Gold jumps nearly 4% to settle near five-year high in reaction to Fed decision

Gold prices shot to their highest settlement since 2013 on Thursday, as investors flocked to the metal after the U.S. Federal Reserve left key interest rates unchanged but shifted away from its “patient” stance on monetary policy.

“Central banks everywhere are preparing to cut rates and re-start [quantitative easing], opening up a new front in the global trade war,” said Adrian Ash, director of research at BullionVault. “In this race to debase, gold stands out as the only currency which policymakers cannot inflate and devalue.”

On Thursday, August gold GCQ19, +3.23% soared $48.10, or 3.6%, to settle at $1,396.90 an ounce. Based on the most-active contracts, gold marked its highest finish since September 2013 and biggest one-day dollar and percentage gain since June 2016, according Dow Jones Market Data.

July silver SIN19, +3.06%  also rose 53.4 cents, or 3.6%, to $15.492 an ounce, for the highest finish since late March.

Gold began climbing higher in electronic trading Wednesday after the Federal Reserve monetary policy statement that followed the gold futures’ settlement. While the Fed held benchmark interest rates steady between 2.25%-2.50%, officials said that over the last six weeks, “uncertainties” have increased about the outlook, hinting at the trade tensions between the U.S. and China.

Fed officials appeared divided about whether the central bank will cut interest rates this year, judging from the central bank’s projections of future interest rate moves, known as the “dot plot” but the message to the market was clear – monetary policy easing is likely. Precious metals like gold tend to attract buyers in a low interest-rate climate.

The yield for the 10-year Treasury note TMUBMUSD10Y, +0.04%  dropped to just under 2%, at 1.997%, a level not seen since 2016. Such a move can make government debt less attractive to buyers seeking haven assets compared against bullion and globally more than $12 trillion government debt now attracts negative yields.

“As long as real rates are headed lower, the pool of negative yielding bonds increases (currently $12.3t) then gold is only going one way,” said Chris Weston, head of research at Pepperstone, in a note to clients.

Gold has gained over 2% week to date, as investors have bought the metal owing to uncertainty over an import tariff dispute between China and the U.S. and fears that the global economy is weakening. On Tuesday, European Central Bank President Mario Draghi suggested that the ECB could introduce more stimulus if the eurozone economy weakens further. The Bank of England’s Monetary Policy Committee also signaled a readiness to increase stimulus on Thursday.

On Thursday, the Bank of Japan left monetary policy unchanged Thursday and maintained a pledge to keep ultralow rates in place until at least spring 2020.

“With real interest rates coming down in the U.S. and globally, the opportunity cost of holding gold diminishes. Gold is likely to be the preferred safe-haven as this economic cycle continues to mature,” said Matthew Miller, analyst at CFRA Research.

Meanwhile, “news that Iran shot down a U.S. military drone rekindles the potential for a heavy-handed U.S. response against Iran,” analysts at Zaner Metals said in a daily note. That further raised demand for haven gold, as well as fueled a rally for oil.

In other metals dealings, July copper HGN19, +1.12% rose 1.2% to $2.712 a pound.

July platinum PLN19, +0.14%  fell 20 cents to $805.60 an ounce and September palladium PAU19, -1.11%  lost 0.8% to $1,480.60 ounce.

 

 

By

MYRA
P. SAEFONG
MARKETS/COMMODITIES REPORTER
&
BARBARA
KOLLMEYER
MARKETS REPORTER
Marketwatch

Gold Jumps to 14-Month High

Gold prices climbed Friday as mounting concerns about the health of China’s economy hit riskier commodities and tensions in the Middle East pushed investors into haven assets.

Gold futures for August delivery, the most-actively traded U.S. contract, jumped 1.2% to $1,359.50 a troy ounce, the highest level since April 2018. The rise accelerated after the National Bureau of Statistics released figures showing that Chinese industrial production grew at its slowest pace in 17 years in May, adding to fears that Beijing’s efforts to stimulate growth are faltering in the face of trade frictions with the U.S.

“Industrial metals are down and gold is rallying—it’s all part of the same picture,” said Carsten Menke, a strategist at Swiss private bank Julius Baer. “The efforts by the Chinese government, by various measures from fiscal policy to monetary policy, haven’t yet been hugely effective.”

