Peter Hug's recent video suggests if gold does not rally on a dovish monetary statement, the market will go lower. " Fed keeps " considerable time pledge of lower interest rates " after QE ends. Sounds dovish to me. Fed Funds rate at end of 2015 1.375 % I was watching, and gold dumped !
Bearish And Bullish Factors For Gold – Denver Gold Keynote
By Alex Létourneau of Kitco News
Tuesday September 16, 2014 4:01 PM
Denver (Kitco News) - Although the U.S. dollar is “fundamentally overvalued” and in a long-term downtrend, one prominent economist is expecting gold prices to average $1,335 an ounce in 2015.
Speaking at the 25th Denver Gold Forum, keynote speaker Dr. Martin Murenbeeld, chief economist with Canadian firm, Dundee Capital Markets, outlined his bullish and bearish factors for the gold market in 2014-2015.
Murenbeeld started his presentation by looking at what went wrong in 2013, highlighting an ‘orgy of ETF sales – 881 metric tons – and investors going to equities.' He did note that Chinese gold net imports from Honk Kong set records, which was positive.
Dr. Martin Murenbeeld, chief economist at Dundee Capital Markets
He explained that in 2012, net imports in gold in China totaled 557 tons, by 2013 imports rose to 1158 tons.
In his presentation, Murenbeeld highlighted five key bearish points causing headwinds for gold: the Federal Reserve must inevitably tighten policy, the U.S. dollar will remain firm in 2014-2015, the world economy is sluggish, equity markets will continue to draw investment interest away from gold -- investors still have gold to sell -- and “technicals” remain bearish.
Focusing on the Fed and the end of QE, Murenbeeld said that the Fed balance sheet must inevitably decline and real rates will rise, but he questioned if higher rates will be seen before 2016. He said U.S. real rates rose in 2013, during the ‘taper tantrum’ and gold may have fully discounted rising yields, discounting further Fed actions.
Touching on the U.S. dollar, he said the currency was actually in a long-term downtrend; however, other currencies have been devalued against the dollar.
Murenbeeld also highlighted several bullish points that could help gold prices in 2014-2015, among them: ETF “supplies” that are down dramatically in 2014-2015; Asian physical demand will continue to expand; central banks will continue to buy gold and the global debt crisis will require ongoing monetary reflation.
He also noted global imbalances will remain unresolved until the dollar declines significantly, the commodity cycle will run many more years, geopolitical crises will multiply and the gold price is not ‘expensive’ by normal measures.
On the supply front, Murenbeeld doesn’t see supply reaching the highs of 2013, and he also expects a lower supply from jewelers and investors.
Looking on the demand side, he said the strengthening middle class in China and India are positive trends for the market, despite consumer demand being down from both countries.
He also expects central banks to continue buying gold as other countries will be looking to make a move to become viable reserve currencies.
Global debt is Murenbeeld's big factor for gold. He said there are more entitlements from U.S. Government and "super-aged economies - Japan, Germany and Italy, today. U.S. real growth, as well as in many economies, are in decline.
"To deal with what's coming at us we need to change a lot of stuff," he said. "And it looks like it's going to reflation, and that worries me."
Sentiment: Strong Buy
Central Bank Bullying: Investor Implications
Tuesday September 16, 2014 16:37
“Bullying” by the Fed, ECB, Bank of England and Bank of Japan has been in place for up to six years, forcing not-so-mighty central banks, savers and investors to deal with the consequences. Understanding the dynamics may help investors to navigate what’s ahead.
First, let’s get one thing straight: it matters little what you; we; or anyone in the blogosphere thinks policy makers should do. We are bystanders that have to deal with the consequences of their actions. The cheapest action undertaken by policy makers is to coerce the markets with verbiage. Their words matter, as they control the printing presses. Having said this, if the words are not followed by action, at some point, the markets may call their bluff.
