Anna Golubova


(Kitco News) The U.S. dollar lost to the euro as the number one currency used for global payments for the first time in nearly eight years, according to the Society for Worldwide Interbank Financial Telecommunications (SWIFT).

The last time the euro was in the number one spot was February 2013, Bloomberg reported, citing monthly SWIFT data, which incorporates international payment messages for more than 11,000 financial institutions in 200 countries.

According to the data, the euro was in the number one spot, followed by the U.S. dollar, then the British pound, and then the Japanese yen. In the fourth spot was the Canadian dollar, which bumped China’s yuan down into the fifth place.

A more detailed look at the numbers reveals that 37.8% of the Swift cash transfers were completed in euros in October, rising 6% from about a year ago and marking the highest level since February 2013. On the other hand, the use of the greenback fell to 37.64% in October, down 4.6 percentage points.

However, despite losing the top spot as the most used currency, the Bank of International Settlements (BIS) said that the U.S. dollar is still a dominant force in international finance.

Around half of all international loans and global debt securities are denominated in the U.S. dollar, the BIS pointed out in its June report.

It also added that “around 85% of all foreign exchange transactions occur against the U.S. dollar. It is the world’s primary reserve currency, accounting for 61% of official foreign exchange reserves. Around half of the international trade is invoiced in U.S. dollars, and around 40% of international payments are made in U.S. dollars.”

Author: Anna Golubova

Source: Kitco: Euro beats U.S. dollar as most used currency globally – SWIFT

(Kitco News) U.S. dollar remains the main driver for gold this week as markets are cautious ahead of the U.S. election on Tuesday, according to TD Securities. “It’s election week, and market jitters are a key feature of this week’s trading environment. Amid narrow trading activity, global markets are largely trading relative to each other, leaving the rise in the broad dollar as the primary catalyst for today’s weakness in precious metals,” TD Securities strategists write. The biggest risk to gold this fall seems to be a contested election, they add. “We have identified risk mitigants in the medium-term, which suggest that the balance of risks is tilted to the upside in both a Blue Wave and with a divided government, leaving the contested outcome a primary risk for gold bugs,” the strategists say.

Author: Anna Golubova

Source: Kitco: Contested election is a ‘primary risk for gold bugs’: TD Securities

(Kitco News) Gold prices edged up after the U.S. consumer confidence index came in short of market expectations in October.

American consumer confidence index declined to 100.9 in October, from September’s downwardly revised reading of 101.30, the U.S. Conference Board reported Tuesday. Economists were expecting to see the index at a reading of 102.0.

Gold prices ticked up towards daily highs after the data release with the December Comex gold futures last trading at $1,909.80 an ounce, up 0.22% on the day.

Traders closely watch the consumer optimism survey as it is a potential leading indicator for economic growth. The more optimistic consumers feel, the more likely they are going to spend money and vice versa.

The Present Situation Index, which describes consumers’ views on current business and labor market conditions, increased to 104.6 from 98.9. At the same time, the Expectations Index, which represents consumers’ short-term outlook on income, business, and labor market, fell to 98.4 from 102.9.

Weaker-than-expected October data follows a significant uptick in September, said Lynn Franco, senior director of Economic Indicators at The Conference Board.

“Consumers’ assessment of current conditions improved while expectations declined, driven primarily by a softening in the short-term outlook for jobs. There is little to suggest that consumers foresee the economy gaining momentum in the final months of 2020, especially with COVID-19 cases on the rise and unemployment still high,” Franco noted.

Looking at the labor market, the report noted that the outlook on jobs was mixed. The proportion expecting more jobs in the months ahead increased slightly from 32.9% to 33.2%, while those anticipating fewer jobs also increased from 16.1% to 20.2%.

Even though the October numbers don’t reveal any negative impact from no additional fiscal stimulus just yet, consumer confidence could still suffer in the months ahead, said CIBC World Markets economist Katherine Judge.

“While the rise in new virus cases as well as fiscal support uncertainty hasn’t proven to completely derail consumer confidence at this point, without a fiscal package, a challenging fall and winter could see the metric push lower in the months to come,” Judge said.

