Neils Christensen


(Kitco News) – The gold market continues to see some selling pressure with prices below $1,900 an ounce even as significantly more Americans than expected applied for unemployment benefits last week.

Thursday, the Labor Department said that 898,000 million Americans filed for first-time U.S. jobless claims in the week to Saturday an increase of 53,000 from the previous week’s revised level. The data missed expectations. According to consensus forecasts, economists were expecting a reading around 810,000 claims.

The report also said that the previous week’s level was revised up by 5,000 from 840,000 to 845,000.

In recent days, the gold market has struggled to find or attract sustainable buying momentum and the latest disappointing economic data is not having an impact in initial reaction. December gold futures last traded at $1,897.90 an ounce, down 0.5% on the day.

The four-week moving average for new claims – often viewed as a more reliable measure of the labor market since it smooths out week-to-week volatility – came in at 866,250 claims up 8,000 from the previous week.

Continuing jobless claims, the number of people already receiving benefits and reported with a one-week delay, rose to 10.018 million for the week ending Oct. 3 Continuing claims rose 1.165 million from the previous week, the government said.

Author: Neils Christensen

Source: Kitco: Gold prices remain under $1,900 see little reaction to sharp rise in U.S. weekly jobless claims

(Kitco News) – In the last few months the gold market has transformed into a hedge against falling interest rates. It has become less of a safe-haven asset, according to the world’s largest asset fund manager.

Russ Koesterich, portfolio Manager for BlackRock’s Global Allocation Fund, wrote in a report last week that in the previous few months, gold has become positively correlated to equity markets. He said that gold has currently has a beta of 0.3 to equity markets.

“This shift in correlations is not unusual for gold. In different economic environments, gold can behave very differently. One explanation for the recent change is that both gold and equities are increasingly reacting to a common factor: Federal Reserve policy,” he said. “To the extent investors expect the Fed’s new policy framework to favor easy money and negative real rates, both gold and stocks are responding to the same underlying dynamic.”

As to what this means for gold’s investment outlook. Koesterich said that he continues to see the potential for higher gold prices in a low interest rate environment; however, he added that investors might want to lighten up on gold as a safe-haven hedge.

“As I’ve highlighted previously, gold performs best when real rates are negative and the opportunity cost in lost income is low. And as the Fed has repeatedly emphasized, this is likely to be exactly the environment we’re in for some time to come,” he said. “All of which suggests that investors should hold for now, add on weakness and, most importantly, look for other hedges to help mitigate equity risk.”

Koesterich’s comments come as gold price seen increased volatile due to shifting expectations on fiscal stimulus measures. Last week President Donald Trump spooked markets when he tweeted that he was calling off all stimulus negotiations until after the election. However, that stance didn’t last long as he has now thrown his support between a $1.8 trillion aid package.

The hopes that a stimulus agreement could come before the Nov. 3 election has pushed gold prices back above $1,900 an ounce. December gold futures last traded at $1,929.40 an ounce, up 0.17% on the day.

Whether it’s a hedge against unprecedented ultra-loose monetary policy or a safe-haven asset in a time of heightened uncertainty and market turmoil, the gold market has attracted a record investment this year.

Last week the World Gold Council said global gold-backed exchange traded products said their holding surpass 1,000 tonnes for the year in September, a new record high.

Author: Neils Christensen

Source: Kitco: Gold is a hedge against low interest rates not market risk – BlackRock

(Kitco News) – Bullish sentiment in the gold market remains healthy even as prices have fallen two a two-month low, according to one research firm.

In a report published last week, commodity analysts at Capital Economics said it expects gold prices to end the year higher after raising its year-end target.

Samuel Burman, assistant commodities economist at the U.K.-based research firm, said in the report that they now see gold prices end the year at $2,000 an ounce and they see prices ending 2021 at $2,100 an ounce. The new year-end target is up from the previous estimate of $1,900 an ounce.

The comments come as gold prices saw their worst selloff since collapsing in March due to the global COVID0-19 pandemic. Gold prices dropped below $1,900, falling nearly 5% last week. Burman said that gold is struggling against rising momentum in the U.S. dollar, which hit a 2-month high last week.

