Independent analyis

Gold Today –New York closed at $1,262.70 yesterday after closing at $1,275.60 Tuesday. London opened at $1,260.00 today. 

Overall the dollar was stronger against global currencies, early today. Before London’s opening:

–         The $: € was stronger at $1.1164 after yesterday’s $1.1217: €1.

–         The Dollar index was stronger at 97.28 after yesterday’s 96.92. 

–         The Yen was stronger at 109.65 after yesterday’s 110.14:$1. 

–         The Yuan was weaker at 6.8019 after yesterday’s 6.7976: $1. 

–         The Pound Sterling was weaker at $1.2696 after yesterday’s $1.2785: £1.

Yuan Gold Fix

Trade Date	Contract	Benchmark Price AM 1 gm	Benchmark Price PM 1 gm
2017    6    15      2017    6    14                    2017    6    13	SHAU SHAU SHAU	/ 279.24 278.29	Trading at 278.20 279.07 278.36
$ equivalent 1oz at 0.995 fineness @    $1: 6.8019        $1: 6.7976        $1: 6.7979		/ $1,272.71 $1,251.73	Trading at $1,265.82 $1,271.93 $1,251.85

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

 Yesterday global gold markets saw volatility in all three markets ahead of the Fed. Once the statement was out global gold markets settled and steadied around $1,260, with London $5 lower than Shanghai.

We expect today  will see a digestion of Mrs Yellen’s statement followed by  gold’s reaction.

Silver Today –Silver closed at $17.13 yesterday after $16.76 at New York’s close Tuesday.

LBMA price setting:  The LBMA gold price was set this morning at $1,260.25 from yesterday’s $1,268.25.  The gold price in the euro was set at €1,128.75 after yesterday’s €1,131.71.

Ahead of the opening of New York the gold price was trading at $1,253.40 and in the euro at €1,123.72. At the same time, the silver price was trading at $16.69. 

Price Drivers

The Fed

In essence, Janet Yellen’s statement showed that the Fed sees a U.S. economy that will continue to grow at a moderate pace. No accommodation of President Trump’s intended policies was made. The Fed Funds rate after the rise is lower than inflation levels and look like remaining there as the Fed Funds rate, if the economy remains on the path they expect it will. If the economy remains on this path, then by the end of the year, the Fed will begin to reduce its Balance Sheet. It will be a very slow process intended to give markets no stress. As a result equity markets may rise more ignoring institutional worries that they are already too high. It is clear that hopes of a robust economy in the near future are unrealistic. For gold this was overall positive because of low inflation levels.

The dollar strengthened overnight on the back of her statement.

Technical picture

With yesterday’s huge sale of over 12 tonnes out of GLD the gold price fell back from the day’s high in New York over $1,276 to $1,260 before London opened where it moved down further. But the move higher in the day followed the previous day’s close as you can see above over $1,262. So it did not have that big an effect on prices. We expect gold prices to move higher in the next week as the impact of the Fed’s move was no surprise, so gold markets can get on with the trend they were moving in before the statement.

It looks like whoever sold was either trying to knock the price back [likely protected by short positions on COMEX] or had positioned themselves for a postponement of the rate hike. Either way, gold remains in consolidation mode today. It has not affected gold’s overall positive Technical position with its bottom level of support at $1,240 now.

Gold ETFs – Yesterday, saw sales from the SPDR gold ETF 0f 12.13 tonnes a huge amount but no change in the holdings of the Gold Trust.

Their holdings are now at 854.868 tonnes and, at 207.06 tonnes respectively.

 

Since January 6th 2017 50.13 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips 

 GoldForecaster.com | StockBridge Management Alliance 

Gold Today –New York closed at $1,268.60 yesterday after closing at $1,268.90 Monday. London opened at $1,267.24 today. 

Overall the dollar was slightly weaker against global currencies, early today. Before London’s opening:

–         The $: € was slightly weaker at $1.1217 after yesterday’s $1.1212: €1.

–         The Dollar index was weaker at 96.92 after yesterday’s 97.04. 

–         The Yen was slightly stronger at 110.14 after yesterday’s 110.16:$1. 

–         The Yuan was slightly stronger at 6.7976 after yesterday’s 6.7979: $1. 

–         The Pound Sterling was stronger at $1.2785 after yesterday’s $1.2700: £1.

