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Gold likely to rise to $1,450 an ounce by the end of 2018 - Scrap Register

Gold likely to rise to $1,450 an ounce by the end of 2018 - Scrap Register

Release Date:  Friday, April 6, 2018

Gold prices ended higher on the last day of the week due to the stock market’s continuing volatility and the U.S. softened dollar as a result of the continuous fear of a trade war between the United States and China. 

“Gold prices rose on Friday as Wall Street stocks tumbled and the dollar fell as rhetoric from U.S. President Donald Trump and Chinese officials fed worries about a possible trade war, and after U.S. jobs data came in weaker than expected. U.S. stocks fell…after Trump on Thursday threatened to slap $100 billion more in tariffs on Chinese imports…Falling stock prices dragged the dollar against the yen and the euro.” (PRECIOUS- Gold rises as dollar, equities fall on trade fears, U.S. data,” Reuters, 04.06.18.)

Gold ended the week up $6.60, closing at $1,337.30. Silver ended the week up $0.65, closing at $16.365

Gold likely to rise to $1,450 an ounce by the end of 2018 - Scrap Register

One of the world’s leading precious metals consultancies, Metals Focus, sees similar trading ranges for gold in the second quarter as the first but sees it breaking much higher by the end of the year.  

“Many of the challenges that gold faced in 2017 persist, including investor commitment to equities despite recent volatility, Metals Focus said. Recent gains in Treasury yields have also hindered the metal, although… gold is benefitting from the fact that few market participants are outright bearish, meaning they are not actively shorting the metal. ‘Based on the above, we believe that the range-bound conditions, which gold has experienced during the first three months of this year, are likely to also persist during the second quarter’, Metals Focus said in the report. ‘Indeed, our projections call for an almost identical trading range of $1,290-$1,360 and a period average that is virtually flat quarter on quarter. Beyond that point, however, we continue to see scope for the gold price to break higher, potentially testing $1,450 before the end of this year’…

“Factors likely to eventually boost gold include slower-than-expected economic growth in the U.S., renewed U.S. dollar weakness, real short-term interest rates remaining negative, and a lack of material upside in the stock market, with eventual corrections, Metals Focus said.

“Nikos Kavalis, director of Metals Focus, also commented that the twin U.S. trade and fiscal deficits ‘will lower investor appetite for bonds and the yield curve may flatten further’, thereby benefitting gold…when, rather than if, equities correct, we will still be faced with depressed yields. At this point, investor rotation back into gold, even on a modest scale, should help take it to around $1,450 by year-end’. “ (“Gold likely to rise to $1,450 an ounce by the end of 2018,” Scrap Register News, New York, 04.05.18)

Bond King Gundlach sees an unusual trend in gold. Here’s why it could end soon - Lahiff, CNBC

The U.S. dollar, trade war and bonds may all potentially be catalysts for a rise in gold. 

"‘Gold can't seem to get any momentum above $1,350, yet it doesn't drop. So that's been consolidating sideways,’ Jeffrey Gundlach, DoubleLine CEO and Wall Street's "bond king," told CNBC’s Halftime report…’It will be interesting to see which way they break.’

"’You've really got to back away from the forest to really see these trees’, Bill Baruch, president of Blue Line Futures, told "Trading Nation." "This gold market bottomed in 2015 and it's had higher lows in 2016, 2017.

“Gold hit the year's peak of nearly $1,363 an ounce on Jan. 25, the day before the S&P 500 reached a record high. The technical bull flag sign shows a strong uptrend in an asset price, such as gold's rise through mid-December to the end of January, followed by a period of consolidation. Prices have held within a fairly narrow trading range of $1,300 to $1,360 this year.

“’Gold will "have a big second half of the year. I expect it to break out above $1,400 sometime before August or September," said Baruch. ‘The dollar's going to be a catalyst and now the trade war can also be a big catalyst. The U.S. dollar should head lower this year, potentially declining another 5 percent to 7 percent…The recent passage of a $1.3 trillion spending bill and a spike in defense spending will likely pressure the dollar, triggering a rally in gold’…

“A rise to $1,400 an ounce would represent a nearly 5 percent increase from current levels. Gold has already increased 2 percent this year.