Author: Anna Golubova

Source: Kitco: Weaker-than-expected U.S. consumer confidence pushes gold price higher

(Kitco News) The U.S. fiscal stimulus package will trigger a price rally in gold, according to Australia and New Zealand Banking Group (ANZ), which sees the precious metal surging to $2,200 by the end of the year and advancing to $2,300 by early 2021.

“Approval of a U.S. relief package will be the trigger for price upside,” ANZ’s commodity strategists Daniel Hynes and Soni Kumari wrote in the latest commodity report.

ANZ’s forecast for the precious metal sees gold rising to $2,200 by the end of the year and then climbing further to $2,300 by early next year.

“The outlook for gold is positive amid mounting economic concerns due to C-19 surges. Accommodative central bank policies and liquidity injections are broadly supporting the market,” Hynes and Kumari said.

Physical demand is also projected to recover ahead of the festival season, the strategists added.

“We see the gold price reaching USD2,300/oz early next year,” they wrote.

In the short-term, uncertainty over the stimulus package and stronger U.S. dollar have been weighing on gold, the strategists said, while noting that this pressure is likely to be only temporary.

“Recent strength in the U.S. dollar triggered profit booking in gold. That said, we see the backdrop as supportive, and the recent price setback is likely to be short-lived,” Hynes and Kumari said.

Gold’s outlook will remain a positive one heading into the election in light of the political uncertainty, increase in coronavirus cases, and low-interest-rate environment, the strategists added.

“We see gold remaining well supported leading into the U.S. election amid the high level of political uncertainty. This has already seen ETFs inflows increasing strongly. Gold-backed ETFs have experienced six straight days of net inflows, and are now up 34% this year alone,” they said.

However, the $2,300 an ounce level expected to be reached in Q1 of next year will likely mark a peak in the gold rally for the next year, according to the bank.

ANZ said that in Q2 2021, gold is likely to begin its decline — first, to $2,100 in June 2021, then down to $2,000 in September 2021, and then to $1,900 in December 2021. At the beginning of 2022, the bank is pricing gold at just $1,675 an ounce.

For silver, the bank projects a $30 an ounce price tag by early next year. However, similarly to gold, silver is estimated to begin its decline in Q2 2021 and end next year at $23.80.

Author: Anna Golubova

Source: Kitco: U.S. stimulus to trigger rally: Gold price to surge to $2,200 by year-end – ANZ

Risk of gold selloff in the near-term if prices fall below $1,900: TD Securities

(Kitco News) There is a risk of another selloff in gold if prices drop below the $1,900 an ounce level, says TD Securities. “A low hurdle for CTA liquidations could catalyze further liquidations in the near-term in gold, as trend-followers could halve their length should prices break below the $1,900/oz range,” write strategists at TD Securities. Also, a lot of investors are sitting on the sidelines and waiting for the election to play-out. “There is also some evidence that money managers are waiting on the sidelines for the event risk to pass, which could suggest positive flows to risk assets and re-leveraging as a result of the reduced uncertainty following election day,” note the strategists. However, the long-term outlook remains a positive one for gold. “Gold traders are discounting macro implications of the forthcoming election. Would a Blue Wave catalyze a reflation-induced rise in real rates, or would large scale fiscal stimulus combined with an uber-supportive Fed policy drive real rates substantially lower thereafter? Our money is on the latter,” the strategists add.

Author: Anna Golubova

Source: Kitco: Risk of gold selloff in the near-term if prices fall below $1,900: TD Securities

(Kitco News) There is pressure building on the International Monetary Fund (IMF) to sell some of its gold to provide debt relief for poorer nations.

Growing debt concerns have been gaining attention as countries struggle to support their economies amid the coronavirus pandemic. The topic was one of the top items discussed during this week’s IMF annual meetings.

The Jubilee Debt Campaign (JDC) is using this as an opportunity to urge the IMF to start selling some of its gold to provide debt relief for the world’s struggling nations. According to the JDC’s press release published on Monday, gold sales could provide much-needed help to underdeveloped countries struggling with the COVID-19 pandemic.