Not all policy makers are created equal. Some grab the headlines simply because their leaders have access to a microphone, such as Christine Lagarde of the IMF. But the IMF only sets policies for countries that are receiving funds from the IMF aid program. For all practical matters, we would like to encourage anyone to tune out when Madame Lagarde tells the Fed or the ECB what to do. Similarly, the OECD just doled out some advice for the ECB, but – frankly – their input is rather irrelevant. Just as irrelevant as yours or mine would be.
Let’s move a step up from the supra-national organizations to small countries. Now we are firmly in bullying victim territory. When large central banks unleash their printing presses, what are smaller countries to do? We have all been told never to blame the victim, but countries have a choice:
Take Switzerland. Think of a beautiful house in a bad neighborhood where everyone dumps their garbage in the back yard. To blend in, folks living in the beautiful house also dump their garbage in their own back yard. The beautiful house is Switzerland. The Swiss National Bank has been printing money to prevent the Swiss franc from rising, buying up euro and US dollar denominated securities, amongst others.
At the other extreme, take New Zealand. The brave island nation has raised interest rates, resulting in a significant currency appreciation, especially versus its bigger neighbor, Australia. For now, New Zealand is expected to take a breather in its rate hiking cycle.
Australia itself has kept rates low (at 2.5% much higher than many other countries), but is widely expected to start raising rates, likely in Q1 next year. To counter investors flocking to the Australian dollar, the Reserve Bank of Australia recently said, “the exchange rate … remains above most estimates of its fundamental value”
And then there are the big boys – and girls, the bullies. When the Fed sneezes, the rest of the world catches a cold. When the ECB or BOJ act, it sends ripple effects around the world. We are told extra-ordinary measures are temporary. Is seven years (since 2008) temporary? Pensioners have been deprived of income. Easy money has pushed up global real estate prices. Buying a home has become unaffordable to ever more people, even as rates hover at or near historic lows.
One could argue that we, as investors, are also “victims.” But just as any country has a choice on how to react to the bullying of central banks, so does any investor. We can’t print our own money, but we can choose where to place our money. Browsing through stories in recent weeks, one can read that the verdict is out: the bullies have been right. After all, stocks have gone up - a bull market creates many smart people.
Things must be great, what could possibly go wrong? Well, Bloomberg reported on Monday that 47 percent of stocks in the Nasdaq Composite Index are down at least 20% from their peak in the last 12 months. No, not all is well. We have argued for a while that the biggest threat we may be facing is that the policies we have in place are actually working, namely that we are getting economic growth. That’s because throughout the world, we have mostly kicked the proverbial can down the road. Should we get economic growth, the cost of borrowing is likely to move higher, making it ever more apparent that we cannot sustain our deficits. Not in the U.S; not in Japan; and not in the Eurozone. But fear not, the bullies of the world may keep rates low. It’s just that something has to give – we think it will be the currency, with the dollar and yen particularly vulnerable.
In our assessment, odds are high that the bullying will continue. That is, central banks won’t allow asset prices to be reflected by fundamentals, but ‘extraordinary’ measures of some form will persist. For countries being bullied, this means they better be in it for the long haul.
For investors, they have to figure out how to navigate these waters. Many have simply gone along for the ride. And why not, if things go wrong, we can simply ask for another bailout, right?
We propose investors to consider what might be a better alternative: how about contemplating what might be a prudent policy for policy makers to pursue, then putting one’s money on the long-term winner? Of course this requires answering the question: what does it mean for a country to win? You see, with both consumers and government heavily in debt, the U.S. might call itself a “winner” if it can devalue the value of this debt; the ones holding the bag are, after all, foreigners. Is a country a winner that provides the best social services? Is a country a winner that allows market forces to play out? Or is a country a winner that minimizes inflation or maximizes employment or GDP?
We believe in the old adage that the best short-term policy may be a good long-term policy. That’s true if for no other reason that businesses are more likely to invest if they know what policies will be in place in the future. As such, we encourage anyone to look at which countries have sustainable policies. Having said that, any such assessment has to be put in the context of valuation because the best values are sometimes found with countries that are about to turn the corner, meaning the market may re-price better times ahead.
