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(Kitco News) Gold prices tumbled Monday morning, falling below $1,900 an ounce as stocks sold off across the board. And, according to Credit Suisse, there is a chance that gold’s plunge is not over until a low of $1,765 an ounce is hit.

The technical level to watch is if $1,897-37 an ounce holds. At the time of writing, December Comex gold futures were down a shocking 3.31% on the day and trading at $1,897.10 an ounce.

“Gold continues its expected consolidation following the move to our base case objective of $2,075/80. Whilst we continue to see the long-term trend higher, reinforced by falling U.S. Real Yields and a falling USD, our immediate bias remains for further consolidation above a cluster of supports at $1,897/37, which includes the 23.6% retracement of the rally from the 2018 low,” Credit Suisse said.

However, if short-term downtrend continues for longer than expected, prices could tumble to $1,765 and even $1,726 an ounce, the bank added.

“Should weakness extend, we would see scope for a deeper setback to $1765, potentially $1726,” the report noted.

Long-term, Credit Suisse is bullish on gold, seeing a potential upside of $2,300 an ounce.

“We look for an eventual move above $2075 with resistance seen next at $2175, then $2300. Whilst we would look for a fresh consolidation at this latter level, a direct break can see potential trend resistance at $2417, with scope seen for $2700/20 over the longer-term.”

Author: Anna Golubova

Source: Kitco: Gold price could touch $1,765 before reversing towards $2,300, says Credit Suisse

(Kitco News) Gold is consolidating ahead of the Federal Reserve Chair Jerome Powell’s keynote address at the virtual Jackson Hole Symposium on Thursday, says TD Securities. It is highly likely that Powell “pre-announce[s] the outcome of the Monetary Policy Framework Review, which suggests the formal adoption of average inflation targeting,” TD Securities strategists say. This major shift in monetary policy will be beneficial for gold, which is why current weakness is a good buying opportunity, the strategists add. “The average inflation targeting framework represents a massive shift in the macroeconomic template that should continue to support inflation-hedge assets. As financial repression continues to suppress real rates, we expect that capital will seek shelter in precious metals — which suggests further weakness in the complex represents a buying opportunity.”

Author: Anna Golubova

Source: Kitco: Current gold price weakness is a buying opportunity before Fed’s Powell speech on Thursday: TD Securities

(Kitco News) Gold’s upward price trajectory is likely to accelerate, according to Bloomberg Intelligence, which sees substantial gains in store for gold once the U.S. dollar and equities enter their bear markets.

“Gold’s upward price trajectory is more likely to accelerate, in our view, led by increasingly favorable macroeconomic fundamentals and moving beyond the extended period of disdain for the metal in 2013-18,” Bloomberg Intelligence senior commodity strategist Mike McGlone said in his August update. “When bear markets in the dollar and equities arise, gold will gain substantial tailwinds.”

After breaching the 2011-high of $1,920 an ounce and hitting new record highs this summer, the gold bull run has not gone too far.

“Gold is in the early days of resuming the bull market that started about 20 years ago, in our view,” McGlone wrote. “The financial crisis and inception of central-bank quantitative easing (QE) accelerated the metal’s upward trajectory then, and we see parallels that are likely more enduring this time.”

There is a good chance for gold to even reach $3,000 an ounce during this bull run, according to Bloomberg Intelligence charts.

“Our graphic depicts the potential upside in spot gold toward $3,000 an ounce vs. about $1,770 on June 26, if simply following the trajectory of the G4 central-bank balance sheet as a percent of GDP. Central banks essentially printing money to spur inflation is a solid foundation for the benchmark store of value,” McGlone said. “Gold bottomed at about $700 in 2008 and peaked near $1,900 in 2011. A similar-velocity 2.7x advance from this year’s low-close near $1,470 would approach $4,000 by 2023.”

A sign of a failing bull run would be a drop below $1,600 an ounce level on a sustained basis, noted McGlone.

At the time of writing, December Comex gold futures were trading at $1,935 an ounce, down 0.62% on the day.

The outlook for the second half of the year is gold versus everything else, according to McGlone.

