Brexit fallout: Gold, Silver Soar, Pound and Euro Plunge, Yen soars   

Gold TodayGold closed in New York at $1,257.50 down $8.70 on Thursday ahead of the start of voting in Britain.  This morning Asia took it up to $1,310 as they were the first market to ‘see’ the Brexit. At the opening on London the gold price the gold price pulled back to $1,319.

The $: € plunged lower to $1.1069 from Thursday’s $1.1336. The dollar index moved higher to 95.77 up from 93.48. It is a day when the dollar is stronger overall but weaker in the Yen. The Euro and Yuan were much weaker, alongside sterling.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  06  24

2016  06  23

SHAU

SHAU

270.42

267.96

278.92

268.66

Dollar equivalent @ $1: 6.6236

$1: 6.5797

$1,269.85

$1,266.70

$1,309.77

$1,270.01

With the Yuan tumbling against the dollar, the gold price in Shanghai was much stronger and led the way for London’s pricing.

While investors can’t export physical gold, they can take a position in Shanghai ahead of London, take their profits and export those. In this way they can ‘arbitrage’, matching their ‘long’ positions in London at higher prices, should they wish.  Above shows that they could have taken a position in Shanghai, well ahead of London’s opening in physical then match the position in London selling out the Shanghai position in Shanghai afterward, before the close. Then it would have shifted the funds to London and not the gold. This makes the International side of the Shanghai Stock Exchange an integral part of the global gold market.

The positive Technical picture promises higher prices.  

LBMA price setting:  $1,313.85 up from Thursday 23rd June’s $1,265.75.

The gold price in the euro was set at €1,186.96 up €76.75 from Thursday’s €1,110.21.

Ahead of New York’s opening, the gold price was trading at $1,323.35 and in the euro at €1,195.92.  

Silver Today –The silver price closed in New York on Thursday at $17.33 up from Wednesday’s $17.27 a rise of 6 cents. Ahead of New York’s opening the silver price stood at $17.93.

Price Drivers

The unexpected happened ! The paw paw hit the fan! The drama erupted at 7.00 a.m. London time and began to be discounted in Shanghai before London opened.

We have just witnessed an earthquake of over 8 on the global, monetary Richter scale.

Will we see a Frexit [Marie le Pen has just called for a French referendum and Spain may follow as could the Netherland…….], a Spexit, a Nexit……? This could prove a mortal blow to the E.U. and eventually leave just the strong members remaining, implying, very long term, a much stronger euro.

The biggest hit was taken by the banking sector as shares in leading banks dropped 20 to 30% at the opening. We are reassured that the banking sector can survive these crises, by Mark Carney, Governor of the Bank of England who pointed out that the banks in the U.K. have raised over 100 billion pounds in capital, while the Bank of England stands ready to provide additional liquidity of another 250 billion pounds in support.

We wondered why they did not resort to the imposition of the dollar premium, as they did in a similar crisis in 1971. Then we realized that the provision of so much more liquidity did more.

  • It permitted a tumbling of sterling [improving the U.K.’s international competitiveness [while joining the currency war].
  • It set the U.K. on a Quantitative Easing path of major proportions.
  • It abandons concern for the exchange rate and stability of Sterling’s value in currency markets facilitating a weaker exchange rate. This suggests a steadily falling pound sterling in the weeks/months ahead.

We recognize that this is why the Fed waited before considering a rate hike. We don’t expect one until the end of 2016 at the earliest, if then. More to the point, we are aware that the Fed/Treasury will not be happy with a strengthening dollar and may well act to counter it, just as we expect the Bank of Japan to intervene in the foreign exchange markets to lower the exchange rate of the Yen.

Please note that gold has only, so far recovered to where it was a month ago at its recent peak. The changes wrought by Brexit promises to take gold higher long term.

Gold ETFs – On Thursday the holdings of the SPDR & gold Trust remained the same as did those of the Gold Trust at 915.898 tonnes and at 201.91 tonnes respectively. We expect that to change today!  

Since January 4th this year, the holdings of these two gold ETFs have risen 321.022 tonnes.

Silver –Silver prices are going to sprint ahead of gold prices now that the way forward higher is now clear.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

 

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Brexit vote Day – All quiet on the ‘Western Front’ for now

Gold TodayGold closed in New York at $1,266.20 up $0.30 on Wednesday ahead of the start of voting in Britain.  Asia took it up to $1,270 and London let it slip a dollar and a half, despite strong demand for physical gold in the U.S.

The $: € moved lower to $1.1336 from Wednesday’s $1.1271. The dollar index moved to 93.48 down from 93.89. It is a day when the dollar is weaker in the world’s main currencies, but the Yuan was weaker too.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  06  23

2016  06  22

SHAU

SHAU

267.96

269.81

268.66

268.00

Dollar equivalent @ $1: 6.5797

$1: 6.5886

$1,266.70

$1,273.72

$1,270.01

$1,265.17

While the Yuan weakened against the dollar, the gold price in Shanghai was slightly stronger than New York, which led the way for London to follow. This showed clearly the small change in direction was due to the influence of Shanghai showing a measure of pricing power.

Gold prices worldwide are ‘on hold’ pending tomorrow’s result in Britain, after which we will see strong movements.

We believe that a ‘stay in’ vote has been discounted in global financial markets, to some extent.

At the moment, the positive Technical picture remains unchanged. We don’t expect any change, subject to tomorrow’s vote.

LBMA price setting:  $1,265.75 up from Wednesday 22nd June’s $1,265.00.

The gold price in the euro was set at €1,110.21 down from Wednesday’s €1,119.96.

Ahead of New York’s opening, the gold price was trading at $1,261.25 and in the euro at €1,110.60.  

Silver Today –The silver price closed in New York on Wednesday at $17.27 from Tuesday’s $17.23 a rise of 4 cents. Ahead of New York’s opening the silver price stood at $17.31.

Price Drivers

We have to be careful to not see the referendum in the U.K. as the ‘be all and end all’ in the global economy today. There are many other issues going on in other parts of the world.

The dollar is a weaker today, a factor totally unrelated to the British referendum. The news out of the E.U. from France is that manufacturing continues to fall into a contractionary state.

Repeat: The Pound Sterling continues at very strong levels! If the vote is to leave, expect a heavily plunging pound!

Currencies and precious metals are in gambler’s territory as the polls look pretty even!

Gold ETFs – The holdings of the SPDR Gold ETF (GLD) rose another 3.564 tonnes as the physical buying continued at a fast pace, leaving its holdings at 915.898 tonnes. The Gold Trust (IAU) saw no action yesterday and its holdings remain at 201.91 tonnes.  

Since January 4th this year, the holdings of these two gold ETFs alone have risen 321.022 tonnes. Silver –Silver prices are stronger over yesterday’s price at $17.41 but remain and now wait for the vote to be announced tomorrow morning.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Polls suggest Bremain – gold slips, pound strengthens but not over yet as Brits vote

So crunch day in the UK is here as voters head to the polling stations to decide on the nation’s immediate future within, or outside, the European Union(EU).  Latest opinion polls suggest the Bremain option will prevail as voters go for the perceived safer option rather than a big step into the unknown.    Financial markets tend to agree with the pound sterling at its highest level against the dollar for some time and gold heading lower back into the $1,250s at one time, although pulling back above $1,260 on some prevailing nervousness about the final outcome.

