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When Nearly Everything’s A Winner, Gold Investors Get Antsy – The Denver Post

When Nearly Everything’s A Winner, Gold Investors Get Antsy – The Denver Post

Release Date:  Friday, September 22, 2017

Precious metals fell this week after the Federal Reserve announced plans to continue interest rate hikes and begin unwinding the balance sheet next month.

“Both policy measures can have the effect of tightening monetary policy and raising rates. Higher rates in turn can make gold, which doesn’t bear a yield, less attractive compared with assets with rising yields.”

While tensions between the US and North Korea continue, gold fell below the key psychological level of $1,300 this week. Traders will continue to heed the remarks of both leaders, looking for clues to judge the extent of gold’s rally.

“The war of words over North Korea continues to escalate…This sparked a move of some capital back into defensive havens sending gold…upward. That being said, gold remains below $1,300 a level it would need to retake to indicate a serious move has started and not just a trading bounce,” (“Gold Tilts Higher On North Korea’s Threat, But On Track For Second Weekly Decline.” MarketWatch 9.22.17)

Gold ended the week down $22.10, closing at $1,298.10. Silver prices closed at $17.08, down $0.56.

When Nearly Everything’s A Winner, Gold Investors Get Antsy – The Denver Post
“In a world where nearly every investment is rising, so is gold. But a big part of why many investors are buying gold is that they’re worried those other investments, such as stocks and bonds, are due for a drop.

“Will Rhind is a former executive at the largest exchange-traded fund backed by gold bars, SPDR Gold Shares. He recently started a rival ETF, GraniteShares Gold Trust, and talked about what’s been behind this year’s 13 percent rise for gold. If that performance holds, it will be the best year for gold since 2010. Answers have been edited for clarity and length.

“Q: Is it odd or disconcerting that gold and stocks are rising at the same time? Isn’t gold at its best when everything is falling apart?
“A: Definitely not odd, but you have to understand why it is doing what it is doing. The main reason has been the decline of the U.S. dollar since the beginning of the year. Historically, gold has had an inverse relationship with the dollar because the lens that a lot of people view gold through is as a currency and not as a commodity.

“What’s also been helping gold prices is geopolitical tensions, such as the North Korean situation. Gold is one of those safe-haven assets that people have historically gone to in times of stress.

“Q: But the Federal Reserve is raising rates and inflation is low. Haven’t each of those historically dulled the appeal of gold as an investment?
“A: Although interest rates are rising, they’re not rising in a large way. We’re talking about very nominal rises, and interest rates today are still at historical lows versus where they were 10 years ago. From that perspective, that’s not really going to impact gold much at all. And that’s shown in the price.

“On inflation, this is not the consensus, but you’ve got some people starting to question the last 40 years of a disinflationary environment and wondering if this is a turning point and are we now moving into an inflationary phase.

“Q: Gold is still down about 30 percent from its peak six years ago. Have investors reframed what they expect from an investment in gold?
“A: Gold hasn’t escaped the bear market in commodities generally, against the bull market of the dollar. When people look at asset classes that are trading at or near all-time highs, gold and commodities are very much not among those asset classes.

“As to whether you can expect good performance from gold going forward, it is impossible to tell, but we’re at a level that looks to be reasonable given where we’ve come from.

“I think what’s happening is there is a movement of capital out of some of these more traditional asset classes (like stocks and bonds) and into gold. As bond prices have increased, and equities have increased, people might be looking to rebalance that. You’ve got people really nervous about the level of the stock market and the bond market, and they are looking to insulate their portfolios to the extent that they can if there’s a correction or worse in the market. People are looking for ways to diversify their investments, and gold is probably the largest, most liquid asset class in the world that is not correlated to stocks.

“You’ve started to see smarter money moving into gold, famous hedge fund managers talking about that the last few weeks. (Ray Dalio, founder of Bridgewater, the world’s largest hedge fund, suggested in a recent blog post on LinkedIn that investors keep 5 percent to 10 percent of their assets in gold to protect against a market he sees as increasingly risky.)” (“When Nearly Everything’s A Winner, Gold Investors Get Antsy.” The Denver Post 9.21.17)

Fed's House Of Fools Flattens Gold - Kitco
“Wednesday’s Fed announcement was another in the long line of fool’s gold decisions. We knew that they were not going to hike rates and that they would discuss the unwinding of their balance sheet. Eighteen hours later translators are still trying to figure out what Janet Yellen said. Dr. Yellen talked a lot using the word idiosyncratic – at least a dozen times through her speech. 

“The metals did not like what the Fed had to say. Gold broke hard on the initial announcement and continues lower this morning, violating the $1,300 support level and making a new 3-week low. Silver took a hit as well, falling below $17. Gold support is now $1,290, silver $16.80. They better hold these levels or it could get ugly.
“The confusion should resolve today or tomorrow and hold support. The Fed’s action should create uncertainty and currency problems which is bullish for the metals. This is one of the problems of letting academia try to run a business, they are clueless. You can’t run the economy from a text book.” (“Fed's House Of Fools Flattens Gold.” Kitco 9.21.17)

Russia Is Largest 'Official' Gold Buyer – WGC
“Russia is the No. 1 ‘official’ gold buyer in the world, with the country’s central bank acquiring 201 tonnes of the precious metal in 2016, the World Gold Council (WGC) said. In sharp contrast, Russian private purchases of the bullion remain extremely low.

‘“Russia is the largest official purchaser of gold in the world and the third-largest producer. But it has yet to reach its potential on international investment markets,’ wrote Tatiana Fic, director of central banks and public policy for the WGC, in the September issue of Gold Investor.

“The country’s central bank surpassed all others with its purchase of 201 tonnes of gold last year, beating the People’s Bank of China, which bought 80 tonnes and came in second, followed by the National Bank of Kazakhstan, which acquired 36 tonnes, the WGC pointed out.

“Overall, the Russian central bank added a staggering 1,250 tonnes to its gold reserves during the past decade, increasing the total to 1,700 tonnes, Fic specified.

“Reserve diversification is one of the primary reasons driving Russia to buy gold, according to Elvira Nabiullina, governor of the Bank of Russia.

“The yellow metal is also a hedge against political and legal risks, Dmitry Tulin, the first deputy governor, stated in the past.” (“Russia Is Largest 'Official' Gold Buyer.” World Gold Council 9.21.17)