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GUNDLACH ON $1400 AND GAN ON $950 OR $1200 GOLD

Star money manager Jeff Gundlach  thinks gold is going to $1,400 and says the current chart pattern is indicative of a bottom. This call, however, was one Gundlach got wrong in 2015.LINK TO ARTICLE ON GUNDLACH’S MARKET FORECASTS

By contrast Bloomberg’s Top Gold Forecaster Barnabas Gan Sees Prices heading lower.  According to Gan:


“The market may have started the year with a depressing note so far, but an eventual rosier 2016 will bring gold to new lows,” said Barnabas Gan, commodity economist for Oversea-Chinese Banking Corp. Ltd. (OCBC), in the bank’s commodity outlook report Wednesday 13th January… 
According to Gan, gold prices were pressured in 2015 not only by expectations for a U.S. Federal Reserve rate hike, which resulted in a stronger dollar, but also by lackluster physical demand from key markets like China and India..The “kingpin” for lower gold prices, according to Gan, is the prospect of higher U.S. rates in 2016, which would result in a stronger U.S. dollar, and a “rosy” global economic outlook…[W]e remain firm on our expectation for the U.S. Federal Reserve to hike interest rates, at least, by three more times this year to an eventual 1.25% print at end-year,” … “Should our expectations come to pass, gold prices are expected to stage another leg down to our forecast of $950/oz this year,” 

  Gan did note that if his expectations are incorrect and economic conditions worsen, he could see gold prices turn higher and touch $1,200 an ounce on safe-haven demand

 LINK TO BLOOMBERG  ON GAN’S  $950 AND $1200 G0LD FORECASTS 

GOLDWATCHER COMMENT

Steep equity market falls on January 14th and 15th support the view that three further Fed interest rates hikes this year are unlikely now.  Further, if gold does spike down to $950,  mine production will  be uneconomic and  supply will fall.

 

 

 

 

CHINA’S ICBC STANDARD BANK GAINS FOOTHOLD IN LONDON GOLD MARKET

Reuters reported on January 8th  ” ICBC Standard Bank is buying the lease on Deutsche Bank’s London gold and silver vault, enlarging its footprint in the city’s bullion market, four industry sources close to the companies said on Friday.

“China’s ICBC, which took a controlling stake in Standard Bank’s London-based Global Markets business last year, has also applied to become a clearing member of the London gold and silver over-the-counter business.

“No one at ICBC Standard Bank was immediately available to comment and Deutsche Bank declined to comment. The Chinese and South African lender is aiming to fill the gap left by Western banks, which are retreating from commodities to cut costs and reduce regulatory burden..

LINK TO REUTERS ARTICLE

 

 

 

 

LONDON, Jan 8 ICBC Standard Bank is buying the lease on Deutsche Bank’s London gold and silver vault, enlarging its footprint in the city’s bullion market, four industry sources close to the companies said on Friday.

China’s ICBC, which took a controlling stake in Standard Bank’s London-based Global Markets business last year, has also applied to become a clearing member of the London gold and silver over-the-counter business.

No one at ICBC Standard Bank was immediately available to comment and Deutsche Bank declined to comment.

The Chinese and South African lender is aiming to fill the gap left by Western banks, which are retreating from commodities to cut costs and reduce regulatory burden.

 

LARRY SUMMERS ADVISES HEED THE FEARS OF FINANCIAL MARKETS

 Larry Summers writes in a 10th January  FT article “policy makers should heed the fears of financial markets. They understood the gravity of the 2008 financial crisis well before the Federal Reserve.”

The article continues “…Because of China’s scale, its potential volatility and the limited room for conventional monetary manoeuvres, the global risk to domestic economic performance in the US, Europe and many emerging markets is as great as at any time I can remember. Policymakers should hope for the best and plan for the worst…

“…Policymakers who dismiss market moves as reflecting mere speculation often make a serious mistake. Markets understood the gravity of the 2008 crisis well before the Federal Reserve. They grasped the unsustainability of fixed exchange rates in the UK, Mexico and Brazil while the authorities were still in denial, and saw slowdown or recession well before forecasters in countless downturns. While markets do sometimes send false alarms and should not be slavishly followed, the conventional wisdom essentially never recognises gathering storms.“The Chinese financial services sector is about as large relative to gross domestic product as in Britain…

“…The Economist reports that, looking across all major countries over the past several decades, there were 220 instances in which a year of positive growth was followed by one of contraction. Not once did International Monetary Fund forecasts anticipate the recession in the April of the growth year…

“…Over the past year, about 20 per cent of China’s growth as reported in its official statistics has come from its financial services sector, which is now about as large relative to gross domestic product as in Britain, and Chinese debt levels are extraordinarily high. This is hardly a case of healthy or sustainable growth…

“…In recent years, China’s growth has come heavily from massive infrastructure investment; China poured more cement and concrete between 2011 and 2013 than the US did in the whole of the 20th century. This, too, is unsustainable. Even if it is replaced by domestic services, China’s contribution to demand for global commodities will fall… Because of China’s scale, its potential volatility and the limited room for conventional monetary policy the global risk to domestic economic performance in the US, Europe and many emerging markets is as great as at any time I can remember. Policymakers should hope for the best and plan for the worst…

THE GOLDWATCHER MONITOR SERVICE

 

 #  Note Added 7th January

 GOLD PRICE HAS BREACHED $1100

Back to 5th January posting:

ANNOUNCING THE GOLDWATCHER MONITOR 

Gold is insurance against the unexpected and the unthinkable. Gold is  poised to breach the psychologically and technically important $1100 threshold.