But the polls have been erratic right up to today and some observers put the result as too close to call.  However if the Brexit (Britain exiting from the EU) vote should prevail, which is still a possibility, the financial fallout could be very quick to follow and very sharp indeed with a rapid turnaround in the pound sterling – perhaps back to $1.40 or lower – and probably a soaring gold price given that the ramifications would be a serious blow to the whole EU experiment and perhaps lead to its breakup as other anti-EU factions in a number of other member countries gain heart and seek their own exit referenda.

We won’t know the official outcome until tomorrow morning, but indications one way or the other would probably start to become apparent by the time the polls close at 10 pm this evening, BST.  Things could get very volatile indeed if the outcome continues to be seen as too close to call, and if Brexit does end up ahead we’d be looking at a brave new world ahead.  if Bremain wins then there would be huge sigh of relief from the UK establishment, which is generally supportive of remaining in the EU, and from the EU itself.  But, one suspects, EU internal politics will still  be changed forever.  It will have come too close to the brink for comfort.

Last day before Brexit vote and gold ETFs still adding metal

Gold Today –Gold closed in New York at $1,265.90 down $24.20 on Tuesday as a “Bremain” position is taken in global financial markets.  Asia took it down to $1,265 too and London held it around that level, despite strong demand for physical gold in the U.S.

The $: € moved lower to $1.1271 from Tuesday’s $1.1341. The dollar index moved to 93.89 up from 93.46.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  06  22

2016  06  21

SHAU

SHAU

269.81

272.84

268.00

271.86

Dollar equivalent @ $1: 6.5886

$1: 6.5818

  $1,273.72

$1,289.38

$1,265.17

$1,284.72

New York, Shanghai and London have decided that $1,265 is the dealer’s consensus on the gold price and will wait for the vote tomorrow before they move one way or the other. We are getting the impression that Shanghai [under the control of the People’s Bank of China] does not want the price there to move out of line with either New York or London. There may well be a day when they change their minds, but we can’t expect that before September when the Yuan is an active part of the Special Drawing Right of the I.M.F.

The expected volatility this week will only reappear after the announcement of the British Referendum result.

At the moment, the positive Technical picture has not changed despite yesterday’s fall. We don’t expect any change, subject to tomorrow’s vote.

LBMA price setting:  $1,265.00 down from Tuesday 21st June’s $1,280.80.

The gold price in the euro was set at €1,119.96 down from Friday’s €1,129.45.

Ahead of New York’s opening, the gold price was trading at $1,265.40 and in the euro at €1,120.72.

 

Silver Today –The silver price closed in New York on Tuesday at $17.23 down from Monday’s $17.50 a fall of 27 cents. Ahead of New York’s opening the silver price stood at $17.24.

Price Drivers

The dollar is a little stronger today, tempered by Mrs. Yellen’s remarks yesterday in front of Congress. She clarified that the British referendum is a significant event that may well affect the U.S. economy. World financial markets are moving as if the referendum is a significant event. It took just one person’s death in 1914 to start World War 1. Will this event trigger events in the financial world as great, or greater, than 2008’ “Credit Crunch”. It would seem so!

The financial world wants a ‘Bremain’ result not a ‘Brexit’ and is discounting it to some extent. This means that a ‘Brexit’ result will cause tremendous turmoil in global markets while a ‘Bremain’ result may provoke a wobble but not turmoil. The polls show the vote still, as ‘too close to call’.

As we said yesterday, “Friday therefore promises to not only be a volatile day, but an historic one.”

The Pound Sterling continues to sit at very strong levels! If the vote is to leave, expect a heavily plunging pound!

Currencies and precious metals are in gambler’s territory as the polls look pretty even!

Gold ETFs – On Friday the holdings of the SPDR & gold Trust rose another 3.546 tonnes as the physical buying picked up its pace, into the gold ETF, leaving its holdings at 912.334. Another 0.45 of a tonne of gold bullion were added to the Gold Trust, leaving their holding at 201.91 tonnes.

Since January 4th this year, the holdings of these two gold ETFs have risen 317.458 tonnes.

Silver –Silver prices are steady and holding ahead of the vote tomorrow but remain within reach of $17.30 and now wait for the vote to be announced at 7.00a.m. tomorrow morning.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Thoughts on Brexit likelihood and big decline in Central Bank buying

Two articles published by me on info.sharpspixley.com, the first of which looks at the possibility of Brexit and although polls look to be showing a swing to the ‘Remain’ option they are still too close to call and the result may come down to whichever side is most successful in getting their voters out.  See:

Brexit loses momentum. Gold drops. But it ain’t over yet!

The second article examines latest Central Bank statistics which have seen a huge slowdown in May with the Chinese Central Bank apparently buying no gold at all, and Russia buying only 3.1 tonnes.  Given that China and Russia were, by a huge amount, the principal buyers of gold over the past year for their respective central banks a continuation of such a slowdown means the the specialist precious metals consultants’ estimates for Central Bank gold buying this year, a significant part of prospective gold demand, may prove to have been hugely over-estimated.  However to counter this purchases into the gold ETFs have been far higher than estimated.  Swings and roundabouts!  See:

 Central Bank gold buying slipping back, but ETF demand compensating

Gold & Silver retreat to support ahead of Brexit vote

Gold Today –Gold closed in New York at $1,298.40 up $16.70 on Friday breaking up to resistance before pulling back, falling to $1,282 support at London’s opening this morning.

The $: € moved slightly lower to $1.1279 from Friday’s $1.1254 over the weekend. The dollar index moved to 93.71 down from 94.38.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  06  20

2016  06  17

SHAU

SHAU

272.42

271.52

272.19

272.38

Dollar equivalent @ $1: 6.5810

$1: 6.5995

$1,287.53

$1,279.68

$1,286.44

$1,283.74

Shanghai reacted to the mood of London late on Friday, this morning, as the news about the U.K. and the murdered British M.P. began to be reflected in the polls and a “Brexit” seems unlikely today.

We expect volatility this week and swings back and forth as different polls tell different tales. $1,280 continues to hold. The Technical picture continues to point higher despite the daily picture pointing to a narrowing trading range.

Physical gold buying continued strongly in the U.S. on Friday [see below].

Global financial markets are far more than just about potential ‘Brexit’. A great danger for investors and traders is to be caught up in short-term emotional swings.  At the time they seem overwhelming, but inevitably the main issues underlying prices return to adjust markets. We expect the same to be true not just in this week, but next week too.  The Technical picture will have a stronger influence than usual particularly in the next fortnight.

LBMA price setting:  $1,283.25 down from Friday 17th June’s $1,284.50.

The gold price in the euro was set at €1,132.51 down from Friday’s €1,141.12.

Ahead of New York’s opening, the gold price was trading at $1,280.30 and in the euro at €1,129.61.

Silver Today –The silver price closed in New York on Thursday at $17.46, up from Thursday’s $17.17 a rise of 29 cents. Ahead of New York’s opening the silver price stood at $17.35.

