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Showing posts with label North Korean. Show all posts
Showing posts with label North Korean. Show all posts

Monday 28 May 2018

Gold might rally soon

Gold has performed quite well over past few years.  In late 2015 it touched $1,050 an ounce, it had a nice progression into 2016 and 2017. Here we are in 2018, and the gold price has been up above $1,300 through most of the year, and it looks like it’s very well supported, for varied reasons.

There are many factors that are influencing or rather supporting gold at this point of time.

Gold has actually been in a rather tight trading range, trading from the upper $1,200s to $1,300 an ounce to $1,370 an ounce, probably because there’s the view in the marketplace that there’s other opportunities, whether it’s in other equities or perhaps small-cap stocks, biotech, cannabis stocks or cryptocurrency-type stocks. And yet gold is doing what it’s supposed to do, it’s providing a hedge to monetary policy. Year-to-date, the dollar has been quite weak, and gold has actually done quite well.
Gold has been rising along with inflation, oil prices and commodity prices. Gold market is actually “rather constructive” right now due to a number of factors, including the amount of credit that’s being created and the recent US tax bill.



 I think it’s had a number of attempts to break through that $1,365 or $1,370 mark and it might break through this level in 2018. There are definitely many aspects that are building whether it’s the deficits or the geopolitical environment. Gold was very responsive in March over the Syrian attacks and with the North Korean developments, but due to certain political uncertainties in the US, it was actually difficult to understand US’s political agenda which has kept the gold prices underpinned.

Until then, gold seems to have carried the green territory forward in the past week too. Gold prices posted the largest one-day gain in six weeks as global risk aversion sent capital flows rushing to the safety of Treasury bonds. That pushed yields lower and bolstered the relative appeal of non-interest-bearing alternatives epitomized by the yellow metal.

Gold prices surged on Thursday, propelled above $1,300 per ounce as the U.S. dollar weakened, after U.S. President Donald Trump called off a summit with North Korea, stoking political tensions. Trump cancelled the meeting with Kim Jong Un, planned for June 12, even after North Korea followed through on a pledge to blow up tunnels at its nuclear test site. The cancellation prompted investors to seek a safe store of value. Rising demand for the yellow metal pushed its prices higher.           
Spot gold gained 0.9 percent at $1,305.18 per ounce during Thursdays trading hours. Gold got momentum on news the North Korea meeting was cancelled but Before the North Korea news, spot gold was slightly firmer but had been losing ground for weeks, shedding 5 percent since touching $1,365.23 on April 11, the highest in nearly three months.

Currently, it’s a bit difficult to find any factor that would go against gold and influence its prices downward. The glittering metals safe haven appeal also glittered after the U.S.launched a national security investigation into car and truck imports that could lead to new tariffs similar to those it imposed on steel and aluminium.           
 
Furthermore, Turkey has been in the spotlight and the lira weakened more than 2 percent, the day after a huge emergency interest rate hike intended to stem its slide.       
  
Gold was also buoyed by a weaker dollar, which slipped to a near two-week low against the Japanese yen, and lower U.S. Treasury yields. Adding to the rally, we saw the minutes of the Fed meeting that were les hawkish on interest rates.

And if these reasons aren’t enough, the bullishness is also related to the fact that US' expansionary phase is in the late cycle.

Gold has historically rallied even after business cycle starts to turn. And also rallied even if the US economy starts to fall into recession and currently Dollar strength looks as f it will fade away soon.
We might also see the European and Japanese market strengthening which might further weaken the dollar and create an inverse relation with the yellow metal this creating a rally in gold prices once again.

The markets’ mood soured as President Trump called for a similar probe into auto imports that preceded the recent steel and aluminium tariff hike. Canada is a major importer of motor vehicles into the US, so the move casts a cloud over NAFTA renegotiation efforts. He then cancelled a June summit with North Korea’s Kim Jong-un, ominously hinting that the US military is prepared to take whatever action necessary.

The gold price may not be as high as some investors want it to be, but according to Doug Groh, portfolio manager at Tocqueville Asset Management, the yellow metal is performing just as it should be.

“Gold is doing what it’s supposed to do, it’s providing a hedge to monetary policy,” he said at the sidelines of the recent Mines and Money conference in New York.

Groh emphasized that it’s important for investors to remember that gold is “not necessarily supposed to [put on] a performance in a portfolio … it’s a sense of security and store of value.” He added, “Gold offers an alternative in a portfolio in that it’s not correlated to other assets.”

Tuesday 1 May 2018

As dollar strengthens, the yellow metal weakens

Spot gold was up 0.1 percent at $1,318.52 past week, not far from a low of $1,315.06 hit in the previous session, it’s weakest since March 21.

The metal was on track to finish the week down more than 1 percent for its second consecutive weekly decline and the biggest weekly drop in four.

The strength of the U.S. dollar - combined with the weakness of the euro zone currency after (ECB chief) Mario Draghi’s speech - is pushing down the yellow metal.


The dollar hit a 3-1/2-month high against a basket of currencies on higher U.S. yields while the euro was hampered by a dovish tone from the European Central Bank. On Wednesday the benchmark 10-year Treasury yield reached its highest since January 2014 at 3.035 percent. A rise in U.S. bond yields pressures gold by reducing the attractiveness of non-yielding bullion, which is priced in dollars.

Thursday’s trading started on a weak footing, but most of the metals ended the day in positive territory, which suggested dip buying and support are features of the market. Precious metals prices were little changed on Thursday morning, with gold and silver prices off by 0.1% – with the former at $1,316.54 per oz. Meanwhile, the platinum group metals were both up by 0.1%.

