Miners Tumble as Gold Sinks

Gold spot futures sank more than 1%, below the $1,300 per troy ounce level on Tuesday, taking mining stocks down with them. VanEck Vectors Junior Gold Miners (ticker: GDXJ), iShares MSCI Global Gold Miners (RING), and VanEck Vectors Gold Miners (GDX) fell more than 2% each, ranking among the worst performers in exchange-traded fund land.

Morgan Stanley’s commodity team sees gold hitting $1,263/oz in 2017 and $1,258 in 2018, “a flat/benign outlook,” according to their note published Monday. Uncertain economic growth for the U.S. and China, declining trade relations and of course, geopolitical tension is expected support prices in the short-to-medium term.

Metals and mining analysts Plyush Sood and Hunter Alley updated their forecasts on large-cap miners. Sood and Alley raised their price target modestly for Newmont Mining (NEM) to $33 from $31, below its recent price of nearly $38, but left its $15 forecast for Barrick Gold (ABX) unchanged. They explained:

Newmont: The cost guidance for 2017 was lowered by ~4% or $30/oz at the end of 2Q. After our trip, we have lowered our 2018 cost estimate to $697/oz, down $36/oz from our prior estimate, and is now at the low end of 2018 cost guidance of $700-800/oz. In our model, we have made similar cost reductions to our estimates for future years. These cost cuts raise our PT by $2 to $33.

Barrick: Our team’s gold price forecasts stay nearly unchanged. We have cut our 2017 forecasts to factor in the impact of the export ban in Tanzania, but haven’t changed our forecasts for 2018 and onwards assuming that exports can resume next year. A continuing inability to export or a value leakage in the region will affect our NAV for ABX.

Gold Boxed In by Bitcoin?

Gold remains under some pressure and as we noted here on Friday spot gold has fallen to “The Box” marking the 50-62% retracement of the move from the lows in early May of $1215 to the highs two weeks ago when spot gold traded to $1298. The Box is bounded on the low side by $1245 and on the high side by $1255 and as we write spot gold is perfectly in the “middle” of that range, with the low thus far in Asian dealing of $1250. We have to suspect that there shall be stops just under $1250 and that when those stops are elected that the lower boundary of The Box shall be put to test.

With crude oil steady at best and with stock prices generally trading better, the propensity on the part of gold buyers to rush forward is muted at best. Further, gold mining shares seem unwilling and/or incapable of 3 taking the lead and until such time as the miners lead weakness is the greater likely future.

Finally, Bitcoin is a bit weaker and we are still of the mind that the peak for the crypto-currencies generally but for Bitcoin specifically was made seven trading sessions ago when Bitcoin rose to just over $2800 and then plunged sharply, tracing out a daily “reversal” to the downside and finishing what appears to us to have been a nearly text-book Fibonacci 5 wave pattern to the upside. However, just did the EUR noted above failed to forge a weekly reversal to the downside, so too did Bitcoin “fail,” for although Bitcoin closed lower on the week it did not close below the previous week’s lows. Thus now a broader, time consuming top shall have to evolve instead. We believe it shall bit it may take time.

Gold pulls back, but on pace for second weekly rise in a row

Gold prices traded slightly lower Friday, but futures were on track to log a second weekly gain in a row as demand for assets perceived as risky waned and as the U.S. dollar retreated to near seven-week lows.

April gold GCJ7, +0.08%  fell $2.20, or 0.2%, to $1,245 an ounce, with the precious metal aiming for a 1.3% weekly gain. Meanwhile, the commodity’s sister metal, silver for May delivery, SIK7, +0.89%  was up 4 cents, or 0.2%, at $17.63 an ounce, on track for a 1.3% weekly advance.

Colin Cieszynski, chief market strategist at CMC Markets, said that momentum for gold, which has climbed in five out of the past six sessions, may be tapering.

