Moving the Market: Profit taking in mega-caps
Thursday, Gold traded near 1,900oz, moving closer to it’s all-time high set nearly 9 yrs ago on concerns about global growth that is driving safe-haven demand.
Increasing signs that the prolonged C-19 coronavirus chaos is stalling an economic recovery and the recent surge in US-China tensions underpin demand for the precious Yellow metal.
Gold is headed for a 7th straight weekly gainer, the longest stretch since Y 2011, and silver is set up for its biggest weekly advance in 40 yrs.
Negative real interest rates, a weaker dollar, concerns over the economic cost of the medical emergency chos and geopolitical uncertainties have put both precious metals on track for their biggest annual gainer in 10 yrs.
UBS Group AG (NYSE:UBS) has raised its near-term forecast for gold to reach 2,000oz by the end of September, my work shows that mark will be met much sooner, as gold is a diversifier in this low-rate world.
“When interest rates are zero or near Zero, then gold is an attractive medium to have because you don’t have to worry about not getting interest on your gold and you see the gold price will rise as uncertainty in the markets are rising,” Mark Mobius, co-founder at Mobius Capital Partners, said. “I would be buying now and continue to buy, because gold is really on a run, it’s doing well.”
Friday, spot gold declined 0.2% to 1,884oz at 1:40p in Singapore. Prices touched 1,898.34 Thursday, nearing the record 1,921.17 hit in September 2011.
Spot silver was steady at 22.60220z, The Devil’s Metal poised for the biggest weekly advance since Y 1980.
While spot gold prices are about $40 away from the all-time high, some futures contracts on the COMEX are already trading even higher.
December, which overtook August as the contract with the highest open interest according to data released when Friday’s Asian trading session was already underway, touched 1,927.10oz Thursday. That’s above the record for the most-active contract of 1,923.70 reached in September 2011.
On the geopolitical front
US Secretary of State Michael Pompeo cast China’s leaders as tyrants bent on global hegemony. His comments came after the US unexpectedly ordered China to close its consulate in Houston within 72 hours, following what it said were years of espionage directed from the diplomatic compound against U.S. commercial and national security assets. China has rejected the accusations and Friday, ordered the US to close its consulate in the southern Chinese city of Chengdu.
Investors’ are looking at the prospect of more fiscal and monetary policy measures as the path to economic recovery remains cloudy. EU leaders this week agreed on an unprecedented aid/relief/stimulus package worth EUR750-B, the Fed meets next week to decide if further accommodation is needed on the home front.
Yes, there is more need than ever to keep governments spending, the extra money being printed will likely prompt investors to increase their gold exposure, and once it clearly breaks the 1900 psych resistance, it will cut to 2000 like a hot knife through butter.
Shayne and I believe that Gold has a long way to go and prices will be strong.
Thursday’s market action: DJIA -353.51 to 26652.33, NAS Comp -244.71 to 10461.50, S&P 500 -40.36 to 3235.66
Volume: Trade on the NYSE came in light at 821-M/shares exchanged
US Dollar off 2.8% so far this week: .DXY -0.3% to 94.70
August gold futures +22.30 (+1.2%) at 1887.4oz
Industry Watch Strong: Utilities, ConsStaples, Financials Weak: CommServices, IT, ConsDiscretionary
- NAS Comp +16.6% YTD
- S&P 500 +0.2% YTD
- DJIA -6.6% YTD
- Russell 2000 -10.7% YTD
HeffX-LTN’s overall technical outlook for the major US stock market indexes is Bullish with a Very Bullish bias as there is little overhead resistance in here.
Looking Ahead: Investors will receive New Home Sales for June Friday
Have a healthy weekend, Keep the Faith!