Gold and Mining Stocks Looks Bright & Shiny

Gold and Mining Stocks Looks Bright & Shiny

$GLD, $GOLD, $USD, $GDX, $GS

FLASH: The savvy observers see Golden opps in the precious Yellow metal and its miners.

Last September in this column we suggested it was time for investors to add gold to their portfolios.

And that data shows that since that time, gold has gained nearly 10%.

Gold marked to a 2-week high Friday after weak US economic data boosted expectations the Fed would stand still on monetary tightening.

  • Spot gold was up 0.4% at $1,317.36 oz having touched its highest mark since 1 February at $1,319.81.
  • US gold futures rose 0.5% to $1,320.60.

Disappointing US economic data followed a spate of weak economic reports from China and Europe. This helped gold hold its ground against the gains in USD, which held near 2-month highs Vs a basket of peer currencies, and a rebound in global stocks on hopes of a thaw in the US-China trade dispute.

The world economy is slowing very rapidly and therefore monetary policy everywhere will be eased, so the outlook is a lot more inflationary, helping gold.

Barron’s said it sees gold’s price continuing to climb because of a variety of factors including: “Investors are worried about a weakening global economy amid potential debt trouble in China and a slowing Europe. Central banks, including the US Federal Reserve, are also backing off plans to tighten monetary policy, which could also benefit gold. Gold has even managed to gain despite a stubbornly strong US dollar.”

Barron’s cited G.Research as saying that gold stocks have outperformed physical gold in recent months, since the end of September 2018, gold prices have risen 10%, while the VanEck Vectors Gold Miners ETF (GDX) has climbed 18%, as “miners benefit from the inherent leverage in their business models.”

The research firm mentioned Detour Gold (DGC.Canada), Victoria Gold (VIT.Canada), and Barrick Gold (GOLD) as 3 examples of stocks which “have benefited from leverage in their business models.”

And China is adding to its gold reserves again, boosting holdings for a second month and reinforcing an outlook from Bulls including Goldman Sachs Group (NYSE:GS) that central-bank buying will remain strong this year.

China is the world’s the top gold producer and consumer, and is adding holdings on signs of slowing growth and uncertainty about whether the trade fight with the US will get resolved.

Central banks worldwide added the 2nd-highest annual total on record in Y 2018 as heightened geopolitical and economic uncertainty drove them to diversify reserves, according to the World Gold Council (WGC).

“We are not surprised that the gold purchases resumed,” the senior commodity analyst at Commerzbank AG, said in an e-Mail Sunday. “We were rather surprised that the hiatus took so long. China possesses only a relatively small amount of gold in its foreign exchange reserves. Hence, there is still a need to buy.”

While China’s holdings are the 6th largest by country, they account for only 2.4% of reserves, compared with more than 70% in the US and Germany, WGC data show.

The increases come Vs a backdrop of rising prices. Gold rose for a 4th month running in January, topping $1,300 an ounce, as the Fed signaled it was done raising interest rates for a while, pivoting away from its bias toward tighter policy.

Retail investors and funds have also been adding to holdings in ETFs lifting the worldwide total to the highest since Y 2013. Last month, ETF holdings increased 70.6 tonnes, the most since February 2017.

Have a terrific Holiday weekend.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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