Author: david@goldsilverdesk.com

Neils Christensen – Tuesday August 24, 2021

The Gold market has pushed back above $1,800 an ounce, and while the precious metal has room to move higher, one major bank is lowering its year-end price target.

In a report published Friday, commodity analysts at Commerzbank said that they see Gold prices ending the year around $1,900 an ounce, down from their previous price target of $2,000 an ounce. However, the downgrade in this year’s price target is just a tactical retreat. The German bank remained a long-term bull and pushed its $2,000 price target to 2022.

“As soon as the U.S. Federal Reserve announces that it will start to reduce its bond purchases, an important obstacle for the Gold price should disappear. Moreover, our economists expect U.S. inflation to start falling significantly as early as the fourth quarter. This should take some wind out of the sails of the interest rate hike expectations that have just emerged,” the analysts said. “Next year, U.S. inflation is even likely to fall below the Fed’s inflation target again, which should further weigh on interest rate expectations. We, therefore, expect the Gold  price to rise significantly over the next 12 months.”

Not only does Commerzbank see the potential for Gold as they expect the U.S. central bank to keep interest rates at historically low levels, but the analysts noted that the precious metal is cheap compared to other historical standards.

“In our opinion, Gold is currently trading at an unjustifiably low level and is too cheap compared to other asset classes: one troy ounce of Gold is equivalent to just under 5% of the Dow Jones Industrial Average. Over the past ten years, it has averaged 7.6%, at its peak even more than 17%,” the analysts said.

One key factor that will drive Gold prices higher is the return of investor demand. Gold prices have dropped more than 13% from last year’s highs as investors pulled 270 tonnes of Gold out of gold-backed exchange-traded funds since August 2020.

“This is almost equivalent to one month’s global gold mine production,” the analysts said.

However, the German bank added that weak ETF demand obscures other pillars of strength in the marketplace, notably physical demand for bars and coins.

Quoting data from the World Gold Council, Commerzbank said that 62 tonnes of gold bullion were bought in the U.S. in the first half of the year. In Germany, the demand for gold coins and bars was around 90 tonnes.

“Demand for these investment forms in North America more than doubled in the first half of 2021 compared to the previous year,” the analysts said.

By Neils Christensen

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August 24, 2021

Today a man who is connected in China at the highest levels said gold is going to be the new global currency.

The Great Default

August 24 (KWN) – John Ing:  Fifty years ago, under the crushing weight of debt to foreigners, President Nixon severed the dollar’s link with the gold standard, replacing the dollar’s backing not with gold but the “full faith” of the United States’ economy. What followed was an era of fiat money debt-fueled spending and the great inflation of the seventies and early eighties.

After years of massive deficits from LBJ’s Great Society and financing the Vietnam War, the United States did not have enough gold to back its debts. The Fed also tried to keep rates low until Paul Volcker forced rates to the roof to stop hyperinflation. Since 1971, the greenback’s purchasing power has lost 98 percent in real terms…

Today America not only has record debts but the Fed keeps creating dollars as the tsunami of money cheapens the world’s leading currency. Money is free. America’s debt is larger than its economy and it is unlikely that debt will every be repaid, debasing the dollar. In less than 10 years, America’s debt has doubled to $29 trillion, another record. The dollar is structurally weak. The present system depends on the dollar, however without confidence in the dollar, the world has no valid reserve currency. America’s exorbitant privilege is not infinite as are the laws of economics.

Gold Is Going To Be The New Global Currency

The crux is that America is reliant on foreign capital to fund its deficits and profligate spending – that is America’s Achilles heel. The greenback is overvalued, deficits are unsustainable and inflation is their next problem. In Washington they do not seem to care. Both the economic vulnerability and geopolitical risk are more acute than it appears. If interest rates rise, paying down and servicing the debt will become unmanageable. Interest on their debt alone tops $500 billion and that is at new zero rates. America is operating a reckless financial system whose main characteristics are rising deficits and a rising stock market. A consequence of America’s profligacy, is that the dollar must depreciate further which will exacerbate rising inflation. And again, America remains divided against this threat. What damages trust in the US, damages trust in the whole world.