Gold pundits like to punt gold demand as coming from fear or love trades. But they ignore the more important trade trades  – i.e. the speculative punts that  can account for most the money flowing in and out of gold.

The global risk landscape this time last year was fairly tame  and I posted several comments on gold price prospects for the year that proved to be useful.  Last month I posted a link to Bloomberg’s Pessimists guide for 2016 that’s  also worth reading again.

NO BRAINERS

An easy and ill informed approach to gold this year will be to say the world is in an unholy mess again. BUY GOLD.  That sounds like a no brainer – depending whether you think a no brainer is a proposal so obvious you don’t need a brain or a proposal that will only work if you have no brain.

IAN BREMMER’S ANALYSIS ON THE TOP 2016 RISKS

We all have access to quality information in the information age . Here is a link to analysis on the top 2016 risks  published in the last few days by the internationally recognised strategist Ian Bremmer.

THE GOLDWATCHER IN 2016

In the seven years since the global financial crisis erupted investor anxiety has been focused mainly on the economic and financial problems that followed .   There is still cause for concern over many of these problems. But in 2016 the spotlight has moved  to global geopolitical crises and, absent a miracle, is going to stay there.

THE GOLDWATCHER MONITOR

It’s likely gold will  be  finding  its way back on important  asset allocation agendas.  Institutional  and private money managers will need up to date and unbiased information on all aspects of supply and demand for gold and possibly for silver and other precious metals.  Supplying such information will obviously be beyond the scope of this  open access free blog  launched in 2007 to promote The Goldwatcher book.

Providing ongoing reliable information  will require a dedicated team of  remunerated  contributors who will together produce THE GOLDWATCHER MONITOR

For further information on

THE GOLDWATCHER MONITOR

Please contact

THEGOLDWATCHER@ICLOUD.COM

 

 

 

 

 

 

 

Last year in response to requests to readers of this bog and friends I posted several comments on supply, demand and price expectations.  The postings are still accessible on this website.

A PESSIMIST’S GUIDE TO THE WORLD IN 2016

Picture credit Boomberg

# Note added 8th January 2016

December 15, 2015

Bloomberg News asked dozens of former and current diplomats, geopolitical strategists, security consultants, and economists to identify the possible worst-case scenarios, based on current global conflicts, that concern them most heading into 2016.

LINK TO BLOOMBERG’S PESSIMISTS GUIDE TO 2016

# Trump wins U.S Presidency

# Oil climbs to $100 per barrel

# The UK leaves the European Union

 

# Banks hit by cyber attack

# The EU crumbles under anti-immigration  fears

 

# China’s economy falls, military rises

 

# Israel attacks Iran’s nuclear facilities

 

# Putin sidelines America

 

# Climate change heats up

 

# Latin America’s lost decade

 

LINK TO related Story: Imagine a World Where Black Swans Really Do Come True in 2016

Goldwatcher Comments are being  published in the Goldwatcher Investor Literacy page    

                Investor Literacy                                                                   GOLDWATCHER PAGE

        TWEETS     @JohnKatzGoldwatcher

 

 

POSITIVE SUPPLY DEMAND INDICATIONS

 

CHART GOLD HOLDINGS IN EXCHANGE TRADED PRODUCTS COURTESY OLE HANSEN SAXO GROUP

Embedded image permalink

The above chart tweeted by Ole Hansen  reflects two important fundamental  developments – further clearance of the overhang of speculative gold in Exchange Traded Products and a significant revival  in Indian demand that needs to be reviewed in relation to the Indian Government’s initiatives to monetise gold hoarded in the country aimed at reducing future imports.

Speculative interest in gold may also have been  spiced up by the current political impasse over the US Budget that must be resolved by the end of September to avoid any shut down of Government activities.  This is potentially unsettling.  But  the issue will almost certainly be resolved without any shut down that acually interrupts significant Government activities.

Financial markets are already  unsettled by these and other  concerns including economic problems  in China  and recent revelations on Volkswagen’s deception on emission measurement – serious on its own and possibly involving other manufacturers.  These concerns may also have influenced increased  speculative interest in gold. But,  unlike the important  supply and demand factors illustrated in the chart above,   they don’t affect fundamental supply demand dynamics.

 

 

This website if not advisory.  Please read our Disclaimer On Investment Advice

 

 

 

 

CHINA : EXPECT THINGS TO GET WORSE BEFORE THEY GET BETTER

 UPDATE; 25th August 13.30 GMT:

BBC REPORT :

The People’s Bank of China cut its main interest rate by 0.25 percentage points to 4.6% after two days of stock market turmoil.