Yuan Gold Fix

Trade Date	Contract	Benchmark Price AM 1 gm	Benchmark Price PM 1 gm
2017    6    14      2017    6    13      2017    6    12	SHAU SHAU SHAU	/ 278.29 278.67	Trading at 279.60 278.36 278.70
$ equivalent 1oz at 0.995 fineness @    $1: 6.7976        $1: 6.7979        $1: 6.7985		/ $1,251.73 $1,269.93	Trading at $1,257.70 $1,251.85 $1,270.07

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

 As you can see from the above, Shanghai traded both yesterday and today lower than New York and London. This was the first time we have seen that happen! New York closed higher than Shanghai yesterday and London opened higher than Shanghai. On these numbers Shanghai is not a buyer from the west today.  

We have heard that China stands accused of gold price manipulation. They are accused of keeping prices low until they have acquired a particular number of tonnes. Meanwhile, Shanghai prices have consistently been at a premium to western prices. This is not the path down.

With no gold allowed to leave China, if this were true, it would have to be conducted in New York with derivatives of sales of physical gold in London, through Chinese banks in London. They would therefore have to buy these tonnages in London first, before they could sell them.

Since 2013 the reports of U.S. banks selling physical gold alongside huge derivative positions have been evident. Goldman Sachs has been at the forefront of these. The evidence therefore supports the story that it has been western banks that have engineered ‘bear raids’ at considerable profit as the gold price fell since then as the gold price was in decline. There is also evidence that western central banks have until 2009 at least, wanted sales of gold to hold back gold prices, as high prices place question marks against the value of currencies. Discussions on the B.I.S. ‘Gold Pool’ prior to this century, Central Bank Sales since 1975. Has this changed? We think not. But as we pointed out yesterday, the power to force prices down is no longer within their reach, due to Asian demand and higher prices. The evidence is that western institutions have manipulated gold prices for over 40 years in one way of another.

While there is no evidence of Chinese gold price manipulation we have seen gold’s pricing power shift to Shanghai. But with Shanghai trading gold lower than New York and London, that pricing power evaporated yesterday and today, because of demand for gold in western markets. Shanghai’s figures tomorrow will expand that story. It certainly does not seem that lower Shanghai gold prices can pull London and New York down.

What is very true is that China has bought as much gold as they can when the bears did drive prices down and will continue to do so whenever they can. Will higher prices make them stop buying? We think not as the Chinese middle classes continue to burgeon.

Silver Today –Silver closed at $16.76 yesterday after $16.94 at New York’s close Monday.

LBMA price setting:  The LBMA gold price was set today at $1,268.25 from yesterday’s $1,261.30.  The gold price in the euro was set at €1,131.71 after yesterday’s €1,124.55.

Ahead of the opening of New York the gold price was trading at $1,265.60 and in the euro at €1,130.15. At the same time, the silver price was trading at $16.95. 

Price Drivers

Technical picture

The pullback in gold seems to have been halted as New York held prices at around $1,268. We are seeing the gold market and currency markets wait for the Fed’s statement today.  However some weak U.S. economic data released as New York trading opened pushed precious metals sharply upwards, – gold hitting $1,280 and silver $17.40 before easing back – but the overall direction of prices beyond this will likely rest with the post FOMC meeting statement later today.

Gold ETFs – Yesterday, once again, saw no purchases or sales into or from the SPDR gold ETF but a purchase of 0.45 of a tonne bought into the Gold Trust.

Their holdings are now at 866.998 tonnes and, at 207.06 tonnes respectively.

Since January 6th 2017 62.26 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips 

 GoldForecaster.com | StockBridge Management Alliance 

 Gold Today –New York closed at $1,268.90 yesterday after closing at $1,266.00 Friday. London opened at $1,262 today. 

Overall the dollar was slightly weaker against global currencies, early today. Before London’s opening:

–         The $: € was slightly stronger at $1.1212 after yesterday’s $1.1220: €1.

–         The Dollar index was slightly weaker at 97.04 after yesterday’s 97.13. 

–         The Yen was slightly weaker at 110.16 after yesterday’s 109.94:$1. 

–         The Yuan was slightly stronger at 6.7979 after yesterday’s 6.7985: $1. 

–         The Pound Sterling was slightly weaker at $1.2700 after yesterday’s $1.2704: £1.

Yuan Gold Fix

Trade Date	Contract	Benchmark Price AM 1 gm	Benchmark Price PM 1 gm
2017    6    13      2017    6    12      2017    6    9	SHAU SHAU SHAU	/ 278.67 280.49	Trading at 278.60 278.70 280.30
$ equivalent 1oz at 0.995 fineness @    $1: 6.7979        $1: 6.7985        $1: 6.7988		/ $1,269.93 $1,278.20	Trading at $1,269.72 $1,270.07 $1,277.33

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

 New York closed lower than Shanghai yesterday and London opened lower than Shanghai as the gold price continues to consolidate slightly lower.

