gold price

Gold rises as a safe haven when investors fear a recession, inflation increases or the U.S. dollar plummets, making the precious metal cheaper for foreign investors.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

Well, none of these things are happening right now. Indeed, quite the opposite is happening. Gold prices fell to their lowest level in nine months. What’s driving gold’s decline?

Gold prices hit a nine-month low

Gold prices hit a nine-month low. Source: MetalMiner analysis of @stockcharts.com data.

The Case For A Bull Stock Market

To be honest, I’ve been pretty skeptical of the U.S. stock market. Markets indexes have traded sideways for almost two years. Still, they have avoided a severe bear market. The day Donald Trump was elected, markets opened sharply lower as fear consumed traders. But stock markets love to do the unexpected and indexes are now back to trading in record territory.

S&P 500 surges following Trump victory

The S&P 500 surges following the Trump victory. Source: MetalMiner analysis of @stockcharts.com data.

Such action is a hint that equity trading desks and large funds aren’t finished buying stocks yet. The question is: will Donald Trump’s presidency for the next four years be just what the doctor prescribed to keep this aging bull stock market going, even after seven-plus years of gains behind its back? Could the rise in equities even accelerate?

That’s too big of a guess. However, going back in history we noticed that in 1982, the stock market was on what it looked like the cusp of a major bull market. But soon after, the new president — Ronald Reagan — slashed taxes and unleashed a super bull market that lasted until the year 2000.

Not saying that history will precisely repeat itself, but the investing crowd is already making some strong bets even before Trump becomes president in January. So far, that hasn’t helped gold as a safe haven.

The US Dollar Hits a 13-year High

Perhaps, the biggest factor driving gold prices south is a surging dollar.

Dollar Index rises to the highest levels in 13 years

The US dollar Index rises to its highest levels in 13 years. Source: MetalMiner analysis of @stockcharts.com data.

The U.S. Dollar Index, which tracks the performance of the dollar against a basket of currencies, continues to rise following President-Elect Donald Trump’s victory.

Investors expect Trump’s proposals to boost fiscal spending, cut taxes and loosen regulation. They also believe he will accelerate economic growth and boost inflation, bolstering the case for the Federal Reserve to raise U.S. interest rates. Expectations for an interest-rate hike in December’s meeting have risen to more than 90%, up from 30% at the beginning of the month. Higher rates make the currency more attractive for yield-seeking investors.

Two-Month Trial: Metal Buying Outlook

A rising dollar depresses commodity prices, especially precious metals. It does have less of an effect on more economically-sensitive groups like energy and industrial metals. Indeed, industrial metals are on the rise despite a strong dollar. This is because the dollar is rising on expectations of higher rates down the road but, at the same time, metal prices are getting an additional boost because of Trump’s plans to spend big on the nation’s infrastructure. However, gold’s demand won’t be affected by infrastructure spending. As a result, investors are left without reasons to buy gold at this moment.

For full access to this MetalMiner membership content:
Log In |

Last night, Republican nominee and developer Donald Trump was elected the 45th President of the United States.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

Gold jumped nearly 5% to $1,337.40 an ounce early Wednesday to its highest in six weeks as investors snapped up safe havens. This was gold’s biggest single-day gain since June 24 when it rose as much as 8% when Britain decided to leave the European Union. It closed up 4.8% that day. However, prices almost immediately began to retreat this morning. It’s back below to $1,281.50/ounce as of this writing (10:45 AM Central), near its closing yesterday of $1,275.80/ounce.

A Trump win, which many believe leads to economic and global uncertainty, may also push the  Federal Reserve to hold off from raising interest rates next month.

Financial markets are beginning to believe the Federal Reserve is finally serious about increasing interest rates.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

At least, that’s the simplest explanation for rising treasury yields and the U.S. dollar index, which measures the greenback vs. a basket of major currencies, hitting the highest level in seven months.

