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$1,500 Gold Is Happening This Year, And Industry Is "Caving Into Itself"

$1,500 Gold Is Happening This Year, And Industry Is "Caving Into Itself"

Release Date:  Friday, March 8, 2019

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Gold and Silver Prices

Gold closed higher on Friday and ended in a gain for the week following losses in global stock markets and a weak U.S. jobs data.

"U.S. job growth almost stalled in February with the economy creating only 20,000 jobs amid a contraction in payrolls in construction and several other sectors.

"'We saw a surprisingly weak non-farm jobs number that pressured the dollar and the U.S. stock markets, which in turn supported the rally in gold,' said Jim Wyckoff, senior analyst at Kitco Metals. 'Gold is going to be influenced by the dollar index.'

"The dollar held its earlier losses versus a basket of currencies, making bullion cheaper for holders of other currencies, while Wall Street was set to fall after the jobs data.

"'Growth in the U.S. is going to slow as the country has reached full employment and productivity is very high so there isn't much space for growth ... And we're coming to an end of the Federal Reserve's rate cycle, which should weaken the dollar further,' said Natixis analyst Bernard Dahdah.

"While Friday's report from the Labor Department did have a few bright spots, such as dip in the unemployment rate and an upward revision to December and January data, it did indicate the U.S. economy is slowing, supporting the Fed's "patient" approach toward interest rate hikes this year.

"Investors also kept a close eye on trade talks between the United States and China, with mixed signals from Washington on the likelihood of a breakthrough. ("Gold breaches $1,300 mark as weak US jobs data dents dollar," Reuters, CNBC, 03/08/19.)

Gold ended the week up $4.90, closing at $1,297.70. Silver ended the week up $0.12, closing at $15.31.

$1,500 Gold Is Happening This Year, And Industry Is "Caving Into Itself" - Lin

Gold is called for a major lift at $1,500 this year.

"We are only a few dollars away from gold's 2019 highs, and E.B. Tucker, director of Metalla Royalty & Streaming, predicts that $1,500 an ounce is a likely price target for this year.

"'So for the $1,500 we're talking about this year. That's a bold call because we've got to put $220 on the price, and I think we can do it,' Tucker told Kitco News on the sidelines of the PDAC 2019.

"Gold reached a 2019 high of $1,345.75 an ounce in mid-February but has since come down to $1,287.3 as of Tuesday's close.

"Tucker noted that gold's movement last year has had predictive power on equities as well.

"'Last summer's decline kind of foreshadowed the fall in the S&P, in my opinion, in December,' he said. 'So what's going telling us now? Is it telling us that stocks are in trouble? Either way, we're only 5% off the recent high.'

"Tucker added that the mega mergers we have been seeing aren't premium adding deals, but rather, 'necessity mergers.'

"'The sector is caving in on itself. These mergers that are going on, these are not mergers that are bidding wars, these are just folding into one another, even the Newmont-Barrick situation that's going on right now, it's not a huge premium, it's not people coming in and saying "we'll pay 20% more, 30% more," it's necessity mergers,' he said." ("$1,500 Gold Is Happening This Year, And Industry Is 'Caving Into Itself,'" David Lin, Kitco News, 03/05/19.

Goldman Sachs preaches caution on commodities: 'They are no longer significantly undervalued' - DiChristopher

Goldman Sachs believes "this is a pound-the table time" to buy gold and targets it at $1,450.

"Goldman Sachs is warning that this year's commodity price rally may be running out of steam, so investors should tread carefully and monitor data before going long oil and metals.

"Commodities have bounced 12 percent this year after a steep sell-off in the final months of 2018. At this point, Goldman analysts say fundamental supply and demand will have to drive further gains - and they're not yet sure whether the figures will underwrite a further rally.

"Goldman acknowledges that the market has moved past temporary drags like the longest-ever U.S. government shutdown, while China is embarking on a more expansionist policy. But the bank is still preaching caution.

"'While this looks like it would point to even more upside for commodities, we believe that commodities have now reached a level where they are no longer significantly undervalued relative to their current fundamentals,' the investment bank's commodity analysts said in a research note Monday.

"The risk-reward of being outright long commodities is therefore less compelling now compared to a few months ago, and we recommend a neutral portfolio position in commodities."

"The bank sees scope for improvement across the metals market, but thinks there's potentially more profit in looking for relative value trades within the sector.

