x
Central bank purchases, light investor allocations, and geopolitical risks mean gold prices can fly higher still – UBS’ Joni Teves
Despite gold prices cresting close to year-end targets months ahead of schedule, the yellow metal is still supported by strong tailwinds and investor allocations remain relatively light, so the risks remain skewed to the upside, according to Joni Teves, Precious Metals Strategist at UBS.
In a Monday interview, Teves was asked what the banking giant sees in gold’s future after breaking above $2,700 per ounce last week and continuing to set new all-time highs in this week’s trading.
“We remain bullish on gold here,” she said. “We think the outlook is quite positive heading into next year. Easing by the Fed continues to be supportive for gold, and fundamentals continue to be positive as well. We expect central bank buying to continue, and physical demand we think will remain resilient even as prices continue to rally.”
UBS also believes investors still have plenty of room to build gold positions. “Generally, we think the market is still under-invested in gold, and therefore there's room for more allocations to be built up,” she added.
Teves was then asked when UBS expects to see the spot price break above $2,800 or even $2,900 per ounce.
“We have a year-end target of $2,800 for this year, but given the price action over the past week, the risks are building to the upside there,” she told CNBC Asia. “We do have a $3,000 target for next year. I think with a lot of uncertainty between now and the US Presidential elections, and given persistent geopolitical risks, we could see choppy price action over the next few weeks, but we think the skew is still to the upside for gold prices.” Read More
Bitcoin slides to $66k, stocks and gold dip as bond yields rise
Asset prices from stocks to gold and crypto fell into the red in early trading on Wednesday as investors reduced their exposure to the markets while reevaluating expectations for rate cuts in November and into 2025.
A rapid rise in bond yields and a spike in the DXY are adding to concerns as many have taken them as a sign to go risk-off in favor of easy returns, which is taking a toll on stocks and crypto.
“Equities have lost their upside momentum so far this week in moves which have seen both the Dow and the S&P 500 pull back from last week’s all-time highs,” said David Morrison, Senior Market Analyst at Trade Nation. “Traders have been spooked by the jump in bond yields over the past five weeks. The 10-year Treasury Note was yielding 3.6% in mid-September, just before the Fed cut rates by a thumping 50 basis points. This had risen to 4.248% as of this morning.”
“That’s a big move in a relatively short period and is a measure of the sharp recalibration carried out by investors as they reassessed the depth and speed of future monetary loosening from the Federal Reserve,” he added. “It suggests that investors expect the Fed to cut at a slower pace than previously thought, mainly because recession fears have been dialed back sharply.” Read More
Gold remains under pressure against the loonie after Bank of Canada cuts rates by 50 basis points
Gold prices in the broader currency market are showing little reaction to the Canadian dollar after the Bank of Canada cut interest rates by 50 basis points.
Following in the Federal Reserve’s footsteps, the Bank of Canada on Wednesday lowered its overnight rate to 3.75%, down from 4.25%. The Bank Rate now stands at 4.00%, and the deposit rate is at 3.75%.
Although the move is considered aggressive, it was not unexpected. Markets had priced in a 92% chance of an oversized cut after inflation dropped sharply in September.
While gold has bounced off its lows against the Canadian dollar, it remains under pressure. It was last trading at $3,788.83 an ounce, down 0.26% on the day. Gold's performance against the loonie is in line with the broader market, with spot gold last trading at $2,737.30 an ounce, down 0.40% on the day.
Looking ahead, the Bank of Canada expects interest rates to continue declining, which should support economic growth. The central bank projects GDP growth of 1.2% in 2024, 2.1% in 2025, and 2.3% in 2026. Read More
Spot gold falls to $2,726/oz after U.S. existing home sales decline 1.0% in September
Gold prices are trading at fresh session lows after the latest data showed the U.S. housing market declining less than expected in September.
Total existing home sales, including single-family homes, townhomes, condominiums and co-ops, fell 1.0% to a seasonally adjusted annual rate of 3.84 million in September, the National Association of Realtors (NAR) announced on Wednesday. The data was better than expected, as the consensus forecast of economists called for a 1.3% drop to 3.80 million. August’s total was revised upward to 3.88 million from the originally reported 3.86 million units. Year-over-year, sales were down 3.5% from September 2023.