Price Drivers

The murder of the British MP, Jo Cox,  last week caused a short term, dealer markdown of prices in the gold and silver markets today, at the opening in London. The gold price remains on support and should begin to rise across the world as the respectful sentiment currently ruling, gives way to the underlying global crises and the referendum. The world being what it is, the Brexit ‘in’ and ‘out’ campaigns will resume and the tragedy fall into the background ahead of the vote. It could still go either way. It will remain the cause of this week’s volatility in all global financial markets.

We detail the consequences on prices more, in our newsletters [website for subscription below].

Gold ETFs – On Friday the holdings of the SPDR & gold Trust rose another 5.347 tonnes as the physical buying ratcheted higher into the gold ETF, leaving its holdings at 907.879. Another 2.01 tonnes of gold bullion were added to the Gold Trust, leaving their holding at 200.41 tonnes.

Since January 4th this year, the holdings of these two gold ETFs have risen 311.521 tonnes.

Silver –Silver prices remain robust as they fell less than 1% today. This indicates a robust underlying strength that may well ride through the swings in the gold market this week. Surprisingly, we expect silver prices to be far less volatile than gold prices this week.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

UPDATE: Brexit in the balance.  Gold surges.  Silver may begin to fly

With the Fed decision not to increase interest rates at its latest meeting, in part because of uncertainties over the possible effects of a UK Brexit vote on the global economy, and UK polling seeing Brexit as a more than distinct possibility, gold surged thought the $1,300 level Wednesday and Thursday morning.  At one point it reached $1,315 – its highest level for almost 2 years.  And silver also has begun to move again too – some would say not before time.  It reached over $17.70 and while it has already exceeded that level earlier this year it tends to be much more volatile in its price movements than gold, and a continuing gold price increase could well see silver shoot up as the Gold: Silver ratio tends to come down when gold rises.  It is currently at 74.2 (still a historically high level) and a fall below 70 and a gold price at $1,310 would see silver around a dollar higher which would certainly give some heart to the long suffering silver investor.

However both gold and silver then came down with a bang, supposedly due to rumours of a postponement of the UK referendum to decide whether or not to leave the European Union following the shooting and tragic death of a very well liked (on both sides of the political spectrum) female Member of Parliament, Jo Cox.  To us here in the UK the idea of a referendum postponement over such an issue is hugely unlikely.  The rumour probably came about because as a mark of respect referendum campaigning was suspended for two days.  See: Rumours on Brexit referendum postponement misguided

But regardless, the big money which appears to have been trying to cap rises in the gold price took this as a major opportunity to bring down the price, with gold falling at one stage to below $1,280 and silver back to the $17.20s.  However the factors which drove gold through $1,300 remain in place and we wouldn’t be surprised to see it regain this kind of level, or move higher, if polls continue to show the Brexit option in the lead.

On the possibility of the UK electorate voting to leave the European Union, I would like to think I had been one of the earlier commentators noting the strong underswell of anti-European Union feeling in the country when all the polls were then predicting a comfortable Remain vote.  I had also been suggesting that UK investors in particular should look to investing in gold as a wealth protector given that if the UK referendum, now only a week away, should result in a Leave vote – the Brexit option – there would be a knee-jerk reaction knocking the pound sterling down sharply against the dollar (perhaps only temporarily so – these things tend to be overdone), while the gold price would likely rise on fears of considerable further economic disruption within the Eurozone and, perhaps, globally – a point now being made by Janet Yellen in her statement on the FOMC meeting deliberations this week.

So what are the chances of a Brexit vote next Thursday?  The UK establishment, which is for maintaining the status quo has really been firing its big guns in a last ditch attempt to ward off separation.  British Chancellor George Osborne has promised an emergency budget likely to raise taxes and cut public spending  should a Brexit vote take place, although whether he would be able to get such measures through a divided Parliament is somewhat less certain.  The whole Remain campaign has revolved around fears of the economic consequences of a Brexit vote, dismissed as scaremongering by those who want the UK to leave.

The Brexiteers on the other hand dismiss much of the presumed economic consequences put forward by the Remain camp as hugely over-exaggerated and have largely based their campaign on the perhaps more emotive issues of regained sovereignty and the cessation of uncontrolled immigration from EU member states which has become significant with poorer countries joining the EU, and more in the pipeline.  It does seem that there may be a growing number of people prepared to put up with some adverse economic consequences in order to regain these controls.

In short it pretty well boils down to head versus heart.  A trade-off between the economic argument which mostly suggests remain and the sovereignty one which suggests leave.  The latest polls suggest the Leave camp may be winning, but overall it is too close to call and could go either way.

A Brexit (Leave) vote would likely give a big boost to the gold price as it suggests a longish period of geopolitical uncertainty as Europe tries to get to grips with the decision, given it would give heart to the already growing anti-EU sentiment in countries like France, Spain and Italy in particular.  A remain vote might cap the gold price for a time – even bring it down a few pegs – but in our view gold’s fundamentals remain strong and it would be unlikely to do  lasting damage.

The above is an edited and updated version of  one first published by me on info.sharpspixley,com precious metals news site

Brexit seen as more likely.  Fed worried.  Gold and silver on the rise 

Gold Today –Gold closed in New York at $1,294.30 up $9 on Wednesday rose strongly in Shanghai to $1,306 before rising again at London’s opening.

The $: € moved lower to $1.1260 from yesterday’s $1.1228 overnight. The dollar index moved to 94.48 down from 94.78.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  06  16

2016  06  15

SHAU

SHAU

275.16

272.75

277.07

273.14

Dollar equivalent @ $1: 6.5982

$1: 6.5967

  $1,297.09

$1,286.02

$1,306.09

$1,287.86

Shanghai led the way again, after New York closed, taking the price higher to be followed by London taking it higher still, where the gold price barged through overhead resistance and the psychological resistance at $1,300 and hit $1,310. We see this, in part, as HSBC buying in London to supply  yesteradya’s SPDR gold ETF demand as well as Chinese investors rushing into gold.

For supplies to be this tight in London tells us that the improvement in the technical picture was reinforced by the supply/demand position in London as U.S. demand continues to burgeon.

We note from Shanghai’s performance, that demand in London or New York cannot be met in China, as no gold exports are allowed from there. Hence Shanghai is untouched by any supply squeeze in the developed world.

Only the Chinese bank ICBC could relieve such demand from its London stocks. But its task, while it is to provide gold to the market as a ‘market maker’ it is not bound to keep the London market ‘in balance’ from its stocks. But it is tasked by China to supply gold to China too. Consequently, it is entirely proper to provide balance in the Chinese gold market, not London. This means that the ICBC will send the gold not needed to be a market maker in London, to China to meet that demand.

Global financial markets are appearing to be discounting an exit of the U.K. from the E.U. and the consequential turmoil now expected. Next week may well prove a ‘watershed’ week for the financial world. If the U.K. votes to stay in the E.U. it will be a damp squid, but if not it may well prove to be ‘the event’ that triggers disruptions that will benefit gold and silver tremendously.

LBMA price setting:  $1,307.00 up from Wednesday 15th June’s $1,282.00.

The gold price in the euro was set at €1,164.37 up from Wednesday’s €1,141.79.

Ahead of New York’s opening, the gold price was trading at $1,305.50 and in the euro at €1,168.44.

Silver Today –The silver price closed in New York on Tuesday at $17.54, up from Tuesday’s $17.38 a rise of 16 cents. Ahead of New York’s opening the silver price stood at $17.71.

