China gold reserves and gold’s likelihood of a strong H2. My latest posts on sharpspixley.com

My two latest posts on sharpspixley.com.  Click on the titles to read in full.

LAWRIE WILLIAMS: CHINA UPPING THE ANTE IN GOLD RESERVES

The Chinese central bank reports having added 15.86 tonnes of gold to its reserves in May – the highest level so far in its current spate of reporting apparent monthly increases.

LAWRIE WILLIAMS:; GOLD COULD HAVE AN EXTREMELY GOOD H2 – MURENBEELD

The latest Gold Monitor from Murenbeeld & Co suggests that the dollar may have peaked and that there are a number of factors out there that are looking to be gold positive for 2019 H2 and 2020

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Sharps Pixley back on line and Gold, GLD and Palladium article updates

After a couple of days where the Sharps Pixley site went offline following an attempted hack, I can report that it is now up and running again and my future articles will find a home there rather than here.  However I will continue to publish articles of interest here as well as occasional links to articles on Sharps Pixley.

Meanwhile I did publish a couple of articles here when the Sharps Pixley site was down – and I have now reposted them on Sharps Pixley with some minor updates.  Links to the updated versions may be accessed by clicking on the links below:

LAWRIE WILLIAMS: UPDATE: GLD TURNAROUND VERY POSITIVE FOR GOLD

06 Jun 2019 – There have been some positive inflows into GLD, the world’s largest gold ETF, since the Memorial Day holiday after around a month or so of almost-continual withdrawals. This represents an important change in sentiment towards gold.

LAWRIE WILLIAMS: UPDATED: GOLD PRICE BACK AHEAD OF PALLADIUM AGAIN

04 Jun 2019 – A rising gold price and a falling palladium one have seen gold regain its crown as the highest priced principal precious metal. Both metals do seem to have a fair amount going for them but, for now, the sentiment appears to be with gold..

LAWRIE WILLIAMS: GLD turnaround very positive for gold

With the Sharps Pixley Site still Down for Direct Posts I am continuing to post my articles here with the link to them picked up by sharps Pixley’s alternate site Metalsdaily.com

Gold showed signs of weakness through most of April and May and no less than 35 tonnes of gold were liquidated out of GLD, the world’s largest gold ETF, between April 1st and the Memorial Day holiday on May 27th. But as so often seems to be the case, the U.S. holiday seemed to trigger a turning point and, since then, GLD has added 22 tonnes of gold to its holdings. And the GLD increase has coincided with a very sharp uptick in the gold price which is currently approaching $1,350 spot as I write – a big increase from a low point of around $1,275 only a week ago.
This is no coincidence as both the GLD deposits and the rising gold price signify a major change in sentiment about the prospects for gold from some of the big money funds. Ray Dalio’s Bridgewater, reputed to be the world’s biggest hedge fund with around $150 billion under management, has been leading the clarion call for gold. Dalio is said to be a gold believer and is reported as recently having his fund increase its gold exposure in the light of what he sees as an escalating trade war between the U.S. and China which he regards as potentially moving out of control. In a recent blog post he noted “History shows that countries in conflict have seen that such conflicts can easily slip beyond their control and become terrible wars that all parties, including the leaders who got their countries into them, deeply regretted, so the parties in the negotiations should be careful that that doesn’t happen. Right now we are seeing brinksmanship negotiations, so it is a risky time.”
While that may be a contentious assessment of the current trade negotiations, many feel that Dalio has a strong point here and President Trump’s ‘shoot from the hip’ approach to weaponise U.S.-assumed financial clout certainly has huge dangers – not least for segments of the U.S.’s own business structures. National leaders, who have ‘face’ to protect, may not cave in to bullying tactics of this type as easily as Trump’s business rivals may have done in the past. Equity markets in the U.S. and globally are looking nervous and there are fears around of a full-on global recession.
Where Dalio is seen to go, others follow, so it is not too surprising that GLD seems to be seeing gold inflows. The big question is how far can this apparent change in sentiment boost the gold price before it is seen as having risen too far too fast with a correction coming back in?
But meanwhile there are other elements boosting the gold price – not least a falling U.S. dollar index which usually coincides with a rising gold price. Geopolitical tensions seem to be ever-present, there are ongoing tariff, counter-tariff and economic sanction impositions, the U.S. Fed is now seen as more likely to cut interest rates rather than raise them, equity market nervousness, central bank gold buying, etc. All these would seem to be in favour of an increasing role for gold globally. Thus the target for a $1,400 plus gold price in the second half of the year would seem to be comfortably in play again. Indeed even higher price levels may come about should some of the current global tensions remain unresolved or escalate further.