However, Burman said that lower real yields will eventually weigh on the greenback and boost gold prices.

“As gold pays no income of its own, its attractiveness as an asset is determined by real yields on competing safe-haven assets, such as US Treasuries. Real yields have plummeted in recent months as a result of the collapse in nominal yields and a revival in inflation expectations,” he said in the report. “We think that the price of gold will drift upwards through to the end of 2021 as real yields edge lower, which could weigh on the value of the US dollar.”

With the Federal Reserve signaling that it expects to hold interest rates at the zero-bound range through 2023, Capital Economics said that it sees nominal 10-year yields ending the year at 50 basis points and remaining there for the foreseeable future.

“This fall, in conjunction with higher inflation expectations as the US economy recovers, will mean that real yields will decline,” said Burman.

Along with rising inflation expectations and lower real yields, Burman said that they see gold prices pushing higher by the end of the year as investors continue to look for safe-haven assets in a world that has been devastated by the coronavirus.

“If COVID-19 is not brought under control soon, ETF demand could rise further, which would provide an additional boost to the price of gold,” he said.

Author: Neils Christensen

Source: Kitco: Gold price to end the year at $2,000 – Capital Economics

(Kitco News) – In delayed reaction, Gold prices pushed above $1,900 an ounce as economic data shows just how much damage the COVID-19 pandemic inflicted on activity in the second quarter.

Wednesday, the U U.S. Commerce Department said that the impact the COVID-19 pandemic on second-quarter Gross Domestic Product was slightly less than expected, according to its final estimates.

According to the latest report, annualized second-quarter GPD declined by 31.4%, Economists were expecting to see a decline of 31.7%.

“The upward revision with the third estimate primarily reflected an upward revision to personal consumption expenditures (PCE) that was partly offset by downward revisions to exports and to nonresidential fixed investment,” the report said.

Accoridng to Jim Wyckoff, senior technical anlyast at, the gold market is seeing technical buying as the latest economic data point to continued uncertainty. December gold futures last traded at $1,903 an ounce, relaitvley unchanged on the day.

Some commodity analysts have said that the latest economic data have not been a signifciant driver for gold prices because it is “old news.” Market players are now focused on the recent wave of better-than-expected data that have raised hope for a fast recovery, the analysts have said.

Looking at some of the components of the report, personal consumption was slightly better than expected. It declined by 33.2%, up slightly from the previous estimated decline of 34.1%.

However, trade was slightly worse than expected. The report said that U.S. exports declined 64.4% in the second quarter, down from the previous estimate of 63.2%. Meanwhile, imports were also slight weaker, declining 54.1%, down from the prior estimate of 54.0%.

Government spending in the second quarter was also lower than expected, rising 2.5%, down from the previous estimate of 2.8%.

Positive for the gold price is stronger than expected inflation data. the report said that core Personal Consumption Expenditures, fell 08% in the second quarter, up from the previous estimate of a drop of 1.0%.

The GDP price index declined 1.8%, up from the previous estimated decline of 2.0%.

Analysts have noted that despite the short-term volatility, which has driven gold prices to their worst monthly performance since November 2016, gold’s long-term fundamentals are firmly in place. Rising inflation, coupled with low interest rates will push real yields lower, which makes gold an attractive safe-haven asset, according to analysts.

Author: Neils Christensen

Source: Kitco: Gold price pushes above $1,900 in delayed reaction as Q2 U.S. GDP contracts 31.4%

(Kitco News) – The U.S. dollar appears to be losing the race to the bottom in currency markets, which prompted some hedge fund managers to reduce their bullish exposure in gold, triggering a strong selloff in the yellow metal, according to some analyst.

The latest trade data from the Commodity Futures Trading Commission (CFTC) shows that net bullish bets in the gold market dropped to their lowest level in roughly 15 months.

CFTC disaggregated Commitments of Traders report for the week ending Sept. 22 showed money managers lowered their speculative gross long positions in Comex gold futures by 21,901 contracts t0 144,670. At the same time, short positions increased by 7,749 contracts to 63,222.