Gold prices fell to a new session low of $2,726.01 in the minutes after the housing data was released, and last traded at $2,727.96 for a loss of 0.76% on the day at the time of writing. Read More
China’s influence in the gold market is only just beginning - LBMA panel
China has played an unprecedented role in gold’s rally to record highs this year, and while the market may have cooled in the second half of the year, investors should not underestimate the Asian giant’s impact on precious metals.
China’s influence in the gold market will only continue to grow as its economy evolves, according to a panel discussion at the London Bullion Market Association’s 2024 Precious Metals Conference.
“From a consumption perspective, the continued growth of China's economy and its large, growing consumer group will create a solid foundation for China's gold market,” said Dr. Zenghui, Vice President of the Shanghai Gold Exchange (SGE), during the discussion.
Zenghui also noted that gold demand is evolving from basic consumption into an important investment asset within the Chinese economy. He explained that the SGE is in the process of streamlining its membership procedures, making it easier for international companies to tap into China’s gold market.
“I believe there will be more trading strategies and a larger trading market,” Zenghui said. “This is a very exciting opportunity, and I warmly welcome global institutions to join our market.” Read More
Routine profit-taking pressure hits gold, silver
Gold and silver prices are solidly lower in midday U.S. trading Wednesday, on profit taking from the shorter-term futures traders. The price pullbacks are not surprising, given gold overnight hit a record high of $2,772.60, basis December Comex futures, and silver futures this week scored a 12-year high. Still, safe-haven demand and bullish charts are keeping a solid floor under the gold and silver markets. December gold was last down $26.20 at $2,733.70 and December silver was down $1.136 at $33.905.
Safe-haven demand is still in the cards for gold and silver. High tensions in the Middle East and the approaching U.S. presidential elections are creating keener uncertainty in the marketplace.
Technically, December gold bulls have the solid overall near-term technical advantage. However, price action today scored a bearish “outside day” down on the daily bar chart, whereby the daily high was higher and low was lower than Tuesday’s high and low. If there is good follow-through selling on Thursday, then a more significantly bearish “key reversal” down would be confirmed, which would be one chart clue that a near-term market top is in place. Bulls’ next upside price objective is to produce a close above solid resistance at $2,800.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $2,650.00. First resistance is seen at $2,750.00 and then at the overnight contract high of $2,772.60. First support is seen at today’s low of $2,722.10 and then at $2,708.70. Wyckoff's Market Rating: 8.5.
Image Source: Kitco News
December silver futures bulls have the solid overall near-term technical advantage. Prices are in a 2.5-month-old uptrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at this week’s high of $35.07. The next downside price objective for the bears is closing prices below solid support at $32.00. First resistance is seen at $34.00 and then at $34.50. Next support is seen at today’s low of $33.61 and then at $33.225. Wyckoff's Market Rating: 8.0. Read More
Image Source: Kitco News
Paul Tudor Jones: ‘I’m long gold, I’m long Bitcoin’ as U.S. faces potential ‘Minsky moment’
The list of prominent figures warning about the U.S. government’s current fiscal deficit and the increased spending promised by both presidential candidates continues to grow as a respected billionaire hedge fund manager recently suggested that rising bond prices could force unexpected actions from the government following the election.
“We are going to be broke really quickly unless we get serious about dealing with our spending issues,” Paul Tudor Jones told CNBC’s Andrew Ross Sorkin on Tuesday.
The Tudor Investment founder and CIO expressed concerns that if the U.S. continues to spend beyond its means, a major sell-off in the bond market could ensue, leading to a spike in interest rates.
“The question is: after this election, will we have a Minsky moment here in the United States and U.S. debt markets?” Jones questioned. “Will we have a Minsky moment where all of a sudden there’s a point of recognition that what they’re talking about is fiscally impossible, financially impossible?”