LAWRIE WILLIAMS: Gold price back ahead of palladium again

the sharps pixley site still appears to be down so posting this article here and seeing if I can upload the Link to sharpspixley.com

A rising gold price and a falling palladium one have seen gold regain its crown as the highest priced principal precious metal. Both metals do seem to have a fair amount going for them but, for now, the sentiment appears to be with gold.

Nervousness about the onset of a possible global recession plus a perceived drop in gasoline (petrol)-powered automobile sales worldwide has seen the high-flying palladium price slip back.  With gold showing some strength, the price positions between the two precious metals have again reversed – as predicted in early year price forecasts – with gold trading as I write at about a $20 premium over the pgm.  However palladium supply/demand fundamentals remain strong and the price tends to be much more volatile than gold so don’t be too surprised if it regains its price ascendancy over gold in the short to medium term, but perhaps only briefly.

Historically gold has usually traded at a substantial premium over palladium, although not over the latter’s sister metal, platinum.  We suspect over time there will be something of a return to the status quo with platinum playing catch-up, but that may take some years to come about.  Palladium demand is hugely dependent on the autocatalyst market – a recent estimate is that this sector accounts for 80% of palladium demand – so a continuation in the drop in auto sales could hit the metal hard.  But there remains a big supply deficit overhang which will take some time to eliminate so palladium could yet benefit from the occasional price spurt.

The ever growing take-up of battery electric powered vehicles, and perhaps longer term of fuel cell power, will also severely dent the prospects for palladium, as it will for another pgm group metal, rhodium, which tends to be utilised – in very small quantities – alongside palladium in autocatalysts, but it will take a few more years yet for these alternative drive systems to put a serious dent in the internal combustion engine market,  Given that the world’s second biggest auto market is the U.S., and that country is currently led by a climate change sceptic who perhaps sees less need for non-polluting vehicles, and has a strong vocal following, the take-up of alternative-powered automobiles may move slower than anticipated in that part of the world.  However the world’s biggest auto market currently is China, and given that country’s air pollution problems electric vehicle take-up there is likely to be strong.  Swings and roundabouts!

As for gold itself there appears to have been a major change in sentiment towards the yellow metal which has certainly been price supportive over the past few days.  Futures markets are pricing gold higher than current spot levels so it could have further to run. Outflows from the world’s biggest gold ETF, GLD, have been replaced by inflows which is a guide to where the big money is now headed.  Some commentators see the gold price as now threatening this year’s high of around $1,350 over the summer.  We shall see.

All in all though there are a number of factors which look to be in favour of a rising gold price.  Tariff wars instigated by President Trump’s aggressive foreign trade policies, geopolitical instabilities in several parts of the world which could blow up any time, fearful equity markets and the now likelihood of U.S. Fed rate cuts all would appear to be gold price supportive.  Gold investors may yet have something to cheer about as the year progresses.

Gold powers through $1,300, but will it stay the course?

This article was posted to Sharps Pixley yesterday but the site is down so I am copying it here

Gold has made several attempts to consolidate above $US1,300 so far this year, but has so far always been brought back down through concerted activity in the U.S. futures markets.  This past Friday, and today, gold has driven up through the $1,300 level again and has seen good strength in Asian and European markets, but will it survive the U.S. markets when they open today?  In other words will this time be different?

The trigger on this occasion for the uplift in the gold price has been President Trump’s announced intention to weaponise further trade tariff impositions – this time on Mexico to try and force the latter to put a stop to illegal immigration into the U.S.   The problem with this is that the U.S. President seems to think the carrot and stick approach to international diplomacy (rather more stick than carrot) will work as well as it may do in business.  But the difference here is that other sovereign nations may just dig in their heels and resist such policies to their fullest extent.  National pride is at stake here.  Governments are not subject to shareholder needs – indeed they may be subject to electoral dismissals, but these are much longer term scenarios and an aggressive approach like that of the U.S. President can have a counter-productive effect in uniting the affected populace against what they see as unwarranted foreign intimidation.

