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SWOT Analysis: Gold Traders Are on Recession Watch
By: Frank E. Holmes, Chairman/CEO/CIO of U.S. Global Investors, Inc.,

 -- Published: Tuesday, 4 June 2019 | Print  | Disqus 



  • The best performing metal this week was gold, up 1.61 percent. Gold traders are neutral on the yellow metal this week; however, the weekly Bloomberg survey was conducted on Thursday before gold shot above $1,300 on Friday morning. Gold saw its first monthly gain in May, breaking a streak of three straight months of losses. In China, premiums on gold rose this week as investors bought the metal on safe haven demand due to rising trade tensions, reports Reuters India.
  • The Philippines is joining a list of central banks adding to their gold reserves this year. The nation’s deputy governor said this week that sales could reach almost 1 million fine troy ounces a year from the current 20,000 to 30,000 ounces due to a new law that exempts the central bank from taxes on bullion purchases from small-scale miners. Bloomberg reports that Malaysia’s prime minister said a gold-based currency for the East Asian region would help avoid manipulative trading.
  • Gold finally crossed back above the $1,300 per ounce level this morning after President Donald Trump announced tariffs on all imports from Mexico. The amped up trade tensions helped push the Index of South African gold producers up 5.7 percent to a two week high. Additionally, inflows to gold ETFs are gaining momentum so far in 2019 after declining for several years.


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  • The worst performing metal this week was platinum, down 1.44 percent, as hedge funds flip to net bearish in their positioning. After increasing last week, Turkey’s gold reserves fell this week by $272 million, according to official data from its central bank. JPMorgan analyst John Bridges downgraded several gold companies, including Eldorado Gold, Kinross and New Gold, to neutral. Bridges said an “increasingly inverted U.S. yield curve suggests the dollar could just be firming into typical recessionary strength and seasonally this is the time when gold can begin its summer time-out.”
  • Newcrest’s Cadia mine, which is Australia’s largest and most lucrative, is being forced to buy water on the open market and invest in pumping equipment due to a severe drought in the area.
  • Panama rejected a bill that underpins First Quantum Minerals’ copper mine in the country, reports Bloomberg. The nation’s panel took issue with the project’s low 2 percent royalty rate. SolGold Plc, a copper miner in Ecuador, saw its shares fall the most in six years after news broke that the nation is close to holding a referendum on mining in some parts of the country.



  • The bond market is flashing a recession signal and it could be good for gold. Win Thin, head of currency strategy at Brown Brothers Harriman, told Bloomberg that “if the U.S. goes into a recession, then the Federal Reserve cuts rates and the dollar’s yield advantage evaporates.” A weaker dollar is historically positive for gold, and the latest tariffs are another sign that the Fed could cut rates.
  • Australian gold reserves are being depleted and there are only so many ways to restock inventory: acquisition, discovery or re-optimization of current projects. St. Barbara CEO Bob Vassie said this week that the consolidation between large gold producers in North American lately could open up a plethora of unwanted assets that could spur deal making among smaller producers.  If the gold prices runs, those assets may be slower to be sold with expanding margins.  That might elevate the shunned exploration and development companies desirability as there are cheap shovel ready projects waiting for capital to move forward.
  • Eldorado Gold shares rose as much as 12 percent early this week after Greece held snap elections that saw its current prime minister defeated. Bloomberg writes that there is hope the new administration will be more business friendly and open the door for foreign investment.



  • Morgan Stanley strategists led by Mike Wilson say that the Treasury yield curve is flashing recession angst and that the trade war is just a sideshow, reports Bloomberg. The strategists wrote “get ready for more potential growth disappointments even with a trade deal.” The gold and silver ratio is also sending a worrisome signal to other risk assets. The ratio is at the highest in 26 years and approaching the record peak hit in 1991 when the U.S. was in a recession. Bloomberg’s Sungwoo Park writes that “the gauge underscores the hostile environment for risk assets.”
  • In a statement released on Tuesday, two top officers are leaving the Federal Reserve Bank of New York on June 1 – the same day and with only three days’ notice. It is concerning to see two high ranking personnel leave at the same time, taking with them 50 years of experience.
  • Modern Monetary Theory (MMT), a theory that says governments have spare capacity to borrow and spend, has gained attention on Wall Street, and enemies in Washington, and is now gaining attention in academia. A college-level textbook about the theory has sold out of its initial print run of 600,000 copies, according to publisher Macmillan.  

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 -- Published: Tuesday, 4 June 2019 | E-Mail  | Print  | Source:

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