Silver Today –Silver closed at $16.94 yesterday after $17.22 at New York’s close Friday.

LBMA price setting:  The LBMA gold price was set today at $1,261.30 from yesterday’s $1,269.25.  The gold price in the euro was set at €1,124.55 after yesterday’s €1,131.44.

Ahead of the opening of New York the gold price was trading at $1,263.85 and in the euro at €1,121.43. At the same time, the silver price was trading at $16.83. 

Price Drivers

Technical picture

The pullback in gold continues and can do so for another $10 before support is reached. But if it can hold above $1,260, it is a positive sign. The upward trend remains intact.  We are watching the gold market and currency markets wait for the Fed’s statement tomorrow to see if there will be a rate rise or not?

While the markets continue towards the expectation that there will be a rate hike by the Fed tomorrow, more and more people are saying what we said yesterday, “With Janet Yellen such a cautious person she may well have been disturbed by the poor data of late. While 94% of the market believes a rate hike must come this week, there is room, we believe, for a delay in the rate hike until the data is more positive. If she does, you will see the dollar weaken and perhaps equity indices move too high. We see gold benefitting if this does happen.”

Central Banks and gold.

We comment further on the position of global central banks and gold. One can rightly say that western central banks are content with their current holdings and be absolutely certain that they will no longer be sellers. In the past they threatened to sell gold to manage the price down, but now that option is not available to them.

China, in particular, is on the acquisition trail for gold. Because it owns the Shanghai Gold Exchange and the banks that deal in gold, as they say, “They own gold through their people.” In other words, they have effectively confiscated gold in China. As it is it is illegal to exports gold from there. So when we look at the gold reserves of the People’s Bank of China, technically, because it is controlled by the PBoC we should consider the gold in China as available to them as reserves.

So when one looks at gold imports to China from wherever, it does go under the government’s control.  Ownership and control are two entirely different things [as one finds out, if one does not pay one’s mortgage for six months]. This sets the future scene where one has to ask, will western banks ever buy gold again? With Asia taking the bulk, if not all, newly mined gold for the last few years, any attempt by other global buyers, including central banks, will drive prices higher, much higher. Of course, any sight of a western central bank buying gold will trigger a stampede into gold. But as in the last century, when western central banks did attempt to drive prices down, they may want to do so again. But this time they will not be able to do so, as it will be bought up very quickly by the east. The only option then  will be to take it from owners in their jurisdiction as is the case in China.

That’s why with the gold price sitting very close to a major inflection point short-term, medium term and long term, we could be very close to a signal that we are very close to a dramatic change in both the gold and silver markets?

Gold ETFs – Friday, saw no purchases or sales into or from the SPDR gold ETF but a purchase of 0.45 of a tonne bought into the Gold Trust.

Their holdings are now at 866.998 tonnes and, at 206.61 tonnes respectively.

 

Since January 6th 2017 61.81 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips 

 GoldForecaster.com | StockBridge Management Alliance 

NOTE:  LAWRIE IS ON HOLIDAY AND POSTINGS AND THEIR TIMINGS MAY BE ERRATIC FOR 2 WEEKS.

Gold Today –New York closed at $1,266.00 Friday after closing at $1,279.50 Thursday. London opened at $1,267.00 today. 

Overall the dollar was weaker against global currencies, early today. Before London’s opening:

–         The $: € was weaker at $1.1220 after Friday’s $1.1178: €1.

–         The Dollar index was weaker at 97.13 after Friday’s 97.44. 

–         The Yen was stronger at 109.94 after Friday’s 110.37:$1. 

–         The Yuan was slightly stronger at 6.7985 after Friday’s 6.7988: $1. 

–         The Pound Sterling was weaker at $1.2704 after Friday’s $1.2720: £1.

Yuan Gold Fix

Trade Date	Contract	Benchmark Price AM 1 gm	Benchmark Price PM 1 gm
2017    6    12      2017    6    9      2017    6    8	SHAU SHAU SHAU	/ 280.49 282.78	Trading at 279.10 280.3 283.13
$ equivalent 1oz at 0.995 fineness @    $1: 6.7985        $1: 6.7988        $1: 6.7954		/ $1,278.20 $1,289.32	Trading at $1,271.90 $1,277.33 $1,290.92

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

 New York closed lower than Shanghai on Friday but Shanghai was higher today as the U.S. dollar started to weaken again. London opened lower than Shanghai but was off its bottom. The London price setting lifted the gold price up above spot this morning.

