Gold Poised for Record as Yields Sag, Most Profitable Miner Says

28-The most profitable producer of one of this year’s best-performing commodities says things are about to get a whole lot better.

For investors who missed gold’s climb to a two-year high in early July, it’s not too late to jump in, according to Agnico Eagle Mines Ltd. Chief Executive Officer Sean Boyd. The Toronto-based company’s gross margin of 52 percent last quarter is the biggest among major producers, according to data compiled by Bloomberg. It’s also the only big gold miner to expand the margin over the past five years, the data show.

“I think in this cycle, they will ultimately set an all-time high,” Boyd said in a telephone interview Thursday. Spot gold prices touched a record $1,921.17 an ounce in September 2011. Agnico is laying the groundwork for expanded output through exploration, and Boyd said it’s “one of the very few companies that can see its output 30-40 percent higher in five years from now from stuff we already own.”

Gold has climbed 26 percent this year, with demand for the metal as a store of value rising on global economic-growth concerns and speculation that the Federal Reserve will be slow to raise rates. Purchases of gold as a haven asset have also increased as more than $9 trillion in government debt in developed markets offers yields below zero. Low rates are a boon to non-interest-bearing precious metals.

“There’s still a tremendous amount of debt in the system,” Boyd said. “There’s an inability to create conditions for growth. You’ve got a negative-interest-rate environment, which is a great environment for gold from an opportunity-cost standpoint. And you’ve still got very strong demand coming out of China and India. So all the factors are there that can steadily move gold up.”


PG View: Boyd sees opportunity costs and the negative yield environment as a primary driver for gold . . . just like the Motley Fool article posted this morning.

Posted in Gold News, Gold Views, Negative interest rates |

Goldman’s Currie admits to gold being a strategic hedge

A change of heart at Goldman?


CurrieBloomberg“We like to say that being long gold is the same as being short politicians and being short politicians is something that you would want right now.” said Jeffrey Currie, Goldman Sachs

MK note:  Seems Wall Street’s traditional heart of the anti-gold narrative is going through some changes.  Yes, this is the same Jeffrey Currie who told us almost one year ago to the day that gold was going below $1000.  It was trading in the $1100 range at the time and went as low as $1050 before the end of the year.  But from there it has been all upside. (It touched $1345/oz overnight and has been as high as $1360 per ounce since Currie made his prediction.)

Last July, he said, “With the more positive outlook on the dollar, and with debasement risk starting to fade, the demand to use gold as a diversifying asset against the U.S. dollar becomes less and less important.” The polar opposite of what he said yesterday. . . . .

Posted in all posts |

Plateau in China Gold output may be supportive for prices


“A report suggests that China’s gold production may have hit a plateau, which presumably would mean more future imports by the country that would be gold supportive, said HSBC.”

MK note:  As this report points out, if domestic production has plateaued then China will need to import to cover its needs.  What it doesn’t point out is that this will be on top of its already prodigious annual demand running at or near annual global mine production.

Posted in all posts |

Homeownership Rate in the U.S. Tumbles to the Lowest Since 1965

28-Jul (Bloomberg) — The U.S. homeownership rate fell to the lowest in more than 50 years as rising prices put buying out of reach for many renters.

The share of Americans who own their homes was 62.9 percent in the second quarter, the lowest since 1965, according to a Census Bureau report Thursday. It was the second straight quarterly decrease, down from 63.5 percent in the previous three months.

First-time buyers have been struggling to find affordable properties as low mortgage rates and an improving job market spur competition for a tight supply of listings. Home prices rose 5.2 percent in May from a year earlier, according to the S&P CoreLogic Case-Shiller index of values in 20 cities released this week.

“One of the biggest hurdles now is affordability,” Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before the Census Bureau report was released. “Home prices are rising so much faster than incomes, so it’s hard for buyers to save for a down payment.”

The homeownership rate reached a peak of 69.2 percent in June 2004.


Posted in Economy |

The Daily Market Report: Gold Retraces Some of its Post-Fed Gains

28-Jul (USAGOLD) — Gold began the U.S. session modestly higher, edging to new two-week highs. However, a softer intraday tone has since emerged and the yellow metal is now trading modestly lower on the day.