Price Drivers

Not only did the Fed hold rates at current levels, it did warn of game changing events such as Brexit, that could affect U.S. growth and the dollar. It stated that while jobs growth was slowing, economic growth was rising. After Janet Yellen’s statement the gold price jumped to over $1,294 in line with more buying into the SPDR gold ETF.

The next event, overnight, to affect markets was the Bank of Japan’s Kuroda confirmation that it would do nothing more to stimulate Japan’s economy. At this point the global markets reacted by falling. It was not just in Japan, it was across the world, why?

We see this as a signal that Japanese monetary stimulation is not succeeding, confirmed by a stronger Yen, now trading at 104.26 to the U.S. dollar. Falling equity markets around the world tell another story. While they are the remaining source of decent yields and likely to stay that way, prospects for global growth are slowing and now affecting global equities, which are either ‘toppy’ or beginning to fall. In other words, the dark clouds that we have been seeing on the horizon are moving above us. What next? Brexit is next, next Thursday with results seen later that day.

Gold ETFs – On Wednesday the holdings of the SPDR gold ETF(GLD) & Gold Trust(IAU) rose another 2.14 tonnes as more bullion was purchased into the gold ETF, leaving its holdings at 900.75. 0.75 of a tonne of gold bullion was added to the Gold Trust, leaving its holding at 197.65 tonnes.

Since January 4th this year, the holdings of these two gold ETFs have risen 301.632 tonnes. This could prove more that the central banks disclose they bought over 2016. With the distinct possibility of Brexit ahead we could see this total leap over the rest of the year.

Silver –Silver is going at full pelt now and should continue to do so in the weeks ahead.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Dovish Fed and Brexit drive gold and silver upwards. $1300 in sight?

Edited and updated version of Julian Phillips’ latest commentary following the dovish Fed comments implying perhaps only one rate increase this year, if that.

With the Fed completing its two-day meeting today markets held their breath to see if any surprises would be sprung on us. We didn’t expect any. But we may hear Mrs. Yellen be less optimistic than the market expects and hopes. The persistent desire for higher interest rates, which the Fed indicated was on the way in summer, may well miss summer and autumn. We see winter as an appropriate time because of the cold damage winters can cause. The U.S. economic recovery may well be looking OK but the data threatens to weaken. In itself this prospect has so far put the Fed off raising rates. In the event gold surged to the high $1,290s

The global economy continues to weaken and will affect the U.S. Most importantly, a rate hike would cause the dollar to rise, something that will damage the U.S. economy.  In the event gold surged up to the highish $1.290s making another tilt at $1,300, before being brought back down a few dollars in later trade.  It will be interesting to see what the Asian and European markets make of the latest Fed inaction overnight and tomorrow.

Global financial markets are tensioning up in preparation for next week’s Brexit vote, with the Yen hitting new recent highs at 106.21: $1, as global equities continue to rise slightly to ‘toppy’ areas.

As we have said in the past, equities are rising because they are the only place left where there is yield, not because a rosy future lies ahead. The huge danger in this is that if and when interest rates do rise, both bonds and equities will tumble!

Yesterday, we mentioned ‘a potentially devastating set of ‘ripple’ effects’’. We need to emphasize this. We are not simply talking about the ripples setting off other crises elsewhere, we are taking about a group of crises being set off and when synergized together, create an even larger global crisis in which precious metals will blossom.

Gold ETFs – On Tuesday the holdings of the SPDR & gold Trust rose yet again as 2.376 tonnes was purchased into the gold ETF, leaving its holdings at 898.671. No purchases or sales were made in the Gold Trust, leaving its holding at 196.90 tonnes.  This persistent buying is not simply holding prices up, but steadily draining London’s physical gold liquidity. We are under no illusion that once the ‘season’ for gold begins in September. Market physical shortages will shine through.

Silver –Silver is again marking time without making as strong a move as gold.

 

Regards,

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Gold and silver prices still have work to do

Gold Today –Gold closed in New York at $1,283.90 on Monday then it slipped in Shanghai, as you see below, then picked up again in London at the opening on Tuesday morning, to over $1,280.

The $: € moved from $1.1228 to $1.1268 overnight. The dollar index is standing at 94.46 down from 94.50.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  06  14

2016  06  13

SHAU

SHAU

272.01

270.31

271.15

271.99

Dollar equivalent @ $1: 6.6017

$1: 6.5860

  $1,281.56

$1,276.58

$1,277.51

$1,284.52

Shanghai pulled back leaving London to lift the gold price. Is this a sign that supplies in London available to make the price are so little as to push prices up? It could be that U.S. demand is so strong that these supplies are diminishing too much. If this is the case, we should see greater volatility in the price in the near term. There is certainly enough going on in the currency world to cause such volatility.

The Yuan still continues to weaken, as expected, while the Japanese Yen is still being sought as a place to escape the dollar, the pound sterling and the euro. The currency war is being waged without relent at the moment.

LBMA price setting:  $1,279.40 down from Monday 13th June’s $1,284.10.

The gold price in the euro was set at €1,147.83 up from Monday’s €1,139.60.

Ahead of New York’s opening, the gold price surged to close to  $1,290 before settling back to the mid $1,280s

Silver Today –The silver price closed in New York on Monday at $17.42, up from Friday’s $17.30 a rise of 12 cents. Ahead of New York’s opening the silver price stood at $17.31.

Price Drivers

With the Fed meeting this week financial markets will be cautious, despite the common expectation of no rate rise. Add to this the fact that German Bunds are yielding a negative 0.00% now. The euro is weaker today as you can see above with the Yen getting even stronger. The Yuan is now 6.60 against the dollar. The weakening of the euro may well not last for long as it remains well off its recent peak weakness.

We have focused on the Brexit vote and its potential impact on markets, but we have not factored in a potentially devastating set of ‘ripple’ effects!

To be clear on this by isolating single events such as ‘Brexit’ there is a danger of ignoring collateral damage, which in turn may well create subsequent crises. For instance if heavy outflows of capital from Britain take place how will the euro be affected? Will such an event damage global growth still further? At what point in a disrupted currency world will protectionism raise it ugly head?

The scene is gold positive and consequently silver positive.

Gold ETFs – On Monday the holdings of the SPDR & gold Trust rose as 2.377 tonnes was purchased into the gold ETF, leaving its holdings at 896.295. No purchases or sales were made in the Gold Trust, leaving its holding at 196.90 tonnes.

The purchases were not sufficient to move the gold price in the U.S. as the gold price is attacking overhead resistance now. This level must be broken for gold to move to attack $1,300. We feel it will take a declining dollar to achieve this. This could prove difficult as both the pound and the euro are under downward pressure, pushing the dollar higher against them.

Silver –Silver decided it would try to climb higher yesterday as you see above. But today it is retreating and as we write is at $17.34. We treat this as still trading around $17.3, waiting for gold to break strongly either way.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Are We Nearing the End of the EU? Will gold hit $1,400 this year?

By Frank Holmes – CEO and Chief Investment Officer, U.S. Global Investors

Global slowdown worries high Indias booming economy

Right out of the gate, I want to thank everyone who took time out of their busy schedules to tune in to our gold webcast last Wednesday. I also want to thank Aram Shishmanian, CEO of the World Gold Council, for joining me as our special guest. His deep insights into gold investing were well articulated and highly appreciated. If you happened to miss it live, I urge you to catch the replay, which we’ll be posting on usfunds.com soon. Look for it!