Friday’s jump continued a strong run for gold. The precious metal was on course for its 12th daily rise in 13 trading days as investors bet the slowdown in the world economy was hurting growth in the U.S. and would lead the Federal Reserve to lower interest rates.

Haven PlayPrecious metals have rallied while industrial metals have dropped on China fears.Percentage change in price over the past monthSource: FactSetAs of June 14, 1:25 p.m. ET
%GoldPalladiumCopperMay 18May 22May 28June 1June 5June 9June 13-5051015PalladiumxMay 20, 2019×1.9%

Gold, which has rallied almost 5% over the past month, becomes more attractive to investors when yields on interest-paying assets like government bonds fall. Expectations that the Fed will cut rates have also weighed on the dollar, making commodities priced in the U.S. currency more alluring to international buyers.

The latest leg in the rally came as stock markets slipped in Europe and Asia and government bond yields fell across the board. The yield on 10-year U.S. Treasurys slipped to 2.067% on Friday, from 2.096% on Thursday. Yields fall as bond prices rise.

Copper and other industrial metals, which are highly sensitive to Chinese demand, declined while oil prices pulled back after spiking in response to the attack on two tankers in the Gulf of Oman on Thursday. The Swiss franc and Japanese yen, also seen as havens, both rose.

Gold bars are stacked in a vault at the United States Mint, in West Point, N.Y. PHOTO:ASSOCIATED PRESS

Money managers have ramped up bets on gold since late April, when they were wagering that its price would fall. Speculative investors held 96,182 more long contracts than short contracts as of June 4, according to the Commodity Futures Trading Commission, which is set to release data for this week later Friday.

Some market participants said this bullish positioning leaves gold vulnerable, especially if President Trump and his Chinese counterpart, Xi Jinping, make progress on trade at the G-20 summit in late June and if the Fed doesn’t cut interest rates in July.

“It’s all about the dollar, it’s all about the Fed, it’s all about rates,” said David Govett, manager of foreign-exchange and precious metals at London-based broker Marex Spectron. On balance, he thinks the Fed is more likely to keep interest rates on hold than cut them.

But other analysts think gold could have further to go as long as tensions between the U.S. and China are running high. “It’s been holding really well and as long as trade tensions are in the background it will continue to be well supported,” said Joni Teves, a precious-metal strategist at UBS Group.

By Joe Wallace

The Wall Street Journal

Gold tops $1,300 to highest level in about 7 weeks on fresh tariff tensions

Gold futures rose firmly on Friday as investors fled to the perceived safety of havens like precious metals amid fresh signs of escalation in tariff tensions between the U.S. and its global trade partners.

The U.S. “intending to impose trade tariff on Mexico, Germany and other eurozone nations apart from China will be bullish for gold,” said Chintan Karnani, chief market analyst at Insignia Consultants.

Also, the “investment world is filled with speculation that China is preparing to retaliate over the Huawei issue. Rare earth exports to [the U.S.] could be stopped in extreme circumstance,” he said.

Gold for August delivery on Comex GCM19, +1.31% rallied by $16.20, or 1.3%, to $1,308.60 an ounce, putting the metal on track for the highest finish for a most-active contract since April 10, FactSet data show. The gains put prices, based on the most-active contracts, on pace for nearly 2% weekly gain, and a 1.8% advance for the month.

July silver SIN19, +0.61% meanwhile, added 16.4 cents, or 1.1%, to $14.655 an ounce, and was on pace for a weekly rise of 0.7%, but traded down 2.2% for May.

The moves for the metals come as President Donald Trump announced in a tweet that the U.S. would impose a 5% tariff on all goods from Mexico until that country stops the flow of illegal immigrants into the country. He said the tariffs will rise to 10% on July 1 if the crisis persists, and by another 5% for every successive month, up to 25% by Oct. 1.

The announcement comes amid reports from Chinese state-owned media threatening fresh retaliatory measures in Beijing’s tariff spat with the U.S. That action comes as data from the second-largest economy in the world showed manufacturing activity slipped into contraction. China’s manufacturing purchasing managers’ index dropped to 49.4, with any reading below 50 reflecting contracting conditions.