“There little to suggest gold will lose its top spot on our metals-sector performance dashboard. What’s notable as 1H wraps up is that the benchmark precious metal is up almost 16% in 2020 despite an advance of about 5% in the trade-weighted broad dollar. This indicates divergent strength in gold. It’s gaining vs. virtually all assets, and most currencies are declining in value vs. the metal. This makes sense in an environment of unparalleled global central-bank quantitative easing,” he stated.

Author: Anna Golubova

Source: Kitco: Gold at $3,000? ‘Upward gold price trajectory to accelerate’ – Bloomberg Intelligence

(Kitco News) Gold found new support above $1,930 an ounce on Thursday as the U.S. dollar weakened after stimulus negotiations saw no progress.

The yellow metal is finding its footing above $1,900 an ounce after hitting a low of $1,874 on Wednesday. At the time of writing, December Comex gold futures were trading at $1,959.20, up 0.54% on the day.

“Prices remain volatile trading in a $40/oz range,” SP Angel analysts said on Thursday. “A drop in prices recorded over the last several days came amid technical selling and profit taking as well as investors reviewing respective economic growth expectations.”

Despite a major price correction of about $200 this week, overall fundamentals remain supportive for gold, including negative U.S. real rates as well as monetary and fiscal stimulus.

Weaker U.S. dollar index is helping gold climb the $1,900 ladder again. The DXY was last at 92.94 after rising to nearly 94 on Wednesday.

“The DXY fell following three consecutive daily advances, as Treasury Secretary Mnuchin cast doubts over a compromise between Senate Republicans and House Democrats to agree on the size of a fresh stimulus package,” the analysts at SP Angel said. “The dollar has risen from the two-year lows seen last week, with the dollar’s value languishing as a result of the U.S. struggling to control the coronavirus pandemic compared to other economies.”

The U.S. stimulus stalemate continues this week as President Donald Trump accused Democrats of not wanting to negotiate on Wednesday while Democrats and Republicans blamed each other for the five-day break in talks.

“Latest evidence suggests investors may turn a blind eye to the matter, and the balance of risks remains tilted to the downside for the dollar today as well,” ING FX strategist Francesco Pesole said in a note.

Going forward, gold will see strong support at $1,875 an ounce, SP Angel said while pointing to the second COVID-19 wave as being the biggest risk.

“We hope and estimate the Coronavirus pandemic will largely burn itself out in the six months as T-Cell resistance helps to build herd immunity,” the analysts wrote. “There is always potential for a second wave of an altered Coronavirus to cause further lockdowns which elevates risk which is why we see ongoing support for gold at around US$1,875/oz.”

Commerzbank is continuing to warn investors against convincing themselves that the price pullback is over.

“The sell-off on Tuesday was too pronounced for this to happen. Following their historic slump in April 2013, prices also embarked initially on a countermovement that took them close to their pre-crash levels before they plunged once again and posted new lows at the end of June,” Commerzbank analyst Carsten Fritsch said.

However, the downturn is projected to be not as long as back in 2013, Fritsch added, touting a very supporting environment for gold.

“As can be seen from the stock markets, prices these days tend to recover from slumps much more quickly than in the past thanks to the massive injections of liquidity by central banks. Gold and silver should also have recouped their losses in the not-too-distant future and begin posting new highs,” he noted.

Author: Anna Golubova

Source: Kitco: Gold price finds new support as U.S. dollar sinks, stimulus talks fail to move forward

(Kitco News) After a major pullback in gold and silver prices, buyers are coming in to buy the dip, which is a sign that the precious metals’ run-up might not be done yet, according to TD Securities. “Certainly, the pullback in gold and silver was swift and deep in nature. However, signs of capitulation following the retail-driven speculative fervor are scarce,” TD Securities strategists write. “Data used as a proxy for retail flows suggests that few accounts liquidated their GLD ownership while even fewer liquidated SLV. Considering the early-day bounce in gold & silver prices this morning, despite still-rising real rates, this suggests that the market has seen some dip buyers after the aggressive pullback during the overnight trading session, but also that there are no signs of capitulation just yet.” There is no evidence showing a wave of people exiting their gold and silver positions yet, which is significant. “We look to our China SmartMoney group of funds for insights on the overnight session, given that these funds have held a significant position in gold & silver over the past few months. The data suggest gold positioning has remained fairly unchanged over the past month, implying little impetus for a fearful exit overnight in the Asia trading session. Conversely, positioning in silver had aggressively grown over the past month, which means silver likely felt some heat on the latter. Close, but no cigar for the bears just yet.”

