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Gold & Precious Metals

We Have A Bifurcated Metals Market

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Posted by Avi Gilburt - ElliottwaveTrader.net

on Friday, 03 November 2017 06:49

First published on Sunday Oct 29 for members of ElliottWaveTrader.net

There is no doubt that the action we have experienced in the metals complex in 2017 has been exceptionally frustrating, especially as the market presented us with several break out set ups that did not follow through. And, when a larger bullish structure presents you with break out set ups, probabilities suggest you have to favor those set ups, as I did in 2017.

But, the market has simply refused to follow through on each set up, and has caused significant frustration to anyone who has been looking for those break out signals this past year, and especially me. And, even though each bottoming set up we noted in December of 2016, and in March, May and July of 2017 provided a rally that we expected, each rally invalidated the bigger break out set up each time through the year.

In fact, I will probably classify 2017 as one of the most challenging years I have dealt with in the metals complex since I have been providing my analysis to the public. When you consider that I began in 2011, and caught the top of the gold market within $6 of the high struck, and then caught the bottom of the market at the end of 2015, I really find 2017 to have been much more difficult than either of those years, or any of those in between. And, this is despite the fact that we have not even broken a single bottoming point we noted through the year, and still remain over even the July lows.

But, as I have been noting in my updates since we broke upper support in the market over a month ago and invalidated a direct break out, the metals market is in a region of uncertainty. In fact, I have been noting the potential for the GDX to drop down to the 17 region, as ABX was signaling a potential drop down to the 11 region.

As we saw this past week, ABX seems to have begun its run to those lower regions. Yet, both gold and silver have still held their respective support regions. So, for now, it seems the market is a bit bifurcated. While I still want to see how the next rally in the complex takes hold, my expectation remains that it will only be a corrective rally. And, even the ABX should begin a corrective rally within the next week or so.



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Gold & Precious Metals

The world is running out of gold mines—Here’s how investors can play it

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Posted by Frank Holmes - US Global Investors

on Thursday, 02 November 2017 06:14

images 1My good friend Pierre Lassonde, cofounder and chairman of Franco-Nevada, doesn’t know how we’ll replace the massive gold deposits of the past 130 years or so. Speaking with the German financial newspaper Finanz und Wirtschaft this month, Pierre says we’re seeing a significant slowdown in the number of large deposits being discovered. Legendary goldfields such as South Africa’s Witwatersrand Basin, Nevada’s Carlin Trend and Australia’s Super Pit—all nearing the end of their lifecycles—could very well be a thing of the past.

Over the medium and long-term, this could lead to a supply-demand imbalance and ultimately put strong upward pressure on the price of gold.

According to Pierre: If you look back to the 70s, 80s and 90s, in every one of those decades, the industry found at least one 50+ million ounce gold deposit, at least ten 30+ million ounce deposits and countless five to 10 million ounce deposits. But if you look at the last 15 years, we found no 50 million ounce deposit, no 30 million ounce deposit and only very few 15 million ounce deposits. 

So few new large mines are being discovered today, Pierre says, mostly because companies have had to slash exploration budgets in response to lower gold prices. Earlier this year, S&P Global Market Intelligence reported that total exploration budgets for companies involved in mining nonferrous metals fell for the fourth straight year in 2016. Budgets dropped to $6.9 billion, the lowest point in 11 years. Although we’ve seen an increase in spending so far this year, it still dramatically trails the 2012 heyday.

And because it takes seven years on average for a new mine to begin producing—thanks to feasibility studies, project approvals and other impediments—output could recede even more rapidly in the years to come.

“It doesn’t really matter what the gold price will do in the next few years,” Pierre says. “Production is coming off, and that means the upward pressure on the gold price could be very intense.”

Have we reached peak gold?



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Gold & Precious Metals

The Next Chair of the Fed and Gold

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Posted by Arkadiusz Sieron, Ph.D.

on Wednesday, 01 November 2017 06:28

Janet Yellen’s term as Federal Reserve chair ends on February 3rd. President Trump is expected to announce the new Federal Reserve Chair very soon, perhaps even this week. He said that we’ll get to know his choice before a tour in Asia in early November. Since that has not taken place so far, we would like to prepare you for the outcomes of Trump’s possible decisions. Moreover, we will analyze which candidate would be the best for the gold market.

The list of pretenders is rather short:

  1. Gary Cohn;
  2. Kevin Warsh;
  3. Janet Yellen;
  4. John Taylor;
  5. Jerome Powell

We will start with Gary Cohn, as his odds are the smallest, just about 2 percent, according to PredictIt. This is because Cohn, who is the president’s chief economic adviser, has neither formal economics background nor experience in central banking. He also worked years for Goldman Sachs, making a decent fortune, which may be not welcomed in Senate, and especially not by the Democrats. Last but not least, he criticized Trump’s response to the protests in Charlottesville. It’s difficult to categorize him as hawk or dove, as very little is known about his view on monetary policy. But as he is pragmatist and stands not very far from Yellen’s stance, his choice – which is very unlikely – would not significantly affect the gold market (but there might be some volatility at the beginning until his views would become clear for the investors – and because it would surprise markets).

