noted that U.S. national debt is rising by $1 trillion every 100 days. Schieven pointed out that this is a significant reason why central banks will continue to buy gold.

“Nobody wants our debt right now,” she said. “As the debt grows, it’s not surprising that central banks want fewer U.S. dollars and want to diversify their holdings.”

Finally, Schieven said that U.S. geopolitical instability as the 2024 election draws closer will also provide new support for gold.

“I don’t really know how to put this, but neither choice is that great. No matter who gets elected, deficits will still rise, and the U.S. dollar will still be devalued,” she said. “Those things are not good for the U.S., but they are certainly good for gold.”

Looking through higher volatility this year, Schieven said that gold remains in a long-term uptrend. She pointed out that during the 1970s, higher inflation, economic uncertainty, and geopolitical turmoil caused gold prices to double.

While that might be an unlikely scenario today, Schieven said that it is not out of the question.

“We do not think it is out of line to look for a $3300+ gold price over the next 5-6 years,” Schieven wrote in a recent report.

By Neils Christensen

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