Author: Anna Golubova

Source: Kitco: ‘There are no signs of capitulation’ in gold price, silver price just yet: TD Securities

(Kitco News) Silver continues to outperform and remains the top pick for TD Securities due to its positioning levels. “Silver continues to outperform and remains our precious metal favorite as a clean positioning slate, strong investment flows and robust industrial demand combine for strong performance at a time when the microstructure creates a disincentive for silver bullion traders to sell,” TD Securities strategists write. On the other hand, positioning in gold is “increasingly bloated” and investors should be ready for modest consolidation. “The bulls are vulnerable to a modest consolidation in the macro drivers that have supported gold length over the past few months. As positioning has grown to increasingly bloated levels, leaving little dry-powder remaining for the bulls, the frenzied retail speculation has further increased the risks of a positioning squeeze for gold bugs,” the strategists add.

Author: Anna Golubova

Source: Kitco: Silver is ‘our precious metal favorite’ as gold’s positioning is bloated: TD Securities

(Kitco News) Gold is more popular than ever this year as investors flock to its safe-haven qualities, taking the precious metal to unprecedented new levels this summer, said RBC Capital Markets in its latest report.

“Gold has settled at its highest levels ever, and the message is clear: gold positioning indicates that investors’ attitudes toward the metal have changed amid the public health crisis, economic turbulence, and extremely easy monetary policy actions,” RBC’s commodity strategists wrote.

The latest move above $2,000 an ounce was supported by weaker U.S. dollar and somewhat disappointing economic numbers out of the U.S., the report stated.

Citing this summer’s developments, RBC Capital Markets updated its gold price forecasts, presenting three scenarios — low, base, and high.

“With gold prices rocketing to all-time highs, gold’s outright price gains have made it a star asset in 2020,” the strategists wrote. “On the back of this, we have moved our previous middle/base case to our low scenario, moved our previous high scenario to the middle/base, and launched a new high scenario where gold crosses the $3,000/oz level assuming the current situation deteriorates materially.”

For gold to cross into the $3,000 territory, the market could have to see deteriorating economic conditions, the report noted.

“Factors that would trigger another wave of large gains could coincide with further unprecedented monetary stimulus, possible asset bubbles, and perhaps difficult to control inflation. This is where we would put ‘expect the unexpected’ and tail risks coming true,” the strategists said. “Steps to get there and early warning signs to watch out for would include ever more aggressive fiscal and monetary policy moves, another and more exaggerated spike in infection rates, and an unexpected geopolitical event sparking a new widespread economic concern.”

The report classified this high scenario as having a 40% probability.

The base scenario, however, projects for gold to make some gains above $2,000 an ounce before retreating back with resistance at new highs proving to be too much for the yellow metal. This more downbeat option for gold has a 50% probability, according to the report.

“[In this scenario,] the themes that have pushed gold to current levels largely persist, but gains beyond that may prove hard-fought absent a deeper than expected economic deterioration from current levels. These gains may seem quaint, but we think a fresh catalyst is needed for yet another record,” the strategists noted.

RBC’s low scenario is tied to a quick resolution to the pandemic, which is very unlikely at this point. The report pointed out that there is only a 10% probability of this to happen while keeping this scenario on the back burner.

“Traction around bullish COVID-19 vaccine news and real progress in defeating the pandemic can and likely would cap gold and drive pullbacks, though it will require real improvements to really take the uncertainty that has pushed interest in gold to record levels off the table,” the strategists said.

In the meantime, RBC pointed out that it expects gold to continue making gains as there is little to stop the yellow metal from rallying.

“Love it or hate it, gold seems like a freight train as investors have gone [perceived safe] haven hunting. Gold prices have been on a winning streak not seen in years, if ever, having set discrete nominal records in essentially all of the currencies that are relevant to gold (RMB, INR, AUD, CAD, EUR) and now even USD,” the strategists said. “In an environment driven by economic uncertainty, low and negative rates, etc., gold is shining for a reason and should continue to do so for the foreseeable future, in our view.”