It all comes out to the numbers, according to the JDC. Gold spot prices rose from $1,500 an ounce to $1,900 an ounce this year already, which means that the IMF’s total gold reserves of 90.5 million ounces are now worth around $175 billion. This is around a $38 billion increase in value.

The JDC notes that if the IMF sold less than 7% of its total gold reserves, it would result in a $12 billion profit, which would be enough to cancel debts of more than 70 poorest nations for the next 15 months. And even after such a sale, the IMF’s gold receivers would still be worth more than $26 billion since the start of the year.

“The profit from selling less than 7% of the IMF’s gold would be sufficient to cancel all debt payments by the poorest countries in the world to the IMF and World Bank for the next 15 months. This would be less than the gain in value of the IMF’s gold since the Covid crisis began,” the press release said.

The Jubilee Debt Campaign is a U.K.-based charity organization with the goal of ending poverty caused by unjust debt.

The poorer nations don’t have the monetary tools available to more developed countries to help them deal with the fallout from COVID-19, argues Jubilee Debt Campaign director Sarah-Jayne Clifton.

“The IMF has the tools and resources to help plug this gap. It has the ability now to unlock a comprehensive debt payment cancellation scheme … This would have a huge impact, helping poorer countries tackle the current economic and health crisis and supporting their faster economic recovery in years to come,” Clifton said in the press release.

However, despite the call, it is looking very unlikely that the IMF would be willing to sell any of its gold reserves, especially during such uncertain times.

“The IMF has no plans to sell gold at this time,” The Guardian quoted IMF spokesman Gerry Rice as saying. “Gold reserves provide fundamental strength to the IMF’s balance sheet, enabling the Fund to lend safely and at low cost to its member countries. This is particularly important at present, when the IMF is undertaking exceptionally large support for its membership, including its poorest member countries, in the context of the Covid-19 pandemic.”

Rice added that the IMF has already approved emergency financing of over $10 billion to 47 low-income countries since March.

The World Gold Council (WGC) also said that gold will continue to play a key role in the IMF’s portfolio.

“The IMF views gold as an important component of its balance sheet, and it has expressed that it currently has no plans to sell gold,” WGC head of Central Banks Relationships Shaokai Fan told Kitco News in an email on Wednesday.

Moreover, the WGC sees gold playing a vital role for central banks around the world during this crisis despite the slowing demand this year.

“We believe that central banks will continue to be net buyers of gold this year, although the quantity of purchases may not be as large as in previous years,” said Fan.

The official sector’s gold purchases reached record levels in 2018 and 2019, seeing a total of 656 and 667 tons bought, respectively. So far, in 2020, central banks have bought just over 200 tonnes of gold.

Author: Anna Golubova

Source: Kitco: IMF not planning to sell its gold for debt relief: ‘Gold reserves provide fundamental strength’

(Kitco News) Investment appetite for gold is not waning, but low physical demand out of China and India requires a lot of offsets, according to TD Securities. “While the pace of gold accumulation remains elevated by historical standards, the hypothetical drag created from low physical demand in India and China demands substantial investment buying in order to offset that drag,” TD Securities commodify strategists say. It is expected that investment demand will pick up after the election, the strategists note. “Investment appetite for gold will continue to rise, particularly in the period that follows the U.S. election. In fact, we reiterate that the long gold trade is likely agnostic to the election outcome — and gold bugs need not look too far on the horizon to expect a large-scale fiscal deal that could de-bottleneck the ongoing real rate suppression.” Both of the presidential candidates provide tailwinds for long gold trade. “Both the Trump and Biden agendas estimated to cost between $5.0T and $5.6T over the next decade … That being said, we expect that a Blue Wave would lead to global reflation, which would be the most positive outcome for gold bugs.”