Sanctions and tariffs seldom work.  The imposition of sanctions on Russia for example, which have now been in place in some form or other for around five years now, if anything have seen the latter nation go from strength to strength and have done nothing to dampen President Putin’s popularity.  He is seen by the Russian people as instrumental in ‘Making Russia Great Again’ – or MRGA – even outdoing, in effect, President Trump’s MAGA clarion call.  Arguably Russia is now a much stronger player on the global stage than it was before U.S. sanctions were implemented.  Counter measures by Russia and an ever increasing political and financial relationship with China may well be more damaging to U.S. global interests than a rather more laissez faire attitude may have been.

Likewise the imposition of swingeing trade tariffs on Chinese goods and the strictures on Chinese tech giant Huawei may end up being counter-productive.  It much depends who out of Presidents Trump and Xi blinks first – but the U.S. President, who claims a deep understanding of China – must be aware that ‘saving face’ is probably a far more important part of Chinese culture than it is of Western political expediency.  While on the face of things the far higher level of Chinese exports to the U.S. dwarfs the latter’s exports to China suggests that the U.S. would be the winner in a trade war, the differing political and economic cultures of the two protagonists suggest that China may be in a far stronger position than the U.S. is counting on!

Be all this as it may, the intransigence of the U.S. President, his propensity to announce significant policy changes on twitter and his perhaps less than honest recollections/interpretations of some of his past utterances could well have the unintended consequence of precipitating a stock market collapse and the triggering of a global recession.  We could even be heading for some kind of superpower shooting war – there are enough global flashpoints for this to happen very quickly.  American military technology may yet not be sufficiently dominant to ensure U.S. victory if such a war springs up.

All the above may be in investors’ minds at the moment.  Equities markets are, to say the least, nervous.  They look to have risen too far too fast, way beyond normally justifiable levels.  Many big players may well have had their profits prospects seriously damaged by the seemingly ever-escalating trade wars.  In the U.S. the all important FAANG stocks which have been instrumental in driving the market upwards look increasingly vulnerable to the U.S./China trade war and the hugely important U.S. auto manufacturing sector to the potential trade dispute with Mexico.

So what does all this mean for gold and the other precious metals?  Gold, in theory at least, thrives on uncertainty.  We are already beginning to see inflows into the gold ETFs which had been seeing liquidations for much of April and the first half of May which suggests the big money is taking notice – not before time.  The pgms would probably suffer in a recession – particularly palladium and rhodium which are hugely dependent on the petrol (gasoline) driven auto market.  Silver may well benefit, despite its strong industrial usage.  The gold:silver ratio has been at close to 90 and will probably come down in a rising gold price scenario suggesting that percentage gains in silver may exceed those of gold.  But silver is not known for nothing as ‘the devil’s metal’ because of its unpredictability so it may be better to play safe and stick with gold as your market crash/recession insurance.  The omens look positive for gold but we shall see whether the U.S. market agrees!

Trust in Gold and Indian Gold Demand Strong

To keep lawrieongold.com readers  up to date with my musings on gold here are my two latest articles published on the Sharps Pixley website.  Click on titles to read:

TRUST IN GOLD

Both Michael Lewitt’s The Credit Strategist newsletter and Ronni Stoeferle and Mark Valek’s very comprehensive 340 page In Gold we Trust report suggest gold is the ultimate investment to protect your wealth

INDIA BACK ON TOP FOR SWISS GOLD EXPORTS IN APRIL

India received a little more gold from the key Swiss refineries in April than Mainland China and Hong Kong combined, confirming something of a pick up in gold demand in the sub-Continent

More recent posts on Sharps Pixley

Another set of recent articles I’ve published on the Sharps Pixley website – click on the titles to read

LAWRIE WILLIAMS: Best March Quarter from Australia’s Gold Mines for 21 years

26 May 2019 – The March quarter production figures for Australia’s gold mines are the highest for 21 years putting the country on track for an annual output of around 320 tonnes of gold this year.

Lawrence Williams

LAWRIE WILLIAMS: Favourable outlook for gold – Murenbeeld

25 May 2019 – In his latest Gold Monitor newsletter Martin Murenbeeld paints a moderately positive view for the gold price in the face of numerous geo-economic and geopolitical issues facing us all.