A pullback in the dollar which has been trading around a seven-week low, has helped assets priced in dollars to trade higher. As measured by the ICE U.S. Dollar Index DXY, -0.12% a measure of greenback against six rival currencies, the buck was slightly lower Friday and staring at a 0.6% weekly decline. A softer dollar can make assets pegged to the currency more appealing to buyers using other monetary units.

The dollar, and assets considered risky like stocks, have been stalling out after a run of records amid heightened concerns about President Donald Trump’s ability to put in place pro-growth legislation, highlighted by the president’s struggle to get the House to pass a bill that would repeal and replace former President Barack Obama’s signature health-care law, known as the Affordable Care Act, or Obamacare. A vote on the new health bill is slated for later Friday, with a failure seen by some as signaling that Trump may face headwinds on other parts of his ambitious agenda.

Gold has mostly benefited in this environment but some market strategist see the path for further rises fading somewhat.

“Gold has started to drop back as its latest rally runs out of gas,” said Cieszynski. He said a recent reading of an asset’s momentum, known as relative strength index, suggests that the recent upswing may be “getting tired” and predicted that a pullback around the $1,242 an ounce, then $1,230 an ounce, as possible.

On the economic front, new orders for durable goods climbed in February for the second straight month. Durable-goods orders advanced 1.7% while the increase in January was raised several notches to 2.3%, reflecting a pickup in manufacturing that kicked in toward the end of last year.

In exchange-traded funds that track metals, the SPDR Gold Trust GLD, +0.20% was off 0.1%, the VanEck Vectors Gold Miners ETF GDX, +0.13%  was down 0.3%, while the iShares Silver SLV, +0.72%  gained 0.1%.

Time to Own Gold?

Over the summer gold, after a great run during the first half of the year, was running into important long-term resistance. A few weeks later, the sentiment in gold had also gotten far too euphoric. The precious metal needed a pullback before it would be able to embark on its next leg higher.

It all actually looked like gold has started a new bull market. Furthermore, the case for owning gold has not diminished because of Donald Trump’s election victory. If anything, it has strengthened. The prospect of rising deficits and inflation enhance the bullish case for owning gold, especially when you consider the fact that the Fed, or any other central bank for that matter, is not likely to change dramatically from its incredibly dovish bias any time soon.

And thanks to the “Trump Triumph Trade,” we have now seen a healthy pullback in gold accompanied by a complete shift in sentiment. Outflows from the gold ETF have persisted every day for nearly three straight weeks since the election. Headlines have become very bearish again, similar to what we saw as gold bottomed late last year. From a contrarian standpoint this is all very constructive.

What might matter most to the price of the precious metal, however, is the path of the dollar as they normally move inversely to each other. On a long-term time frame there are some significant bearish momentum divergences at play in the greenback. These are very similar to what we witnessed at the 2002 peak in the dollar. In fact, that 3-year analog is 92% correlated to the last 3 years’ trading in the greenback. Furthermore, this comes just as the Dollar Index tests the 61.8% Fibonacci retracement of its long-term decline since then. Technically, it looks ripe for a major reversal.

But the bullish case for gold does not just rest on the direction of the dollar. Gold is also an, “investment in monetary policy failure,” as Michael Lewitt wrote this week, or at least a hedge against it. And for anyone paying attention, it is becoming very clear that the “policy stakes are now very high,” to quote William White from a recent speech he gave in which he discusses in brilliant detail the waning efficacy and growing risks of the central bank experiment we have witnessed for the better part of the past decade.

The bottom line is the case for owning gold has only grown stronger over the past few months even while prices and sentiment have reversed. Righr now it seems to be a terrific opportunity to take advantage of what could be the very early stages of a major shift in the long-term trend of outperformance by financial assets over real assets.

Gold dips, down for 7 of last 8 sessions as dollar firms

Gold futures on Tuesday were headed for a seventh drop in eight sessions as the dollar saw firm early gains.

December gold GCZ6, -0.24% fell $3.80, or 0.3%, to $1,256.60 an ounce, while December silver SIZ6, -0.42% fell 5 cents, or 0.3%, to $17.61 an ounce.