US Dollar Index hits 7-month high

The U.S. dollar Index hits a seven-month high. Source: @stockcharts.com.

While the Fed has repeatedly pronounced its intentions to raise rates, markets took those announcements with a grain of salt, pricing in a lower future rate than what the Fed was promising.

Fed Turns Hawkish

However, since October, the 10-year Treasury yield has risen significantly as markets now see a 67% chance of a rate hike in the December meeting. Higher interest rates make the dollar more attractive to yield-seeking investors. Moreover, the dollar rose as most other major world currencies slid, particularly the British pound, which was depressed by Brexit concerns.

Two-Month Trial: Metal Buying Outlook

A rising dollar has a negative impact on metal prices. Metals are priced in dollars and when the value of the dollar rises, it takes more more of them to buy metals. Another reason is that when the value of the dollar rises, foreign buyers have less buying power, typically causing demand for metals to shrink.

Gold plunges as dollar rises

Gold plunges as the dollar rises. Source: MetalMiner analysis of @StockCharts.com data.

This is particularly true in the case of gold and something we mentioned in September. Recently, gold prices fell to a four-month low as the dollar rose.

What This Means For Metal Buyers

The dollar is not the only thing that moves metal prices but it is important. If the Fed raises rates this year that would likely strengthen the dollar, adding pressure to metal prices. On the other hand, if future Fed decisions disappoint, that would weaken the dollar, having a bullish effect on metal prices.

For full access to this MetalMiner membership content:
Log In |

The IMF has downgraded its U.S. growth outlook and Canada’s Goldcorp has been forced to shut down one of its largest mines in Mexico.

IMF Downgrades U.S.

The International Monetary Fund is downgrading its forecast for the U.S. economy this year and warns that political discontent threatens global growth.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

The IMF on Tuesday cut its estimate for U.S. economic growth in 2016 to 1.6% from the 2.2% it had predicted in July. The American economy grew 2.6% in 2015. The fund’s dimmer outlook for the U.S. occurs even as the Federal Reserve is thought to be preparing to raise interest rates in December.

The global economy will expand 3.1% this year, it said — the same as forecast in July.

The IMF described worldwide growth as “subpar,” with a slowdown in the U.S. and other advanced economies being offset by slightly stronger output in developing and emerging nations.

Goldcorp Shuts Down Blockaded Mexican Mine

Goldcorp Inc. said on Monday it was temporarily shutting down its Peñasquito gold mine in Mexico as it was unable to safely continue operations due to a week-long blockade by a trucking contractor, sending its shares down nearly 5%.

Two-Month Trial: Metal Buying Outlook

The world’s No. 3 gold miner by market value said it was unable to bring in food, water and fuel for the 750 people on the site, which has been blockaded by a contractor concerned about losing business due to efficiency improvements at the mine.

India will complete the second phase of its mining auctions later this month, after the first round last year received a lukewarm response. Going under the hammer will be gold, diamond and iron ore mines.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

Mines in five provinces — Karnataka, Andhra Pradesh, Madhya Pradesh, Rajasthan and Jharkhand — will be auctioned. This time, there are 14 iron ore mines, 12 blocks of limestone and one block each of gold, diamond and copper. While some analysts have predicted a better response than last time to the iron ore mining auction, the limestone blocks may not see much action because of the cement market slump.

Round One

In the first round of the auction, the states offered 47 mines bearing minerals such as gold, iron ore, bauxite and limestone.

They were able to auction seven mines in that phase, earning the government billions of dollars over the next 50 years. However, 17 blocks were not sold due to an insufficient number of initial bids on account of factors such as quantity and grade of ore and low quality of the mineralization studies, among other reasons.

The first round also came under scrutiny when the comptroller and auditor general of India (CAG), a body that audits all government expenditures, passed certain adverse observations. It said in a report tabled in the Indian Parliament that competition may have been restricted in the auction of 11 coal blocks on account of multiple bids by corporate groups made through joint ventures or subsidiaries.

