Pogue rare coin sale delivers shocking surprises and $16.7 million in sales
Posted onThe fourth D. Brent Pogue Collection sale of rare coins took place Tuesday, and 61 ultra-rare specimens brought in a total of $16.7 million. But perhaps the bigger story concerned what didn’t sell.
A phone bid for the star of the show, the fabled 1804 Draped Bust Silver Dollar (PF68 PCGS), hit $10.575 million, the most ever offered for a coin but it wasn’t enough. The seller declined to part with the numismatic treasure for that amount.
Considering that the Pogue family paid a then-record price of $4.14 million for the coin in 1999, the owners are still sitting on top of a significantly appreciating investment, with a provenance that includes the Sultan of Muscat and the Childs family. One of a total five of its kind, it is considered one of the rarest coins in the world.
Owner says no to more than $7 million: A similar surprise occurred with the second-most-illustrious coin on the block, the 1822 Capped Head Left Half Eagle, certified at AU50 by PCGS and the only available privately owned specimen. Once part of the Eliasberg Collection, the gold coin attracted a phone bid of $7.285 million that the seller ultimately rejected.
Once again, the Pogue family has more than reaped a return on its investment, with the coin last selling at auction for a then-record $687,500 in 1982.
Together, the two coins had been expected to sell for between $18 million and $27 million. Still, the sale, which featured coins from 1793 to the 1830s, saw some big numbers elsewhere.
2 coins top $1 million mark: Two coins hit seven figures each, for example. A 1795 Draped Bust Dollar graded Specimen 66 by PCGS sold for $1.057 million, while an 1833 Capped Head Left Half Eagle (PF67 PCGS) beat pre-sale estimates by hitting $1.351 million.
Another coin almost breached the $1 million mark: An 1825/4 Capped Head Left Half Eagle, certified at MS66 by PCGS, commanded $940,000.
In all, 19 coins topped the $100,000 level; nine coins broke $200,000; one coin sold in the $300,000 range; three coins surpassed the $400,000 mark; one fell in the $500,000 range; two ended up in the $600,000 range; two topped the $700,000 barrier; and three coins finished in the $800,000 realm. Eighteen specimens weighed in at less than $100,000, running from $21,150 for an 1839-D Liberty Head Half Eagle (AU58 PCGS) to $99,875 for an 1839-O Capped Bust Half Dollar (MS66 PCGS).
A fifth and final Pogue Collection sale is set for September of this year. It remains to be seen whether the 1804 dollar and 1822 half eagle will be available then, but clearly their owners have strong hands. Their investment in these two jewels has long since paid off, and they’re holding out for some truly astounding prices.
With the three prior Pogue sales having already brought in $68.577 million in addition to the almost $17 million garnered this week, the Pogues are indeed sitting pretty thanks to their longstanding investment in top-quality numismatic standouts.
Coin sales sizzle as Fed jawbones: Silver Maple Leafs smash all-time record
Posted onJawboning by Federal Reserve officials this week has continued to hammer gold prices to attractive buy-in levels, now trading near $1,225 by late Wednesday.
But discerning Fed watchers should know by know that even if an interest-rate hike comes this year, it likely will be one and done. And as Lindsey Group strategist Peter Boockvar has pointed out, in order to be bearish on gold, you have to believe that the Fed is going to embark on 100 to 200 basis points of hikes over the next couple of years, which I think is completely unrealistic.
Data deal a blow to rebound hopes: The U.S. economic data continue to be mixed at best and should keep the Fed in check. Although new-home sales shattered expectations this week, the U.S. industrial sector remains teetering at recession levels. Mondays U.S. PMI industrial-output report from Markit produced levels unseen since the financial crisis, and the Richmond Feds manufacturing index also collapsed. Major layoffs also were announced by Microsoft, Intel, and Shell.
Meanwhile, on Wednesday, Markits report on the U.S. services sector one of the economys alleged bright spots tumbled back to three-year lows. A deterioration in the survey data for May deal a blow to hopes that the U.S. economy will rebound in the second quarter after the dismal start to the year, said its chief economist, Chris Williamson. Service sector growth has slowed in May to one of the weakest rates seen since 2009, and manufacturing is already in its steepest downturn since the recession.
