·         The best performing metal this week was palladium, up 5.04 percent as hedge funds flip to net bullish on the metal this past week. Despite gold facing a fifth month of losses and bullion-backed ETF holdings reaching a 10-month low, analysts and traders are bullish on the yellow metal, according to a weekly Bloomberg survey. During the Jackson Hole Economic Symposium, Federal Reserve Chair Jerome Powell indicated that investors can expect continued gradual interest rate increases. Gold prices surged following Powell’s comments and held the majority of those gains.

·         In a great example of gold’s Love Trade, a strong U.S. economy empowered consumers to spend their discretionary income on gifts for their loved ones – in particular, gold jewelry. Signet Jewelers, the parent company for Kay Jewelers, experienced a startling 20 percent increase in premarket trading after an unexpected bump in sales. Last quarter, the company reported only a 1.7 percent rise. Tiffany & Co. posted a strong second quarter as well, increasing its global sales by 12 percent. The jeweler announced plans to expand its brick-and-mortar presence in China. This move is well-timed as nationwide gold consumption in China is up 0.3 percent. Gold bar sales in China are down 16 percent, which is completely offset by the gain in jewelry.

·         The International Monetary Fund (IMF) approved adding the yuan, China’s currency, into the IMF’s foreign exchange basket. This is the first time the IMF has ever added a new currency to its foreign exchange basket. The IMF’s acceptance opens the door for potentially putting the yuan on par with the U.S. dollar, according to Reuters. Meanwhile, Shandong Gold, a state owned Chinese gold mining company, is preparing to raise $1 billion via a Hong Kong listing.

·         The worst performing metal this week was silver, down 1.92 percent as hedge funds boost their net bearish view to a 20-week high. Gold has fallen for the fifth straight month, making this the longest decline in five years.  The yellow metal has been weakened by a variety of sources. U.S. equities are at record highs, the U.S. dollar has been strengthening and President Donald Trump announced his intention to add another $200 billion in tariffs on Chinese imports. In light of these external influences, gold’s road to recovery is unlikely to be a straight one.

·         Heavy flooding in Kerala, India, resulted in over $3 billion in damages, draining away funds that would have otherwise been used during the upcoming wedding season. Kerala is India’s biggest gold-buying state. Under ordinary circumstances, families in Kerala spend 200 grams to 1 kilogram of gold for the average wedding. This is expected to drop 50 percent according to the All Kerala Gold & Silver Merchants Association president.

·         The Commodity Futures Trading Commission (CFTC) ordered UBS Group AG, a Swiss multinational investment bank and financial services company, to pay a $15 million penalty for manipulating and spoofing precious metals futures markets from January 2008 to December 2013. 

·         The NYSE Arca Gold BUGS Index rebounded from oversold levels while the relative strength index reached a low on August 16 that hasn’t been seen since July 2015. The last time sentiment toward gold was this bearish was at the end of 2015, before the market swung aggressively the other way, according to BMO analyst Colin Hamilton. “You probably won’t see the short squeeze until about $1,225,” says George Gero, a managing director for RBC Wealth Management.

·         Northern Star Resources, the Australia’s third-largest gold producer, announced its acquisition of Sumitomo Metal Mining Co.’s Pogo Mine in Alaskan for $260 million, marking its first overseas operation. This mine is expected to add as much as 260,000 ounces to the Australian producer’s yearly output. Pogo has a resource of 4.1 million ounces at 14 grams per tonne. We continue to see limited merger and acquisition activities playout within the gold sector, despite valuations in the junior space being very depressed.

·         Cardinal Resources Limited announced positive drill results earlier this week, identifying significant gold intersections at shallow depths. The company reported 27.0 grams per tonne of gold at 2 meters, 12.6 grams per tonne at 6 meters and 2.2 grams per tonne at 7 meters. Allegiant Gold Ltd. similarly reported successfully expanding the drilling area for its Eastside gold project outside of Tonopah, Nevada. One of its drill holes returned 42.7 meters of 2.49 grams per ton of gold, including 9.1 meters of 9.03 grams per tonne.

·         For those declaring that an inverted yield curve is no longer a recession predictor, the Federal Reserve Bank of San Francisco may have some bad news, reports Bloomberg. “Adjusting for the compensation investors demand to hold longer-dated bonds doesn’t invalidate the curve’s prognosis powers,” notes a new research post published on Monday. Markets have their eye on the narrowing gap between short- and longer-term rates. And as Canada’s yield curve approaches inversion for the first time in more than a decade, the nation’s central bank believes there is little cause for alarm. BlackRock Inc., however, isn’t so sure.

·         Some of the biggest buyers of short-dated corporate debt are now turning into sellers, reports Bloomberg. Companies like Apple, Microsoft and Oracle at one time bought $25 billion of debt per quarter, but are now selling in $50 billion clips. According to data tracked by Bank of America Corp., this is leaving a $300 billion-a-year hole in the market and could drive up borrowing costs.

·         During the month of June, home prices in 20 U.S. cities rose at the slowest monthly pace in nearly two years, writes Bloomberg. Data released Tuesday point to demand cooling due to affordability constraints. Other notable market news this week includes the fact that short positions against FAANG stocks have surged by more than 40 percent in the past year, to $37 billion. According to Bloomberg, this comes as investors are betting against some of the biggest drivers of the global bull market. Lastly, U.S. President Donald Trump seems to have made no real progress on one of his core promises as he heads into a midterm referendum on his presidency, reports Bloomberg – to raise the wages of America’s “forgotten man and woman.” After factoring in the impact of inflation, the typical hourly earnings of Americans are lower than they were a year ago.

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 -- Published: Tuesday, 4 September 2018 | E-Mail  | Print  | Source: GoldSeek.com

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