Investor confidence is fleeting. History shows that there is a cycle of debt, and borrowing trillions of dollars only makes it harder to be repaid. The overvaluation and bubble-like market conditions have masked many problems but the swamp is draining; exposing some very ugly frogs. Credit Suisse alone suffered a $5.5 billion loss from the collapse of Archegos Capital which cost the big banks a total of $10 billion in losses. Greensill in the UK filed for bankruptcy in March, sparking a corporate and political scandal, shortly after the Wirecard implosion in Germany.

Today, the crackdown from Beijing has hurt many of the big private equity players as Chinese tech stocks dropped the most since 2008. While global capital has so far digested these shocks, risk keeps piling up. Awash in a sea of debt, growing public and investor disenchantment over government mismanagement of the economy, pandemic and ESG has created inequalities and an unjust society. Without confidence, there will be pressure for familiar old remedies. Our problems are being treated as everybody’s problem and therefore nobody’s. All in all, gold is a good thing to have…

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August 6, 2021

Panic Day

August 6 (KWN) – Eric King:  “Michael, obviously we are having a panic day here in the gold and silver markets with the price of gold down at one point tumbling $50 and silver trading down $1, but you always step back and look at the big picture.”

The Clock Is Ticking For The Bears

Michael Oliver, Founder of MSA Research:  

“We are focused on our technical conclusion, that is the March low at $1,673, which took them 10 months to get gold to shed 20% (after doubling), and then we shot back over $1,900, lately we’ve been hovering around $1,800, and today we get a sharp break. We are not near the March low of $1,673. Instead we are in the $1760s.

On a short-term basis, this decline that we’ve finally had this week — because if you look at the past 4 or 5 weeks they’ve hovered like a quiet little clump of ink mostly above $1,800 gold, so they’ve been selling it for 4 or 5 weeks now and they couldn’t get any downside — finally they got some downside. It looks like they’ve spent too much time (trying to break the gold market). In other words, when we measure weekly momentum, we measure weekly bars, and frankly this is week 4 down on momentum, not price. So the clock is ticking for the bears. I would say they’ve got next week and that’s it. So if they don’t get any real damage by then, they’ve already shot their wad.

Golden Stick Of Dynamite

We believe the March $1,673 low was the corrective low. And we think everything that’s occurred since then is in-between noise. Meaning, in between the low and setting up to challenge the high again. But momentum has a stick of dynamite above this level that could really get things going on the upside. And the level we want to see…

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Anna Golubova – Tuesday August 03, 2021

The last month of the summer is looking “terrific” for gold and “tough” for the S&P 500, said CNBC’s Jim Cramer.

“The charts, as interpreted by the legendary Larry Williams, suggest that August could be a tough month for the S&P 500, but a terrific month for gold,” Cramer said Monday. “Given the big picture backdrop right now, that wouldn’t surprise me one bit.”

And it is the seasonality which makes all the difference, the ‘Mad Money’ host explained.

“Williams is long gold for precisely the same reason he’s worried about the S&P: The seasonal pattern,” Cramer said.

One thing Cramer pointed to is the build-up of the debt ceiling worries that come after the two-year suspension of the debt ceiling expired at the end of July. “Remember, during the original debt ceiling debacle a decade ago, the stock market broke down and … gold did great,” Cramer noted.

The technical setup is also working in gold’s favor, especially when looking at the Commodity Futures Trading Commission (CFTC) data that show commercial hedgers stepping up their gold buying. Cramer added that this increased activity usually leads to “a nice rally.”

On top of that, gold is currently undervalued in comparison to Treasury bonds. “Not only does the precious metal have a powerful seasonal trend on its side … but it’s extremely undervalued versus the bonds,” Cramer said, citing Williams’ analysis.