Author: Anna Golubova

Source: Kitco: Gold to see more investment demand after the election: TD Securities

(Kitco News) The current volatility in the marketplace is delaying gold’s rise back to $2,000 an ounce, says RBC Wealth Management managing director George Gero. “Gold range bound recently over $1,900 area means continued volatility for now; $2,000 price delayed,” Gero writes on Tuesday. However, despite a pause in the price action, Gero expects to see a “strong year-end” for gold. “Earnings season in full swing, dollar firm. However, expect gold to see bids as ETF buyers continued in gold … Vaccine trials paused,” Gero says. “Usual worries remain: U.S.-China tensions, economic recovery, stimulus talks, the pandemic, North Korea, Middle East, Turkey, Venezuela, Argentina are more than enough to keep gold buyers active. Open interest gold futures yesterday’s holiday kept most metals hardly changed. Gold futures open interest 558,222.”

Author: Anna Golubova

Source: Kitco: $2,000 gold price delayed as volatility weighs: RBC Wealth Management

(Kitco News) There is one driver that could really re-ignite the gold price rally during this turbulent fourth quarter, according to Bloomberg Intelligence (BI).

All macro and political risks aside, a peak in the dollar is the one factor that can push gold significantly higher, BI senior commodity strategist Mike McGlone said in his Q4 update.

“Gold is likely to remain atop our macro-performance scoreboard in 4Q,” McGlone said. “The greenback entering a bear market would propel gold, if history is a guide.”

The yellow metal is currently in a bull market with strong established above $1,800 an ounce after a sharp rise to a new record high of $2,075 an ounce this summer.

“As a bull market resumes, the metal has pulled back from getting overextended above $2,000 an ounce and should build a base around $1,800, with increasing debt-to-GDP and quantitative easing the catalysts,” McGlone wrote.

Another sign of the current bull market is that gold hasn’t wrapped up a quarter since Q1 2019, less than 8% above its 50-week moving average, McGlone pointed out.

Bloomberg Intelligence sees gold eventually climbing back up to its new record highs, especially in light of the increasing debt-to-GDP ratio and massive global quantitative easing.

“History dictates that the gold-price rally should accelerate toward $2,000 if the dollar is peaking,” McGlone said.

The debt-to-GDP ratio is an important one to pay attention to when it comes to projecting gold price rallies, according to the Q4 update.

“A prime reason the store-of-value metal should continue rising — U.S. relative indebtedness has leaped to about 140% vs. an average just above 100% since 2012. The fact that debt-to-GDP rose despite one of the longest economic expansions in history to 2020 suggests there’s little to reverse the trend. We see gold staying the upward trajectory and potentially getting overextended like it did to the 2011 peak. An underperforming stock market would be a top support for the metal,” McGlone explained.

Plus, once the U.S. dollar enters its bear market, gold could really take off. “The U.S. stock market reaching its record ratio vs. GDP in 3Q signals stiffer equity and dollar headwinds, meaning the performance baton may pass to the metals and agriculture,” McGlone noted.

On top of that, gold has developed divergent strength in the face of a rising U.S. dollar this year, which points to a solid price footing and even a more significant price acceleration once the dollar drops.

“Our graphic depicts the divergent strength in gold despite a rising dollar. Since the Federal Reserve rate hike in December 2015, gold has gained about 80% vs. 5% in the dollar,” McGlone stated. “In more of a nascent resumption-rally mode at the onset of 2020, the benchmark store-of-value metal appears poised to accelerate its edge vs. most assets if the dollar peaks. In 2008, when gold reached the $1,000 handle the first time, the trade-weighted broad dollar had dropped to a 13-year low. Record highs in March elevate greenback mean-reversion risks, favoring dollar-denominated gold.”

When it comes to silver, McGlone projects a re-take of $30 an ounce and rules out a return to this year’s lows of $12 an ounce.

“Silver’s 2020 trading range of about $12-$30 an ounce could mark the low forever, while the high should eventually be breached,” he wrote. “It’s a matter of time, if history is a guide, before silver revisits $30 resistance, as we see the metal in a similar breakout pattern as 2003-04.”

Author: Anna Golubova

Source: Kitco: This driver could ‘propel’ gold price back to its new all-time highs – Bloomberg Intelligence

(Kitco News) If this year could not get more bizarre, you can now buy some gold with your gas and groceries at Costco.