Gold’s net length now stands at 81,448 contracts, down nearly 27% from the previous week. During the survey period, the long liquidation pushed gold prices to support levels just above $1,900 an ounce. Since the end of the survey period, gold prices have lost further ground falling to a two-month low.

Although gold prices have seen some significant selling pressure, analyst do see a silver lining in the price action. Many analyst have said that the drop in speculative longs is helping to shakeout “weak hands” in the marketplace, allowing gold to build a strong base from which to rally off of.

Analysts have said that even during gold’s consolidation between $1,900 and $2,000 the precious metal was overbought.

“Considering that positioning remained bloated, adding some fuel to the pain trade lower in prices, the yellow metal traded through support into a new range, thereby prompting money managers to aggressively liquidate their length,” said analysts at TD Securities in a report Friday. “However, it is worth highlighting that traders also added some shorts — signaling the return of some healthy skepticism in the gold market.”

Ole Hansen, head of commodity strategy at Saxo Bank, said in a report Monday that although gold has fallen below $1,900 an ounce, it is still holding critical support levels. However, he also added that he can’t rule out another drop, especially if the U.S. dollar continues to push higher.

“The short-term technical and fundamental outlook is somewhat challenged until yields and dollar stabilize,” he said. “Gold, however still trades above key support at 1837/oz, the 38.2% retracement of the March to August rally.”

Commodity analysts at Scotia Bank said in a report Monday that gold’s weak performance is more due to perception rather than reality. They are looking past gold’s short-term volatility.

“More recent selling pressure looks to reflect perceptions of relative rather than absolute risk in foreign exchange markets, which are bidding up the U.S. dollar,” they said. “Medium-term yellow metal fundamentals remain constructive. In particular, the Federal Reserve’s stated tolerance for stronger inflation, though subject to implementation challenges, has the potential to weigh on US real rates.”

It wasn’t just the gold market that saw significant long liquidity. Hedge funds have also been quickly to ditch their bullish bets in silver and have added some short bets.

The disaggregated report showed money-managed speculative gross long positions in Comex silver futures fell by 1,700 contracts to 61,547. At the same time, short positions rose by 1,070 contracts to 25,052.

Silver’s net length currently stands at 36,495, down 7% from the previous week.

During the survey period silver prices dropped 14.5%.

“The 7% reduction in speculative net long positions in silver was less pronounced than the sharp price fall might have suggested, on the other hand. However, net longs may well have been cut further after the reporting date last Tuesday,” said commodity analysts at Commerzbank.

Author: Neils Christensen

Source: Kitco: U.S. dollar strength prompts hedge funds to drop bullish gold bets

(Kitco News) – The gold market is seeing some renewed buying momentum as Federal Reseve Chair Jerome Powell strikes and cautiously optimistic tone in first day of testimony before Congress.

Tuesday, in before the House of Representatives Committee on Financial Services, Powell said that although the U.S. economy is recovering, a lot is still dependent on how the COVID-19 pandemic evolves.

“Economic activity has picked up from its depressed second-quarter level, when much of the economy was shut down to stem the spread of the virus. Many economic indicators show marked improvement,” he said in his opening statement, released ahead of the hearing.

“A full recovery is likely to come only when people are confident that it is safe to reengage in a broad range of activities. The path forward will depend on keeping the virus under control, and on policy actions taken at all levels of government,” he said.

Powell also reiterated that the U.S. central bank is committed to using all of its monetary policy tools for as long as necessary to support the global economy. However, he also did not hint at the potential for any new stimulus measures.

“Our economy will recover fully from this difficult period. We remain committed to using our full range of tools to support the economy for as long as is needed,” he said.

The gold market is seeing some modest buying momentum as investors jump into the market after Monday’s sharp selloff which pushed prices below $1,900 an ounce. December gold futures last traded at $1,920.90 an ounce, up 0.54% an ounce.

The comments come roughly a week after the Federal Reserve signaled that it expects to keep interest rates at the zero-bound range through to 2023.

Author: Neils Christensen

Source: Kitco: Gold price sees some buying interest following Fed’s Powell’s testimony before Congress

(Kitco News) – If there was ever an environment for gold and silver to do well, it is now, according to Lloyd Blankfein, former chairman and chief executive officer at Goldman Sachs.