Jobs, GDP at stake: And dont expect a jobs rebound for May, the numbers suggest.A deteriorating order book situation and waning business optimism have meanwhile led to a further pull-back in hiring as companies scaled down their expansion plans, he continued.The surveys are signalling a non-farm payroll rise of just 128,000 in May.
The report bodes ill for U.S. GDP. Having correctly forewarned of the near-stalling of the economy in the first quarter, the surveys are now pointing to just 0.7% annualised GDP growth in the second quarter, notwithstanding any sudden change in June, Williamson added.
And the outlook doesnt look positive to George Mason University economist Anthony Sanders, who doubts the May 17 Atlanta Fed GDPNow forecast of 2.5% second-quarter growth. The latter half of Q2 2016 may not be so rosy as the current rate of 2.5% indicates, he wrote.
Silver Eagles at record pace: Investors arent buying the Feds hawkish talk either. U.S. Mint bullion sales continue to rocket higher, with 22.8 million silver American Eagle coins sold as of Tuesday a rate almost 38% higher than the same time in 2015.
Gold coin sales also are hot. As of May 23, more than 406,000 ounces of gold American Eagle coins have been sold, versus 197,000 ounces during the first five months of 2015.
But look to our neighbors to the north for an even more amazing demand story. The Royal Canadian Mints first-quarter report for 2016 reveals that its flagship silver Maple Leaf coin broke its all-time sales record during the January-March period, topping the milestone set in the third quarter of last year. The mint reports that 10.6 million ounces were purchased in Q1, versus the 9.5 million sold in Q3 2015.
Mint notes supply crunch: Demand for the Mints gold and silver bullion products remains strong, it wrote. Sales of gold coins, mostly gold Maple Leaf coins, increased 18.7% to 212.6 thousand ounces from 179.1 thousand ounces in the first quarter of 2015. Sales of silver coins, mostly silver Maple Leaf coins, increased 19.3% to 10.6 million ounces from 8.9 million ounces from the same quarter in 2015.
The mint also reported that it cant get its hands on nearly enough silver. Sales of silver bullion have been driven for several quarters by demand that exceeds supply in North America and Europe, it noted. With silver now trading neat $16.29, even more bargain hunters could step in.
China seeks global pricing role: Meanwhile, look for precious-metal supplies to continue to drift east, toward Asia, as China signals its intention to play a greater role in commodity markets, particularly in pricing, and lure increasing numbers of foreign investors.
Were facing a chance of a lifetime to become a global pricing center for commodities, Fang Xinghai of the China Securities Regulatory Commission said at the Shanghai Futures Exchanges annual conference Wednesday.
The above sales figures show that demand for gold and silver is running high as investors doubt the recovery story the mainstream media continues to promote.
Gold to hit $1,800 next year, UAE wealth manager says
Posted onMonday brought news that U.S. manufacturing output collapsed to its lowest level since the financial crisis. Given this underlying weakness in the economy, if the Federal Reserve is actually serious about raising interest rates in June or July, it risks committing a policy error that sets a fresh fire underneath gold prices.
Any Fed rate tightening is widely expected to be bearish for stock prices. That reaction is going to be negative, said Krishna Memani, chief investment officer of OppenheimerFunds. The Fed cant kid itself on that.
The key factor that drives gold is the threat to equities, so if you sort of think through that the Fed rate hike may actually trigger a selloff in equities, that will probably be very positive for gold, and as long as gold holds the $1,200 level, I still think its a pretty good long, argued BK Asset Managements Boris Schlossberg in a recent CNBC appearance.
And one Deutsche Bank team thinks that if the Fed hikes prematurely, we will re-enter the doom loop from a more hawkish Fed to a stronger dollar, lower oil prices, higher [high-yield] credit spreads and lower equity markets. The end result is that the central bank might have to reverse those hawkish measures by cutting rates again.