Putting money with a country pursuing “good” policy rather than one pursuing “bad” policy may sound well, but will an investor benefit? And if so, what does it mean to put money into a country? Does one buy the currency, stocks, or bonds?
Since we put this in the context of central bank bullying, let’s consider a “good” policy to be sound monetary policy. Sound monetary policy, namely one that fosters price stability, may bode well for a currency. In the context of other central banks trying to debase their currencies, it may lead the currency of a country pursuing sound monetary policy to appreciate. Those fighting the hardest against currency appreciation may win the currency war, but impose losses on those buying the currency.
The call for currency debasement is usually associated with the fear that a strong currency suffocates a domestic economy. As such, at first blush, equity markets in such a country might be at risk. But small countries can have rather odd mixes of domestic versus international revenue for large players. Take New Zealand for example, whose fate is mostly dependent on soft commodities (notably milk powder exports to China); or Switzerland that houses headquarters of various multinational companies, although much of the revenue is from abroad. Many of these countries also have sophisticated currency-hedging operations in place. Importantly, we believe the countries that embrace their strong currencies and adjust accordingly will be better equipped as the bullying of large central banks may continue.
The good news about the recent run-up in the dollar is that it may provide an opportunity for investors to diversify outside of the dollar. Notably, just as the dollar has appreciated with rising equity prices of late, the dollar may not be the safe haven should equity prices fall back down to earth. Given that a downturn in equity prices in the U.S. may drag down equity prices worldwide, investors might want to consider staying on the cash side of things, outside of the dollar, thereby embracing currency risk as a potential opportunity.
President and Chief Investment Officer, Merk Investments,
Sentiment: Strong Buy
China may join other emerging countries in boosting gold reserves as the precious metal makes up a smaller share of its foreign-exchange holdings compared with developed economies, said a London-based researcher.
The country hasn’t announced any changes to state gold reserves since authorities in 2009 said holdings totaled 1,054.1 metric tons. While China holds the world’s biggest foreign-exchange reserves, bullion accounts for 1.1 percent of the total, compared with about 70 percent for the U.S. and Germany, the biggest gold holders, World Gold Council data show.
“It is clear that western central banks over time will be reducing their reserves and China and other Asian countries will be increasing,” David Marsh, managing director at the Official Monetary and Financial Institutions Forum, said in a Sept. 11 interview in Beijing. “Gold will become more traded amongst central banks in the next 30 years because there are colossal imbalances in world gold holdings as a percentage of overall asset reserves.”
Central banks, net buyers of gold for 14 straight quarters, helped limit bullion’s losses last year that were the most since 1981 and may increase purchases to as much as 500 tons this year after adding 409 tons last year, the London-based council said Aug. 14. The precious metal rose 3 percent this year as geopolitical tensions boosted demand for a haven.
Bullion for immediate delivery climbed 0.3 percent to $1,237.04 by 10:44 a.m. in Beijing, according to Bloomberg generic pricing. The metal fell 28 percent last year, the biggest annual decline in more than three decades, and is down 36 percent from a record $1,921.17 reached on Sept. 6, 2011.
Russia is among nations that added gold to reserves this year, boosting holdings to the highest in at least two decades and surpassing China’s hoard to become the fifth-largest by country, data from the council show.
“I don’t know if China has been boosting their official gold reserves,” said Marsh, who co-founded the group that tracks economic and monetary policies. “But I’d rather think over the past six or seven years the Chinese authorities probably have been adding to their holdings in different ways.”
Foreign-exchange reserves of China, the second-biggest economy, have nearly doubled to $3.99 trillion since April 2009 when the nation last announced changes to bullion holdings, according to State Administration of Foreign Exchange data. Last year the country, also the biggest bullion producer, overtook India as the top gold user after price declines spurred buying.
The U.S. holds 8,133.5 tons of gold in reserves, while Germany keeps 3,384.2 tons and Italy has 2,451.8 tons, World Gold Council data show. Russia keeps 1,105.3 tons, or 9.8 percent of its total holdings, according to the data.