In a virtual fireside chat with CME Group, the famed banking executive and commodity trader acknowledged gold and silver ’s impressive run so far this year. However, he added that he genuinely did not know what is in store for the precious metals as prices continue to grind in a consolidation phase.

“It has been so long since these metals have played a role in financial markets as a store of value,” he said. “But if there was ever a time where they would, it would be now.”

Blankfein said that generally he is bullish on commodities as he sees the risk of rising inflation as the Federal Reserve has signaled that it is not going to raise interest rates anytime soon.

“I think from an inflation point of view, everyone has decided that we won ’t see inflation ever again,” he said. “From an inflation point of view, as an investor, I think investing in material sectors while they’re under-appreciated is not a bad thing now,”

Although inflation isn ’t a threat for now, Blankfein said that sentiment can shift in an instant.

Adding to the inflation picture, Blankfein said helping to keep interest rates low will be the massive deficits governments will have to deal with. He added that whichever party gets elected after the November 3 general and presidential elections, any government will have to deal with massive debt.

He added that he wouldn ’t rule out further deficit spending from any government.

“Because of these low interest rates deficits can go higher,” he said.

Although Blankfein didn ’t have a firm view on gold and silver prices, his former bank is fairly bullish on gold.

In July, commodity analysts at Goldman Sachs said that they saw gold prices pushing to $2,300 an ounce and silver rising to $30 an ounce within 12 months as governments debase their currencies.

“This relentless decline in real interest rates against nominal rates bounded by the U.S. Fed has caused inflation breakevens to rise in an environment that would ordinarily be viewed as deflationary,” the analysts said. “Ironically, the greater the deflationary concerns that policymakers must fight today, the greater the debt build up and the higher the inflationary risks are in the future.”

Author: Neils Christensen

Source: Kitco: Now is the time for gold, silver to shine – former Goldman Sachs CEO

(Kitco News) – The Federal Reserve’s new inflation target of an average of 2% has created even more long-term potential for the precious metals price and mining sector, according to one Canadian bank that is now raising its long-term forecast for gold and silver.

In a report published last week, analysts at Bank of Montreal announced that they were raising their long-termgold and silver price forecasts. The bank now sees gold prices averaging above $1,800 an ounce through 2023.

For this year, the bank sees gold prices averaging the fourth quarter around $1,920 an ounce, up 4% from the previous forecast.

The bank is even more bullish on silver as it now sees the prices for the precious metal averaging above $27.60 an ounce through 2023, up nearly 50% from their previous estimate.

The analyst are more bullish on silver as the physical market pushes into deficit this year.

Looking at silver prices, the bank sees prices averaging the final quarter of the year around $27.50 an ounce, up 47% from the previous forecast.

The bank added that although it has increased its medium-term outlook, its long-term outlook remains unchanged. Gold prices are expected to average $1,400 an ounce and silver is expected to average around $18.25 an ounce.

“As we factor in the new Federal Reserve policy of average inflation targeting, as announced at the recent Virtual Jackson Hole Economic Policy Symposium, the net result is likely to be low-for-even-longer interest rates,” the analysts said. “With this, we see the precious positive cycle of macroeconomic policy being prolonged, and have thus increased our short- to medium-termgold and silver price forecasts.”

Although BMO analysts are bullish gold and silver, they don’t see runaway prices above $2,000 an ounce anytime soon. They added that the best way to play the precious metals market as prices hold around current levels is through mining equities.

They noted that because of higher gold and silver prices, they have increased their equity target prices by an average of 9%.

“In our view, the key story in gold is the rise in industry profitability,” the analysts said.

Looking at gold prices, the bank said that the market should remain in its current range as it doesn’t expect to see real bond yields pushing much further into negative territory, nor pushing into positive territory anytime soon.

“Unless we see further currency debasement (still a possibility rather than a probability) or real yields drop even further, the story from current levels is not about whether the gold price rises a further 20%. Rather, it is about the duration of gold prices in excess of our long-run equilibrium,” the analysts said in the report. “Thus, the key factor to watch over the coming years is what the gold mining and refining industry will do with the strong free cash flow set to be generated.”

