Real time market

Don't Be Afraid of Fed, Gold Price To Touch $1600 - Aslam

Don't Be Afraid of Fed, Gold Price To Touch $1600 - Aslam

Release Date:  Friday, May 4, 2018

Gold and Silver Prices

Gold prices went back and forth between small gains and losses the past week, closing slightly higher on Friday but ultimately closed down for its third consecutive week after jobs report and dollar rise. "...tallied a loss for a third week in a row as investors showed a lukewarm reaction to the monthly U.S. jobs report.
"The data came in a bit softer than expected in some areas, offering the Federal Reserve little reason to turn more aggressive with interest-rate hikes, but still largely support the Federal Reserve's path toward tightening policy.
"Trade issues also remain in focus as U.S. and Chinese officials were meeting for discussions on tariffs and other issues. Worries about trade hostilities between the top two global economies have roiled financial markets in recent months, underpinning some demand for haven gold." ("Gold Suffers slips, logs 3rd straight weekly loss after jobs report," Myra P. Saefong, Market Watch, 05.04.18.)

 Gold ended the week down $8.00, closing at $1,316.00. Silver ended the week with no movement from last week, closing at $16.55.

Don't Be Afraid of Fed, Gold Price To Touch $1600 - Aslam

Gold's three elements- inflation hedge, safe haven and dollar effect- all reasons for gold to move to $1600 by the end of the year.

"Gold traders really needed support from the Fed and yesterday the Federal Reserve Bank said what many wanted to hear; there is no change in their monetary policy stance. The significance of the Fed statement was in the phrase where the Fed emphasized that they are not going to deviate from their gradual rate hike path. This particular statement pushed the dollar index lower and we saw a higher move in the gold price yesterday...

"Gold is an interesting commodity, it acts like a safe haven when there is too much fear in the market, especially geopolitical concerns...But if we remove the safe haven component out of the gold equation (the equation for me has three key elements; inflation hedge + safe haven + dollar effect), the price of gold would be very different from where it is now...

"So, removing the geopolitical component from the equation, I think the true value of Gold must be circa $1150 or even below the $1K mark. Remember those days when the Fed started to talk about winding down their QE? We saw a massive sell-off in the gold price and we touched the levels which I mentioned before. What is the monetary policy stance since then? Has it gone more dovish or hawkish? Of course, hawkish!

"Hence, it is safe to say that the dollar effect isn't that strong, but the correlation is there, and it is a strong one. If the Fed even adopts a more hawkish stance, I do not think it is going to crush the gold price anytime soon.

"It must be the geopolitical concerns which are keeping the gold price higher despite the fact that Trump has been officially nominated for Noble Peace Prize by House Republicans...I think the situation in the Middle East is of grave concern. Israel has ranched up the tensions with Iran and the geopolitical triangle; Iran, Russia, Turkey, Qatar and China one side and Israel, Saudi Arabia, US and its Allies on another side, has the potential to create a World War III. In this context, any pullback in the gold price is a perfect opportunity to buy.

"Another reason that I am bullish on gold is gold-oil ratio...and its move towards it mean. If history repeats itself, then we are about to see some serious explosive move in gold . Back in December 2016, it was near 20 and the subsequent move in the price pushed was from $1127 to $1350. The same ratio is trading at 19 now, a level not seen since June 2015. Now, again, if history comes into play (or if oil prices face a major correction), I am expecting the gold price to move all the move to 1600 by the end of this year." ("Don't Be Afraid Of Fed, Gold Price To Touch $1600," Naeem Aslam, Forbes, 05.03.18.)

Gold Bounces Back as Dollar Retreats - Ramkumar and Hodari

Gold remains a hedge against inflation and market volatility.

"Gold rebounded from a recent downturn Thursday, lifted by a pause in the dollar's recent rally.

"Front-month gold for May delivery added 0.6%, to $1,310.70 a troy ounce...With the dollar surging and worries about higher interest rates mounting, prices had fallen in eight of the previous 10 sessions entering Thursday, though essentially staying in their year-to-date range of about $1,305 to $1,360.

"The precious metal becomes more expensive to overseas buyers when the dollar grows stronger and struggles to compete with yield-bearing assets such as Treasurys as borrowing costs rise. A recent shift in global growth momentum back to the U.S. and firming inflation have more investors betting that the Federal Reserve will raise interest rates three more times this year.