The ICE U.S. dollar index DXY, +0.45% was up 0.6% to 97.45.

A stronger dollar often can weigh on dollar-denominated commodities, as they become more expensive for holders of other monetary units.

What’s more, prospects for higher U.S. interest rates could cut demand for gold, which doesn’t bear a yield. No major economic reports were on the U.S. docket Tuesday, leaving financial markets to focus on recent Federal Reserve rhetoric, most of which left the door open to an interest-rate hike yet this year.

“The dollar gains as the market becomes more convinced that Fed will raise rates this year—probability of rate hike in December rises to 68% from 64% before last week’s nonfarm payrolls. [Democratic presidential candidate Hillary] Clinton’s improving position in the polls is also helping USD, as do higher US Treasury yields as rising oil prices pushed up U.S. [market] interest rates,” said Marshall Gittler, head of investment research for FX Primus.

Last week, gold dropped roughly 5% for the week—the largest such loss in three years. But to start the week, gold moved back above the 200-day moving average near $1,260.

Gold prices at auction rose to a two-year high

At the auction in Singapore on the morning of Wednesday, July 6, the price of gold rose 1.1%, to $ 1,371.39 an ounce, showing the highest level since March 2014, and continued to trade at $ 1367.64. At the same time, silver prices have grown by 2.4%, to $ 20.4103 an ounce and traded at $ 20.2469.

“Investors are investing in gold, as growing concerns over the global economic outlook, as well as about the political uncertainty,” – said an analyst at Bloomberg Shenhua Futures Co Wu Zhili.

Tuesday, July 5, the gold exchange-traded fund assets increased by 2%, to 1997.28 metric tons, which was the highest rate since 2013, says Bloomberg, since the beginning of the year they grew by 37%

Gold Price Cuts India Demand as Government Schemes Don’t

HIGH GOLD PRICES have seen India’s gold import volume fall sharply, something the government has been trying to achieve with new schemes to deter household demand since the end of 2015, writes Katie Hillan at BullionVault.

With gold prices in Rupee terms rising over 16% in 2016 so far, gold imports into India have fallen year-on-year for four months straight due as consumers cut their demand.

“At this level,” says trade body director Bachhraj Bamalwa at the All India Gems and Jewellery Trade Federation, “no one wants to buy. Everyone is waiting for a correction.”

April saw only 22 tonnes imported, with May’s inflow to the world’s No.2 consumer market more than halving from the same month last year to 31 tonnes.

2015 imports totalled 939 tonnes – a monthly average above 78 – despite the launch of several government schemes aimed at deterring demand.

With Indian residents owning an estimated total 11% of the global gold stock, the Indian government last year announced two schemes to try and curb India’s high demand for gold.

The objective of the Gold Monetisation Scheme (GMS) was to mobilise some of the gold already held by Indian households, estimated to be around 22,000 tonnes worth $1 trillion.

The scheme then plans to make gold available as a raw material, on loan, to the jewellery sector in order to reduce its reliance on imported bullion to meet new domestic demand.

Over the past 6 months only 2.8 tonnes of gold have been collected under the GMS.

State-owned Punjab National Bank is the top gold collector, having mobilised 1,311kg of gold, according to The Economic Times of India.

The Sovereign Gold Bond Scheme, meanwhile, allows investors to acquire returns linked to the gold price, plus a rate of interest. The bonds are bought and sold in Rupees but denominated in grams of gold.

The first three tranches of gold bonds, issued between November and March, attracted Rupee investment equal to 3.8 tonnes according to figures quoted by India Express.

“Prices [are] expected to move higher during the second half of this year,” says specialist consultancy Metals Focus in its latest India Focus Monthly.

“As price expectations continue to improve, this will lure back Indian investors and see consumers increase their spend on gold.”

Gold importing increased in May from March and April’s lows, when many Indian jewellers were closed in protest at the government imposing a new 1% excise tax in its February budget on all gold objects made and sold in India.