Yesterday’s rather noncommittal FOMC statement boosted gold initially. The Fed suggested that risks to the economic outlook had diminished, but apparently not enough to overtly add to speculation that a rate hike imminent.

They didn’t take September off the table per se, but the market read the statement as somewhat dovish. September rate hike expectations based on Fed funds futures dropped back into the teens.

The Fed expressed some ongoing concern about inflation still being below its 2% objective, citing earlier declines in energy prices. Well, oil is off more than 20% from the June high of 51.64, at three-month lows. If the retreat continues, that’s going to add renewed pressure to inflation expectations. That in turn is going to make it even harder for the Fed to pull the trigger on another rate hike.

Inflation has continued to run below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. — FOMC Statement

As for the decline in non-energy imports: That is going to be largely attributable to the stronger dollar. The Commerce Department reported this morning that the U.S. trade deficit widened to -$63.3 bln in June, outside expectations of -$61.0 bln, versus -$61.1 bln in May. This may also explain the dismal durable goods report from yesterday. The strong dollar makes foreign durable goods — and goods in general — more attractive to U.S. consumers.

This is yet another reason why the Fed would be ill-advised to raise rates and buoy the dollar further. We’ll find out tomorrow just how aggressive the BoJ is willing to be — on top of everything else they’ve done over the past twenty-plus-years — to knock the yen lower.

Posted in all posts, Daily Market Report, Gold News, Gold Views |

Oil’s Slide and That Sinking Feeling for Inflation Watchers

28-Jul (WSJ) — Lower oil prices don’t seem to be spooking markets for once. But they should cause a few wrinkled brows for inflation watchers.

The price of a barrel of Brent crude has fallen some 16% from its June peak, and was trading Thursday at $43.80. But stocks haven’t swooned. The S&P 500 is close to its highs, and even unloved European stocks have been bouncing back, with the Stoxx Europe 600 up 3.5% in July.

That may be in part because economic data has been holding up on both sides of the Atlantic, enabling the U.S. Federal Reserve to start hinting at another rate increase. In addition, the decline in oil prices appears to be connected more to supply than demand.

But if oil isn’t correlated with stocks, for once, inflation can’t escape so easily.


PG View: The Fed noted ongoing concerns about the absence of inflation in yesterday’s FOMC statement.

Posted in inflation |

The Single Most Important Reason Gold and Silver Should Keep Rallying

28-Jul (MotleyFool) — It’s been an extraordinary year to be an investor. In just seven months we’ve witnessed the worst two-week start to a new year in recorded history, and also the most voracious intraquarter rally in the S&P 500 to finish back in the black since 1933.

But the year really belongs to precious-metal and mining investors, who’ve turned out to be the surprising winners. After a multiyear downtrend that began in 2010 for silver and 2011 for gold, both metals have made resounding comebacks in 2016. Spot gold prices are higher by approximately 25% year to date, while spot silver is up an even more robust 44%. Silver has a tendency to follow the movement of gold, although it’s a more thinly traded metal and tends to be a bit more volatile.

…The single most important reason to be bullish boils down to opportunity cost and yields.

Opportunity cost is defined as “the loss of potential gain from other alternatives when one alternative is chosen.” Historically, interest-based assets, such as U.S. Treasuries, money market accounts, or bank CDs, have been steady sources of nearly guaranteed income for seniors and other risk-averse investors.

…Today, though, interest-bearing assets are, in some cases, not even yielding pennies on the dollar. Bank CDs probably aren’t even yielding 1%, and Treasury yields are still bordering their lowest yields in history. A 30-year Treasury bond currently yields nearly 2.3%, which would be ahead of the current rate of inflation; however, locking yourself in at 2.3% for 30 years could prove disastrous if inflation does rise anywhere near its historical norm of 3%. Though you’d be making nominal gains, you’d be losing real money if the inflation rate increased. What this means is that the opportunity cost of a sub-1% yield for CDs and money market accounts, or a near-record low yield for T-bonds, makes owning gold and silver more attractive.


Posted in Gold News, Gold Views |

Why gold prices spiked after the Fed decision

28-Jul (MarketWatch) — Gold futures rallied to their highest level in two weeks late Wednesday in electronic trading.