If you’re a serious investor—and because you’re reading this, I have to assume that you are—gold is looking more and more like a crucial trade. Fewer than two weeks remain before United Kingdom voters decide on whether the country will continue to be a member of the European Union (EU) or become the first-ever to leave it. The “Brexit,” as it’s come to be known, is arguably the most consequential political event of 2016—perhaps even more so than the U.S. presidential election in November—with far-reaching implications.

Global slowdown worries high Indias booming economy

Should the U.K. leave, it will certainly underline the question many people have about the EU’s viability. And remember, this is a group of countries that collectively has the world’s second largest gross national product (GDP), followed by China.

But whatever happens, “the European Union is not going to remain the same,” as Aram put it during the webcast. “The euro is still very unstable, and I think we could easily see an environment in which trade barriers will increase and currency wars will increase. Regrettably, we could have a weaker global economy.”

With this as the threat, “gold’s role is one of wealth protection,” Aram said.

Taking Precautions Against an Unknowable Future

Even Europeans are beginning to lose confidence in the European experiment. The Pew Research Center recently polled nearly 10,500 Europeans from 10 separate EU countries on their favorability of the 28-member bloc. Nearly half of all respondents—47 percent—held an unfavorable view.

Global Manufacturing Sector Stagnates May
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Trust in the European Central Bank (ECB) continues to falter as well. In a blistering note titled “The ECB must change course,” Deutsche Bank called out the central bank for “threatening the European project as a whole for the sake of short-term financial stability.” The ECB’s actions have “allowed politicians to sit on their hands with regard to growth-enhancing reforms.” The longer the bank persists with a negative interest rate policy, the more damage it will inflict upon Europe, Deutsche added.

Meanwhile, Frankfurt-based Commerzbank is considering stashing physical cash in pricey vaults instead of keeping it with the ECB, whose policies are cutting into bank profitability.

Speaking to the World Gold Council’s Gold Investor newsletter this month, former Governor of the Bank of England Mervyn King criticized the ECB’s negative rate policy, saying: “If you repeatedly bring down interest rates to try and persuade people to spend today rather than tomorrow, it works for a while. But they become increasingly resistant to being asked to spend their resources now rather than save for the future.”

Like Aram and others, Governor King sees gold as a likely solution. “There is clearly a need to take some precautions against an unknowable future,” he said, which is the same argument for having health insurance.

Negative rate policies are having a huge effect on bond yields, as you can see below. Over $10 trillion worth of government debt across the globe carried a negative yield as of the end of April. (In a tweet last week, legendary bond guru Bill Gross called it “a supernova that will explode one day.”) In Switzerland, three quarters of all government bonds right now actually charge investors interest. Real harm is being done to retirees, who have had to pick up part-time work at Walmart or become Uber drivers to offset lost interest on their savings and pensions.

Global Manufacturing Sector Stagnates May
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This is prompting investors to look elsewhere, including the U.S. municipal bond market, which has attracted $632 billion in assets this year alone as of June 1. Of that amount, more than $22 billion has flowed into muni mutual funds, the best start to a year since 2009. Between that year and the end of 2015, the amount of U.S. municipal debt held by foreign investors climbed 44 percent, validating its appeal as an investment with a history of little to no drama, even during times of economic turmoil and periods of rising and lowering interest rates.

$1,400 Gold this Summer?
George Soros

Joining Aram in seeing the Brexit as further proof of impeding economic troubles is billionaire investor George Soros. After a hiatus of conducting any personal trading, the 85-year-old is back in the game—this time with some bearish investments. In the first quarter, he purchased a $264 million stake in Barrick Gold, the world’s largest gold producer, and a million shares in precious metals streaming company Silver Wheaton. It appears he’s added to both positions, indicating a bet against the broader equity market.

Now, with a Federal Reserve rate hike looking more and more unlikely this month, gold is expected to resume its bull run, according to Australia and New Zealand Bank Group (ANZ) commodity strategist Daniel Hynes. This, along with a possible Brexit, could push the yellow metal to $1,400, a price we haven’t seen in three years this month.

Paradigm Capital also sees the rally picking up where it left off in May, noting that gold’s trajectory so far this year resembles the one it took in 2002, the first full year of the last bull market, which carried the metal to $1,900 in 2011. “The resemblance is rather striking,” Paradigm writes.

Global Manufacturing Sector Stagnates May
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The investment dealer forecasts gold to reach nearly $1,400 by year-end after a dip in October. It also maintains its position that this particular bull run will peak at $1,800 sometime during the next three to four years.

Whether or not this turns out to be the case is beside the point. Savvy investors—not to mention central banks and governments—recognize gold’s historical role in minimizing the impact of inflation, negative rates and currency depreciation. This is what I call the Fear Trade, and I always advocate up to a 10 percent weighting in gold that includes gold stocks as well as bullion, coins and jewelry.

Catching Up with Sectors and Industries

Because we’re near the halfway mark of 2016, I thought you’d be interested to see what the top performing sectors and industries were for the year so far.

As for sectors, utilities is on top, delivering more than 15 percent so far. Jittery investors, worried about slow global growth and geopolitical threats, have moved into defensive stocks such as water and electricity providers and telecommunications companies, many of which offer steady dividends in a low-yield world. Financials, as you might imagine, have been hurt by interest rate uncertainty.

Global Manufacturing Sector Stagnates May
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Below I’ve highlighted the 10 best performing industries for the year, and interestingly enough, metals and mining companies, particularly those involved in the gold space, lead all others. Spot gold is up 20 percent so far, but amazingly gold miners have doubled investors’ money. Metals and mining companies have rallied more than 53 percent.

Global Manufacturing Sector Stagnates May
click to enlarge

Many of the top-performing companies this year had some of the biggest declines last year because of impaired balance sheets. To maintain their performance long-term, they will need to show earnings.

Latest Brexit polls rock sterling, boost gold

I would refer readers to the following paragraph written mid-May in an article entitled: Britain Facing Brexit Bombshell.  What Would Happen to Gold?.  With some new opinion polls published over the weekend suggesting a strong move towards making the Brexit (for the UK to leave the EU) option in the forthcoming referendum on June 23rd reality, it might be seen as prescient!  In trading today the pound sterling has dropped sharply against the US dollar and the gold price in sterling has risen to above £900 an ounce.  The paragraph I’m quoting is below.

This website is largely about gold and precious metals.  What would be the effects of a Brexit on the yellow metal?  We think the impact could be strongly positive for gold.  The yellow metal tends to thrive on economic and political uncertainty and there are potentially far reaching consequences of a Brexit decision, particularly within the EU itself.  For UK holders a mini collapse of sterling as a result of a Brexit decision should it happen, would probably make moving some of one’s wealth into gold a very wise decision indeed.  Gold is in effect financial insurance and if the economists and politicians predicting disaster for the UK economy if Brexit happens are correct and sterling plunges – it probably would in a knee-jerk reaction anyway – then a global gold price rise coupled with a fall in the domestic currency looks to make holding some gold a no-brainer for the UK investor in particular.

