Friday, 19 July 2019 08:56

Falling Yields Driving Gold Higher

(New York)

Falling yields are having a very positive effect on gold. The metal is already enjoying its best first half in years, and the fundamentals for gold look solid. Potential weakness in equities and worries about growth are both stoking gold demand, while lower yields and a weaker Dollar are also supportive. Gold is now being used as a hedge against equities in a way that bonds have traditionally been employed. “The bond market is not acting as a reliable hedge against equity weakness in the way that everyone expected it to and it hasn’t operated that way since 2008. Gold is providing better protection against potential equity weakness right now than bonds are”, says the head of gold strategy at State Street Global Advisors.


FINSUM: Gold seems like it has a nice path to keep its performance going. That said, we are worried rate cuts might spark a more risk-on equity market, which would pull money out of the metal.

Published in Comm: Precious
Monday, 15 July 2019 10:18

Why Gold is Headed a Lot Higher

(New York)

Gold is having a good year, up almost 10% after a very long bear market. But where might it be headed now that the Fed is likely going to start a cutting cycle? The answer is probably significantly higher. The macro backdrop is perfect for gold—geopolitical tensions are high, there are worries over the domestic and global economy, the Fed is going to be cutting (lower rates are better for zero-yielding gold), and the Dollar is likely to weaken, making gold cheaper for overseas buyers.


FINSUM: We agree all the ingredients are there, but if the Fed starts cutting, it may alleviate a lot of worries about the economy and make risk assets look more favorable.

Published in Comm: Precious
Monday, 08 July 2019 09:21

Gold Heads for Biggest Fall in 2019

(New York)

Gold just took the jobs report on the chin. As our readers will know, the US jobs report from Friday was nothing short of stellar, with the job creation numbers blowing away all expectations, and in doing so, lowering the odds and potential pace of Fed rate cuts. That led to a big sell-off in gold on Friday that followed an even larger one Monday. Gold lost almost 4% over just two days last week.


FINSUM: The jobs report simultaneously sapped gold of the fear boost it gets from worries about the economy, as well as the potential benefit of lower rates.

Published in Comm: Precious
Friday, 28 June 2019 09:41

Why the Gold Rally Won’t Reverse

(New York)

Gold has been doing well recently. Between global trade turmoil, a falling economy, and decreasing yields, the metal has thrived. Here are three reasons the gains won’t reverse. The first is that the stock market continues to look risky, meaning gold’s allure as a safe haven seems assured. Secondly, yields on bonds have a definitively downward direction, which makes gold more attractive. Finally, inflation is unlikely to stay low forever. When it starts to rise, it would give investors another reason to bet on gold instead of bonds.


FINSUM: We don’t really think inflation will be much of a factor for gold in the immediate term, but the first two points are material.

Published in Comm: Precious
Friday, 21 June 2019 10:20

How to Play Gold with ETFs

(New York)

Gold is doing well, and it is no surprise. Markets are worried about an economic downturn, and yields are falling, both of which are bullish for gold. The metal is up almost 7% in July alone. But what is the best way to play the commodity using ETFs? Owning gold directly is costly, so passive structures are great. Consider the SPDR Gold Shares ETF (0.40% fee), the iShares Gold Trust (0.25%), and the GraniteShares Gold Trust.


FINSUM: Passive is definitely the best way to play gold. We like the outlook for the metal as rates and yields are definitely headed lower, which helps gold in multiple ways.

Published in Comm: Precious
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