Many gold investors settled on the notion that the Federal Reserve was actually dovish—in favor of maintaining low interest rates—despite the central bank leaving an interest-rate rise on the table for September.

“The Fed has had numerous opportunities to normalize rates over the past two years and have squandered them all,” said Peter Hug, global trading director at Kitco Metals Inc. in an emailed note after the Fed statement.

After gold futures settled Wednesday, the Fed said it decided to keep its benchmark fed-funds rate unchanged in a range between 0.25% and 0.5%. That was widely expected, but it also hinted that a rate increase was possible at its next meeting in September.

“True to form, they left enough language in today’s release to leave September on the table,” said Hug.

“In my opinion, the judgment of Fed members notwithstanding, what choice do they have but to leave the possibility of a rate hike on the table?,” he asked. “They would look like total buffoons, if they reversed course now.”


Posted in Central Banks, Gold News, Gold Views, Monetary Policy |

U.S. initial jobless claims +14k to 266k in the week ended 23-Jul, above expectations of 260k, vs downward revised 252k in previous week.

Posted in Economic Data |

U.S. trade deficit widened to -$63.3 bln in Jun, outside expectations of -$61.0 bln, vs revised -$61.1 bln in May.

Posted in Economic Data |

Gold higher at 1345.43 (+5.48). Silver 20.47 (+0.168). Dollar lower. Euro higher. Stocks called easier. U.S. 10-year 1.53% (+3 bps).

Posted in Markets |

Fed leaves rates unchanged, says risks to outlook reduced

27-Jul (Reuters) — The Federal Reserve left interest rates unchanged on Wednesday but said near-term risks to the U.S. economic outlook had diminished, opening the door to a resumption of monetary policy tightening this year.

The U.S. central bank said the economy had expanded at a moderate rate and job gains were strong in June. It added that household spending also had been “growing strongly,” and pointed to an increase in labor utilization.

While Fed policymakers said they continued to closely monitor inflation data and global economic and financial developments, they indicated less worry about possible shocks that could push the economy off course.

“Near-term risks to the economic outlook have diminished,” the Fed’s policy-setting committee said in its statement following a two-day meeting in which it left its benchmark overnight interest rate in a range of 0.25 percent to 0.50 percent.

The Fed noted, however, that inflation expectations were on balance little changed in recent months, and gave no firm indication of whether it would raise rates at its next policy meeting in September.


Posted in Central Banks, Monetary Policy |

Gold extends to two-week highs post-FOMC

27-Jul (USAGOLD) — Gold extended to the upside following the July FOMC statement. The Fed noted diminished “near-term risks to the economic outlook,” but there was no overt hints about an impending rate hike. The yellow metal has traded as high as $1339.69 thus far, up more than $20 on the day.

Posted in Gold News, Gold Views |

Fed Statement

Fed Funds rate remains unchanged: .25-.5%. “Near terms risks to the U.S. economy have diminished”

Posted in all posts |

The Daily Market Report: Gold Rises Ahead of Fed Announcement on Latest Data Miss

27-Jul (USAGOLD) — Gold popped in early New York trading as the latest weak economic data dimmed prospects for a more hawkish tone from the Fed later today. The yellow metal rose from unchanged on the day to trade nearly $10 higher before stabilizing intraday.

The Fed announces policy at 2:00ET today. They are widely expected to hold steady. Traders will carefully parse the language in the statement in an effort to get a sense whether of whether a rate hike is in the cards for September or December.

The probability of a hike has been rising recently based on Fed funds futures, but today’s sizable miss on June durable goods orders seems to have tempered those expectations. Durable goods came in at -4.0%, well below expectations of -1.0%, versus a negative revised -2.8% in May.

I suspect there will be very little change from the June statement. There may be some mention of markets stabilizing in the wake of the surprise Brexit vote, which occurred just about a week after the June FOMC meeting.

The likelihood that the BoJ will offer further accommodations when they announce policy on Friday got a boost from PM Abe today. The master of Abenomics announced a larger than expected ¥28 trillion stimulus proposal today. It was widely believed that the duo of Abe and Kuroda would not squander the former’s upper-house electoral victory, viewing it as a referendum on Abenomics. Abe has delivered. Now we await Kuroda’s offering.