Author: Anna Golubova

Source: Kitco: ‘A star asset’: Here’s how $3,000 gold price could be on the table – RBC

(Kitco News) This summer’s massive gold price rally could be a sign that the market is losing confidence in the U.S. dollar as the world’s reserve currency, according to Horizons ETFs portfolio manager Nick Piquard.

“The rally is telling investors that the financial system with the U.S. dollar as the reserve currency, [might need] some changes,” Piquard told Kitco News last week.

Global debt and unlimited money printing are deteriorating the confidence in the U.S. dollar as the global reserve currency.

“The U.S. dollar system has worked so far. But we’re getting to the point where there’s so much debt in the world and with this new crisis, there’s even more debt,” Piquard explained. “People are figuring out that maybe they will have to make some changes to how the U.S. dollar acts as a reserve system. The U.S. is probably going to have to print a lot of dollars to bail out all this debt. That’s really fuelling the gold rally.”

The market is also realizing that higher gold prices are inevitable due to the situation the Fed and the U.S. government have been forced into.

“Investors are seeing that this COVID crisis isn’t going to go away anytime soon. The cases keep going up globally. And the longer it takes, the more debt needs to be created,” Piquard said. “Congress is debating right now about how many trillions of dollars they’re going to have to spend for a new stimulus after having already spent trillions of dollars.”

And even once the COVID crisis is behind us, the economy is going to be weak for a while, Piquard pointed out.

“After all that money has been spent, it’s not like you’re going to be able to raise taxes to get that money back, or it’s not going to be easy to raise rates,” he said. “The market is anticipating that the Fed is going to have to do more. And all those things are just beneficial for gold.”

The Federal Reserve cannot just go back to normal. “That will just be negative for everyone. Nobody really wins in that scenario,” Piquard noted.

Inflation vs. deflation argument

There are currently two camps out there: inflationary and deflationary one. In the inflationary scenario, gold will do great, while in the deflationary one, the yellow metal will perform poorly, Piquard explained.

“The deflationary guys think that gold is going to go a lot lower, stocks are going a lot lower and the U.S. dollar is going to go a lot higher,” he said. “Basically, what they’re saying is that there’s all this debt in the world and everyone has borrowed U.S. dollars and they’re going to have a hard time paying it back, especially with a weak economy … When they have to pay back that debt, everyone’s going to scramble for the U.S. dollars and that will drive down asset prices, which drives the U.S. dollar up.

The gold bulls believe in the inflationary argument that sees the Fed intervening and not letting deflation take over.

“All the Fed needs to do is buy what is being sold. And that’s kind of what they’ve done,” Piquard said. “They’ve been buying bonds first. Now, they’re saying they’re going to buy corporates. Central banks around the world have already been doing this. The Japanese have been buying stocks for who knows how long, the Swiss central bank has been buying stocks.”

Based on the inflationary scenario, the Fed will continue to intervene, print more money and weaken the U.S. dollar. “That’s positive for gold, which is the only asset that you can’t print,” Piquard said.

Inflation doesn’t even need to go much higher, the portfolio manager added. “All we need is for rates to be extremely low for extremely long and for inflation to be a little bit higher. As long as as the real yields are negative, that is good for gold.”

How to tell the gold price rally is over

The gold market has not seen its top yet with more upside potential still ahead of the precious metal, Piquard stated.

One major sign of a market top in gold is silver prices catching up and hitting their all-time highs of $50 an ounce.

“Silver price generally makes new highs towards the end of a gold bull market,” Piquard said. “The reason for that is because silver is more of an industrial metal, which is used more in the economy. So when silver starts rallying, that implies that the economy might be picking up.”

So far, silver has risen but it is still significantly below its record highs. At the time of writing, September Comex silver prices were trading at $24.365, up 0.62% on the day.

“Gold has made new all time highs and I think we need silver to reach its old highs as well. Then, there might be an indication that the economy’s doing better. Once we see silver catching up, then maybe it’s a sign that the bull rally has less room to go,” Piquard said.

