Gold: both Wall Street and Main Street are expecting to see higher prices in the near-term ahead of employment report – Analysts

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Sergey Golubev, 2015.05.31 15:44

Weekly Gold Market Review (adapted from goldsilverworlds article)

"China has announced the establishment of a new international gold fund with over 60 countries as members. The fund, which expects to raise 100 billion yuan ($16 billion), will develop gold mining projects across the economic region known as the New Silk Road. The project will facilitate the central banks of member states to acquire gold for their reserves more easily.

While the conventional wisdom holds that rising real rates would strengthen the dollar, which would in turn pressure gold, Cornerstone Macro believes otherwise. In a recent piece of research, it demonstrates how global growth determines the direction of the U.S. dollar, not the U.S. economy.  Only when the U.S. economy briefly decouples, does the dollar strengthen, but this is rarer now as global trade is 60 percent of world GDP and emerging market currencies have a 69-percent weighting in the Trade-Weighted U.S. Dollar Index."

"2015 has been a busy year for acquisitions as the value of gold deals jumped more than 150 percent in the first quarter compared to a year earlier. Producers are seizing on a wave of mine sales and tumbling asset valuations to expand output or secure growth projects. This week Barrick Gold announced that it signed a strategic partnership with Zijin Mining Group which will take a stake in its Porgera Joint Venture gold mine in Papua New Guinea. Under the deal, Zijin will acquire 50 percent for $298 million in cash.  It appears that Zijin received a very favorable price on this transaction as Barrick is hoping to bring in a partner on other South American assets which need a capital injection.  Additionally, Evolution Mining has agreed to pay $550 million for Barrick’s Cowal mine in Australia’s New South Wales which went for considerably more than where we see the relative valuation of this asset."

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Sergey Golubev, 2015.06.01 06:51

Gold Trades in Narrow Range in Asian Trade - says Gnanasekar Thiagarajan, director of Commtrendz Research (based on wsj article)

Gold prices are trading in a narrow range in Asian trade.

The precious metal has largely been taking cues from the expected timing of Federal Reserve’s interest rate increase. Data issued late last week showed the U.S. GDP fell 0.7% in the first quarter, which traders are interpreting to mean that a rate increase may come only late this year.

However, the dollar has held steady resulting in little price impact on gold as the two typically have an inverse relation with each other.

“The only trigger for gold could be Greece, if it signals a debt default,” says Gnanasekar Thiagarajan, director of Commtrendz Research. Investors typically buy the precious metal during times of geo-political uncertainty. Spot gold is currently trading up 65 cents at $1,190/oz.

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Sergey Golubev, 2015.06.01 08:43

Gold Market To Remain Range Bound Ahead Of Employment Report (adapted from kitco article)

Sean Lusk, director commercial hedging division at Walsh Trading said that gold has the potential to pop higher this week but prices will remain within the $100 range between resistance at $1,230 an ounce and $1,130 an ounce. “Right now there is a lack of conviction to take gold either way; I don’t think that is going to change,” he said.

Bart Melek, head of commodity strategy at TD Securities, said that although there is a lot of important economic reports to be released this week, unless the data is widely outside of expectations, it won’t change the perception that the Fed will still hike rates in the second half the of year. “I just don’t think we will see a break out next week,” he said. “So long as the data is not horrible the expectations will remain that the Fed will raise interest rates in September,” he added.

George Gero, senior vice president at RBC Wealth Management, said that he is slightly bullish on gold as the market has already priced in higher interest rates, limiting gold’s downside; however an increase in wage, in Friday’s employment report could be seen as positive for gold because it is considered inflationary.

Ronald-Peter Stoeferle, fund manager at Incrementum AG and author of the In Gold We Trust report, agreed that the wage data in the employment report will be an important indicator for the gold market in the near-term.

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Sergey Golubev, 2015.06.02 06:39

Gold Gains Allure as U.S. Economy Stumbles (based on wsj article)

“Gold is still cheap relative to fixed income [assets]…gold could really pop and move,” said Nicholas Johnson, who helps manage $20 billion invested in commodities at Pacific Investment Management Co.

Mr. Johnson wagered that gold prices would rise while 10-year Treasury inflation-protected securities, which had rallied this year, would pull back. The price of 10-year TIPS is up 2.52% this year, according to data from Tradeweb, while gold prices are up 0.4%.

Investors buying gold aren’t expecting another global recession. Instead, they say that years in which gold was passed over for other assets has pushed the metal’s price too low, and now it is ripe for a rebound.

Gold prices tumbled 29% in 2013 and 2014, a selloff driven largely by the Federal Reserve’s exit from its post-financial-crisis stimulus measures and expectations for a rise in interest rates.

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Sergey Golubev, 2015.06.02 13:55

Gold And Silver Charts For June 2015 (based on goldsilverworlds article)

"The chart notes indicate a greater likelihood for another dollar rally higher, and an additional reason comes from the base out of which this fiat paper currency has rallied.  You can see how the “dollar” index has been in a base trading range (TR) since 2006, on this chart, and said base provides the impetus to carry price much higher than has developed, to date."

"Higher time frame charts are for a truer reflection of market context and direction, for it takes considerably more time and effort to change the direction of monthly, and even higher time frames, to change.  Charts can be like a mosaic where you can see something unseen from one viewing to another.  We attribute this to the fact that when one makes a presentment of a particular point of view, that view takes on a bias, and that bias will block out information that does not support what is being presented.  This point of view may be too in-house, but there is a sound basis for it.

The fact that price has not rallied higher since the December swing low, coupled with a demonstrated inability to break overhead resistance [horizontal line], keeps the December low in question and positioned to be broken.  Too soon to tell but something of which to be aware."

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Sergey Golubev, 2015.06.03 06:59

Gold Prices Close Higher on Weaker Dollar (adapted from wsj article)

Gold prices edged higher Tuesday, boosted by a weaker dollar.

Gold for August delivery, the most actively traded contract, closed up 0.5% at $1,194.40 a troy ounce on the Comex division of the New York Mercantile Exchange.

The possibility of a deal between Greece and its creditors boosted the euro against the dollar Tuesday, with the single currency gaining 2.1% to $1.1161, its highest level in almost two weeks. Stronger-than-expected eurozone consumer price data for May helped the euro extend its gains. A softer dollar is good news for gold, which is priced in the U.S. currency and becomes more affordable for foreign buyers when the greenback weakens.

“The falling dollar has been the main mover for gold today,” said George Gero, a senior vice president with RBC Capital Markets Global Futures. “There is a good potential for a Greek deal this week, which would signify more euro strength and more upside for gold.”