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Higher Inflation Will Drive Gold Out Of Its Rut-ING - Christensen

Higher Inflation Will Drive Gold Out Of Its Rut-ING - Christensen

Release Date:  Friday, April 20, 2018

Gold and Silver Prices

Silver prices closed higher but gold ended lower on Friday as the uncertainty over geopolitical tensions weren't as high and made for a less compelling argument in the gold market.

"Gold prices inched lower on Friday and were headed for the first weekly decline in three weeks as expectations of higher U.S. interest rates and easing political tensions on the Korean Peninsula and Syria weighed on demand for the safe-haven metal." ("PRECIOUS- Gold slips as U.S. rate rise hopes, easing global tensions weigh," Reuters, 04.20.18.)

Gold ended the week down $12.20, closing at $1,337.60. Silver ended the week up $0.46, closing at $17.115.

Finally They're Getting It: Goldman Sachs and Famed Bond King Turn Bullish On Gold - Tumerkan

Metal assets, while cheap, is good to get in to as the U.S. dollar has a lot of downside and gold a lot of upside due to current market conditions. 

"Commodities and gold are finally getting the attention they deserve. Many of us contrarians and independent-thinking investors are fond of commodities in a portfolio - especially the commodity producers - in today's market.
"A few days ago, famed investor and CEO of Doubleline Capital - Jeff Gundlach - said he's very bullish on gold. He's known as the 'Bond King' - and when someone hailed as a bond king turns bullish on gold, that's a serious sign. . .
'We see a massive base building in gold. Massive. It's a four-year, five-year base in gold. If we break above this resistance line, one can expect gold to go up by, like, a $1,000. . .'

"…the big upside for gold is the U.S. Dollar weakening. And that's exactly what Jeff Gundlach believes will send gold up by "like, a $1000."

"The U.S. Dollar has a lot of negative asymmetry (big downside risk - little reward) in the foreseeable future.
'When you get a lousy year in the dollar, like last year, it's very typically followed up by another year that's bad just after,' Gundlach said.

 "Here are just a few of the big reasons:
Massive trade deficits - caused by Trump's tax cuts and huge spending plans. .

Flattening yield curve that's heading towards inversion - a classic recession indicator

And most importantly - the ramping up trade war with China that leaves us vulnerable to their 'nuclear option' of dumping $1.3 trillion in U.S. bonds.

"The investment thesis is clear - the further the U.S. Dollar falls, the higher gold and commodities will climb. That's why Jeff Gundlach is so bullish on gold - he understands the dollars bleak outlook.

"Another big name that's finally agreeing with this outcome is Goldman Sachs. According to them, the case for owning commodities has "rarely" been stronger. . .

"You want to be in the assets long before everyone else is; while it's cheap. As a recent example - think about the investors who hoarded bitcoin a year or so before it sky-rocketed. I will say it again - as I have for a long time - that the U.S. Dollar has more downside ahead, while gold has much more upside. Jeff Gundlach and Goldman Sachs finally agreed with this - and many more will. Sooner, rather than later. ("Finally They're Getting It: Goldman Sachs and Famed Bond King Turn Bullish on Gold," Adem Tumerkan, Palisades Research, 04.17.18.)

Higher Inflation Will Drive Gold Out Of Its Rut- ING - Christensen

Higher inflation and increasing market volatility will push gold prices up according to an ING commodity strategist.

"In a report Monday, Oliver Nugent, commodity strategist at ING, said that he thinks it's only a matter of time before gold prices push past $1,400 an ounce as markets are underpricing rising inflation risks.

"While the Federal Reserve is expected to continue raising interest rates this year, forecasting two more rate hikes, Nugent said that the central bank will remain behind the inflation curve, which would keep real interest rates low, supporting gold prices.

"'Our economists expect inflation prints to remain high and nudge closer to 3% into summer now that a distortion from cell phone data pricing drops out of annual comparisons, as well as support from a weaker dollar," he said. "Each positive data print will tempt gold closer to its higher range."

"…He added that there are a lot of investors sitting on the sidelines waiting for prices to break out.

"'The market is increasingly skewed to the upside but it will need to be nudged into taking outright positions through an initial breakout in prices,' he said.

"Along with higher inflation, ING is also bullish on gold as analysts see market volatility rising because of ongoing geopolitical turmoil.

"The Dutch bank is not just bullish on gold. Nugent said that he also sees potential for silver prices as the gold/silver ratio is too high…the ratio currently trading at 80.36 points. …silver…last traded at $16.74 an ounce, up 0.38% on the day.