Worries about intensifying trade clashes have been a key support for gold prices over the past few weeks, driving demand for gold and government debt alike.

The exchanged-traded gold fund, the SPDR Gold Shares GLD, +1.25% has gained 1.2% for the week, with a 1.3% gain in sight for the month. However, the silver-focused iShares Silver Trust SLV, +0.63% was set for a 0.1% weekly rise and drop of 2.5% in the month to date.

Both the Dow Jones Industrial Average DJIA, -1.08% and the S&P 500 indexSPX, -1.07% were down sharply Friday, as investors exit assets considered risky in favor of so-called havens. In bonds, the yields on the 2-year U.S. Treasury noteTMUBMUSD10Y, -2.44% and 10-year Treasury note TMUBMUSD10Y, -2.44% tumbled, also providing support for non-yielding gold.

Among other Comex-traded metals, July copper HGN19, -0.53%  fell by 0.1% to $2.65 a pound, with the contract down 8.8% for the month. July platinumPLN19, +0.04%  was flat at $794.10 an ounce, trading about 11% lower for the month. The most-active September palladium contract PAU19, -2.46%  lost 2% to $1,338.10 an ounce, poised for a weekly decline of 3%.

By Myrap. Saefong & Mark DeCambre – marketwatch.com

The Best Performing Long Term Assets of The Last 20 Years. Hint, Hint, It’s Not The Dow Jones.

Are you one of those people who are at least trying to save for retirement?

Maybe you’re in your 40’s with 25+ years to go before retirement and you’re just starting out. Maybe you’re in your 50’s and you’ve been through a couple of market crashes and maybe you’re still trying to recoup some of 2008’s losses. It could be that you’re almost to retirement in your 60’s and not only have you seen several market crashes, but you’ve experienced inflation, stagflation, and several recessions as well.

But there is one thing that all people who work on “saving for retirement” have in common. Legacy. Savers, nearly in all instances, want to leave a legacy behind for their children and their family. Some wish to be benefactors and leave behind a namesake legacy for other heirs such as non-profit organizations, colleges, churches, etc. That has always been Americas “Gold Standard.” Leaving something behind.

As savers and investors, we are always looking for the next best thing to invest our money in so that our capital and savings continue to grow. When we look back over the last 20 years we can see what assets have been performing at the top of their class and which have been lagging.

surprisingly being in the longest bull market now in recorded history, you would think the Dow Jones and the stock market were the best performer for the 20-year period ending December 31, 2018. Well, guess what? I have news, It’s not.

Here are the top 5 best-performing assets over the last 20 years, as Per Forbes, Bloomberg News & JP Morgan.

Starting from number 5, Bonds. Bonds also includes Treasuries, government agency bonds, corporate bonds, city bonds, etc. They had the fifth best-annualized returns of 4.5% during the last 20 years.

The next best-performing asset coming in at number 4 has been making new highs as of late and returned an annualized rate of 5.6%. I’m speaking of none other than the S&P 500. During the last 20 years, the S&P took two pretty big beatings during that period, the 1999 Internet Tech Bubble crash and the 2008 Mortgage Meltdown. And yet today it is reaching new highs.

The next best-performing asset after the S&P 500 is WTi Oil (Crude oil). WTi is mainly extracted from oil fields here in the United States and is primarily extracted in Texas, Louisiana, and North Dakota. During the last 20 year period, WTi Oil had an annualized return of 7%.

We are going to skip number two for just a moment. We’ll come back to that. This asset is a little different from the rest and I’ll discuss momentarily.

The number one asset of the last 20 years was REIT’s. (Real Estate Investment Trusts). These are funds that invest mostly in commercial real estate and pay out quarterly dividends to their shareholders. For the 20 year period, REIT’s had an annualized return of 9.9%. That’s the number one best performing asset class.

So what is the one thing all these top performing assets have in common? If you guessed “paper”, you are correct. Nothing physical to take hold of. So that brings me to the number 2 best performing asset in the last 20 years.

Have you guessed what it is? Have you been trying to figure out number 2? It’s the only physical asset on the list. This asset returned an annualized rate of 7.7% and it is the only asset that doesn’t crash as paper assets do and that is none other than gold.