Lawrence Williams

LAWRIE WILLIAMS: Palladium/platinum premium to persist – Metals Focus

23 May 2019 – In its take-away from opinions expressed at London Platinum , Metals Focus sees palladium’s price premium over platinum continuing for years to come despite a number of risks facing the catalytic metal.

Lawrence Williams

LAWRIE WILLIAMS: Russia adds another 15.6 tonnes to gold reserves in April

21 May 2019 – Russia is continuing to build its gold reserves monthly and remains on track to become the world’s third largest national gold holder by early next year.

Lawrence Williams

My recent postings on Sharps Pixley website

In the interests of keeping Lawrieongold readers up with my latest musings on precious metals, here are links to my most recent articles published on the Sharps Pixley website

SHARPS PIXLEY MARKET REPORTS

Winding Down

To all Lawrieongold readers

This is to let you know I’ll be winding this site down, but am still writing on precious metals.  You can still read my writings on the Sharps Pixley site.  I may still publish the occasional article here if the mood takes me but in general old age is eating into my time availability so am heading towards long overdue retirement.

I’ve been involved in the precious metals sector – firstly as a mining engineer, and latterly as a publisher/writer/analyst, for over 50 years so its probably time to call at least some of what I do to a halt.

Thank you for reading my material – I hope you’ve enjoyed it and found it useful

With best wishes

Lawrence (Lawrie) Williams

World Top 20 Gold 2018 – Countries, Companies and Mines

Top independent precious metals consultancy, Metals Focus, has published its latest analysis of the World’s gold supply and demand and the following 3 tables break down global production showing the Top 20 gold producing nations, companies and mining operations last year and their relative performances compared with a year earlier.  What will perhaps be disappointing for gold investors and some analysts is that the figures do not yet show that Peak Gold has been achieved, with new mine production growing by around 1.8% last year,

Table 1: Top 20 Gold Producing Nations 2017/2018 (Tonnes)

Rank Country 20 18 Output 2017 Output %  Change
1 China 404 429 -5.9%
2 Australia 315 293 +7.6%
3 Russia 297 281 +5.9%
4 USA 222 236 -6.3%
5 Canada 189 171 +10.4%
6 Peru 158 167 -4.9%
7 Indonesia 137 114 +20.0%
8 Ghana 131 130 +0.7%
9 South Africa 130 154 -15.7%
10 Mexico 115 119 -3.4%
11 Brazil 97 96 +1.3%
12 Uzbekistan 92 89 +3.9%
13 Sudan 77 88 -13.0%
14 Papua New Guinea 69 64 +7.4%
15 Kazakhstan 68 56 +22.1%
16 Mali 61 50 +21.3%
17 Argentina 60 63 -4.6%%
18 Burkina Faso 59 53 +12.8%
19 Tanzania 48 55 -12.7%
20 DR Congo 45 37 +22.8%
Others 728 697 +4.4%
  Total 3,503 3,442 +1.8%

Source: Metals Focus, lawrieongold

Table 2: Top 20 Gold Mining Companies 2017/2018 (Tonnes)

Rank Company 2018 Output 2017 Output %  Change
1 Newmont Mining 158.7 163.8 -3%
2 Barrick Gold 140.8 165.6 -15%
3 AngloGold Ashanti 105.8 116.8 -9%
4 Kinross Gold 76.5 78.6 -3%
5 Polyus Gold 75.9 67.2 +13%
6 Freeport McMoran 75.9 49.1 +55%
7 Newcrest Mining 76.7 71.1 +6%
8 Goldcorp 71.4 79.9 -11%
9 Navoi MMC (est) 64,7 62.3 +4%
10 Gold Fields 58.9 62.5 -6%
11 Agnico Eagle Mines 50.6 53.3 -5%
12 Shandong Gold 47.7 43.9 +4%
13 Harmony  Gold 44.1 34.0 +30%
14 China National Gold 40.4 42.4 -5%
15 Randgold Resources 39.9 40.9 -2%
16 Polymetal 37.8 33.4 +13%
17 Zijin Mining 37.0 37.5 -1%
18 Sibanye Gold 36.6 43.6 -16%
19 Yamana Gold 32.1 30.4 +6%
20 Glencore 31.2 32.1 -3%

Source: Metals Focus, lawrieongold

Table 3.  World’s 20 largest gold mines in 2018 (Production in tonnes)