In a Bloomberg article, Yasunari Ueno, the chief market economist at Mizuho Securities said the government is pretending it has resources even though they don’t. However, Kuroda’s BoJ has the ability to print those resources (yen) and he has shown no compunction about doing just that.

Posted in Daily Market Report, Gold News, Gold Views |

Koo on why helicopter money just won’t work

27-Jul (FT Alphaville) — Helicopter money won’t work in Japan, says Nomura’s Richard Koo in a note on Tuesday, because when the typical Japanese citizen finds a 10,000-yen note lying on the ground, she will turn it in at the nearest police station rather than spend it.

“Put differently, a helicopter money policy can only work if the people in a country have little sense of right and wrong.”

Koo, of course, is talking about the effectiveness of actual banknotes being thrown out of helicopters in the sky. It’s one of four ways he thinks helicopter money policy could be implemented — since the real challenge with helicopter money is how it would be distributed, and to whom.

The first option really is throwing bags of money out of the sky. But here be unintended social consequences. For example :

“No seller would exchange products for money that fell from the sky.

“Another critical omission from the argument that helicopter money will resuscitate the economy is that it focuses exclusively on the logic of buyers while ignoring the logic of sellers.

“Unethical buyers may try to go shopping with money that has fallen from the sky, but there is no reason for sellers to accept such money.

“Sellers are willing to take money in exchange for goods and services only because the supply of that money is strictly controlled by the central bank. If money starts falling from the sky, sellers will refuse to accept it as payment for their products.

If the authorities actually began dropping money from helicopters, shops would either close their doors or demand payment in foreign currency or gold, and the economy would quickly collapse. There is no economy so wretched as one that no longer has a national currency the people trust.”

Because it plainly ignores the psychology of sellers in the market, literal helicopter money is not, in Koo’s opinion, the ultimate form of monetary accommodation. Taking it to this extreme would only lead to an economy’s collapse, not its recovery. More so, there’s no case in recorded history where an economy without a credible national currency outperformed an economy with one.


Posted in Helicopter Money |

Gold climbs as Fed policy statement looms

27-Jul (MarketWatch) — Gold futures turned higher Wednesday after a report on factory orders came out weaker than expected, bolstering appetite for haven gold.

Orders for durable, or long-lasting, goods tumbled 4% in June, following a drop in the previous month and marking the biggest monthly decline in almost two years as U.S. manufacturers struggle to drum up sales.

Economists polled by MarketWatch had expected a seasonally adjusted 1.7% decline.

August gold was trading higher, up $6.40, or 0.5%, at $1,327.20 an ounce.

Silver futures for September delivery gained 39.7 cents, or 2%, to $20.08 an ounce.

…Both gold and silver finished higher Tuesday, but were trading lower Wednesday, before the durable-goods order report was released.

The weak economic data can be seen as providing the Federal Reserve less cause to lift interest rates from ultralow levels, which can make metals, which don’t offer a yield, more attractive to investors.


Posted in Gold News, Gold Views |

U.S. NAR pending home sales +0.2% to 111.0 in Jun, below expectations of +1.2%, vs 110.8 in May; +1.0% y/y.

Posted in Economic Data |

PM Abe’s plan for $265 billion stimulus puts pressure on BOJ to ease

27-Jul (Reuters) — Japan’s prime minister unveiled a surprisingly large $265 billion stimulus package on Wednesday to reflate the world’s third-largest economy, adding pressure on the central bank to match the measures with monetary stimulus later this week.

The earlier-than-expected announcement to boost the flagging economy sent Japanese and other Asian stock markets higher while it weighed on the safe-haven yen, but lacked crucial details on how much of the package would be direct government spending.

The size of the package, at more than 28 trillion yen ($265.30 billion), exceeds initial estimates of around 20 trillion yen and is nearly 6 percent the size of Japan’s economy. It will consist of 13 trillion yen in “fiscal measures,” which likely includes spending by national and local governments, as well as loan program.

“We need to take steps to support domestic demand and put the economy on a firmer recovery path,” Shinzo Abe said in a speech in southern Japan on Wednesday. “I want to use various measures to increase our escape velocity from deflation.”

The market expects the Bank of Japan to produce some fire power of its own at its rate review ending on Friday.


