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SWOT Analysis: Year-to-Date Gold Holds the Glory – How Long Can It Shine?

 -- Published: Monday, 7 March 2016 | Print  | Disqus 

By Frank Holmes


  • Despite all the recent focus on gold, the best performing precious metal for the week was palladium, up 14.78 percent.  Platinum should also get special mention with a gain of 7.10 percent.  The World Platinum Investment Council made a strong investment case for the platinum group metals going forward as over 2 million ounces of vaulted stocks have been liquidated over the past four years, depressing the price of the metals.  
  • Following poor Chinese manufacturing data (which contracted for a record seventh month), gold held near a two-week high this week, reports Bloomberg News. Traders are pricing in only a 10-percent chance of an interest rate increase this month as well, and 50-percend odds of it happening by year end, adding to gold’s appeal.
  • Gold headed for its biggest monthly gain in four years, reports Bloomberg, as falling equities bolstered demand for a haven asset during February. Central banks like the precious metal too, extending the longest gold-buying spree since 1965. According to Bloomberg, countries purchased almost 590 metric tons last year, accounting for 14 percent of annual global bullion demand.


  • The worst performing precious metal for the week was gold.  Silver climbed 5.48 percent. Perhaps we are seeing some of the money flows rotate down to the other precious metals as year to date, gold has had all the glory.
  • A dispute erupted this week between India’s Prime Minister Narendra Modi and thousands of the nation’s jewelers. Modi wants to impose a 1 percent excise duty on jewelry produced and sold within the country, reports Bloomberg. This caused a three-day stoppage on Wednesday by members of the All India Gems & Jewellery Federation. A similar shut down in 2012 was successful in getting the then Manmohan Singh government to drop plans for an excise duty.
  • Bad news is on a roll, reports HSBC Global Research, citing that most PMIs fell in the month of February. The group says volatility in financial markets might be affecting corporate sentiment. The most “worrying development” was the sharp fall in Markit U.S. service sector index; the Markit measure of business activity fell below 50 for the first time since 2013.


  • As seen in the chart below, gold ETF inflows surged to the highest since 2009. The last time inflows were high, the S&P 500 had fallen more than 18 percent for the year and the Federal Reserve was only three months into its first QE program, reports Bloomberg. Lawrie Williams writes that the gold price is resilient and set for an interesting year. He points out, “The markets ignored the fact that all these ETF liquidations were being eagerly soaked up by the Chinese, Indians and others yet the gold price was being marked down on the COMEX futures markets where the price is largely set.”

  • According to Taurus Wealth advisors, bullion could prove to be this year’s best performing asset class as central banks exhaust their firepower. The group says there is a high probability gold could reach $1,350 to $1,400 an ounce at year end, says Rainer Michael Preiss at Taurus. Deutsche Bank also raised its outlook on gold, citing slowing global growth and the possibility of a large yuan devaluation. Deutsche sees gold at $1,195 an ounce in 2016. This week on CNBC, a top economist for Moody’s stated that there are absolutely zero signs of recession. A Sovereign Man article mockingly writes of Moody’s statement, “When the agency that consistently fails to predict recession predicts that there will be no recession, you can pretty much guess what’s going to happen next.” The article continues by stating, “This is what virtually assures negative interest rates in America.”
  • And of particular interest to investors were the announcements of two acquisitions this week. In one case, Endeavour Mining pulled the trigger to buy True Gold Mining for a 43.4 percent premium to the prior day’s close.  In a second transaction, Lundin Mining agreed to take over Freeport McMoRan’s stake in a copper-gold project in Serbia.  Reservoir Minerals was a partner with Freeport in the project and its share price jumped 17.62 percent on the news.


  • William Dudley, president of the Federal Reserve Bank of New York, says he’s lost some confidence on his prediction that inflation will reach the U.S. central bank’s 2-percent target over time, citing recent turbulence in financial markets. “Partly, this reflects my assessment that uncertainty to the outlook has increased and that downside risks have crept up,” said Dudley.
  • In a recent report from Cornerstone Macro, the group considers a few of the unintended consequences of negative rates. One consequence Cornerstone noted is that negative rates around the world are acting as a drag on U.S. interest rates, making the Fed’s job a bit tougher. 
  • In a video interview with SchiffGold this week, John Rubino of Dollar Collapse joins the discussion to talk about the printing of money. The description of the interview reads, “The ability to essentially create money out of thin air has allowed the world’s governments to take on unprecedented debt.”  It continues by calling attention to the fact that 20 years ago economists never would have imagined a world with $7 trillion of bonds trading at negative interest rates, along with global debt at 300 percent of global GDP. However, that is the exact situation we are in today.  Even the Wall Street Journal ran a story this week on the woes of negative interest rates.  The writer found it somewhat interesting that the major insurers in Europe, who are big bond holders, never mentioned negative interest rates in their recent earnings calls.

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 -- Published: Monday, 7 March 2016 | E-Mail  | Print  | Source:

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