Silver Today –Silver closed at $17.22 Friday after $17.41 at New York’s close Thursday.

LBMA price setting:  The LBMA gold price was set this morning at $1,269.25 from Friday’s $1,274.25.  The gold price in the euro was set at €1,131.44 after Friday’s €1,139.76.

Ahead of the opening of New York the gold price was trading at $1,269.15 and in the euro at €1,135.19. At the same time, the silver price was trading at $17.14. 

Price Drivers

Technical picture

The pullback in the gold price was not heavy [so far] and the upward trend remains intact.  We are watching the dollar weaken again which is why, this morning, the gold price was a little higher.

U.K.

For the second time U.K.’s conservatives have backed the wrong horse and suffered because of it. But we see the result of the U.K. election as a consequence of their manifesto, not a rejection of Brexit.

France

The President elect, M. Macron is sweeping into power, consolidating the future of a united E.U. Only Italy remains a concern on this front. But markets are expressing the belief that this is not a concern.

The Fed for Wednesday

The Fed begins its 2-day deliberations on interest rates ahead of its announcement on Wednesday. With Janet Yellen such a cautious person she may well have been disturbed by the poor data of late. While 94% of the market believes a rate hike must come this week, there is room, we believe, for a delay in the rate hike until the data is more positive. If she does delay, you will see the dollar weaken and perhaps equity indices move too high. We see gold benefitting if this does happen.

The dollar has turned back lower this morning against most currencies [except the Pound]. We expect it to weaken further.

Central Banks and gold.

The central banks of Europe stopped selling gold in 2009 when the mining companies had bought back their vast hedges established before the end of the last century and gold ETFs had been well established. This was the time when the Chinese and the Russian central banks entered the market to buy gold. At the same time the Chinese government encouraged their citizens to buy gold for themselves. This they have been doing alongside the Chinese banking industry. Gold is not permitted to be exported from the country so one-way traffic into China sees the shift of gold into Asia. Likewise Indian gold does not return to the west.

This has put a brake on western central bank sales of gold as they know it will be bought by Asia. This appears to have happened as evidence has surfaced of a reduction in Bank of England stocks of gold. [but this has also happened as a result of gold being moved to home countries] We believe all central banks sales of gold will be halted. Consequently, the past power of western central banks to manipulate the gold price is considerably reduced, as they know that if they sell their gold it will move east.  

As a result, we see the threat of future, announced central banks gold sales as being emasculated by this fact. We have no doubt that they will, at times, attempt to suppress the gold, using derivatives markets but only in the short term. After all, such maneuvers do not involve actual gold sales only cash transactions. We also don’t expect any announcements in the future of intentions to sell gold as per the Central Bank Gold Agreements.

We also doubt that the gold mining companies would ever again embark on an exercise to raise production at the request of and with the support of bullion banks with the backing of central banks as they did at the end of the last century.

This leaves global central banks on balance being buyers not sellers, in the future.

Gold ETFs – Friday, saw no purchases or sales into or from the SPDR gold ETF but a purchase of 0.45 of a tonne bought into the Gold Trust.

Their holdings are now at 866.998 tonnes and, at 206.61 tonnes respectively.

Since January 4th 2016, 261.86 tonnes of gold have been added to the SPDR gold ETF and to the Gold Trust.  Since January 6th 2017 61.81 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips 

 GoldForecaster.com | StockBridge Management Alliance 

Frank Holmes’ SWOT (Strengths, Weaknesses, Opportunities, Threats) Analysis of what’s driving the markets over the past week

Strengths

• The best performing precious metal for the week was palladium, up 6.17 percent. Consumer demand is rising for gasoline- versus diesel-engine powered vehicles, yet automobile sales have started to relax in recent months.  According to Bloomberg, gold bulls outnumber gold bears this week as Trump probes are boosting safe-haven demand for the yellow metal. In fact, gold advanced to the highest level in nearly a month as Trump’s administration “grapples with revelations of mounting scrutiny into son-in-law Jared Kushner’s outreach to Russian officials,” Bloomberg continues. In related news, Fed’s Brainard says that soft inflation data may warrant a rethink on interest rates. Inflation in the Euro-area slowed more than economists forecast.
• The Indian rupee posted its first monthly loss since November, reports Bloomberg. The positive side of this is the decline came amid increasing demand for dollars to pay for imports of items such as gold. The Perth Mint reported its gold coin and minted bar sales for the month of May, coming in at 29, 679 ounces. This is compared with April’s sales of 10,490 ounces.
• Data from the Commodity Futures Trading Commission shows that money managers boosted their long positions in U.S. gold futures by the most in almost a decade in the week ending May 23, reports Bloomberg. As you can see in the chart below, hedge funds are jumping back into the yellow metal.