"The Fed left interest rates unchanged Wednesday and gave no indication that it plans to deviate from its previous projection of two more increases...

"Still, some analysts who had feared a more aggressive statement said the latest signal from the Fed was encouraging for holders of gold and other assets that tend to struggle when borrowing costs rise.

"On Thursday, the WSJ Dollar Index, which tracks the U.S. currency against a basket of 16 others, was down 0.4%...

"'That's really what has driven the price of gold," said Chris Gaffney, president of EverBank World Markets. "The question is how long this rally will last. I still think we're within a weakening trend of the dollar that started in the beginning of 2017.'

"Analysts will be closely watching Friday's jobs report for the latest reading on the U.S. economy. Some think a pickup in wage growth that hints at rising inflation could reinforce expectations for higher interest rates.
"Still, some investors bullish on gold think the metal can withstand higher rates if consumer prices rise or geopolitical risks mount. Some money managers use the metal as a hedge against inflation and market volatility." (Gold Bounces Back as Dollar Retreats," Amrith Ramkumar and David Hodari, The Wall Street Journal, 05.03.18.)

Gold Will Do Well With Fed Focused On 'Symmetric' Inflation- Axel Merk - Christensen

Axel Merk, CEO of Merk Investments, bullish on gold with inflation and the equity markets.

"Although interest rates are expected to move higher in June, one fund manager said that the currency environment is still positive for gold as the Federal Reserve has no intention of getting in front of inflation pressures.

"For gold investors, the key phrase from the Fed's statement on Wednesday should have been: "Inflation on a 12-month basis is expected to run near the Committee's symmetric 2 percent objective over the medium term," Axel Merk, chief investment officer and president of Merk Investments, told Kitco News in an interview focused on the Fed's monetary policy decision.

"'The committee is emphasizing that it is okay if inflation rises above its 2% target,' Merk said. 'This is a strong indication that the Fed doesn't believe it has to get ahead of inflation. I think gold will do well in this environment.'

"Merk explained that rising inflation pressures will ultimately keep real interest rates low even as nominal rates rise. Gold can benefit in this environment because as a non-yielding asset it has relatively low opportunity costs.

"'It's not like there is going to be runaway inflation, but in a context of valuation, gold is worth considering compared to other assets,' he said.

"But, interest rates are only one part of the investment argument for gold. Merk said that he also likes the yellow metal in an environment of falling equity markets. He added that investors are starting to realize that equities are becoming expensive as volatility rises." ("Gold Will Do Well With Fed Focused On 'Symmetric' Inflation, Axel Merk (interview)", Neils Christensen, Kitco News 05.03.18.)

 You Must Own Gold or You Will Lose a Third of Your Retirement Savings - Garret

" is not too late to invest in gold and make a profit at any age. Quite the contrary, with the market showing the early signs of a correction, it is, in my humble opinion, a perfect time to invest in precious metals.

"The first rule of successful investing is to buy assets on the cheap, not when they are peaking...

"The reality is that stocks and bonds have been in a major uptrend for 9 years and 20+ years respectively, and so are overdue for a correction. Gold, on the other hand, peaked in 2011 at $1,900 and has only recovered part of its loss so far.

"It's ironic that people were bullish on gold when it hit $1,900 and turned bearish when it dropped to $1,100.

"I believe a recession is due within the next year. As soon as the markets tumble, the Fed will resume quantitative easing. In turn, precious metals will continue the rally that was halted after the end of QE3 in 2010.

"A more important question you should ask yourself, especially if you are close to retirement, is this: Can I afford to lose 30% or more of my retirement savings if the stock market crashes? Do I have a hedge or Plan B in such a scenario? That's where gold comes in handy...

"Most investors, including myself, buy physical gold not to make a profit, but to hedge against inflation, stock market crashes, currency devaluation, and all sorts of financial crises.

"The reason is that gold has retained its value for 5,000 years. It has been a unit of exchange and a store of value since the dawn of humanity.

"Another advantage is that gold is not correlated to the stock market...

"As far as choosing between gold coins vs. gold bars, both are good investments..." ("You Must Own Gold or You Will Lose a Third of Your Retirement Savings," Olivier Garret, Newsmax, 05.04.18.)