Author: Neils Christensen

Source: Kitco: Gold price should hold steady through 2023; silver has more potential – BMO

(Kitco News) – The gold market continues to consolidate in a narrowing range. While the price action balances on a knife’s edge, analysts note that the Commodity Futures Trading Commission’s latest trading data remains bullish.

The Commodity Future Trading Commission (CFTC) disaggregated Commitments of Traders report for the week ending Sept. 8 showed money managers increased their speculative gross long positions in Comex gold futures by 8,353 contracts to 155,528. At the same time, short positions rose by 1,803 contracts to 51,236.

Gold’s net length now stands at 104,292 contracts. During the survey period, the gold market managed to hold critical support above $1,900 an ounce as the price continued to consolidate.

Analysts have said that not only are hedge funds still buying gold, but the market has seen only a shallow correction from August’s all-time highs above $2,000 an ounce.

Analysts at TD Securities noted that there is a lot of pent up demand in the marketplace as investors continue to buy gold on dips.

“As expected, we did not witness a deeper shakeout in positioning, with recent price action signaling there were not many weak longs remaining in the market,” the analysts said. “Furthermore, the ECB’s decision to brush off the exchange rate appreciation has crossed off an important hurdle for gold bugs as investors can refocus on the weak USD narrative. In addition, a dovish FOMC meeting could clear the second hurdle for yellow metal bulls, opening the path for a renewed run toward $2000/oz.”

In a report, Monday, Mike McGlone, senior commodity strategist at Bloomberg Intelligence, said that the latest trade data shows the gold market is attracting healthy long-term interest.

He added that the data shows more organic interest in the precious metal than speculative hot money driving prices to unstainable levels.

“Gold’s futures positioning indicates divergent strength to us. Steadily increasing prices coinciding with declining managed-money net longs imply a healthy bull market that’s driven more by demand in excess of supply than speculation,” he said. “Fewer speculative net longs diminish risks of overbought and overexuberant liquidation price declines.”

In a recent interview with Kitco News, Charlie Nedoss, senior market strategist with LaSalle Futures Group, said that although gold has struggled to make new highs, the most crucial factor for him is that the price has managed to hold critical support during the consolidation phase.

He noted that gold has bounced off its 50-day moving average and is now pushing above the 20-day moving average. He noted that this is an indication of underlying strength in the marketplace.

“I look at the chart and the past of least resistance for me is higher,” he said.
While investors are once again paying attention to gold, their interest in silver appears to have plateaued, according to the latest trade data.

“The disaggregated report showed money-managed speculative gross long positions in Comex silver futures fell by 1,902 contracts to 59,951. At the same time, short positions fell by 139 contracts to 24,127.

Silver’s net length currently stands at 35,824, down nearly 5% from the previous week.

Similar to gold, silver prices have been consolidating in a narrow range with support above $26 an ounce and resistance at $28 an ounce.

Author: Neils Christensen

Source: Kitco: Hedge funds still bullish on gold price; waiting for a breakout

(Kitco News) – The gold market is seeing some new buying momentum as the U.S. The U.S. labor market continues to struggle as applications for weekly unemployment benefits remains significantly elevated.

Thursday, the Labor Department said that 884,000 Americans filed for first-time U.S. jobless claims in the week to Saturday an increase of unchanged from the previous week’s revised level.

The U.S. economy continues to feel the economic impact of the spreading COVID-19 pandemic. Although initial claims remain below the 1-million mark, the data was worse than expected as consensus forecasts call for a drop to 838,000 claims.

December gold futures last traded at $1,965.50 an ounce, up 0.55% on the day. Ahead of the report gold futures were relatively unchanged on the day.

The four-week moving average for new claims – often viewed as a more reliable measure of the labor market since it smooths out week-to-week volatility – was 970,750, a decrease of 21,750 claims from the previous week.

Continuing jobless claims, the number of people already receiving benefits and reported with a one-week delay, rose to 13.385 million, for the week ending Aug. 29. Continuing claims rose by 93,000 claims from the previous week, the government said.

Author: Neils Christensen

Source: Kitco: Gold price jumps as 884K Americans file for unemployment benefits

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