With gold making mainstream-media headlines this summer as a secure investment during the turbulent times of the COVID-19 pandemic, it may not be that surprising to some that Costco in the U.K. is trying to enter the market.

Indeed, gold has had a tremendous year, attracting all kinds of new investors as prices rallied to new record highs of USD$2,075 an ounce and silver surged to nearly USD$30 an ounce in August.

Yet, prices have also been quite volatile as gold temporarily dropped below $1,900 an ounce in September.

At the time of writing, December Comex gold futures were trading at $1,919.20, up 0.61% on the day, while spot prices in GBP were trading at £1,473.72, up 0.44% on the day.

Costco — the wholesale grocer that also sells cheap gas, tech-gadgets, and jewelry — is now offering gold and silver bars, U.K. media reported. Gold bars can be purchased for up to £24,500 a time.

However, the premium on those bars is a pretty high one, said experts in the field.

According to Costco’s prices, reported on September 24, gold bars were sold at a 7% premium and silver at a 28% premium.

For example, the 100-gram gold bar at Costco was priced at £4,939.99 on September 24, which was about at a 7% premium when compared to the market price of that much gold at the time.

On that same day, a 50-gram gold bar was going for £2,442.99 at Costco, which was about a 6% premium and a 500-gram bar went for £24,549.99, which was at a 6.5% premium, the Daily Mail reported.

At the same time, a 1-kilogram silver bar was priced at £711.99, which had a mark-up of 28.3% at the time, according to reports.

When it comes to getting gold and silver bars from Costco, serious investors need to make sure they check prices at their local bullion dealers first, said Kitco Metals global trading director Peter Hug, noting that they are very likely to find a better deal there.

“The [Costco] mark-ups are going to reflect the fact that they are going through another dealer that marks it up. You will likely be paying a lot more than going directly to a dealer,” Hug said on Monday.
Hug noted that dealers currently have a premium of about 3% on gold and 20% on silver.

A precious metals investors who have not done their due diligence by checking prices with the local dealer could be missing the point, Hug noted. “Anybody doing that size of transactions without comparing pricing, probably shouldn’t be in the gold market and anybody who checked the pricing can find a better deal from any dealer worth their salt,” he said.

Investors need to remember that the price of gold and silver will need to go up considerably in order to breakeven with Costco’s price tags.

Also, the choice of weight units is somewhat problematic for the North American audience, Hug noted, saying that gold’s 50-gram and silver’s 1-kilogram bars are not popular unit weights in the North American market. “There is no demand for gram weights in North America. There is small demand for the 100-gram gold bars,” he said.

However, the fact that Costco chose to get into the bullion market in the first place shows just how much gold’s role as an investment has changed this year.

“Over the past six months, gold has certainly been at the front and center of the financial news cycle. Prior to his, gold has been a topic generally not spoken about by the mainstream media. This has changed, given the anxiety globally. Plus, Britain is still facing Brexit on top of everything else. People are generally nervous and scared,” Hug pointed out.

Time will tell whether Costco shoppers’ psychology to buy in bulk to save will translate into gold and silver purchases. “You are going with the mindset to buy groceries and gas, and while you are there, you have an inclination to buy gold? It feels strange to me that they will get investor demand,” Hug said.

Also, there is a question of expertise, Hug said. “If you want metals, go to a dealer.”

Right now, physical gold demand is waiting for a new catalyst, Hug added. “If you look at retail physical demand in March, April, May, June, July, and August, it was extremely high in the context that you had the gold market moving from $1,500 to almost $2,100 and silver from $15 to $29. Now that the market has come back down and gold is back under $2,000, and silver is below $25, the market has slowed,” Hug said. “Right now, retail is watching. There is no timely emergency to get in today.”

However, nothing has changed for gold and silver in the long-term, Hug explained.

“Global central banks, including the Fed, are going to keep rates at zero for at least two years. The stimulus package will also come from existing or new administration. The whole caveat of that liquidity is very constructive for the metals over the medium to longer term. And if we get gold above $2,000 and silver over $26, retail will re-engage,” he said.

Author: Anna Golubova

Source: Kitco: Some gold with your gas and groceries? Costco enters the gold bullion market

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