Sentiment: Strong Buy
The Federal Reserve will have to double its borrowing through overnight reverse repurchase agreements in order to raise its benchmark interest rate from near zero, according to economists surveyed by Bloomberg.
Some 61 percent of 43 economists in the survey said the Fed would have to borrow more than $250 billion per day on average through its overnight reverse repo facility to sustain a floor under the federal funds rate at liftoff, more than double the $120.3 billion daily average logged in 2014 as the central bank has tested the facility. The survey was conducted Sept. 11-15.
The Fed has been testing overnight reverse repos with a limited set of counterparties, mostly money funds, as a tool to set a floor under short-term interest rates when it begins guiding those rates higher, an event Fed officials forecast to occur in 2015, according to projections they issued in June. They will publish new forecasts tomorrow after a meeting of the policy making Federal Open Market Committee that began today.
So far, tests show the tool has been effective: a key measure of repo market rates calculated by the Depository Trust and Clearing Corporation hasn’t traded below the Fed’s overnight reverse repo rate since Feb. 26, when the New York Fed increased it to 0.05 percent.
In an overnight reverse repo, the Fed borrows cash from counterparties using securities as collateral. The next day, it returns the cash plus interest to the lender and gets the securities back.
The Fed’s need for a tool to influence repo rates directly arose after almost six years of bond buying to stimulate economic growth flooded the banking system with $2.68 trillion of excess reserves. That means banks no longer need to borrow reserves in the once-vibrant fed funds market, so the fed funds rate no longer represents the true cost of overnight credit.
In order to raise bank borrowing costs and ensure that the fed funds rate doesn’t trade below the FOMC’s target range when it begins tightening policy, the Fed will have to absorb cash from money funds that would otherwise be lent to banks through repos.
“Once you start seeing credit picking up more meaningfully and the Fed starts exerting the effort to tighten policy, then I would think that the level of liquidity absorption would rise,” said Millan Mulraine, deputy head of U.S. research and strategy at TD Securities USA LLC in New York. “For the Fed to be able to engineer policy tightening, it would probably have to absorb a significant portion” of the excess reserves created by the central bank’s bond purchases.
Members of the FOMC “generally agreed” that the overnight reverse repo facility “should be only as large as needed for effective monetary policy implementation and should be phased out when it is no longer needed for that purpose,” according to the minutes of their July meeting.
“Many” also said that “minimal or no reliance” on reverse repos “might result in insufficient control of money market rates at liftoff, which could cause confusion about the likely path of monetary policy or raise questions about the Committee’s ability to implement policy effectively,” the minutes said.
Officials plan to use the rate of interest the Fed pays on excess reserves deposited at the central bank as the “primary tool used to move the federal funds rate into its target range” while “temporary use” of the overnight reverse repo facility will be employed to “help set a firmer floor,” according to the July FOMC meeting minutes.
There is still disagreement among FOMC members over how much borrowing the Fed will have to do through reverse repos in order to make sure the fed funds rate moves up when the central bank wants to start tightening credit conditions.
St. Louis Fed President James Bullard said “possibly several hundred billion” dollars of borrowing through the facility “would be enough” to put a floor under rates, while Philadelphia Fed President Charles Plosser said the Fed “may not need the reverse repo facility at all” in separate Bloomberg Radio interviews in August.
Sentiment: Strong Buy
Beano please donate your head to science immediately so they can ponder how someone could live with out any rational thought
Sentiment: Strong Buy
Speaking as a keynote speaker at the 25th Denver Gold Forum, Doug Pollitt, of Pollitt & Co. Inc, spoke of how the gold mining industry blew its decade-long bull run.
Doug Pollitt of Pollitt & Co
Pollitt focused on how mining companies at $1,900 gold prices misplayed the market.
"We did squander an epic opportunity," he said. "We called the market, and then we blew it.
Pollitt said the industry was correct in calling gold's ten-year rise, but gold share prices did not follow.
