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Gold Forecaster – Weekly #574: U.S. gold investors continue buying and the mood of the markets favor gold!

World gold markets finished the week in line with each other [Shanghai, London and New York] at around $1,235. The consolidation below $1,250 continues as this overhead resistance at that level sees a build-up of a foundation around $1,240. Exchange rates have been a large influence this last week as gold in the euro advanced and in the dollar weakened at one point.

What does appear to be happening is that uncertainties across the world are worrying investors and they are being seen to favor gold investments. Here we are talking about directly held gold bullion under the control of the investor, not ‘electronic gold’. This demand is growing, as reported by our friends in Swiss refineries, etc, who continue to be going flat out refining gold into metric formats for trading in markets in Switzerland and eastwards. It is most enlightening to hear that such Swiss gold people are not at all happy to receive dollars in payment, only euros or Swiss Francs. This tells quite a story!

With even Blackrock recommending gold in portfolios we expect more U.S. buying to follow in gold.

One of the most difficult features of financial markets today is the demand for short term performance even within monthly time slots.

Gold has always been for the long term outperforming all other investments over that time, but in the world today it’s the fund manager that meets trading demands that is deemed the best manager. Indeed, we have always seen that the best portfolio manager is measured over the medium to long term and is not a trader. Warren Buffett backs that and proves the point.

We have absolutely no doubt that if you measure gold from today over the next five years or longer, gold will outperform all other investments. Look back over the last decade and we prove our point.

Having said that, we expect to see gold, from today to the end of the year, likely outperform all other investments. Even Alan Greenspan has recently stated that gold is the ultimate insurance policy.

This seems more than appropriate in a world that is moving from dollar hegemony to a multi-currency monetary system as ‘popularism’ is spreading across the developed world. With French and German elections pointing towards change and an E.U. that Greenspan says is ‘not working’ gold seems to be a safe place to weather coming storms…

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Gold Forecaster #573: U.S. gold investors continue buying despite Trump’s statement that a new Tax regime is coming!

Shanghai returned last week and gradually gained momentum but only on one day did it lead the way, before President Trump said he was about to introduce a new fabulous tax regime and then the gold price faltered and fell $5 before falling another $10, before stabilizing and recovering to finish the week at $1,233.

Bear in mind that no physical sales of gold took place, but a small physical purchase happened in the Gold Trust last week in the U.S. 

What did happen was a High Frequency Traders raid on the gold price that involved no physical gold. 3,927 April gold futures contracts (paper gold) were dropped onto the COMEX gold market. This was 11.1 tonnes of ‘paper’ gold which hit the COMEX trading floor and electronic trading system in a 60 second window. The subsequent fall was not substantial, so we view it as primarily a response to a stronger dollar. 

What was important about the raid was that it had barely an impact on the gold price. Can we believe that such raids have lost their impact? It seems so!

The buying of gold into the U.S. based gold ETFs is persistent enough for the bullion banks to keep their books ‘long’ of gold. The potential for any shortage of open market stocks is great now, as the mood towards gold goes positive. So dealers and banks have re-positioned themselves for higher prices.”

Will the dollar move higher in the days, weeks and months to come. We know that the Fed and the Treasury as well as the government do not want a strong dollar. The ‘strong dollar’ policy is changing as the U.S. wants a globally competitive trade position in the world and a strong dollar goes against that. Hence, we see the rise in U.S. dollar and U.S. markets as being short lived.

Many may feel that with the U.S. raising rates in 2017 and a tightening of liquidity against a Europe and Japan loosening monetary policy will lead to a strong dollar. But we feel that until we can measure the impact of President Trump’s tax cuts and infrastructure spending, it is too early to conclude along those lines. As it is foreigners appear to have lost their appetite for U.S. Treasuries, so the U.S. may well rapidly increase its government deficits to provide such financing and move strongly towards adding liquidity to the U.S. monetary system…

 

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