Gold Hits Six-Year High as Markets Spook Investors
The growing debt and trade war concerns continue to push gold prices higher as more and more analysts warn of global slowdown and recession.
Gold pulled back Friday as many of us expected it would, however, gold is up around 1% for the week and has rallied 5.9% so far in August as an intensifying U.S.-China trade war, and growing worries over the global economy saw investors pile into haven assets. The related rally in Treasury’s, sending down yields, further reinforced gains for gold, analysts said, by diminishing the opportunity cost of retaining the metal.
"Meanwhile, it is not just retail and institutional investors boosting gold," said Christopher Looney, an analyst at RBC Capital Markets. 'Central banks have been adding to their reserves for some time, and the official sector at large has favored the metal, among other things, amid de-dollarization efforts,' he said, in a note...." ("Gold pulls back from a more-than-6-year high," MarketWatch, 8/16/19; emphasis added.) Analysts Forecast $2,000 Gold – MarketWatch.
MarketWatch announced that several analysts see fundamentals driving told prices to $2,000.
Gold has benefited from several supportive factors over the past few months, and some bulls now see the precious metal doing a climb to a record high of $2,000 an ounce. It will need more fuel to make that move, however, and the timeline for that rally remains uncertain.” ‘There has been a strong undercurrent of demand for gold,' said Brien Lundin, editor of Gold Newsletter. 'Even as short-term factors like the China trade dispute may come and go, longer-term investors are confident that the issues of monetary debasement and other geopolitical factors will continue to impact the market.
"Stan Bharti, chief executive officer of private merchant bank Forbes & Manhattan, do not believe that gold is moving up because of short-term market fears. It is a move that's been a long time coming in the 'last 8-10 years we have seen a bull market in stocks and lived in a low-interest-rate environment. That is dangerous for inflation.'
Given that backdrop, he expects gold prices to top $2,000 by the end of next year. That would be a record for Comex futures. More near term, Bharti sees gold jumping from $1,480 to $1,600 in the next quarter." ("Why gold's 'strong undercurrent' has some analysts eyeing $2,000 an ounce," MarketWatch, 8/15/19; emphasis added.)
Stockbroker T.D. Ameritrade believes that gold prices will rise much higher, possibly reaching $2,000.
As Treasury yields continue to skydive, gold price levels could go through the roof as the scrambler for haven assets remains amid the latest market volatility as trade wars between the U.S. and China rage on providing more gains for gold-focused exchange-traded funds (ETFs) as analysts are predicting that the precious metal could shoot past the $2,000 per ounce price mark.
"We have a long position trade on gold. We are targeting $1,585,' said Daniel Ghali, commodities strategist at T.D. Ameritrade. 'We do think gold is on its way higher for the time being. Over the coming years as the likelihood of the unconventional policy becomes more of a reality, We could see a case for gold at $2,000.
"'Negative yields are symptomatic for the search for safe assets. The reason they are trading at negative yields is that the demand for safe assets is bigger than the supply for them,' said Ghali. 'Gold stands to benefit quite a bit from that... the trade we have been recommending we have it as a three-month time horizon I would argue we are likely on the cusp of a multi-year bull market for gold....'" ("$2,000 Price Level a Possibility for Gold," ETF Trends, 8/15/19; emphasis added.)
A UBS report forecasts gold prices to rise more than 10% to approach $1700 in 2020. Gold prices could rally more than 10% in the next 18 months, a new report says. The bullion bounce surge, which has taken off this month, will continue to be propelled by mounting investor worries, according to Swiss bank UBS. 'Gold is set to gain as recession, trade and geopolitical risks rise, and yields fall,' the report states.
An ounce of the metal, which recently fetched $1,520 could rally more than 10% to $1,680 in 2020, and the usually-conservative bank says It is becoming challenging for market participants to anticipate and plan for the future. In this environment of rising uncertainty and falling opportunity costs of holding gold, the yellow metal stands out as a clean way to take a strategic position both for institutional investors as well as the formal sector; meaning central banks.
"It also looks like the gold fever will last. We think wider exposure to gold is still not overly extended and looks particularly muted compared to investor allocations to other asset classes,' the report states...." ("UBS: Gold To Reach Almost $1,700 Next Year," Forbes, 8/15/19; emphasis added.) Deutsche Bank Raises Gold Targets to $1,700Deutsche Bank's new research report increased the bank's price targets for gold see macro scenarios where gold could grow as high as $1700.
Long-time market investors have always tended to chuckle at the "gold-bugs" as they tend to stay positive on the precious metals all the time. Not many are laughing now, as the spot price has broken out to six-year highs, and investors late to the party have been bidding up the top companies in the sector to 52-week highs. One thing is for sure: the gold trade is on, and it makes sense to add some shares now.