"If a junior dies in the forest, does it lose money? Yes, it does," he said.
"Cost push destroyed our margins," Pollitt said. "But that's no excuse as base metals and oil weren't affected."
He also noted the excuse that ETFs stole investment dollars, but added that he believes gold equities had their opportunity to get those dollars.
Finally, the bear market of 1999-2001 may have also done irreparable damage as prices were low and funding was lacking.
"At current prices, there are not enough opportunities for gold investment," he said. "When this small asset class, which is an asset class unto itself, sees capital, the money has nowhere good to go. The opportunity is just not there."
Ultimately, Pollitt said that in order to not blow it again funds and brokers need to resist free capital.
He said taking cheap money now will only hurt the sector down the line.
"We think it would go a long way to be honest with investors," he said. "We need higher gold prices to sustain this industry. It's not sustainable at these prices"
Pollitt concluded that "it will remain a challenge to not repeat the mistakes in the past. Gold mining will remain a tough business."
By Alex Létourneau of Kitco News
Sentiment: Strong Buy
After reaching a collective bottom in December, last week’s negative price movement has thrown gold mining stocks back into uncertainty and speculation of future weakness is growing.
At different periods during the month of December, the GDX, GDXJ, HUI and XAU all reached their respective bottoms and after a strong start to the year, the mining sector is back in the red. Its gains were essentially wiped out over a three-day period, during gold’s significant decline last week.
“As a result of the last week’s actions, we’ve taken out the year-over-year positive returns of the gold mining stocks, so, that’s really amazing,” said Don Coxe, chairman of Coxe Advisors LLC, in a telephone interview with Kitco News. “Year-over-year gold is now down but it was up as of last week.
From Left to right: Paul Burton, Don Coxe, Brent Cook, Adrian Day
“Now you’re in a position where it’s better to own government bonds than gold stocks – that won’t last,” he said. “What is amazing to me is that this occurs against the backdrop of the worst geopolitical environment in 25 years, which should’ve been extremely good for gold.”
Speaking with Kitco News at the 25th Denver Gold Forum, Adrian Day, chairman and chief executive officer of Adrian Day Asset Management somewhat agrees.
“I think investors think, rightly or wrongly – that can be argued – that gold prices should be doing better,” he said. “We had a very good run at the beginning of the year, then it fell back, then we had another run and it fell back and I think investors are frankly very skittish.
“They’re afraid of not just losing all of their gains, but they’re afraid of another 20%, 30% or 40% decline,” he added. “When you have a decline like gold had last week, investors sell the stocks without regard to value or quality, they’re just afraid of being in it when it drops.”
Despite the recent shortcomings in gold prices, Paul Burton, managing director at Piran Mining Research, and Brent Cook, editor of the Exploration Insights newsletter, do see some value in mining stocks.
“Companies that aren’t producing are still confident that still want and can bring projects on stream, so they certainly see that there’s a future there,” Burton told Kitco News in Denver. “They’re looking to get cash flow as soon as possible, a number of them have a bigger project but are reigning in starting very small. The phrase starter-pit came up a number of times.
“Selectively there is value in the junior space,” Cook said in Denver. “The issue is you have to value these things by how much money a deposit can make and will make, and then what value it is to a larger company in terms of acquisition.
“The bottom line is it’s really hard to find high-quality deposits, they’re just very rare,” he added. “That’s the reality of it.”
The U.S dollar has been the belle of the ball recently, but analysts aren’t convinced that recent the recent dollar rally is sustainable long-term, but the short-term is a little dicey.
“In the next month or two, gold is very vulnerable to a decline,” Day said. He added that scenario could drag gold stocks, further.
“On the other hand, I do see some strong fundamentals in gold,” he said. “Gold stocks, as a group, are very inexpensive on a historical basis and any valuation metric on a historic basis.”
Burton, who said he’s not hugely bullish on gold, doesn’t see the U.S. dollar keeping up its big rally long-term.