 Rank Mine Country Owner(s) 2018 2017 Change
1 Grasberg Indonesia Govt ., Freeport 83.9 43.3 +74%
2 Muruntau Uzbekistan Govt. 61.5 61.0 +1%
3 Olimpiada Russia Polyus 41.1 36.6 +12%
4 Cortez USA Barrick 39.3 45.0 -13%
5 Lihir PNG Newcrest 30.3 28.6 +6%
6 Pueblo Viejo Dominican Rep Barrick/Goldcorp 30.1 33.7 -11%
7 Zarahshan Uzbekistan Govt. 30.0 30.0  –
8 Carlin USA Newmont 28.8 30.2 -5%
9 Goldstrike USA Barrick 26.0 26.9 -3%
10 Kibali DRC Randgold/AngloGold/Sokimo 25.1 18.5 +35%
11 Cadia Valley Australia Newcrest 23.4 17.0 +38%
12 Boddington Australia Newmont 22.1 24.5 -10%
13 Canadian Malartic Canada Agnico Eagle/Yamana 21.7 19.7 +10%
14 Kalgoorlie Super Pit Australia Newmont/Barrick 19.5 22.9 -15%
15 Detour Lake Canada Detour Gold 19.3 17.8 +9%
16 Geita Tanzania AngloGold 17.5 16.8 +5%
17 Veladero Argentina Barrick/Shandong 17.3 19.9 -13%
18 Kumtor Kyrgyzstan Centerra 16.6 17.5 -5%
19 Merian Suriname Newmont/ Govt. 16.6 16.0 +4%
20 Yanacocha Peru Newmont/Buenaventura/Sumitomo 16.5 16.6 -1%

Source: Metals Focus, lawrieongold

 

 

Very irreverent Brexit ditty

In the UK we are bombarded with pro and anti Brexit media coverage day in day out.  As someone who voted to Remain in the referendum 2 years ago, but has changed his view since, particularly in the light of intransigent EU negotiators, I hope others may find this ditty, posted on YouTube by Dominic Frisby, amusing if NSFW due to the language used.  Dominic will be known to many lawrieongold readers as an astute commentator on precious metals.  I wasn’t previously aware of his comedic singing abilities, nor of his Brexit viewpoint until this YouTube posting was brought to my attention by Canadian blogger ‘Otto Rock’ (a pseudonym) on his regular Inca Kola News blog (which I would recommend as must reading for anyone interested in the nefarious goings-on in the Canadian junior mining and exploration sector.

What has to be surprising for anyone who follows the UK economy is that it hasn’t collapsed under Brexit uncertainty.  Indeed key indicators like the number of people in work is at its highest level since records began in huge contrast to a number of EU nations which are suffering record unemployment levels.  Global growth is set to expand far faster than EU growth and the UK is one of the world’s biggest economies in its own right, which is why the EU is desperate to keep us in the Common Market and is making it so difficult for us to leave.  Enough said.

The link to the YouTube video for Dominic’s song entitled 17 million f**ck-offs (I warned you so don’t view this if of a sensitive nature) is as follows: https://www.youtube.com/watch?v=jiUFPjulTW8

The latest updates on China’s gold

The Chinese central bank, The People’s Bank of China, has announced a 9.95 tonne increase in the country’s gold reserves and its subsidiary, The Shanghai Gold Exchange (SGE) has come up with its gold withdrawal figures for February (which we equate to China’s real gold demand).  My comments on both these have been published on the Sharpspixley.com website and links to the two, admittedly opinionated, articles are shown below:

CHINA ADDS 10 TONNES TO GOLD RESERVES, BUT IS THAT ALL?

The Chinese central bank has reported adding a fraction under 10 tonnes of gold to its forex reserves in February, but is the new total any more accurate than in the past?

CHINA’S GOLD DEMAND LOOKS TO BE SLOWING THIS YEAR SO FAR

The Shanghai Gold Exchange has now released gold withdrawal figures for the first two months of 2019 and if we equate SGE withdrawal figures to Chinese gold demand, as we do, these suggest the nation’s demand may be slowing this year/

LBMA Panel forecasts 2019

Every year the London Bullion Market Association (LBMA) invites a selection of precious metals experts to predict precious metals prices for the year ahead.  This year there was little consensus among the participants who generally predicted a very conservative price scenario.  The LBMA’s tabulation is shown below:

Our comments on the findings and our more bullish projections have been published on the Sharps Pixley website.  Click here to read them

Gold, Silver, Platinum Group Metals 2019 Metal Price Predictions And Stock Choices

Article published on Seekingalpha.com
Summary

Last year with precious metals, apart from palladium, falling short of projected values, our predictions and anticipated stock gains fell well short of expectations.