Weaknesses

• Platinum bore the brunt of the palladium move this week with a loss of 0.61 percent.  Shares of junior gold miners headed for the longest stretch of monthly losses in more than two years, reports Bloomberg, citing investor concern that “flagging momentum in this year’s bullion rally will dent the outlook for profits.” A Bloomberg gauge of 72 junior miners has lost 15 percent since the end of January and the rebalance of the VanEck Vectors Junior Gold Miner ETF (GDXJ) is also having a depressing effect on many gold names. Despite gold gaining 9 percent this year with a drop in the dollar, junior gold miners have not followed through with those gains as the GDXJ is set to cut in half its exposure to the junior mining space on June 16.
• “Inflation has been below target for five years and has moved up only slowly toward 2 percent, which argues for continued patience,” said Fed Governor Jerome Powell in a statement this week. Powell is calling for gradual interest rate increases and a start to balance-sheet reductions later this year if the economy stays on track, reports Bloomberg, though he is keeping an eye on a recent slowdown in inflation. Based on prices in federal funds futures contracts, investors see the probability of a rate hike at around 85 percent when the FOMC meets June 13-14, the article continues.
• Asanko Gold is set to release an expanded Mine Feasibility Report in response to a Muddy Waters short report that detailed negative assertions regarding the company and its operations, reports Bloomberg. Asanko said in a statement that there is no merit to the Muddy Waters report, while detailing that it maintains production guidance of 230,000 to 240,000 ounces for 2017. Asanko also said it sees no impact on production or safety resulting from a partial failure on the western wall of the Nkran pit, nor does it see a need for a $115 million pushback expense (as speculated by Muddy Waters).  The short report was likely timed to force Asanko’s market capitalization below the lower threshold limit for staying in the GDX index, thus triggering an additional 10.6 million shares to be sold.

Opportunities

• Friday’s jobs report came in lower by 4.3 percent, and although the three-month moving average of 121,000 net new jobs is positive, the pace has slowed dramatically, writes Bloomberg. And if the Fed continues to raise rates, it will slow even further. Economists have three major risks they are worried about, according to the article: 1) slumping U.S. auto sales, 2) weaker Chinese manufacturing and 3) the potential for U.S. fiscal policy disappointment. “Anticipating a rate-hike endgame or more increases in rising inflation, gold is poised to continue to perform well,” explains another Bloomberg article. “In the current tightening cycle, spot gold and the S&P 500 Index are neck and neck, up 19 percent to June 1.”
• In a research update from Industrial Alliance Securities, the group summarizes production statistics released by Rye Patch Gold from its Florida Canyon heap leach operation for May. Rye Patch reported 3,094 ounces of gold poured during May, up from 485 ounces in April. The mine is well on its way to achieving operating financial breakeven, the report continues. Rye Patch notes that heap leach operations tend to perform better in warmer temperatures (so notable production acceleration during the Nevada summer would not be a surprise) as well as the company’s extra cash in hand to fund further exploration. Similarly, Richmont Mines reported strong results from the Island Gold Mine Expansion Case Preliminary Assessment. It confirmed an increase in underground mine and mill productivity to 1,100 tonnes per day, supporting growth of 22 percent over an eight-year period, reports Bloomberg.
• More company-specific news comes from Lundin Gold this week, which announced a $400-$450 million project financing package for Fruta Del Norte in Ecuador. The package comes with support from Orion Mine Finance and Blackstone Tactical Opportunities. Another announcement comes from AuRico Metals, noting a positive Preliminary Economic Assessment for the Kemess East Gold-Copper Project. Pre-production capital costs are C$327 million, reports Bloomberg.