For the S&P 500, the situation looks very different from both the seasonality and the technical perspectives.

“Just since the beginning of the summer, [Williams] can point to three moments when the S&P rallied to higher highs, but the Advance/Decline line failed to make a higher reading, meaning the market went up on not-so-hot breadth,” Cramer said. “For Williams, that suggests lots of big money managers must be selling many of their positions. He says he’s seen this pattern before, and it’s not healthy. Normally when stocks rally, the Advance/Decline line should be making new highs. But that’s not happening, and it means this move could have feet of clay.”

Also, the on-balance volume, which is the momentum indicator, is flashing bearish signals, Cramer said as he once again pointed to Williams’ research.

“The S&P makes new highs, but the On Balance Volume stays flat. That’s another negative. Remember, for technicians, volume is like a lie detector. When it’s weak, that means a move is deceptive. One more reason Williams is worried about the rest of this seasonally challenging month,” Cramer said.

Cramer’s comments come as the gold market is suffering from a lack of conviction while traders wait for the key macro data of the week — the July nonfarm payrolls, scheduled to be released on Friday in the U.S. 

On Tuesday, gold was trading above $1,800 an ounce but was unable to break out significantly higher. They were last at $1,813.80, down 0.46% on the day.

By Anna Golubova

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July 30, 2021

July 30 (KWN) – Alasdair Macleod:  Following the demise of gold’s active August contract, gold and silver had a better week. In European morning trade, gold was at $1829, up $28 from last Friday, while silver rallied to $25.60, up 45 cents.

As always at the month-end, the bullion banks had an interest in seeing prices lower, so that call options expired worthless and in the hope that short-term speculators would trade these factors, giving added downward impetus to prices.

Following a pause on Wednesday, the change came yesterday when gold rose over $20 and silver by 56 cents. Until then, positive sentiment had deteriorated, probably the lowest seen for some time, lower even than at the end of June when gold tested the $1750 level. And in silver, the unwinding of small investor interest in SLV, which momentarily drove silver to touch $30 on 1 February, has brought back some liquidity into the market — enough to encourage bullion banks to shake some more silver out of loose hands.

This left the gold/silver ratio to 71.5 this morning, which is our next chart.

Gold/Silver Ratio Preparing To Break Below 60

Having nearly halved from the 20 March 2020 peak, the upper sixties proved to be resistance to further falls. While there is no knowing when that resistance might be overcome, we can conclude that when it is the bullish move for silver relative to gold is likely to be significant. And the lesson from yesterday’s trading, when silver was up 3% at one point tells us that futures traders are short enough to be badly squeezed.

But with some physical liquidity being recovered in London, the direction will probably come from gold, and it has been noticeable in the market how gold held up relative to silver, perhaps confirming relative liquidities. That said, excess silver liquidity tends to dry up in a flash.

On fundamentals, this week saw the release of the Fed’s FOMC July minutes, another factor that nailed the timing of precious metal price recoveries to late this week. Ahead of it, buyers held off, amid rumours that the Fed might say something about tapering, given the sudden rise in official price inflation figures. Instead, the FOMC remained firmly in denial of these factors, maintaining the funds rate at 0-0.25%. It was an exercise in justifying no change.

For bond markets it was all one big yawn. But the dollar’s trade-weighted index slipped noticeably, helping to underwrite gold and silver, along with some key commodities such as copper. The dollar’s TWI is next.

US Dollar May See Major Breakdown Below 90

Having briefly touched 93 and failed to properly test the high established in late March, the TWI appears to have some downside in it. It will need close watching, because a combination of further rises in commodity prices and a weakening TWI would be a threat to the Fed’s interest rate policies. Equities, and even bond markets would then begin to take note.

But other than these factors, the outlook for gold and silver next week looks positive based on technical factors. The sellers have sold, and bullion banks are wary of increasing their shorts…

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