“Larry McDonald, editor of the Bear Traps Report, is also bullish on gold prices as investors eschew bonds. When stocks sell-off, bonds are often seen as a safe haven in which to park money. That relationship appears to have broken down this year as a multidecade bond bull market comes to a close and the government puts to auction a record amount of debt.

"’That's going to create a flight of capital out of bonds, out of equities, and into alternatives like gold. I'm extremely bullish at these levels’, said McDonald.” (“Bond King Gundlach sees an unusual trend in gold. Here’s why it could end soon,” Keris Lahiff, CNBC 04.05.18)

Guggenheim investment chief sees a recession and a 40% plunge in stocks ahead -Cox, CNBC

Drop in the market and recession coming soon according to Scott Minerd.

“Guggenheim's head of investing sees a tough road ahead for the market and economy, with a sharp recession and a 40 percent decline in stocks looming.
“Scott Minerd, who warned clients in a recent note that the market is on a "collision course with disaster," expects the worst of the damage to start in late 2019 and into 2020.
“Along with the decline in equities, a rise in corporate bond defaults is likely as the Federal Reserve raises interest rates and companies struggle to pay off record debt levels.
“’For the next year ... equities will probably continue to go up as we have all these stock buybacks and free cash flow.’ Minerd told CNBC's Brian Sullivan in a "Worldwide Exchange" interview. ‘Ultimately, when the chickens come home to roost and we have a recession, we're going to see a lot of pressure on equities especially as defaults rise, and I think once we reach a peak that we'll probably see a 40 percent retracement in equities’.
“Once short-term rates hit 3 percent, that will be enough to drive up defaults and cause a recession, he added.

“From there, Minerd figures the Fed will get involved, going back to the quantitative easing policies that helped pull the economy out of the last recession and pushed a surge in stock market prices but also coincided with lackluster economic growth.

“All that will do is defer the problem into the future and allow excesses to continue to build and the collision course that we're on will just come later and probably be worse," he said.” (“Guggenheim investment chief sees a recession and a 40% plunge in stocks ahead,” Jeff Cox, CNBC 04.06.18)

Gold Market Shouldn’t Fear Rising Real Rates- Axel Merk - Christensen, Kitco News

Gold is a portfolio diversifier and prices expected to rise even with real interest rates going up.

“In a telephone interview with Kitco News, Axel Merk, chief investment officer and president of Merk Investments, said that he sees real rates moving modestly higher this year, but added that he also expects gold prices to climb as well.

“In the past few years, gold has had a strong negative correlation to real interest rates, ashigher bond yields increase gold’s opportunity costs as a non-yielding asset.

“But, that correlation has broken down. So far this year, U.S. Treasury data show real interest rates rising from 68 basis points to 86 basis points - a rise of more than 26%. Yet, gold prices have also increased, with June gold futures last trading at $1,328.50 an ounce, up 1.7% since the start of the year.

“Ultimately, Merk said that as correlations break down, investors need to rely more on their convictions and ignore the “noise” in the marketplace.

“Merk pointed out that even in an environment of higher real interest rates, he still sees the potential for gold as a portfolio diversifier. He said that gold remains an attractive alternative as volatility continues to roil all financial markets, adding that in the first quarter both bond markets and equity markets saw a price drop.

“’As volatility rises everything is going to be expensive and there is no easy place to hide, especially as correlations break down,’ he said. ‘This is why people are looking at assets like gold. People are looking to diversify.’

“Going hand-in-hand with rising market volatility, Merk said that he likes gold as a safe-haven asset because of rising geopolitical tensions as the threat of a potential trade war between the U.S. and China increases.

“He described gold as the “neutral global currency” that would benefit if a global trade war escalates and the U.S. dollar suffers.

“’If you introduce trade tensions that is usually bad for countries with a current account deficit and gold can move higher in that environment’, he said.” (“Gold Market Shouldn’t Fear Rising Real Rates-Axel Merk,” Neil Christensen, Kitco News, 04.06.18)