Greater volatility requires gold: Citing the effects of Fed moves, a major wealth management firm in the United Arab Emirates is going so far as to predict gold will hit $1,400 this year and $1,800 by the end of 2017, Bloomberg is reporting.
We believe that policy mistakes by central bankers, in this case the Federal Reserve, will lead to greater volatility in the global economy, maybe another slide in those growth rates into the future, creating more problems for the financial system, said Gary Dugan, chief investment officer atEmirates NBD PJSC. And so we believe that typically, a client should have 5% to 10% of their portfolio in gold, and should be buying after the recent dips of the last week.
Islamic gold standard could be huge: And that advice could be huge as the Islamic world moves toward developing a gold standard based on Shariah law, which forbids interest payments and investing in industries such as gambling and alcohol. A Bahrain-headquartered group called the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) is working with the World Gold Council and Amanie Advisors to craft that standard.
A gold standard based on Shariah law would require investment options directly linked to physical bullion not substitutes like Comex gold futures.
So far, Islamic investors have been reluctant to invest in gold because to do so, they would need the metal in physical form as an underlying asset, which is rarely the case in conventional gold trade, Qatars Gulf Times news site reported.
We are almost there in finalizing a gold-standard plan for the AAOIFI, said Shariah expert Mohd Daud Bakar.
Overwhelming demand noted: The upshot is that hundreds of tons of new gold demand could be created, said the WGCs Natalie Dempster. The standard would fill an important gap in the market.
She told the Gulf Times: We found that there is overwhelming demand for gold to play a greater role in Islamic finance. Our discussions with industry participants signal that it will act as a major catalyst for the development of a broad range of Shariah-compliant gold products such as gold accumulation plans and physically-backed gold funds.
Thus, as central banks such as the Fed continue to lose the confidence of investors worldwide, gold should stand to gain, and the Islamic world is positioning itself to become an even greater source of heavy demand for the yellow metal.
Russian miner sees $2,000 gold ahead with central bank on course to buy 187 tons in 2016
Posted onWhile Citi analysts grabbed headlines Monday by suggesting that gold could fall below $1,000 if the U.S. dollar index continues to strengthen, Americas biggest rivals continue to take steps toward a world in which the greenback is no longer top dog.
CNN reported that in March, China and Russia (in addition to Brazil) sold off U.S. Treasury bonds at a record pace, with each shedding at least $1 billion worth of government debt paper. So far this year, the global bank debt dump has reached $123 billion, it reported. It’s the fastest pace for a U.S. debt selloff by global central banks since at least 1978.
Allies targeting U.S. petrodollar: What are they buying? China, when its not warning the U.S. to stop meddling in the South China Sea, just bought a record amount of oil from Russia in April, boosting imports by almost 53% to 4.81 million tons. Russia has now topped Saudi Arabia as Beijings biggest source of crude.
And Russia has been besting China as the largest purchaser of gold, with Moscows central bank buying 500,000 ounces (or 15.6 metric tons) in April, according to analyst Lawrie Williams.
The average month-on-month increase this year has been 500,000 ounces, suggesting that the bank may be planning to increase reserves by this amount on a regular monthly basis throughout the year, Williams speculated, putting Russia on course to amass 187 tons this year.
These moves on the bond, oil, and gold fronts continue to drive home the point that Russia and China are moving to establish new alternatives to the U.S. dollar and petrodollar hegemony.
Gold to shine this year, CEO says: No wonder some of Russias top miners are so bullish on gold. I personally expected the metal to trade sideways this year, so this midyear price was a pleasant surprise, Polymetal CEO Vitaly Nesis told Bloomberg last week. Asked whether golds movement is sustainable, he said, I would say short-term yes as long as there is significant political uncertainty. Over the remainder of the year, I think gold will continue to shine.
And commenting on the increase in merger activity in the mining sector, Petropavlovsk CEO and cofounder Pavel Maslovskiy said that the market is starting to welcome mergers. While gold prices were low that was on the backburner, but its coming to the fore again now.
According to Maslovskiy, gold could reach a record of $2,000 in the next few years, Bloomberg reported in relaying his forecast.