Despite the latest opinion polls, which have seen huge fluctuations, Brexit is still certainly not a foregone conclusion.  Bookmakers odds for example still see the UK voting to remain in the EU, as do some other polls, but in the above paragraph we were looking at gold investment very much as insurance against the possibility of a leave vote – and if today’s movements in gold and sterling are a guide then gold investment would have been a very wise move back in mid-May!

It is also worth noting that our view then was that regardless of the UK referendum final decision, gold investment for the longer term would be a positive move in any case.

Re the latest Brexit fears I would commend readers to check out the following abridged version of an article today by Ross Norman – the CEO of London bullion company Sharps Pixley.  Ross is a long-time observer of the precious metals markets and his views carry a lot of weight in the UK precious metals investment space.  The full article is available for reading on the info.sharpspixley.com website.  Click on the headline to go direct to the original article.

Gold Rallies For British Investors on BREXIT Fears
For UK gold investors, the sharply weakening currency is proving a fantastic win for them; gold commenced 2016 at GBP 725.02 per ounce and today was trading at £907.64, netting investors a healthy gain of 25.2 pct in just 5 months. In short, gold provides an easy escape from a declining local currency.

Whilst Sharps Pixley has never advocated taking a short term gold position for tactical wins, for the discerning investor with a long term strategic view, it authenticates the case for owning physical gold and for what it does best – and that is as a long term store of value and an effective means of wealth preservation.

The UK is not unique in seeing its currency weaken and physical gold is an easy way of hedging yourself and providing wealth protection for just such an eventuality.

ggg

CHART ABOVE – GOLD IN STERLING TERMS

Although some polls are suggesting the leavers are in the lead, the remain camp still very much has the betting odds in their favour (and crucially this is regarded as the best guide), which sees them likely to secure victory with an implied 64.5 pct probability of winning.

With just 10 days to go before the vote it looks likely that the rhetoric on both sides will scale the fear factor and the British pound is likely to weaken and correspondingly gold in sterling terms may be the winner.

 

Jobs, Brexit and Gold – the unholy trio that are upsetting the Fed applecart

As maybe I’ve mentioned before, of the plethora of supposedly independent information and reports which come through to me in my daily emails, one I will always read assiduously is Grant Williams’ Things that make you go hmm… twice monthly (usually) newsletter.  Not only does he take a pretty jaundiced view of much of what passes for mainstream economic analysis and media comment, but he expresses his opinions forthrightly and with good humour as anyone who has attended one of his conference presentations will be well aware.

Grant is both a Singapore-based fund manager and very well followed commentator on geopolitics and economics and he occasionally touches on gold as a part of this terrific coverage in his subscription-based newsletter.  He makes you sit up and think – and understand that much of what data is released by governments, central banks and government funded economists is more akin to some of the claptrap often put out by junior mining and exploration companies (and some bigger ones too) and their PR companies in trying to hoodwink investors by putting a strong positive spin on financial and drilling results which often, on deeper analysis, should be suggesting quite the opposite.

His latest newsletter, entitled ‘The 60 Second Excitement’ looks in some depth, inter alia, at the latest U.S. non farm payroll figures, the possibility of a Brexit (Britain leaving the European Union) and their combined effect on the gold market, gold stocks and the gold price should the initially unexpected materialize – as it has already done with the U.S. jobs figures.

Let’s take all these in order:

Firstly the latest U.S. jobs statistics which showed an increase in non-farm payroll figures for April of only 38,000 – hugely below the consensus expectation of 160,000 – coupled with also reducing the figures for the prior two months as well.  Yet in Fed terms the positive spin was that the overall unemployment rate fell to 4.7% (below the Fed 5% target),  but conveniently ignoring the incontrovertible fact that according to government stats this relatively low unemployment rate has only been achieved by an ever-continuing rise in the percentage of people who have somehow withdrawn from the labour market altogether.  One is thus drawn to John Williams’ (no relation to Grant or myself – we Williamses seem to be getting around!) Shadow Stats, which looks at such government statistics more in the way they used to be calculated before goalposts were moved (several times in some cases).  According to Shadow Stats the U.S. unemployment rate is, in reality, is somewhat north of 20%, which would seem confirm reality rather than manipulated government statistics.

Prior to the latest jobs announcement observers had seen the likelihood of the Fed raising rates 25 basis points in June much more likely and gold had been suffering as a consequence.  After the jobs announcement the likelihood of a June rate rise receded substantially, although some observers feel a July rate rise still on the cards if U.S. economic data between now and then looks supportive – and if the U.K votes to stay in the European Union in the referendum on June 23rd.  Others think September, or even later, will see the next Fed rate rise.  Undoubtedly the Fed has talked itself into imposing another rate increase this year, or perhaps two, just to maintain what little credibility it may have left in its ability to really jumpstart the U.S. economy and promote sustainable growth.

But now back to Brexit.  As we have pointed out here before there’s a substantial underswell amongst the British public of anti-EU feeling.  Whether this will express itself in a Brexit vote remains uncertain – a set of opinion polls published today (so after the latest TTMYGH newsletter was written) – suggest that the Brexit vote may indeed carry the day, although the high powered government-based Remain propaganda machine may yet prevail.  But if the Brexit option does emerge triumphant in just over 2 weeks’ time, with its decidedly uncertain, and almost certainly immediately negative impact on the U.K. economy, there are a growing number who believe the impact on the whole European Union concept – and even on the global economy – could actually be even more severe.

There has been a huge ‘project fear’ campaign unleashed on the U.K. electorate by the Remain camp, but as Grant Williams points out all the statistics being put about predicting doom and gloom for the U.K. economy as a whole and for the wealth of the person in the street, are totally unquantifiable – much as the positive spin on some drilling results from exploration juniors could be equally speculative but on the positive side.  Not that the pro-Brexit campaigners are not equally guilty of disseminating unquantifiable statistics and suppositions of their own.

So what has all this to do with gold?  Gold tends to thrive on uncertainty and the Fed’s dithering over rate increases, growing concerns about whether the U.S. economy is actually growing, and the potential effects of a Brexit should it come about – which looks to be much more of a possibility now than it did only a couple of weeks ago, are all uncertainties gold could thrive on. Add to that the apparent beginnings of a downturn in global gold production and doubts about continuing supply availability, coupled with what has been enormous gold ETF demand so far this year, and this is all gold supportive.  True, Asian demand has slipped.  Indeed this fall in demand from the East coupled with the huge ETF demand shows there has been something of a reversal in gold flows with more flowing into the Western gold ETFs than into India and China combined.  But virtually no-one believes that Asian demand will not pick up again – quite probably later this year and if this is accompanied by a continuation of ETF inflows the doubts about availability of unattributable (i.e. freely available physical gold) will multiply.

Grant Williams also points to another supportive phenomenon in the performance of gold stocks which have been hugely outstripping the rise in the metal price, and which have been remaining relatively strong even through the recent correction in the gold price.  Some of the biggest gold stocks of all have more than doubled and the most significant gold stock indexes and ETFs have been outstanding performers vis-à-vis the gold price itself.  Gold stocks are often the precursors of significant moves in the gold price rather than just being followers.