“The excise duty will bring jewellers’ business to a standstill,” said Ketan Shroff, a spokesman for India Bullion and Jewellers Association, warning that many of the nearly 10 million artisans working in the industry could lose their jobs.

What’s Next for Gold Investors?

After witnessing the best quarter in almost three decades, investors are expecting gold to move sideways for the second quarter of 2016. With the Chinese markets recovering from their recent fall, safe-haven bids may be expected to vanish slowly. However, the dipping global interest rates may lift the demand for this non-yield bearer, helping its price.

Gold gave steady returns to investors for the first two months of 2016 as unrest and instability continued in the markets. However, March started with some ups as well as downs for gold. As of April 18, gold has posted a 2% loss on a five-day trailing basis. However, silver and palladium maintained gains of ~0.4% and 4.3%, respectively, during the same timeframe.

What’s next?

The most important determinant for gold under the current circumstances is the Federal Reserve’s call for an interest rate hike. With the recent upbeat economic data from the US and hawkish comments from the Fed’s decision-makers officials, investors are remaining curious.

However, the global downward sticky interest rates continue to concern the members of the Fed with respect to the appropriate time for an interest rate hike.

Charles Evans, president of the Chicago Federal Reserve, noted on April 15, 2016, that the Fed is unlikely to raise interest rates when it meets later this month. However, it seems to be on track for at least two increases over the rest of the year. An interest rate hike could subdue precious metals as well as the mining companies.

Gold regains upside momentum after Fed dials back rate hikes

Gold futures bounced back Thursday to push higher, a day after the Federal Reserve scaled back expectations for the next interest rate hike, citing a weak global economic environment and volatile stock markets.

The U.S. central bank signaled two more rate increases this year instead of the four hinted at back in December, as the policy makers “continue to see risks” to the economy. The dovish outlook sent the dollar sharply lower and instead spurred a rally in dollar-denominated commodities such as gold.

“Never underestimate the power of the Fed to impact the markets. The doves are clearly winning the argument resulting in yesterday’s dovish announcement, which dragged the Fed back far more in line with market views on the potential for rate hikes in 2016,” said Richard Perry, analyst at Hantec Markets, in a note.

“Once the dust settles we will get more of an idea of how sustainable this move is for the gold bugs,” he added.

Gold for April delivery GCJ6, +2.98%  tacked on $34.60, or 2.8%, to $1,264.70 an ounce.

The ICE dollar index DXY, -0.95%  slumped 0.9% to 94.85.

Gold has reclaimed its upside momentum and it has potential for an extended rally if it closes above $1,287.80 in the near term, which was last week’s high, said Jim Wyckoff, senior analyst at Kitco.com, in a report.

Randgold signs three new joint ventures in Congo

Randgold Resources has signed three joint venture agreements with junior miners to explore potential gold deposits in northeastern Democratic Republic of Congo, its chief executive Mark Bristow said on Tuesday.

Randgold already operates the Kibali mine in northeastern Congo, a joint venture with AngloGold Ashanti and state miner Sokimo. It also has a joint venture with Kilo Goldmines to explore for gold in the area.

The new joint ventures with the Toronto-listed Kilo, Deveron Resources and Loncor Resources more than double the size of Randgold’s landholdings in Congo.

“We have offered them to take over their ground,” Bristow told reporters in the Congo capital of Kinshasa. “If we discover any deposits and are able to deliver a pre-feasibility study, we get 65 percent of the joint venture.”

Kibali and other new gold mines opened by companies like Banro Corporation have boosted Congo’s gold output from near zero in 2011 to an expected 26 tonnes in 2015.

Randgold also announced on Tuesday that Kibali, which poured its first gold in 2013, was likely to exceed its 2015 production target of 600,000 ounces.

Congo, which hopes to become one of Africa’s leading gold producers, increased output 69 percent in the first half of 2015 compared to the same period in 2014 despite falling gold prices.