Threats

• As Jared Kushner, Donald Trump’s son-in-law and most trusted adviser, is sucked into an FBI probe, the President’s goals are increasingly at risk, reports Bloomberg. The probe could undermine policy priorities and hinder behind-the-scene communications with business leaders and foreign governments. “Kushner tried to establish a secret back channel between the president-elect and Kremlin after Trump’s election, and is reported to have held multiple undisclosed meetings with Russian officials during the campaign and transition,” the article states.
• The AOMA Argentine union has threatened to restart a strike at Barrick Gold’s Veladero gold operation in the country next month if talks with management fail to resolve a contractual feud, reports Bloomberg. Barrick and the AOMA union were set for a third round of talks late Monday, with the dispute over contracts for outsourced workers being about three-quarters of the way resolved, said AOMA Secretary General Hector Oscar Laplace.
• According to Wood Mackenzie, deep-water drilling costs are coming down as producers streamline operations and prioritize drilling in core wells. This means that oil at $50 per barrel could sustain some deep-water projects by 2018, reports Bloomberg. The tumbling costs present a challenge for the Organization of Petroleum Exporting Countries (OPEC), which is currently curbing output to shrink a glut, the article continues. Falling energy prices could dampen inflation expectations and be a headwind to gold prices.

Frank Holmes is CEO and Chief Investment Officer for US Global Investors

Metals surprise by exerting strength as equities remain near record highs

Since the U.S. presidential election, the stock market has remained strong, but what has surprised some financial analysts have been that the precious metals complex has been ever stronger, says Blanchard President and CEO David Beahm.

“What is notable through the end of May is that gold and silver continue to outpace the strength in the stock market, leaving both precious metals very well-positioned for strong new rally waves if stocks turn lower in a seasonal correction phase or a bear cycle move,” Beahm says. “Typically, gold and silver perform well during periods of stock market weakness, but the fact that metals are climbing alongside the strength in stocks is notable from a historical perspective. It reveals that there is a strong safe-haven bid for metals and a desire to diversify away from stocks in the current environment.”

The Blanchard Index

Here’s how the market performance stacks up through late May:

• Gold +9.45%
• Silver +8.13%
• S&P 500 +7.91%

Beahm says investors around the world continue to turn to gold and silver as uncertainty over the global order continues to unfold, and numerous factors are creating both economic and political uncertainty that is supporting safe haven flows into the precious metals markets.

From President Trump’s tussles with European allies with NATO to North Korean intercontinental missile tests (nine to date in 2017) to an ongoing investigation into the new administration’s alleged ties to Russia, political tensions at home and abroad continue to cause concern and uncertainty for investors who want stability and protection from volatility, Beahm says.

Strong demand for physical metals are also positive for future price increases, Beahm says, pointing to investor demand from China and India – two of the world’s larger consumers of gold – remaining extremely high. A May 25 report confirmed that China’s imports of gold via Hong Kong rose 7.9 percent year-over-year in April, and more significantly, China’s gold imports from Switzerland surged 188 percent year-over-year.

Additionally, Indian imports of gold revealed a staggering 211 percent year-over-year increase in U.S. dollar terms in April, according to Indian Commerce Ministry data.

At home, the U.S. stock market has entered into a seasonally weak period despite high investor expectations for equities, Beahm notes, adding that a downturn in stocks could be another trigger for an increase in volatility and a new wave of buying in the metals complex.

While the U.S. economy continues to expand, Beahm says the current rate of growth remains below long-term historical averages and is nothing “to write home about.”

“Recent data raises fresh concerns about the health of consumer spending, amid new downward revisions to wage and salary income for the fourth quarter 2016 numbers,” Beahm says. “That means consumers may have less to spend going forward than economists previously estimated, and the 3% economic growth target set by the White House will be a high bar to reach without significant fiscal stimulus, and there are no signs of that on the horizon.”

Beahm also suggests that while a quarter basis point rate increase is likely at the Fed’s June 13-14 meeting, the pace of increases off the zero-bound interest rate policy implemented during the 2008 financial crisis has been slow. The current 0.75-1.00 percent rate remains well below historical norms of $.5 percent or higher.

“A Fed rate hike could act as a short-term headwind for the gold market, but for longer-term investors any price retreat should serve as a buying opportunity,” Beahm says. “With the economic expansion cycle in a mature phase, it appears unlikely the Fed will be able to normalize monetary policy before the next recession hits, meaning any modest Fed rate increases should have limited long-term impact on the gold market.”

Blanchard and Company Price Predictions

Blanchard and Company analysts predict gold will trade in the $1,225-$1,375 range over the next 90 days, with moves to the downside seen as buying opportunities. The same holds true for silver, which Blanchard and Company sees trading in the $16.50-$18.50 range in the same time period.