For 2019, we again anticipate relatively conservative gains in precious metals prices and continuing falls in general equities and bitcoin valuations.

If our predictions are correct, we could see a further recovery in precious metals prices and a sharp upturn in relevant stocks.

We are sticking in our stock recommendations to major precious metals miners and royalty/streaming companies as they are likely to remain comfortably in existence if metal prices move against them again.

To read full article on Seeking Alpha click on:

https://bit.ly/2Aw1ivY

Precious metals price predictions 2019

An article written by me for www.sharpspixley.com to estimate where I think precious metals prices may be in a year’s time:

Predicting precious metals prices for the year ahead can be an invidious task and I have to say that, although I considered my guesstimates for 2018 made a year ago as fairly conservative they were nearly all out by an order of magnitude.  My only consolation, perhaps, is that they were no more so than those of most other precious metals professional analysts and observers.

In the event, as the year played out to the full, gold at least outperformed equity markets by being almost flat over the full year despite underperforming general stocks for much of the period.  Equities, after performing well earlier on, came down with a bit of a bang over the final few weeks of the year and long term gold holders will have done better than those who held on to their general stocks.

My one prediction which turned out to be very accurate was that for bitcoin – not a precious metal at all – which I predicted would come down very sharply, as it did.  I was also looking for a sharp fall in general equities, but it took the final few weeks of the year for this to happen – prior to which they had performed fairly positively.

But herewith my best guesses for precious metals performance in the current year.  In general the projections for gold and silver are much the same as those I made a year ago – but perhaps a little more conservative.  OK, my timing was wrong a year ago but I see many of the factors likely to drive prices in the year ahead as actually being much the same. Let’s hope I am more accurate in my guesstimates this time around.

In general in 2018 precious metals had a fairly dismal year, with the exception of palladium and for much of the year, after a promising first quarter, were strongly outperformed by equities.  But in the final few weeks of 2018, equities came off very sharply and gold holders did rather better with the yellow metal coming off its lows.  As I pointed out in a previous article here, the strong dollar meant that gold actually performed even better – indeed positively – over the year in most countries other than the U.S.A. and with equities declining even more in most other countries than in the U.S. gold did indeed work rather well as a safe haven – as it is supposed to.  Some of the final figures and percentage changes over the full year are noted in the table below, but these figures are in U.S. dollars and with the U.S. dollar index (DXY) rising quite sharply (around 5%) over the full year gold actually increased in value in many other currencies which made it an even better performer in these nations.

Metal Price or Index Level

Price/Level 1/1/2018

Price/Level 1/1/2019

% Change

Gold (US$)

$1,306

$1,282

-1.8%

Silver (US$)

$17.06

$15.47

-9.3%

Platinum (US$)

$947

$794

-16.2%

Palladium (US$)

$1,087

$1,252

+15.2%

Dow Jones Industrial

24,824

23,327

-6.0%

S&P 500

2,696

2,507

-7.0%

NASDAQ

7,007

6,635

-5.3%

Nikkei

23,506

20,015

-14.9%

DAX

12,871

10,559

-18.0%

FTSE 100

7,648

6,728

-12.0%

Bitcoin

$13,445

$3,717

-72.4%

Gold:  The most significant of the precious metals being covered given that where gold goes the others tend to follow – more or less – despite the fact that industrial demand becomes more and more significant as one moves through the precious metals list.  My prediction for the gold price at this time next year is a conservative US$1,400 – up a little over 10%.   ……..

To read the full article which includes my price estimates for silver, platinum and palladium too on sharpspixley.com’s metalsdaily website click on:

LAWRIE WILLIAMS: PRECIOUS METALS PRICE PREDICTIONS 2019

Gold a better 2018 investment than equities – almost everywhere!

Lightly edited version of article first published on www.sharpspixley.com

The better gold price, coupled with the big downturn in general equities, has meant that over the year to date gold has outperformed stocks quite significantly even in the USA – and even more so in most other countries.