Gold was the second best performing asset for the last 20 years and it’s not hard to understand why. Gold is the only physical asset that protects and preserves a persons wealth during market volatility. It grows in currency value when the stock market declines, and secondly, it acts as a hedge against inflation as consumer prices increase and the dollar loses more of its value.

But gold also offers many tax benefits to precious metal investors especially if they have self-directed IRA’s. That isn’t the only tax benefit but it is a big one for most small investors and mom and pop savers.

So now you may be thinking that it might be a good time to diversify some of your savings into metals or maybe even roll your 401(k) into a self-directed IRA. That would be very smart thinking on your part.

The smart money always hedges their investments with gold. “People-in-the-know”, meaning institutional investors, the wealthy, hedge funds, etc., always protect themselves, their funds, and their investments with gold.

By adding some precious metals to your portfolio, you protect your savings against the recent volatility in the stock market, plus if the United States suffers another crash like that of 2008, (which I expect we will) not only will you have protected your savings, but you’ll most likely see your precious metals grow in value as well.

Monetary Gold has been a precious metals broker for nearly 20 years and has an A+ rating from the Better Business Bureau. We specialize in helping people protect their financial assets by diversifying their portfolio with precious metals, and by helping people with 401(k)’s rollover their savings into self-directed precious metal IRA’s.

If you’ve decided that it’s time to make this move, contact us via the following:

email: support@monetarygold.com

Phone: (888) 411-GOLD (4653)

We look forward to working with you.

‘One of the most important charts about the economy this century’ — and what it means for market volatility

‘The modern equivalent of Bread and Circuses to sate the masses’

To those pinning the recent spikes in stock-market volatility on inflation and, specifically, higher wages, Barry Ritholtz of Ritholtz Wealth Management wants you to take a close look at this chart:

As Ritholtz points out, the two big outliers to the upside are health care and college. On the flip side, clothes, cars, TVs and technology, in general, showed disinflation or outright deflation in prices.

“Wages have barely ticked over the median inflation measure,” he said, “but that did not stop some people from blaming the correction on rising wages.”

Ritholtz says “we are a long ways” from the wage push inflation of the 1990s, although he does expect wages to tick higher, just not enough for the Federal Reserve to take any drastic action.

“Reading the pundits, I cannot tell which fate awaits us: the robot-driven apocalypse where we are all out of work, or the inevitable spike in wages that sends rates much higher and kills the market,” he wrote in a blog post. “Perhaps both — higher wages sends employers into the waiting arms of our automated future.”

Mark Perry, econ professor at the University of Michigan and the man behind the Carpe Diem blog, created the chart and posted it on Twitter, where it was hailed as “stunning” and “one of the most important charts about the economy this century.”

One Canadian used it to take a jab at socialism:

Another pointed to the cost of necessities surging and the cost of luxuries dipping as “the modern equivalent of Bread and Circuses to sate the masses.”

The Dow Jones Industrial Average DJIA, -0.84%  just finished off its worst monthly performance since January 2016, and March has kicked off with declines as investors digest the news that the U.S. plans to impose tariffs on steel and aluminum imports. Both the Dow and the S&P 500 SPX, -0.95%   are coming off their third straight session with a 1% decline, their longest such streak since January 2016.

Fear is in the air, but investors should take a deep breath, according to Gregory Daco, chief U.S. economist at Oxford Economics.

“You can have firmer inflation without inflation spiraling out of control,” he said. “It’s not something to be terribly worried about.”

By

SHAWN LANGLOIS

MarketWatch

Five Charts Show Platinum Markets Coming to Life

After months of being ignored in favor of market darling palladium, platinum is finally getting some attention from investors.

The metal, which is mostly used to make jewelry and reduce emissions from car exhausts, is trading near the highest since May and money is pouring into platinum-backed exchanged-traded funds. Prices have gained as expectations for tough wage negotiations this year in top producer South Africa raised the threat of supply disruptions, and platinum’s cheapness relative to other precious metals is also prompting a second look by investors.

“Platinum has been beaten up too much and became too cheap,” said Georgette Boele, a senior foreign-currency and precious-metals analyst at ABN Amro Bank NV. “The fundamentals are not as negative as perceived.”

Read more and see the charts here…