Another sign of a market top is the economy recovering and the Fed’s 2% inflation target being breached on a sustainable basis. “The Fed said they’re only going to raise rates once inflation recovers above their 2% benchmark. That that could take some time — a year or more,” Piquard noted.

Gold miners present a unique buying opportunity

In this very competitive market, gold miners present an interesting buying opportunity, according to the portfolio manager.

“In terms of relative value, miners offer good [deal]. At over $1,900 an ounce, most miners are making money. Miners are significantly below the prices that they were at back in 2011,” he said. “Not all miners are equal but if you buy a portfolio of them, they offer more margin of safety because even if gold goes down a little bit, they’re still making some money.”

Author: Anna Golubova

Source: Kitco: Gold’s historic rally is a sign that the U.S. dollar’s reign as reserve currency is in question, says portfolio manager

(Kitco News) Bullish sentiment in the precious metals space will take gold prices to their all-time highs, according to Citigroup Inc., which views the upward move up as “only a matter of time.”

“Nominal gold prices have already posted fresh records in every other G-10 and major emerging market currency this year,” Citigroup analysts said in a report. “It is only a matter of time for fresh [highs in USD-terms].”

The record-high price to beat is around $1,920, which was reached back in 2011. At the time of writing, August gold futures were trading near nine-year highs of $1,840.80, up 1.29% on the day.

Citi projects gold to reach its all-time highs in the next six-to-nine months, the report stated. On top of that, analysts see a 30% chance that the yellow metal tops $2,000 an ounce in the next three-to-five months.

The drivers pushing gold higher are loose monetary policies, low real yields, and increased allocation to gold.

Rising safe-haven demand will also continue to lift silver prices, analysts added, projecting for the precious metal to rise to $25 within the next six-to-twelve months and even possibly reaching $30 in a bullish scenario.

At the time of writing, September silver was up nearly 7% on the day and trading at $21.540 an ounce.

Tuesday, the market is focused on a potential agreement between the European Union leaders for a massive stimulus package that deals with the coronavirus-related economic fallout. Markets are optimistic that the 750 billion euro ($857.33 billion) recovery fund and its related 1.1 trillion euro 2021-2027 budget will help the EU economy recover after the COVID-19 pandemic.

In the U.S., investors are carefully watching their own stimulus talks. Senate Majority Leader Mitch McConnell, Treasury Secretary Steven Mnuchin and other key players, are scheduled to meet in the White House on Tuesday. Republicans are expected to propose a $1 trillion rescue package, which is much less than the Democrat’s proposal of $3.5 trillion.

Author: Anna Golubova

Source: Kitco: Gold prices gearing up to take all-time highs, silver could reach $30 — Citi

(Kitco News) Gold continues to trade above the $1,800 an ounce level as prices see support from weaker U.S. dollar and rising geopolitical tensions, says Commerzbank. “Gold was lent support by a weaker U.S. dollar. Apparently the U.S. currency is no longer profiting from the rising numbers of new corona infections in the U.S., which was strange enough in any case. Instead, the foreign exchange market appears to be adopting a more realistic view of the impact of the corona pandemic,” writes Commerzbank analyst Carsten Fritsch. The U.S. economic recovery might be slower than in other coteries due to the rising coronavirus cases nationally, Fritsch notes. “Recently, the U.S. even overtook Brazil in terms of the number of new cases per 100,000 inhabitants,” he says. “The economic recovery is therefore likely to be sluggish despite the positive U.S. economic data and rising U.S. stock markets of late.” On the geopolitical front, tensions continue to heat up between the U.S. and China, with Hong Kong stuck in the middle. “Gold is also finding support from the geopolitical tensions that continue to simmer. U.S. President Trump has signed a decree that ends Hong Kong’s special status. What is more, he has signed a bill that allows sanctions to be imposed on Chinese individuals who are responsible for suppressing the political opposition in Hong Kong,” Fritsch points out. “The dispute between the US and China over territorial sovereignty and sea routes in the South China Sea is also continuing. Gold is likely to remain in demand in this environment, as the ongoing interest in gold ETFs indicates.”

Author: Anna Golubova

Source: Kitco: Gold is supported by weaker U.S. dollar, geopolitical tensions — Commerzbank

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