As the year draws to a close we see that gold has outperformed equities, virtually everywhere in the world.  Year to date U.S. equities, as measured by the Dow, S&P and NASDAQ, are down over 10%, while European and Asian equities have fallen by even greater percentages.  Gold, in U.S. Dollars is also down year to date, but only by a little under 4%.  Indeed the gap may even be widening as the year end approaches with gold gaining and equities still falling.

So even in the U.S. gold has comfortably outperformed equities over the year, while in other key currencies it has even done rather better having seen gains in most, with many currencies declining in value against the mighty dollar.  Globally, thus gold has more than performed its role as a safe haven investment extremely well.  In countries where the domestic currency has collapsed, like Venezuela and, to an extent, Argentina, gold has proved to be an exceptionally good asset to hold.

As an example of gold in major currencies, the gold price in Euros is up by 1% so far this year and in the British pound sterling it is up around 2.5%. while in both the EU and the UK equities have fallen sharply (around 11%) over the year to date.  In the Australian dollar gold is up almost 6%, and in Canada it is up around 3.5% in the domestic currency’ while again equities are down sharply in both countries.

There are exceptions of course – in Japanese yen gold is down by 5.7%, but Japan’s prime stock index – the Nikkei – is off by 11.4% so gold has still easily outperformed the market there too.  In Swiss Francs, another currency which is usually considered among the stronger palyers, gold is also down – by around 2.9% – but again it has comfortably outperformed the Swiss Stock market which is also down a little over 11%!  (All figures as at close Friday December 21st).

If one looks also at another key investment asset – the heavily promoted bitcoin – the biggest bitcoin player, BTC, has lost around a massive 70% since January 1st this year.  I think that more than quashes any argument that bitcoin provides a better haven than gold which was prevalent when BTC was riding high in the second half of 2017.  It has proved to be a far more volatile asset than gold which somewhat defeats the safe haven principle! It is altogether a much more speculative asset class and we would not be surprised to see the price dive further in the weeks and months ahead.  Other cryptocurrencies have declined even further than BTC in percentage terms.

As we have noted before we have not been a believer in bitcoin as an investment.  We warned people to get out when BTC was at around $10,000 on the way up to almost double that level so we were a little early with our advice, but were obviously correct in principle.  In our view it’s better be out too soon in what was looking increasingly like a developing bubble situation than too late!

So what happens from here?  Equities are still looking vulnerable while portents for gold and the other precious metals are looking positive although data may yet change the position of either or both.  Geopolitics are ever increasingly uncertain – in part due to President Trump’s domestic difficulties and his insistence on a continuing trade dispute with China which seems to be disadvantageous to both nations. There are also continuing issues in the Middle East, Ukraine, Afghanistan, North Korea and the South China Sea to name but five potential flashpoints – but there could well be others which crop up in the year, or years, ahead.  The Democratic party majority in the U.S. House of Representatives which will be in place in 2019 and the subsequent possibility of moves to impeach the U.S. President add further degrees of uncertainty to the mix, which could weigh on equities and the dollar and boost precious metals.

Some observers feel that silver, which has underperformed in the past year, might be the precious metal to plump for given that it tends to outperform gold when the latter is in a rising pattern.  Palladium fundamentals look strong too, but the price could suffer if there is an economic recession, as could that of silver,  and a global recession may, or may not, be on the cards.  A U.S. recession has looked unlikely in the near term, but further falls in equities could lead to negative overall sentiment which could push the recession button and adversely affect all industrial metals – sooner rather than later.

The U.S. Federal Reserve is currently looking as if it will reduce the projected number of interest rate rises next year.  If this is indeed confirmed – or if the Fed looks as if it will reduce the number of rate rises further, which looks possible if equities continue on their downwards path – then this could depress the U.S. dollar and gold could move up strongly.

A word of caution for precious metals investors though – should equities truly crash, which has to be a possibility, liquidity issues could also lead to a precious metals sell-off too as happened in 2008 as big investors struggled to stay afloat and needed to sell good assets to do so.  However, if history repeats itself in this respect the twin consolations are that firstly some of the big institutions are much lighter on gold holdings this time around, given that gold investment fell out of favour given the seeming ever-upwards path of equities up until the past few weeks.  And secondly comfort could be gained in that back in 2008/9 gold was the quickest major asset class to recover – indeed was rising strongly while equities were still on the way down!