But while the TTMYGH newsletter highlighted just the three factors noted above, Grant Williams goes on to end with the comment: There are plenty more (such factors).  He mentions China, the upcoming US elections, the explosion in corporate debt levels and perhaps the biggest problem of all—unfunded pension liabilities—which will all have a big part in determining what kind of outcome the world gets as the ghosts of 2008 return.  You have been warned.

The above article is a lightly edited version of one I posted onto the info.sharpspixely.com site a day earlier

Weekend reading on gold

Lawrieongold readers may be interested to read my two most recent articles on SeekingAlpha.com and Sharpspixley.com which both look at specific aspects of the current  gold and gold stocks markets.

To read the Seeking Alpha article click on Billionaires, Gold And Gold Stocks… They Are In For The Long Term, Should You Be Too?.  This in a way comments on some recent media decrying the idea of following some highly publicised media coverage of some huge investments in gold and gold stocks by some high profile billionaires.  My view is that it’s not too late to follow their example as they are for the most part investing in gold for the long term.  They see a whole lot of factors ahead which will support a rising gold price over the remainder of this year and into the years ahead.

For the Sharps Pixley article click on Reversing gold flows could lead to Perfect Storm.  This article examines the changes in gold flows which have been taking place this year which have seen the main area of demand in the West, rather than in the East which has been the case for the past several years.  This has been due to weak Asian demand coupled with enormous investment demand in the U.S. and Europe exemplified by the big move back into gold ETFs and in coin sales.  It also takes a look at the  recent Swiss data which saw big gold imports from the UAE and Hong Kong – normally major recipients of gold from the Swiss refiners, and a very big export figure for gold into the U.K. – again a huge reversal of the normal flows.  Is this an indicator that London is actually short of unattributable physical gold?

Readers are reminded regarding this latter possible conclusion by my earlier article: Switzerland gold data raises new doubts about London’s Gold Stocks

In my view these are very interesting times for the gold market, which could result in some good upwards momentum, particularly given the recent weak U.S. employment data which could yet again dissuade the Fed from raising interest rates in the near future.  And if and when the Fed does raise rates, probably by a paltry 25 basis points again, should gold investors be worried.  Consider what happened to the metal price when the Fed raised rates in December.  It was closely followed by one of the biggest gold price surges in years rather than knocking the price back as most analysts were predicting.  The weakness in price mostly occurred prior to the event and strength afterwards.

Readers may also want to look at the possible impact of a Brexit should the U.K. public vote to withdraw from the EU in 3 weeks time.  This now looks to be a definite possibility, while only just over a week ago many commentators had virtually written this possibility off as highly unlikely.  There is an underswell of resentment regarding EU membership in the U.K. which only now seems to be becoming apparent.  See: Brits and Europeans may find gold attractive as Brexit possibility looks stronger.

All good weekend reading!

Brits and Europeans may find Gold attractive as Brexit possibility looks stronger

 

Here’s a lightly edited version of an article I published on the info.sharpspixley.com website a day or so ago following the two Guardian opinion polls – one by telephone and one online – suggesting that a UK vote to leave the EU (the Brexit option) is a real possibility.  One suspects one result will be a redoubling of the Remain campaign in the 3 weeks up to the actual referendum and with most of the big guns supporting it, this may swing the final vote back to Remain.  But the Remain camp will now be much more nervous about the final result!

In recent weeks the majority of opinion polls in the U.K., and perhaps even more significantly the bookmakers, had been predicting that the U.K. electorate would be voting to Remain in the European Union by a comfortable margin rather than the Leave the EU option (Brexit).  Indeed some commentators had virtually written off the likelihood of Britain voting for Brexit.  The fear of the unknown in terms of the potential effects on the British economy, in particular, which has been highlighted by the Remain camp, almost ad nauseam, appeared to be winning the day.  True there had been the occasional outliers suggested by some online polls which were often disregarded as being less likely to be accurate than telephone polling which was consistently showing strong support for Remain.

But the latest polls for The Guardian newspaper by polling company ICM, which conducted simultaneous online and telephone polls, have really put the cat among the pigeons with both suggesting a 52%-48% Brexit lead, despite most of the country’s heavyweight politicians, including the leaders of the major political parties – Conservatives, Labour, Liberal Democrats and Scottish National Party – all being strongly in the Remain camp.  The only political party wholly in favour of a Brexit is UKIP, led by the charismatic Nigel Farage, which the mainstream supporters of a vote to leave have tried to sideline given the perceived make-up of  many of UKIP’s followers – seen in something of the same light as Marine Le Pen’s Front National in France.  The remain camp has been supported in its dire warnings of what an economic disaster it would be for the U.K. to leave the EU by such major global figures as U.S. President Barack Obama, German Chancellor Angela Merkel, IMF Head Christine Lagarde and a host of other global political and economic heavyweights.

The trouble is that a large sector of the British public is ever more distrustful of statements from major politicians and just doesn’t believe, or don’t care about, the figures being bandied about.  They are probably prepared to accept a limited downturn in the U.K. economy in exchange for winning on the arguments which may appeal most to the person-in-the-street.  These include regained Sovereignty (in other words getting away from U.K. laws being subject to override by EU ones, and the pre-eminence in the legal system of the European Court of Justice); fear of potential unlimited immigration by EU nationals (probably not a problem when the EU was much smaller only incorporating the most wealthy European nations, but now with a 28-nation EU, and the prospect of it being further enlarged as time goes, by including countries with some much poorer economies, it becomes a worry in terms of the nation finding it hard to cope with the demands of high immigration levels completely outside its control); and border security in terms of terrorists coming in via the EU open borders (which is an additional aspect of the same worry).

Perhaps the most interesting assessment of what would happen to the U.K. economy came from the well-respected Institute for Fiscal Studies (IFS), an independent think tank (if anyone in this argument can be truly seen as truly independent).  It assessed that leaving the EU would lead to two more years of austerity as the economy struggles to get back on track post a Brexit decision.  However it also suggested that some of the economic disaster figures being put about by the vote Leave campaign were somewhat exaggerated and the U.K economy would eventually recover, but that it could take some time.  It also assessed, on the other hand, that the economic predictions put out by the Brexit campaign were ‘absurd’.  No words minced there then!

Latest analysis from the OECD also confirms the opinion that the U.K.’s economy would be hit significantly in post Brexit years should there be a leave vote but that also there would be “substantial negative consequences for the United Kingdom, the European Union and the rest of the world”.

But it could be the sovereignty issue which wins the day.  The British, as an island nation, are inherently insular and while the populace largely accepts the country is part of Europe geographically, the idea of closer political union into a European Federal State – the avowed aim of many EU intellectuals – appals them.  And whatever the politicians say and promise, if Britain remains in the EU, there is a strong belief that there will indeed be an ultimate progression into absorption into a European mega-state – by then probably incorporating additional nations including the latest political football in this respect – Turkey.  Someone on the Brexit side gave an undoubtedly hugely exaggerated estimate that 12 million Turks would want to move to Britain if it became an EU member (and would have the right to do so through the EUs open borders policy).  This is undoubtedly a ludicrous figure, but such numbers stick in people’s minds.