Posted in Central Banks, Monetary Policy, QE |

Abe Plans Stimulus Package of More Than 28 Trillion Yen

27-Jul (Bloomberg) — Japanese Prime Minister Shinzo Abe announced plans Wednesday for more than 28 trillion yen ($265 billion) in economic stimulus in an effort to prop up the nation’s economy.

The plan will include 13 trillion yen in “fiscal measures,” he said in excerpts of a speech broadcast by NHK public television. Abe added that the package would be compiled next week, but it was unclear how much of it would be new spending. His speech was given in the city of Fukuoka, 1,000 km (620 miles) southwest of Tokyo and no transcript was immediately made available.

In the days after Abe’s ruling coalition won a big victory in the upper-house election on July 10, he ordered that a stimulus package be compiled as he seeks to again revive the economy. The government is in a difficult position with limited excess funds and will probably need to issue new bonds to pay for a large package of fiscal stimulus.

“Tax revenues aren’t rising, and the funds for an extra budget are limited,” said Yasunari Ueno, the chief market economist at Mizuho Securities Co. in Tokyo. “This is all padding,” with the government pretending it has resources even though they don’t, he said.


Posted in all posts |

Gold jumped on durable goods miss as rate hike expectations dim again. Presently trading up about $10 on the day.

Posted in Gold News |

U.S. durable goods orders -4.0% in Jun, well below expectations of -1.0%, vs negative revised -2.8% in May; -0.5% ex-trans, below expectations vs -0.4% in May.

Posted in Economic Data |

Gold steady at 1320.94 (+1.88). Silver 19.65. (-0.005). Dollar better. Euro steady. Stocks called higher. U.S. 10-year 1.56% (unch).

Posted in Markets |

How would you invest money you didn’t need for ten years?

One in six choose gold in Bankrate survey

by Michael J. Kosares/USAGOLD

One in six investors chose gold as the best place to park money they wouldn’t need for more than ten years – the same number that chose stocks, according to a recent Bankrate survey. Another 6% chose bonds, while 25% chose real estate, and 23% said they would simply bank the money.

bankratesurvey2016Data source: Bankrate/Claes Bell

To the typical Wall Streeter, these results represent a world turned upside down. CNBC’s Jim Cramer took one look and lamented, “As someone who has lived and breathed stocks for most of my life, this is a horrendous finding. But it’s not surprising.”

In a recent Financial Times column titled appropriately, Brexit and the power of wishful thinking, Tim Hartford, the Underground Economist, sheds some light on the psychological transformation now taking place among investors:

“Perhaps the most important lesson is that we spend too much energy trying to foretell the future, and too little trying to be resilient whatever happens. . . Because scenarios are persuasive stories, they can help us face up to uncomfortable prospects and think clearly about possibilities we would rather ignore. And because scenarios contradict each other, they force us to acknowledge that, in the end, we cannot actually see into the future. As a result we move from ‘What will happen?’ to ‘What will we do if it does?'”

To become “resilient whatever happens” requires acting before, not after, the next financial crisis headlines the evening news. Many now reject the old financial religion that diversification amounts to the proper blend of stocks and bonds and little else. That formulation was acceptable when the money was sound and the federal government had not buried itself under a $19 trillion pile of debt. It held sway when confidence was running high and considerably more of the population than 17% were satisfied with the direction of the country (a polling number recently reported by Gallup). Now investors are looking to add safety and liquidity to their portfolios to augment the pursuit of capital gain, and, as the Bankrate survey shows, are now turning to the preeminent safe haven – precious metals.

Even Willem Buiter, chief economist for Citigroup and a long-time critic of gold, now says he would own the metal. “Gold, in times of uncertainty and especially in days of uncertainty laced with negative rates, looks pretty good,” he concedes. At the same time, he sees stocks as in a bubble. He believes investors are “pinning their hopes on a long-term growth of corporate earnings which bear no relationship to underlying economic growth.”

Buiter’s change of heart is symptomatic of the trend charted below by our friends at SentimentTrader. This chart depicts the ebb and flow of sentiment towards gold. The Bankrate chart shows its cumulative effect. Note particularly that the positive change in sentiment toward gold began in the early 2000s and did not retreat below the excessive pessimism line until 2013-2015, when gold fell from its all-time highs.