To help offset the deficit, the government has to sell Treasury bonds, and with investors around the world becoming increasingly cognizant of the rapidly rising U.S. debt, demand for Treasuries is waning, which means that the rate of return will need to rise to stoke more demand. Read More
Gold’s medium-term uptrend remains firmly in place - OANDA’s Kelvin Wong
The gold market continues to see solid selling pressure after hitting fresh all-time highs at the start of the week. However, one market analyst notes that gold has a fairly long way to fall before its uptrend, supported by geopolitical uncertainty, is threatened.
Kelvin Wong, Senior Market Analyst at OANDA, said the $2,590-an-ounce level is acting as key medium-term pivotal support for the yellow metal.
“Failure to hold at US$2,590 negates the bullish tone for a multi-week correction sequence to unfold within its major uptrend phase to expose the next medium-term supports at US$2,484 and US$2,360,” he said in a note published Tuesday.
However, Wong is not expecting gold to see a major correction anytime soon, as the market has managed to attract significant upside momentum. Read More
Traders favor gold over Bitcoin as economic concerns mount – Mike McGlone
As global economic conditions worsen and concerns about the U.S. federal debt mount, traders are increasingly shunning Bitcoin (BTC) as a store of value and hedge against inflation in favor of gold, according to Mike McGlone, Senior Commodity Strategist at Bloomberg Intelligence.
“Bitcoin lagging gold despite the record-setting S&P 500 may augur headwinds for risk assets,” McGlone said in a report released Wednesday. “At 24 ounces of the metal equal to the crypto on Oct. 22, the Bitcoin/gold ratio is below a high of 34 in March and a 2021 peak of 37, with a big difference – the S&P 500 remains relatively elevated.” Read More
Markets tumble as rising bond yields and election uncertainty shake investor confidence
Financial markets experienced a broad sell-off on Wednesday as doubt about future rate cuts crept into the minds of investors, who opted to reduce their exposure to the markets ahead of the expected volatility leading up to the U.S. elections in November.
Rising bond yields and a spike in the DXY also contributed to the weakness, which took a toll on risk assets as investors migrated to the safety of guaranteed income.
“On the macroeconomic front, the 10-year Treasury yield climbed to 4.25%, a peak last seen in July, propelled by strong economic indicators and concerns over the national deficit,” said analysts at Secure Digital Markets. “Concurrently, the US Dollar Index escalated to a year-high, exerting further pressure on risk assets, including cryptocurrencies.”
“The political landscape is also influencing market sentiments,” they added. “Donald Trump’s recent electoral success is viewed positively by traders, given his supportive stance on making the U.S. a leading player in the crypto arena. Conversely, Kamala Harris has taken a more cautious approach, focusing on consumer protection regulations without committing to the same level of industry promotion.” Read More
Gold and silver acting as protection against possible ‘Red Sweep’ in U.S. election – Saxo’s Hansen
Gold and silver have been rallying in the face of headwinds from rising yields and a stronger dollar, and the precious metals are being used as a hedge against a potential 'Red Sweep' in the upcoming U.S. elections, according to Ole Hansen, Head of Commodity Strategy at Saxo Bank.
In a new analysis published Tuesday, Hansen noted that gold, and more recently silver, are seeing significant breakouts, and the main drivers appear to be geopolitical.
“Over the past week, gold has surged to a new record near USD 2,740, marking a year-on-year increase of nearly 40%,” he wrote, while silver followed suit on Friday with a significant breakout to close above resistance at $32.50, marking a 50% year-on-year gain.
Hansen said that while the recent rally has exceeded expectations, several factors continue to support their upward trend.
“Key drivers of this bullish phase include concerns over fiscal instability, safe-haven demand, geopolitical tensions, de-dollarization driving strong demand from central banks, and uncertainties surrounding the US presidential election,” he said. “Additionally, rate cuts—by the Fed and other central banks—are reducing the cost of holding non-interest-bearing assets like gold and silver. This environment is already spurring renewed interest in gold-backed ETFs, particularly from Western asset managers who had been net sellers up until May 2024.” Read More
Disclaimer: These articles are provided for informational purposes only. They are not offered or intended to be used as legal, tax, investment, financial, or any other advice.
Featured Image - Source: Unsplash