It is the fifth interest rate cut since November and will take effect on Wednesday.

The move has boosted European share prices further, with the FTSE 100 in London jumping 3.3% after the China move.

In Germany, the Dax was up by 4.4% and in Paris, the Cac was ahead by 4.6%.

 

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Blog Posting 10.30 a.m. 25th August 2014:

 In a comment Pressure Mounts on China to Act Scott Minerd, Glocal CIO Guggenheum Partners writes:

“…the PBoC will soon be forced to reduce bank reserve requirements while allowing for a more rapid devaluation of the RMB. Time is not on the side of Chinese policymakers. Given the severity of the current domestic slowdown, pressure is mounting for more radical policy action.

“Expect to see further downward pressure on commodity prices, global equities, and U.S. Treasury yields. The first sign that we are approaching a bottom for all three will be when China caves and allows the RMB to adjust to a more appropriate level, which could mean another 25–30 percent decline in the value of the RMB against the U.S. dollar.

“Things will get worse before they get better, and investors around the world are demonstrating appropriate concern. Unfortunately, relief is nowhere in sight.”

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Goldwatcher comment:

Gold is likely to be back on the agenda of investors “demonstrating appropriate concern” over adverse developments and uncertainties.

This website if not advisory.  Please read our Disclaimer On Investment Advice

For information on Goldwatcher Analysis and Events please e-mail

             thegoldwatcher@icloud.com

 

                TWITTER : @JohnKatzGoldwatcher

 

 

 

GOLD PRICES : SHORT SELLERS BUT AS YET NO BLACK SWANS

 

Black Swan at Martin Mere.JPG

BEHIND RECENT ACTIVITY IN GOLD

A sustained rally in gold prices could follow a financial catastrophe  or  other so called  black swan event.  Some commentators  continue making the case a financial catasrophe is imminent  – a case they have been making for years. But  the recent Chinese currency devaluation isn’t a black swan event. It’s a legitimate decision made by a sovereign nation .

 

The following August 13th chart reflects speculation and short covering following China’s currency announcements.  While fundamentals for a sustained gold price rise  appear negative a squeeze on short sellers may supported the modest bounces.

 THE FEAR, LOVE & TRADE TRADES:

Pundits like to make the case  gold demand follows  fear trades and a love trades.  The fear trade moves markets  when global economic or political conditions are precarious and gold is being bought as catastrophe risk insurance. The love trade moves markets when buyers are active in China, India and other regions where gold remains  a traditional store of value.

However, while the fear and love trade are part of the demand story, markets also  respond to speculation . The trade trade.

Recent modest  gold price advances appear to have  been driven by  trade trades. Some buying in response to the China devaluations followed by a squeeze on short sellers and  a price bounce.

 

GOLD AT A REASONABLE PRICE:

Mining costs are a key factor in determining reasonable prices and, if gold is bought at a reasonable price,  owning it as insurance against black swan events  and major corrections in financial markets can make sense.  Should market prices for gold fall below levels it can be mined profitably supply will probably fall, demand will exceed supply and prices will adjust.

Metals Focus  report on mining costs for the industry . Their recent analysis reveal a significant portion of production is already at a loss and at current levels there is the potential for substantial production lshortfalls.  Metal Focus’s findings are detailed in this recent  Kitco comment

 

For further analysis on gold supply, demand and prices please contact:

TheGoldwatcher@icloud.com

 

 

 

 

 

 

PRICED IN REMNINBI GOLD GAINS & COMMODITIES FALL

Chart illustrating Gold priced in offshore  Remninbi Courtesy  Ole Hansen Saxo Bank

Gold in offshore Chinese Renminbi

Ole Hansen  Head of Commodity Strategy Saxo Bank “Is Gold Getting Back Its Moxie
“What a difference one announcement makes, especially when that announcement comes from China and it involves its currency which has been very steady for a long time against the dollar while many other currencies have weakened.”
Commodities recovered a bit on Monday only to be struck down in flames on Tuesday when the Peoples Bank of China announced its new fixing mechanism which essentially opens the door for a continued devaluation. The fact that the weakening of the currency has continued today has left the market with the unpleasant guessing game of how far they are prepared to let it go. Our FX Strategist John Hardy is looking at a potential 10% devaluation before the PBoC halts the slide.

 

Commodities most affected by China demand

Two day commodity performances

Chart Courtesy Saxo Bank

The previous Goldwatcher posting illustrated emerging market currencies in freefall.   4.5%  Remninbi adjustment in two days isn’t free fall Remninbi  but loss is significant. Short covering  rally is likely to support the gold price.

 John Hardy Head of FX Strategy at Saxo Bank writes: 

“I suspect the move will stop as quickly as it began at some unknowable point in the very near future (perhaps 6.80 area in USDCNY where the rate was fixed during the global financial crisis and representing approximately a 10% move?) and then the PBoC will try to make things as boring as possible.”