Now, since January, gold sentiment has returned to positive territory mostly driven by the low-to-negative rate environment, but also because gold once again looks to be under-valued. If Buiter is correct, and I think he is, in the months ahead we might anticipate another significant flow of capital out of stocks, bonds and cash savings and into gold and silver. Jim Cramer elaborated on the Bankrate findings by saying that “successive waves of mistrust, abuse and fear have now become ingrained into the American public.”

 Chart courtesy of SentimentTrader/Jason Goepfert
USAGOLD’s News & Views newsletter has provided cutting-edge coverage of the gold and silver markets for over 25 years. Its content is widely quoted, re-circulated and sourced at websites all over the world. Its principal objectives have always been the same – to keep our clients informed on important developments in the gold market, condense the available gold-based news and opinion into a brief, readable digest, and, most importantly, to counter the traditional anti-gold bias in the mainstream media. That formula has won it a five-figure subscription base. This SPECIAL REPORT is published as a supplement to our regular newsletter. If you would like to receive the upcoming August issue, we invite you to sign-up at our registration page. There is no charge for the service and your participation is welcome.


Posted in all posts |

The Daily Market Report: Gold Higher Within Range as FOMC Meeting Begins

26-Jul (USAGOLD) — Gold is modestly higher, but remains confined within the recent range as the Fed’s two-day FOMC meeting gets underway. When the Fed announces policy tomorrow, they are widely expected to hold steady.

The mixed bag of economic data that came out today does not offer any additional clues as to whether the Fed statement will contain a hawkish or dovish bias. I’d expect something pretty neutral. Nonetheless, the rate hike probability for September has crept higher again; and presently stands at 25.5%.

Despite the heightened odds, the dollar index is lower for a second consecutive day. Stocks have struggled this week as well, displaying some degree of concern over the prospects of a rate hike this year.

The latest GFMS gold survey noted that weaker demand in India and China, related to higher prices, was offset by western safe-haven demand. The latter took the form of ETF demand, which was very robust.

The first half of this year set a new record in half yearly demand for gold ETFs. — The Wall Street Journal

Those haven investors should be aware that an ETF is nothing more than a security indexed to the price of gold. It is not actually gold, and as such there are risks associated with ETFs. Even if one were inclined to make a price bet on gold, they should supplement that investment with some actual gold — in coin or bar form — to serve as the true haven in their portfolio.

Posted in Daily Market Report, Gold News, Gold Views |

U.S. consumer confidence fell to 97.3 in Jul, above expectations of 96.0, vs negative revised 97.4 Jun.

Posted in Economic Data |

U.S. new home sales +3.5% in Jun to 592k, above expectations of 557k, vs positive revised 572k in May.

Posted in Economic Data |

U.S. Market flash services PMI fell to 50.9 in Jul, below expectations of 52.0, vs 51.4 in Jun.

Posted in Economic Data |

Case Shiller home price index (20-cities, NSA) +0.89% to 188.29 in May; +5.24% y/y, below expectations of 5.52%, vs 5.44% y/y in Apr.

Posted in Economic Data |

Gold climbs as dollar retreats ahead of Fed meeting

26-Jul (Reuters) — Gold rose on Tuesday as the dollar slipped ahead of a two-day Federal Reserve policy meeting this week, which will be closely watched for clues on the outlook for U.S. interest rates.

The Fed is expected to leave policy unchanged at its meeting starting later in the day, but investors are watching for any signs that the U.S. central bank may move back to tightening
later this year.

Spot gold was up 0.4 percent at $1,320.01 an ounce at 1135 GMT, while U.S. gold futures for August delivery were up 80 cents an ounce at $1,320.30.

“Looking at Fed funds futures, no one is really expecting a move this week, but what the meeting may do is give us more of a clue as to what might happen in September, and perhaps in
November and December,” Mitsubishi analyst Jonathan Butler said.

“It does still look like there could be a rate rise before the end of the year,” he said. “That is consistent with the improving economic situation, particularly the strong employment
data for June, and there are also sighs that inflation is starting to pick up as well.”


PG View: Yes, the employment data in June was better than expected, but remember a scant 11k jobs were added in May.

Posted in Gold News, Gold Views |