This is why we’ve been tracking gold

Tuesday, 10 September 2019
Adelaide, Australia
By Bernd Struben

  • It’s already underway
  • A sign of things to come?

We’ve been keeping a sharp eye on gold and gold stocks over the past months. And for good reason.

The price of the yellow metal is up 16.8% since 21 May. As you’d expect, even the larger gold miner’s have generally seen their share prices go up far more than that. The VanEck Vectors Gold Miners ETF [NYSEARCA:GDX], for example, is up 33.9% over that same time.

Of course, in the investment game nothing goes up in a straight line.

Gold dropped 1.0% overnight, bringing it to US$1,493 per ounce.

Does the drop below the psychological US$1,500 level mark the end of gold’s bull run?

Not even close, say two of the world’s preeminent gold experts. You should see any short term pullback as a buying opportunity.

We’re fortunate enough to have both these gold whizzes working at our sister company, Agora Financial Australia (AFAU). Even better, this Friday 13 September, in a special Australian event, they’re going to lift the veil on all of their latest research into the booming gold sector.

It’s called ‘The 2019 Gold Mania Summit’. And it takes place at 2pm AEST in an exclusive interview conducted by publisher James Woodburn. As a paying subscriber to one of our investment advisories, you’re invited to tune in and watch at no cost.

Don’t worry. I’ll remind you again as we approach the broadcast date. You should be receiving a few direct emails about the event as well.

Now you may be familiar with both of these gold experts already.

First, there’s Shae Russell. Shae’s a former derivatives consultant with almost a decade of experience as an investment analyst in financial media. For the past few years she’s been covering the gold and precious metal markets over at The Daily Reckoning Australia.

Then there’s bestselling author, Jim Rickards. Jim’s a former lawyer, economist and investment banker with 35 years’ experience on Wall Street. I’ve yet to meet anyone who knows the ins-and-outs of the global gold market more intimately than Jim. And I’ve been fortunate enough to meet a lot of gold authorities over the years.

Now I don’t know about you, but I’m eager to hear what they have to say during Friday’s ‘2019 Gold Mania Summit’.

Of particular interest is Jim’s research into why he expects the price of gold to surge. And Shae’s investment methodology intended to milk gains of 37 or more times gold’s price rise from the stock market.

Now, to the markets…

Markets

Overnight, the Dow Jones Industrial Average closed up 38.05 points, or 0.14%.

The S&P 500 closed down a fractional 0.28 points, or 0.01%.

In Europe the Euro Stoxx 50 index finished flat, shedding 0.17 points, or 0.00%. Meanwhile, the FTSE 100 lost 0.64% and Germany’s DAX closed up 34.37 points, or 0.28%.

In Asian markets Japan’s Nikkei 225 is up 63.30 points, or 0.30%. China’s CSI 300 is down 0.56%.

In Australia, the S&P/ASX 200 is down 44.26 points, or 0.67%.

West Texas Intermediate crude oil is US$58.33 per barrel. Brent crude is US$63.03 per barrel.

That puts WTI up 2.5% since this time yesterday. The reason? A mild uptick in sentiment on the global trade outlook. And new Saudi energy minister Abdulaziz bin Salman indicated he’ll up the pressure on oil producers to keep a lid on production.

To Abdulaziz we say, ‘Good luck!’

Failing a shooting war with Iran — which would likely see crude prices rocket midterm — I still expect WTI to continue trading within the US$50–$60 range I forecasted for 2019. With Brent some 10% higher.

As for 2020, crude is likely to slip lower.

US output, already at record highs, will only keep growing. And Mexico, perhaps optimistically, has budgeted in a 17% increase in its oil output. That’s an additional 280,000 barrels per day, if Pemex can achieve it.

Even if global demand does hold up, OECD oil stockpiles show no signs of shrinkage:



chart image
Sources: Bloomberg / IEA
Click to enlarge

Turning to gold, the yellow metal is trading for US$1,493.57 (AU$2,176.58) per troy ounce. Silver is US$17.90 (AU$26.09) per troy ounce.

One bitcoin is worth US$10,340.11.

The Aussie dollar is worth 68.62 US cents.

It’s already underway

There’s a reason Jim Rickards keeps close tabs on central bank actions.

Actually, there are numerous reasons. And most all of them involve central banks’ impact on gold prices.

As you can see in the chart below, central banks have been on a gold buying spree:



chart image
Source: Seeking Alpha
Click to enlarge

Shae Russell says the institutional push into gold indicates ‘something extremely significant is going on behind the scenes in the gold market’. Something she expects to underpin gold’s bull run and send the yellow metal beyond US$1,600 per ounce by year’s end.

Indeed, as Bloomberg reports today:

Bullion is near a six-year high as central banks including the Federal Reserve cut interest rates as signs of a slowdown mount amid the U.S.-China trade war. Central-bank purchases have been another key support for prices as authorities from China to Russia accumulate significant quantities of bullion to help diversify their reserves.’

As you can see in the below chart, China’s appetite for gold has been particularly voracious:



chart image
Source: PBoC / Bloomberg
Click to enlarge

The spike in gold purchases since December has seen China add almost 100 tons of gold to its reserves.

And there’s no sign yet that the world’s central banks appetite is close to sated.

Moving on…

A sign of things to come?

We leave off today with a few headlines that greeted me over breakfast. Headlines that saw my wife come into the dining room this morning to see what was so darn funny.

You may find them useful in gauging where the Aussie and global economies are headed. At the least I hope they draw a chuckle.

First, this bleedingly obvious headline from the print version of The Age:



chart image
Source: The Age
Click to enlarge

And the sky is blue!

Thanks Organisation for Economic Cooperation and Development. We had no idea the US$64 trillion in public debt and US$70 trillion in private sector debt your report quotes could trigger a crisis.

Foolishly, we thought the US$134 trillion (AU$195 trillion) in global debt was the crisis. After all, that works out to some $26,000 for every man, woman and child on Earth. Many of who won’t earn that much in a lifetime.

Now I’m not sure if The Age editors intended this irony. But here’s the headline that appears right below the above article:



chart image
Source: The Age
Click to enlarge

‘Senior economists’, at least, are sounding the alarm. As noted by The Australian:

Ultra-low interest rates and looser banking restrictions have sparked the fastest rise in mortgage lending in five years, as senior economists warn the growth risks reinflating a dangerous housing bubble.

Finishing off my breakfast mirth was this headline, from the Australian Financial Review:



chart image
Source: Australian Financial Review
Click to enlarge

You’ve probably heard that Jacqui Lambie managed to get Tasmania’s $157 million of state government housing debt waived. With the other states owing almost $2 billion yet, the rush is on to expunge their debts as well.

Fair’s fair, after all.

As I said up top…a sign of things to come?

Cheers,
Bernd