What Does This Mean For India’s Steel Exports?

The iron ore auction comes at a time when the Indian government is contemplating a relaxation of export duties on iron ore. This has led to protests from the domestic steel industry.

In a representation to the steel ministry, the Indian Steel Association asked the government to continue with a 30% export duty on all grades of ore, to preserve natural resources for domestic use.

The government already cut the export duty on low-grade fines to 10% earlier this year but continued with a 30% levy on lumps.

Two-Month Trial: Metal Buying Outlook

India’s ore production is lagging its growth of steel production. Production, according to steel ministry data, fell at a compound annual growth rate (CAGR) of 6.5% in the past five years.

Our Global Precious Metals MMI took a slight step backward this September, coming in at a value of 85 — a 4.5% drop from the previous month’s 89.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

However, the latter half of the summer has been kind to the gold, silver, platinum and palladium prices we track, with the past three months representing the highest MMI values of the entire calendar year.

Global-Precious-Metals_Chart_September-2016_FNL

All four precious categories tracked by the MetalMiner IndX softened over the month of August for our September 1 reading, contributing to the overall 4-point decline.

Main Index Drivers: Platinum and Palladium Prices

In a forthcoming MetalMiner analysis, my colleague Stuart Burns will share his findings from interviewing Trevor Raymond, director of research at the World Platinum Investment Council. The main takeaway? That the platinum market is like a “ticking time bomb.”

Two-Month Trial: Metal Buying Outlook

Essentially, the global platinum market has been in deficit for five years running, with mine strikes and shortfalls leading the way into a supply-side headache for the industry. Demand, meanwhile, appears robust, according to WPIC’s data and quarterly reports, led by developments on the heels of Volkswagen‘s diesel scandal, China and India’s jewelry desires, and a potentially interesting knock-on effect from rising oil prices.

However, the investment community will likely be the prime driver of PGM price movements in the future; but whether it’s a chicken-and-egg situation — rising prices spurring investment activity, or vice versa — remains to be seen.

Secondary Driver: Gold Prices

According to a recent release by Sprott Asset Management, “August marked the fourth successive month that gold prices rose in contrast to the dollar — something that has not occurred since metal peaked five years ago amidst the global financial crisis.

Demand is now at a four-year high with metal displaying one of its best yearly performances since the 1970s. Due to the rise of negative interest rates and a more volatile market, gold is looking like a safe bet for many investors,” right alongside platinum, it would seem; with a secondary positive aspect of the latter being its industrial element.

“As a result of sluggish global economic growth, central banks are pushing interest rates into negative territory, which is positive for gold,” according to Senior Portfolio Manager Paul Wong, along with the Sprott Asset Management precious metals team. “We are likely in the early stages of the current gold bull market, driven by a global push to a negative interest rate policy, currency volatility and a high level of cross-asset class correlation.”

My colleague and our in-house metals procurement specialist and analyst, Raul de Frutos, agrees — see his most recent report on the gold market.

For full access to this MetalMiner membership content:
Log In |

Tired of being an also ran?

Two-Month Trial: Metal Buying Outlook

Having status symbols no better than the guy next door? Ever pulled up in your yacht only to find, 10 minutes later, a guy with a yacht twice the size pulls into the same bay right next to you? Yeah, tiresome isn’t it?

Who Needs a Ferrari When You Can Have a Gold iPhone 7?

Well, while everyone else is queueing outside an Apple store from midnight before the next morning release of a new smartphone, we have something so much better for you. This is the new iPhone 7 from Goldgenie, finished in 24-karat Gold, Rose Gold or Platinum, and if that is not enough for you they do a super luxury version edged and decorated with Swarovski Crystals and even high-quality diamonds. Here’s the best bit, this exclusive, oh-so-cool, piece of one-upsmanship (if there is such a word) luxurious collection will be available with prices starting at just $3,150 (£2,400).

goldgenie_gold_iphone7_550

Why buy a bigger yacht when you can have a 24-karat gold iPhone 7? Source: goldgenie.