"While the market has an abundant, liquid above-ground supply, Nugent said that bearish positioning in silver is unstainable." (Higher Inflation Will Drive Gold Out Of Its Rut-ING," Neils Christensen, Kitco News, 04.17.18.)

What's behind the big commodities rally, and why it could be just getting started - Cox

Many current events including geopolitical turbulence such as a possible trade war and market volatility has commodities, with gold as a focal point, moving upward.

"Threats of a trade war and continued signs of global growth are combining to create myriad opportunities for investors in one long-dormant asset class: commodities.

"In fact, the geopolitical turbulence and market volatility putting downward pressure on the stock market is working out just fine for the commodities market, which languished for years under slow economic conditions and a general trading malaise.

"One popular commodities index just hit a 2½-year high, and investors in the space see the trend continuing.
"'Long-term when you look at the global picture, it sets itself up for a measured supercycle,' said Mike Wilkins, commodities expert for Fidessa, a London-based trading technology provider. 'Beyond the rhetoric and saber-rattling, there is a good, compelling story for growth and continued uptake in the end for commodities, especially base metals.'
"Commodity booms bring bigger returns for traders and investors along with higher prices for consumers, contributing to expectations that inflation is about to accelerate.
"Bond king Jeffrey Gundlach, of DoubleLine Capital, went into this year forecasting that commodities would outpace stocks, and so far he's been right.
"There are multiple explanations for the current run, with some pointing to short-term bursts off headlines and others signaling longer-term trends about economic fundamentals. Another factor is the threat of a U.S.-China trade war that almost certainly would restrict global flows and push values higher.

"'Prices had been relatively depressed over the last 3½ years. It's been a down type of market mainly because we have dealt with at or near-record production just about everywhere around the globe,' said Mark Schultz, chief analyst at Northstar Commodity. 'That is now reversed, and you're starting to see things build back up.'

"Of course, the area that often takes the most focus in commodities is energy, and oil prices have been a tear that looks like it has legs.

"Another focal point in the commodities sphere is gold.

"The yellow metal is pushing higher this year, gaining more than 2.5 percent before dipping Thursday, and is considered a bellwether indicator of inflation. Rising interest rates often can spell trouble for the gold trade, but not this time around.
"'Normally inflation and gold have an inverse relationship. However, when inflation is rising more quickly than interest rates, causing real yields on government bonds to decline or turn negative, gold can flourish,' said Lindsey Bell, CFRA investment strategist. 'This is a key example of gold as a store of value.'

"Finally, there are trading patterns that are influencing commodities.
"Paul Ciana, technical strategist at Bank of America Merrill Lynch, said a number of chart formations are pointing to further price upside.

"'A rally so far [has been] led by energy and metals, the rallies in gold and silver are young while oil and copper have room to trend,' Ciana said in a research note. While he said a wider rally will depend on how agricultural commodities perform, a look at a broad index 'suggests commodity markets are on the verge of signaling a secular bull trend.'

"He further pointed out that commodities generally do well when the Federal Reserve is raising interest rates.
"The central bank already has enacted one increase this year and markets are betting on at least two and perhaps three more. Ciana said one of the few periods where commodities rose when rates didn't was in 2010-11." ("What's behind the big commodities rally, and why it could be just getting started," Jeff Cox, CNBC, 04.19.18.)

Brace for a 10-15% market correction this year, warns financial advisor - Fox

A serious market correction is likely to happen from now to year end so it’s important to keep a well-balanced portfolio according to United Capital CEO.

"United Capital CEO Joe Duran is sticking to his prediction of another correction for the S&P 500 before the end of the year.

"He believes that while the "micro story" for individual companies is good, the macro picture - like rising interest rates and a weak dollar - isn't so bullish.

"'You should expect a 10 to 15 percent decline in the next nine months, from here to year-end and you should be allocated to protect yourself,' he said Thursday on CNBC's "Power Lunch."

"That means making sure your portfolio is balanced appropriately for your risk level, Duran said.

"The market has already had one correction earlier this year. On Feb. 8, the Dow Jones industrial average, S&P 500 and Nasdaq all closed about 10 percent below record highs set Jan 26. It was the first pullback of that magnitude since 2016.

"Duran isn't alone in warning about another drop in equities.

"In March, Allianz CEO Oliver Bate said he expects a 'more severe correction over the medium to long term' thanks to high market valuations and jittery investors. And after the correction in February, Morgan Stanley strategist Andrew Sheets said it was just an 'appetizer, not the main course."

"Duran said market declines typically happen when rates are going up, which is what happened in February. The move higher caused investors to fear the possibility that inflation was rising faster than expected." (Brace for a 10-15% market correction this year, warns financial advisor," Michelle Fox, CNBC, 04.19.18.)