Gold continued losing ground through the early NA session and is currently placed at fresh 6-week lows, around the $1312-11 region.

After Friday's corrective bounce, resurgent US Dollar demand was seen as one of the key factors weighing heavily on dollar-denominated commodities - like gold at the start of a new trading week.  Gold prices retraced upward in what looked like a correction after higher and sent the yellow metal to a one-month low.

Easing geopolitical concerns and the strengthening dollar index are the factors which are creating the sell-off. This rise in the dollar seems to be weighing on gold and is likely to be a headwind for metals’ prices generally.

Recent increases in geopolitical tensions and rising commodity prices, especially oil, seem to have spurred inflationary concerns that have led to stronger bond yields and in turn that has lifted the US dollar, with the dollar index at 90.97. This has broken above the previous peak at 90.94 from March 01.

At their summit on Friday, North Korean leader Kim Jong Un  and South Korean President Moon Jae-in declared they would take steps to formally end the 1950-53 Korean War, which ended only with a truce, and work towards the "denuclearisation" of the Korean peninsula.           

North Korean leader Kim Jong Un and South Korean President Moon Jae-in on Friday declared they would take steps to formally end the 1950-53 Korean War, which ended only with a truce, and work towards the “denuclearisation” of the Korean peninsula.

The signs of detente in the North Korean conflict are ... contributing to the lack of solid demand for gold as a safe haven at present

Further as tensions o the Korean peninsula eased, the European shares rose after a positive session among Asian stocks overnight. The dollar index rose 0.2 percent on Monday, 30th April, holding just below its strongest since mid-January.

Gold fell at the start of this week, pulling back towards last week's more than one-month low as easing tensions on the Korean peninsula boosted appetite for assets seen as higher risk, such as stocks, and lifted the dollar.
   
The metal slid 1 percent last week on the back of a stronger dollar and a rise in Treasury yields to above 3 percent, which weighed on interest in non-interest bearing assets. On Thursday, it hit its lowest since March 21 at $1,315.06 an ounce.

That has left it on track to end April down 0.5 percent, erasing all the previous month's gains.
Spot gold was down 0.4 percent at $1,316.15 an ounce during trading hours.
   
Meanwhile, the Fed’s favoured PCE inflation gauge is expected to put core price growth at a 13-month high of 1.9 percent.

The latter would put the Fed within a hair of at least ostensibly meeting its dual objectives. Policymakers aim for inflation of 2 percent to be sustained in the medium term – abating the significance of a single month’s reading – but another sign of steady progress may reinforce the case for tightening.

Gold may return to suspicion, if this materializes as the prospect of higher rates sustains the US Dollar, undercutting demand for non-interest-bearing and anti-fiat assets.

   

Monday 9 October 2017

Gold Prices May Surge

Gold was once again seeing pulled and pushed by various factors doing rounds in the market. Where one side gold was seen consolidating by a strong dollar price on Wednesday, on the other hand on Friday it once again picked momentum over the North Korean crisis.

Gold prices fell for the fourth consecutive week with the precious metal down nearly 0.5% to trade at 1271 ahead of the New York close on Friday. The losses come amid what seems to be an unstoppable rally in broader risk assets with the major U.S. equity indices up more than 1% on the week.



A surprise U.S. Non-Farm Payroll report on Friday showed the economy shedding some 33K jobs last month, missing expectations for a gain of 80K. However, a closer look at the data revealed underlying strength in the labor markets with labor force participation rising to its highest level since March of 2014 at 63.1%. Wage growth figures were also stronger-than-expected with average hourly earnings posting a 2.9%  gain – up from a previous upwardly revised 2.7% . With the recent barrage of hurricanes largely accounting for the weak headline figure, the broader labor market outlook remains firm and keeps the FOMC on target for a December rate hike.

The dollar earlier rose to a more than two-month high against the yen and seven-week high against the euro as wage data from the September labour market report was seen as a sign of potentially improving inflation.

The greenback jumped as high as 113.43 yen, the highest level since July 14, before dropping to 112.71. The euro fell to $1.1670, the lowest level since Aug. 17, before rising back to $1.1726.
The U.S. dollar tumbled on Friday on a report that North Korea is preparing to test a long-range missile, overturning earlier gains after the government’s jobs report for September showed an unexpected rise in wages.

RIA news agency cited a Russian lawmaker’s making comments on the missile test, which North Korea believes can reach the U.S. West Coast.

Amidst these tumbling and rising influencers, gold prices are expectedto surge not only in the international but also domestic market given the upcoming and biggest festival for gold in India.
A few reasons why weexpected gold prices to shoot are:

10 reasons why gold will surge:

  1. Gold will follow inflation which will increase strongly eventually leading to hyperinflation.
  2. Real interest rates will be negative which favours gold. This was the case in the 1970s when gold rose from $35 to $850 despite rates in the mid-teens.
  3. China’s accumulation of gold on a massive scale and potentially introducing a gold for oil payment system
  4. Inflation will increase institutional gold buying substantially. Gold is today 0.4% of global financial assets. An increase to 1% or 1 1/2% would make the gold price go up manifold.
  5. With relatively low global demand today, annual goldmine production of 3,000 tonnes is easily absorbed. With falling production, the coming upturn in demand can only be met by much higher prices.
  6. Demand for gold will rise in the domestic market during Dhanteras and Diwali. After Akshaya Tritiya, gold sales are seen to be highest on Dhanteras and this rising demand might push gold prices further.