"'Specifically, we see significantly lower growth in copper supply versus zinc in 2019,' Goldman said. 'Finally, gold's safe-haven status will also likely see relative outperformance as late-cycle recession fears remain and several key central banks continue diversifying their reserve assets.'

"Jeff Currie, Goldman's global head of commodities research, says gold has sold off on overly optimistic views that Washington and Beijing will soon resolve their ongoing trade dispute. Gold fell toward a five-week low on Tuesday and was last trading around $1,287 per ounce.

"'We actually think this is a pound-the-table time to be buying gold right now,' Currie told CNBC on Monday. 'We're sticking to our $1,450 target.'" ("Goldman Sachs preaches caution on commodities: 'They are no longer significantly unvalued,'" Tom DiChristopher, CNBC, 03/05/19.)

Gold Prices Up, GS Boosts Price Forecast-

Goldman Sachs lifts its forecasts for both gold and silver.

"Gold prices showed mild increases Tuesday morning in Asia. Gold futures for April delivery on the Comex division of the New York Mercantile Exchange were up 0.15% to $1,289 a troy ounce...

"Over the past three weeks, gold has given up some of the gains from a big three-month run up. Prices rose from around $1,200 in mid-November to almost $1,348 on Feb. 20 but have since dropped by about 4.4%.

"News on Monday that a potential trade deal between the U.S. and China could happen soon helped lift stock markets but put downward pressure on safe-haven assets like gold. On Tuesday, however, concerns rose about the ultimate impact of such a trade deal and those concerns gave gold some of its luster back.

"And also supporting gold prices in the medium term was the release of an updated forecast for gold prices by Goldman Sachs (NYSE:GS).

"The investment bank now expects gold to touch $1,350 in three months, up from a previous forecast of $1,325. In six months, the bank expects gold to hit $1,400 and $1,450 in 12 months on the back of falling unemployment rates in the US that could support inflows into exchange-traded funds, low growth in Europe, higher geopolitical tensions, a weaker dollar and faster GDP growth in emerging markets that could boost gold price, according to FX Street.

"Goldman Sachs also lifted its forecast for silver.

"The U.S. Dollar Index that tracks the greenback against a basket of major currencies fell marginally by 0.01% to 96.67." ("Gold Prices Up, GS Boosts Price Forecast,", 03/04/19.)

Gold's Dip below $1,300 Is Temporary- Analyst - Golubova

Increased volatility in 2019 will boost gold prices according to analysts.

"There is no reason to fear gold's drop below its key psychological level of $1,300 an ounce, according to one gold bull, who sees the recent sell-off as 'short-lived' while projecting stronger demand for gold in 2019.

"'Gold has come under marked downward pressure since February 20,' Metal Bulletin precious metals analyst Boris Mikanikrezai wrote in a Seeking Alpha post on Wednesday. 'Expect the current consolidation in gold prices to prove short-lived. Investors need more gold to serenely navigate rocky waters this year.'

"The analyst forecasts that increased equity volatility in 2019 will boost demand for gold in investors' portfolios.

"'Last year marked the start of rocky waters for U.S. and global equities, I expect more volatility in the course of 2019. This should eventually induce investors to position themselves more defensively, resulting in stronger haven demand and thus stronger gold ETF inflows,' Mikanikrezai said.

"'Another plus for gold this year is "the approaching end of the U.S. business cycle," the analyst pointed out. 'This should translate into stronger monetary demand for gold,' he said.

"Other positive signs for gold include increased pace of gold purchases and slowing rate of short-covering, Mikanikrezai added, citing the latest Commitment of Traders report and ETF investors activity.

"'The net spec length increased by 127 tonnes, moving from 326 tonnes (22% of open interest) on February 12 to 453 tonnes (29% of open interest) on February 19,' he said. 'Looking forward, I expect the speculative gold's spec positioning to move to an extremely bullish configuration ... The significant wave of speculative buying in favour of Comex gold would exert marked upward pressure on Comex gold spot prices.'

"Liquidating gold due to a likely end of a US-China trade war does not sound like a very prudent move. This is especially true considering the technical nature of the rally in equities since year-start, which was initially triggered by a dovish turn by the Fed and reinforced by policy relaxations from China." ("Gold's Dip Below $1,300 Is Temporary- Analyst," Anna Golubova, 03/07/19.)