In a new Deutsche Bank research report, the firm's precious metals team raises its price target for gold. The report noted these three top reasons for increasing the goals: 'We have increased our gold and silver price forecasts for the next six quarters to reach a level of $1,575/ounce based on our updated view of the macro, including what we see as the primary drivers of gold: real interest rates, the equity risk premium, the U.S. dollar, and central bank purchases;” We have shown macro scenarios that could result in gold going above $1,700/ounce....'" ("Deutsche Bank Raises Gold Price Targets: 3 Top Stocks to Buy Now," 24/7 Wall St., 8/16/29; emphasis added.)
Very Limited Window to Buy Gold Before Prices Rise to New Record
Egon von Greyerz, Founder and Managing Partner of Matterhorn Asset Management, wrote that investors have limited time to acquire gold at current low prices before demand sends prices significantly higher.
Non-government physical gold investment is approximately 0.5% of global financial assets, which are $260 trillion. So, 0.5% is $1.3 trillion, which is 28,000 tonnes of gold. The total annual mine production of gold is 3,000 tonnes. So, if investment gold ownership doubled to 1%, it would require nine years of gold production at current prices.
So, only a minuscule reallocation of global assets into physical gold would put enormous upward pressure on the gold price. Thus, it would be impossible for institutions to make any meaningful investment into gold at current levels in which the future gold demand can only rise to much higher gold prices and smaller quantities.
Anyone intending to buy gold in significant quantities has a tiny window currently when that is still possible. Very few institutions will realize this until it is too late. Also, buyers of smaller amounts of gold will have problems to get hold of gold at reasonable prices or margins as the price of gold moves up rapidly. I emphasize physical metals because anyone who buys paper metals is unlikely ever to get delivery or be paid out.
There is no doubt that gold in dollars will soon make new highs past the $1,920 top in 2011. We must remember that gold has already made new highs in dozens of currencies, including Australian and Canadian dollars, British pounds, Swedish and Norwegian Kroner and many more. The last major resistance point of $1,350 was the last obstacle for gold. The old high at $1,920 will shatter away easily. The risk of the most significant recession the world has ever seen is here now, and it can start at any time. There is no time to think or procrastinate. Be bold and act now while you still have a chance to protect your assets and not be one who loses assets accumulated over decades in a flash. The very few who own gold or silver as protection against the coming catastrophe will sleep better.
Three significant factors will sustain a bullish gold market.
• The current stage of the economic cycle. Data that came from my team's asset-mapping framework is currently signaling a higher allocation into gold. We tend to favor a gold allocation of about 13%-14% for a balanced portfolio during late-cycle and recession periods, 'with strong signals on the U.S. yield curve inversion and post-inversion phases.
• Safe-haven assets are scarce. We believe the U.S. is nearing an economic slowdown or an outright recession, which would make portfolio protection a prudent move. Yields could get even more cynical, you might argue, but the rationale and potential crowdedness of this 'easy' trade should also be considered. That could help explain the performance of gold in recent months, adding that sentiment toward gold is turning around following 'years of doubt about how gold may have lost its glitter.'
• Central bank purchases. Central banks, which are seeking diversification away from the dollar, are building gold reserves that could 'sustain steady growth for a prolonged period. Recession Could Strike in as Little as Three Months. All of our models show a possibility of this breakdown within the next 90 days.
The collapse in global bond yields has been a theme since October of last year, with 10-year U.S. Treasury bonds dropping to 1.6% from their October 2018 high of 3.23%. Now that the two-year/10-year Treasury yield curve has inverted; the recession alarm bells are ringing. Why? Because every single recession in the past 45 years has seen a yield curve inversion preceding it. History suggests that on average, a recession begins 22 months after a yield curve inversion. It is not until about 18 months after an inversion that the stock market turns negative.
Bank of America's Merrill Lynch indicates that we have less time than many people realize. For the ten yield curve inversions since 1956, the S&P 500 peaked within approximately three months of the reversal six times. Following the other four, the S&P 500 took 11 to 22 months to the peak. Twenty-two months of growth vs. three months? That is quite a big gap.
Growth is slowing. Long gone are the promises of 4% GDP growth. Growth is looking to drop below 2% in place of a trade deal. The only thing that has been growing is deficits, which are on pace to hit $1 trillion this year already. All of these are signs that the risk of a global recession is a clear and present danger. Comprehensive economic data suggests a global slowdown may come a lot sooner than anyone anticipated. Moreover, this reveals an uncomfortable truth: We have never faced a depression with these levels of debt, giving the Fed very little ammunition available and with negative rates still in effect in many countries. There is no playbook for this. Historical data may be of little predictive use. A sudden end to the trade deal may be overbearing - without it, we do not have much time before the next recession begins. I, nor anyone can tell you when the bottom is going to fall out, when the next terrorist attack will be, or what the world around us will look like when the cards do come crumbling down. I can tell you this though; instead, it is tomorrow, a year from now, or 5 years from now, the system is going to fall, and when it does you are not going to care if you paid $ 1,000 0z. or $ 2,000 oz. All that's going to matter to you is that you protected your family while others that procrastinated are having to figure out unconventional ways of living to survive. Make the safe choice while you still have a chance. Call 855-423-4653 Now to secure your family's safety now!