“I think this U.S. dollar strength seems to be the key thing at moment, I just can’t see that being sustainable, he said. “I still think there’s a lot of poor companies out there that are still in the mix and this bottoming could be a good thing for weeding out the poor companies.”
Cook echoed those remarks regarding junior companies scraping along.
“They’ve been remarkably resilient, I’ve got to say,” he said. “I expected a lot of them to go but they’ve been doing these small financings with friends and family, paying people in stock rather than money.
“I think it’s going to happen, it just hasn’t happened as quick as we might’ve expected, he said. “Since December we’ve had two rallies, so they were able to raise money during those rallies, and if we get another one next year, they’ll survive another six months.”
Burton also noted that funds have not been as eager to jump into the fold.
“One of the reasons that company share prices have not really moved as much is that a number of the funds were fully invested a few years ago and they’ve seen huge losses,” he said. “They’re sticking with their book, there’s no new money coming in.
“Until new money comes into the fund, they’re not going to sell their stocks because they’re underwater, so there’s no new money available for buying new stock,” he added. “I think that’s one of the bottlenecks of the industry.
Day added caution when looking at the gold industry and gold mining stocks.
“Trying to time the gold market, trying to be too clever, is not always the best approach,” he said.
Coxe added his view of a disappointing market.
“The definition of really disappointing market is one that gets the kind of news it should have to go up, and it goes down,” he said. “We went in a matter of a week from $1,320 gold up to $1,390, then agave it up, and since then, every rally has been a failing rally.
“There’s no doubt about it that what we’re seeing now is liquidation on an amazing scale,” he added.
By Alex Létourneau of Kitco News
Sentiment: Strong Buy
Also, European stress tests for banks into Oct. Wed 2pm FOMC interest rate results may run GSS after great mine news today.
Sentiment: Strong Buy
FOMC Wed, Isis, Ireland, Russian sanctions blocking OG companies_ Nervous week for investors_Whole market's been down_Buying opportunity for a Double October if not sooner_You want excitement & danger, try NEWL or NIHD to day trade_GSS is slow & steady until it pops.
Sentiment: Strong Buy
Very, very positive news. However, it just shows how hated the sector is and how little credibility management has with the street. If GSS was an internet company, its stock would have doubled on the news. Instead, the market greets it with a yawn.
Unlike you who has no interest in which way this position goes. ;-O Get a life troll. You have no credibility especially if you are posting on CHOWPOW's thread. You idiots must be getting desperate to scare investors into selling. Not going to happen.
Sentiment: Strong Buy
Typical HORSE-DUNG coming from the Fidelity scamsters, a grand collection of weasels who lie to their own dysfunctional families and imaginary friends, so you can imagine the FALSE NONSENSE they purvey to mere strangers.
Reason: these WORTHLESS golds and silvers are in NO position to "merge," they are all STRUGGLING merely to survive and meet this month's payroll-----and MOST will go under by the time 2015 arrives.
Second, it is impossible for gold/silver bullion to rise to any degree, and the Fidelity SCAMSTERS know that fact, given that the smarter gold/silver shorts can print/digitize INFINITE amounts of paper/digital gold to SHORT the USELESS bullion into the toilet where it belongs. The bogus COMEX "regulators" have allowed this ongoing paper/digital gold/silver SCAM to perpetuate for decades now.....and even worse, the smarter shorts can NAKED short the rotten gold/silver bullion without fear, since COMEX allows INDEFINITE DELAY of gold/silver delivery.....if a long counterparty demands physical gold today, the COMEX will intervene and allow smarter shorts to postpone delivery for as long as we choose. ROFLMAO
Case closed , girls, the gold/silver bullion is worth ONE BIG FAT ZERO today ---and don't let anybody tell you otherwise.
Thankyou to whoever busted the troll pushing ENZR and having yahoo delete him from this board. To our resident complainer - in - chief, that is the way you handle real pumpers and dumpers. And you can put them on ignore if you do not like what they are posting but they aren't really pumping, So please put me on ignore if you do not like my posts
Sentiment: Strong Buy