Kevin Warsh has greater chances – PredictIt assigns him a 11 percent probability of becoming the next Fed chair. He was an economic adviser to President George W. Bush from 2002 to 2006 and a Fed governor from 2006 to 2011, so his experience is better suited than Cohn’s. Warsh’s impact on the gold market could be significant as he is considered to be among the most hawkish of the contenders. He opposed the second round of quantitative easing, so he might try to accelerate the quantitative tightening a bit. He will also support the deregulation of the financial industry. Hence, his choice would increase the interest rates, a bearish factor for the gold prices. Indeed, when he led the polls two weeks ago, the short-term interest rates moved higher.

Janet Yellen has about 19 percent odds to be reappointed as the Fed chair. It would be in line with tradition, and we would not be surprised if Trump eventually nominates her after all this fuss. He said that he liked low interest rates, so dovish Yellen (who is actually not so dovish, given her focus on tightening) could be fine. However, Yellen’s Democratic views, opposition to less discretionary monetary policy and far-reaching deregulation of the financial sector might be serious obstacles to her being picked. Her choice would not shake the gold market, as it would keep the status quo. And from the long-term point of view, Yellen should be, well, neutral for the yellow metal, which could remain in the sideways trend (big price swings could still happen, but gold would not be likely to stay away from the current price levels for long). As the chart below shows, the price of gold is now very close to the level seen in February 2014, when Yellen was appointed.

Chart 1: Gold prices during Yellen’s term (London P.M. Fix, monthly average).

2017-11-01-1-mofe

As we write these words (October 21), John Taylor’s odds are the same as Yellen’s. However, he has recently gained momentum after press reports that Stanford University economist impressed Trump and his team during a meeting at the White House. Actually, the White House spokeswoman told reporters on Friday that Trump was considering nominating John Taylor for either the Chair or the Vice Chair (and Powell for the Fed’s second top job). Taylor’s nomination would be very interesting and could have a lasting impact on the gold market. This is because he is a strong supporter of a rule-based framework for interest rates policy. Have you heard about the Taylor rule? Yup, it was created by our candidate. And the key thing is that this rule suggests that rates are still far too low. Far, far too low: according to Taylor’s model, the Fed should raise its policy rate to about 3 percent (or even higher, as there are several versions of Taylor’s rule) from 1.15 percent currently, as one can see in the chart below.

Chart 2: Actual Fed funds rate (green line) and Taylor Rule prescription (red line) over the last ten years.



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Gold & Precious Metals

Gold Stock ETFs: New Kid On The Block

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Posted by Stewart Thomson - Graceland Updates

on Tuesday, 31 October 2017 06:10

Oct 31, 2017

  1. I’ve suggested that investors may need to look beyond the head and shoulders top formations that recently appeared on bullion and many precious metal stocks. 
  2. Please  click here now. Double-click to enlarge this daily gold chart. Intermediate uptrends often consist of three legs. In 2017, gold has had two legs up. 
  3. The next US jobs report is scheduled for release on Friday. Will it be the catalyst that launches a third leg higher for gold? I’m not sure, but I am sure of what’s important for gold, which is that it is generally very well supported here, both technically and fundamentally.
  4. The bottom line: Gold held in ETFs is quite steady. China’s economy has softened, but only modestly. That light softness is almost certainly related to the government’s action taken to reduce pollution.
  5. Chinese mine production has fallen as excessively polluting operations have been shut down. That’s adding support to the gold price.
  6. In India, the economic growth has slowed more noticeably than in China, and that does have an effect on gold demand. This growth slowdown has been mitigated by a rise in the rupee against the dollar, which lowers the cost of gold for Indians.
  7. Along with commercial traders on the LBMA and the COMEX (aka “the banksters”), Indian buyers are the most eager buyers when the gold price drops.
  8. On that note, please  click here now. The US Treasury wants India’s central bank to reduce its purchases of US dollars.


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Gold & Precious Metals

Gold Market Update

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Posted by Clive Maund

on Monday, 30 October 2017 06:02

The big news last week for the Precious Metals sector was that the dollar broke out of its Head-and-Shoulders bottom to start its “Swansong Rally”, a development predicted in the last update, and for weeks before that. This caused PM sector stocks to break sharply lower, and brought gold to the point of breakdown from its Head-and-Shoulders top, as we can see on its latest 6-month chart shown below. It hasn’t quite broken down yet, but is expected to follow stocks’ lead and break down soon and head lower. Target is support in the $1200 - $1215 zone which is expected to be reached as the dollar index arrives at its upside target in the 97 area. 

gold6month291017


Gold’s latest COT chart shows some improvement over the past week but still looks more bearish than bullish, with a lot of room for further improvement, such as would be occasioned by a drop to the $1200 - $1215 area, which now looks imminent after last week’s dollar breakout…



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