However if you really want to push that boat out and outdo the sheikh next to you, go for the $14,300 (£11,000 ) Diamond Rockstar. A bargain, right? It is also rumored that the luxury brand may even be replicating the $3 million (£2.3m) iPhone 6s Diamond Ecstasy encrusted with over 800 diamonds. Read more

The commodities sector is suffering from lackluster prices, weak demand and, in many cases, overproduction but one sector is on the up, and that’s precious metals. Particularly gold and silver prices.

Two-Month Trial: Metal Buying Outlook

According to the Financial Times, gold and silver have been among the best performing metals during 2016, powering a sharp rally in stock prices and helping miners ease concerns over their finances.

Gold Prices Take Off

Since the start of the year, gold has risen 27% while silver is up 46% giving more scope to the sector to return to dividend payments.

Source: Financial Times

Source: Financial Times

Many miners cut dividends after the price of gold, which peaked at about $1,900 in 2011, started to fall sharply in 2013. Although gold miners were not alone, they did take action early. Read more

Gold prices near multiyear highs

Gold prices are near multiyear highs. Source: MetalMiner analysis of @StockCharts.com data.

Gold prices surged last week, settling near multiyear highs. Two developments added fuel to gold’s bull market:

Weak GDP Data

For the second quarter, the U.S. gross domestic product grew at a seasonally adjusted annual rate of 1.2%, less than half the rate economists had predicted for the second quarter, casting doubt on the strength of the U.S. economic recovery. Gold benefited from safe-haven demand on a worsening economic outlook.

Two-Month Trial: Metal Buying Outlook

Meanwhile, Federal Reserve officials said earlier last week that they could raise rates as early as September, but most analysts agree that their language isn’t hawkish enough to suggest an increase is forthcoming.

In addition, the weak data raises even more doubts on whether the Fed will raise interest rates this year. Gold is a more attractive asset when interest rates are low. On the other hand, a rate hike would lower the value of gold, since investors would prefer to park their money in yield-bearing bonds than gold.

Japan Didn’t Ease Monetary Policy

Dollar Index falls on weak GDP and stronger Yen

The U.S. dollar index falls on weak GDP and a stronger Yen. Source: MetalMiner analysis of @StockCharts.com data.

The U.S. dollar fell sharply against the yen last week after the Central Bank of Japan announced limited easing measures. Markets were surprised the Bank didn’t do more to ease monetary policy.

Free Download: The July 2016 MMI Report

Expectations that the Fed would raise rates this year combined with easier monetary policy elsewhere would make the dollar more attractive to yield-seeking investors, but things are going the other way. The Fed is not raising rates and countries like Japan are not easing monetary policy as much as investors had expected. Consequently, the U.S. dollar has fallen, giving a boost to dollar-denominated assets such as gold.

What This Means For Gold Buyers

A more dismal economic outlook, a falling dollar and ongoing low interest rates in the U.S. continue to favor rising gold prices. Until we see any of these drivers turning around, we would expect gold’s (and silver’s) bull market to continue.

For full access to this MetalMiner membership content:
Log In |

Gold prices jumped this week, extending their best start to a year in more than 30 years, the Financial Times reports.

Two-Month Trial: Metal Buying Outlook

Encouraged by a sharp fall in the dollar and a doveish stance by the Federal Reserve, the metal climbed 1% to $1,262.77 an ounce as the dollar fell over 2% against the yen after the Bank of Japan decided not to further ease monetary policy.

Source: Financial Times

Source: Financial Times

Gold had continued a long decline last year from it’s peak in Q3, 2011, but along with all other metals it has rallied some 19% so far this year as investors have plowed back into gold-backed exchange traded funds, encouraged by a relaxation in the Fed’s stance on interest rates and, from that, the prospects for inflation in the medium term. Read more