Displaying items by tag: metals

Thursday, 25 October 2018 13:00

Gold is Back from the Dead

(New York)

It might come as no surprise, but that does not mean it isn’t noteworthy. Alongside the big surge in volatility this month, gold has risen considerably. The precious metal has risen 3.2% this month to $1,230 per ounce, no small feat considering that stocks initially started falling because of worries about rising rates. Gold has been shunned for most of the year as stocks rose, but is now being sought out as a haven from volatility. An analyst at UBS summarized the situation this way, saying “Price action in the past couple of weeks has shown signs that gold is slowly reasserting its role as a safe haven … In the near term, a pullback in the dollar, weakness in equities and the potential for a soft patch in US data would be upside catalysts for gold”.


FINSUM: Gold rising when the Dollar is strong and rates are being hiked is quite noteworthy. It will be interesting to see how fast gold might fall if this correction in stocks reverses.

Published in Comm: Precious
Friday, 05 October 2018 10:54

Gold is Finally at a Bottom

(New York)

Gold has been in an extraordinary multi-year slump. From its peak of around $1,900 a few years ago, the shiny metal has sunk into a multi-year bear market, recently settling at around $1,200 an ounce. However, a couple of factors are coming together that may mean the bad times are over. The first is that there has been consolidation in the mining sector, but secondly, because the pending trade wars have meant that central banks have been buying more gold as a safe haven. This type of demand rose 8% since last year, and gold buying by central banks is off to its best start since 2015.


FINSUM: Unfortunately, we have to disagree with this article. Buying gold as we move into a higher-rate and stronger Dollar period contradicts all the fundamentals of the market. Furthermore, we think if gold was going to benefit from trade war fears, it would have already started.

Published in Comm: Precious
Monday, 24 September 2018 09:43

Why It’s Time for Gold to Shine

(New York)

Gold has been in the doldrums for a long time (and we mean long). The shiny metal is still down over 35% from its peak in 2011, and it has lost 8% this year. However, Barron’s is arguing that it is time for gold to shine. They argue that since gold is currently very cheap relative to other asset classes and inflation is increasing, the metal is poised to make a comeback. Gold has historically been a good hedge against inflation, which may drive its renewed appeal as inflation rises. The metal is currently trading around $1,200 per ounce.


FINSUM: The problem with this argument is that gold also tends to weaken as rates rise (because it has zero yield). So, how much will that offset any gains?

Published in Comm: Precious
Wednesday, 05 September 2018 09:42

Precious Metals Send a Major Buy Signal

(New York)

All precious metals have been in a tough bear market for several years. Rising rates and a strengthening Dollar have effectively blocked any recovery. The question then is when do they get cheap enough that it is a no-brainer buy? Perhaps right now. Gold’s ratio to silver just hit its highest point since 2008, making silver a buy. Silver has fallen 16% this year, almost double gold’s fall, making it the cheapest in a decade. Gold currently trades at over 80x silver, compared to a ratio of just above 30x in 2011.


FINSUM: The big question here is a catalyst. What would spark a rally? We are not specialists in precious metals, so we won’t comment, but we are sure it will take something significant to break a 6-year slump like this one.

Published in Comm: Precious
Friday, 24 August 2018 09:59

Emerging Markets: Deflation Threatens

(Rio de Janeiro)

The outlook for emerging markets appears to be dimming. While Turkey’s troubles are well-know, widespread weakness in EM currencies is rattling the markets. EM equities are flirting with a bear market and metals prices have dropped sharply, with the latter hurting EM economies in particular. The worries over EM stocks are now seeping into Eurozone banks, where fears for lending losses are rising. One research analyst sums it up this way, saying “The combination of stronger currencies, lower commodity prices, and potentially weaker bank credit creation is a disinflationary headwind for developed markets in the near term”.


FINSUM: There are many factors which seem to be dragging emerging market economies downward, and that may be a bad sign for the global economy as a whole.

Published in Eq: EMs
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