So what does all this mean for gold?  The geo-economic uncertainty engendered by a Brexit vote would probably lead to a higher price.  However an immediate knee-jerk reaction would likely see a dive in the value of the pound sterling against the US dollar and a likely decline in the value of the euro too given the boost a Brexit would give to anti-EU sentiment in many other member states.  Given that the gold price is set in US dollars there would seem to be a strong logic for investors in the EU, and in the U.K. in particular, to add some gold to their portfolios as insurance – and an insurance which could well appreciate even more given that the yellow metal would likely react positively to a Brexit decision.

There is obviously a slight risk in this policy.  Should the Remain vote prevail – and believe me there will be a huge amount of effort by the big political guns and most of the media, which tends to be Remain supportive, to persuade the general public of doom and gloom should the electorate vote to leave – there would be a collective sigh of relief and the pound and euro would likely rise as a result and thus the gold price fall in the pound and euro.  But we feel any such surge would be shortlived and there would be a quick return to the status quo prevailing beforehand.  But the positive fundamental prospects for gold in the medium to long term would remain given doubts about physical gold supply availability in the light of still huge demand and some major global geopolitical uncertainties .  The downside risks are thus quite low, but the positive upside should Brexit happen would be strong.  Gold has always been a wealth protection insurance asset and this possible short term event, and its likely immediate effects, would seem to make this a very wise insurance policy to follow.  Indeed the positivity would likely be further advanced as there would be some significant destabilising global knock-on effects, as the OECD warns, which would also be likely gold price positive.

And looking only a few months further ahead there is also the possibility, growing by the day it seems, of a Trump Presidency in the USA.  Now what would that mean for gold?………..

Gold Taking a Breather … Is this the time to buy?

By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors

It makes a great deal of sense to own gold. Billionaire hedge fund manager, Paul Singer

First it was Stan Druckenmiller, now it’s George Soros. Following billionaire former hedge fund manager Druckenmiller’s announcement that gold was his family office fund’s largest currency allocation, we learned last week that his old boss, billionaire investor George Soros, purchased a $264 million stake in Barrick Gold, the world’s largest gold producer, after liquidating $3.5 billion in U.S.-listed stocks. Additionally, he disclosed owning call options on a gold ETF.

Soros’ investment can be held up as further proof that sentiment toward gold has decidedly shifted positive, following the challenging last three years.

London-based precious metals consultancy Metals Focus just released its Gold Focus 2016 report in which the group calls an end to the gold bear market that began in late 2011, after the metal hit its all-time high of $1,900 per ounce. “We are optimistic about gold over the rest of this year and our projections see it peaking at $1,350 in the fourth quarter,” the group writes. Global negative interest rate policy fears have reawakened investors’ confidence in gold as a reliable currency and store of value.

The group adds: “In the near term, there may well be some liquidations of tactical positions.” This is to be expected, especially around the start of summer, based on historical precedent

Will Gold Follow Its Short or Long-Term Trading Pattern?

We’ve noticed that mining companies which have deleveraged their balance sheets this year have been some of the biggest gainers. Barrick, now Soros’s largest U.S.-listed allocation, started 18 months ago.

Glencore, Teck Resources and higher-risk junior producers such as Gran Colombia bounced off the canvas after being knocked down.

Gold equities always have a higher beta than bullion. Usually a ±1 percent move translates into 2 to 3 percent in gold stocks.

Regardless of it being a bull or bear market, there are still fairly predictable intra-year trends in the price of gold. Below is an updated composite chart of the metal’s historical yearly patterns over the last five, 15 and 30 years, courtesy of Moore Research.

lucara diamond at a nine-year high

click to enlarge

In all periods, gold contracted in May to early summer, then rallied in anticipation of Ramadan—this year beginning June 4—and India’s festival of lights and wedding season. India has one of the largest Muslim populations in the world, and for at least 5,000 years they’ve adhered to the tradition of giving gold as gifts during religious and other celebrations. .

Predictably so, the yellow metal has retreated somewhat this month, following its best start to a year in 30 years and its best-ever first quarter for demand. As I told Daniela Cambone during last week’s Gold Game Film, this pullback provides an attractive buying opportunity

The five-year period decoupled from the other two starting in mid-autumn, but the annual losses in 2013 (when the yellow metal fell 28 percent), 2014 and 2015 skewed the data. Metals Focus sees gold following its more typical trading pattern this year, possibly climbing to as high as $1,350 an ounce

lucara diamond at a nine-year high

click to enlarge

In the near-term, gold is threatened by a rate hike, possibly as early as next month’s Federal Open Market Committee meeting. The metal fell to a three-week low this week on hawkish Fed minutes. If the Fed ends up delaying a hike, it could give gold the chance to take off.

Analysts See a Possible 25 Percent Depreciation in China’s Currency

One of the concerns the Fed has right now is the depreciation of the Chinese renminbi. In a special report, CLSA estimates it could fall as much as 25 percent before rebounding somewhat. Because the trade volume with China is so massive, the fear is that it could affect the U.S. economy

lucara diamond at a nine-year high

click to enlarge

This would have many obvious negative consequences. For one, because China’s oil contracts with the Middle East are denominated in renminbi, not dollars, Middle East suppliers would be hurt.

CLSA points to several winners, however, including investors. The devaluation could very well “represent the best opportunity to buy Chinese assets that investors have had since the financial crisis,” the investment banking firm writes. China’s materials sector, local exporting producers and mainland gold producers should also benefit. The renminbi will “inevitably” fall, CLSA says, “irrespective of economic fundamentals, as a free market works out what it is worth.”

It’s little wonder then that, in the meantime, the country’s consumption of gold has skyrocketed in recent years as it vies to become one of the world’s key gold price makers. (Remember, China just introduced a new renminbi-denominated gold fix price.)

lucara diamond at a nine-year high

click to enlarge

In addition, it was reported last week that Chinese bank ICBC Standard just purchased one of Europe’s largest gold vaults from Barclays, located in London, for $90 billion. This will help give the country greater control over gold transactions around the world, about $5 trillion of which are cleared in London every year

Should They Stay or Should They Go?

Likely to help gold this summer are geopolitical events, specifically the potential “Brexit” next month when U.K. voters decide on whether to remain members of or leave the European Union.

former libertarian vice presedential nominee wayne allyn root whose latest book is the power of relenetless

Various analysts have warned that such an event could trigger a crisis with both the euro and pound, which might spread to other economies. A recentBank of America Merrill Lynch survey found, in fact, that the idea of a Brexit has risen to the top of global investors’ worries. What’s more, no consensus was reached during a meeting among G7 nations this past weekend on how to deal with fiscal policy, other than to take a “go your own way” approach.

In the past, gold has been used as a hedge against the risk of not only negative interest rates but also inflation.

High inflation might also be coming to the U.S. thanks to the Labor Department’s new regulation on overtime pay, which doubles the eligibility threshold from $23,660 a year to $47,476 a year, on condition that the worker puts in more than 40 hours a week. It’s estimated that the ruling will affect 2.2 million retail and restaurant workers, among others.

President Barack Obama’s heart is certainly in the right place by wanting to boost workers’ wages. But it’s important to be aware of the unintended consequences that have often accompanied such sweeping edicts throughout history. We could end up with rampant inflation as companies will have little choice but to raise prices to offset the increased expense. Again, having part of your portfolio invested in gold and gold stocks, as much as 10 percent, could help counterbalance inflationary pressures on your wealth.