Gold and the dollar and inextricably linked, and if the dollar loses stature to competitors such as Russia and China, then bullion priced in the greenback could become prohibitively expensive to those seeking to buy the metal at the last minute. The early bird gets the worm.
Dazzling $20 gold Stella coin reels in $1.88 million
Posted onThe pullback in the gold bullion market was likely not on the minds of those bidding last week for an extremely rare jewel of 19th-century American numismatics: a $20 Stella from 1879.
But this wasn’t just any Stella. Dubbed the Virgil Brand-Amon Carter-Ed Trompeter-Bob Simpson Quintuple Stella, the coin is the second-finest of just five known to exist one of which resides in the National Numismatic Collection at the Smithsonian Institution.
And as of this week, this Stella is a member of the rarified class of numismatic coins that have commanded seven figures in 2016 bringing in an incredible $1.6 million! When including a 17.5% buyers premium, the total price paid was $1.88 million.
Classified as a Judd-1643, the coin was certified as PR64 DCAM by PCGS and has seen significant price appreciation over the years.
Star motif replaced the eagle: Stella is the Latin word for star, and to elite coin collectors everywhere, the Stella has always been one of the most elusive and sought-after coins in U.S. numismatic history. Minted in 1879 and 1880, the Stella patterns were the product of a U.S. ambassadors plan for an American currency that would approximate the value of common European coinage of the time and facilitate Americas entry into the Latin Monetary Union. John A. Kasson proposed two metric gold coins and one goloid silver dollar. The two gold coins would be a $4 Stella and a $20 Quintuple Stella, each containing 10% silver. The silver dollar would contain 4% gold.
The Mint then went to work on creating pattern coins for Congress inspection. Because the bald eagle already adorned all domestic coins, the star was chosen as the motif for the United States go-to coin for international trade.
The $4 Stella exists in two versions: the Flowing Hair depiction of Miss Liberty, created by Mint Engraver Charles E. Barber; and the Coiled Hair design, created by Barbers assistant engraver, George T. Morgan. In the Flowing Hair version, Lady Liberty sports cascading locks and a headband etched with Liberty, in contrast to the restrained bun atop the Coiled Hairs design. The quintuple Stella reproduced the $20 Liberty Head design of the time on the obverse but added the legend “30G1.5S3.5C35GRAMS” in place of the encircling stars.
Some found their way to D.C. bordellos: Despite the Stella’s beautiful design, it never received the official authorization of Congress. The Stella has now joined an exclusive club of highly coveted collectible patterns that includes the 1856 Flying Eagle Cents, Gobrecht Dollars, and Wire Edge Indian Head Eagles.
Though these pattern pieces all proofs never entered circulation, several hundred were sold to congressmen at cost, eventually fueling a 19th-century sex scandal of sorts when numerous Stellas were spotted as jewelry pieces adorning the necks of madams operating bordellos in the District of Columbia. Many Stella survivors show the wear and tear of having been used as jewelry or pocket pieces.
But the Stella that sold for $1.6 million this week is not one of those damaged specimens its the cream of the crop and another real-time marketplace example proving that the best rare coins will almost always generate mega-prices for their lucky owners.
5 analysts who say gold can advance in rising-rate environments
Posted onDo you think that rising interest rates are necessarily bad for gold? Think again. Listed below are five analyses that suggest gold prices can actually increase if the Federal Reserve lifts its federal funds rate this year.
Gross misinterpretation of the Feds April minutes have sent many investors into a tizzy, with stocks flirting once again with negative performance returns for 2016 before bouncing back this week.
But a review of recent and past analyses of golds performance during rising-rate environments suggests that the yellow metal can indeed increase in value along with rates. We saw the metal display unexpected resilience most recently this year, after the Fed raised rates in December and gold took off on a 20% run higher.
Falling behind the inflation curve: The conventional wisdom, of course, is that Fed tightening is bad for gold, mainly because higher U.S. rates can strengthen the dollar and increase the opportunity cost of holding commodities, wrote Julian Jessop of Capital Economics, who is predicting $1,350 gold this year. Prices have indeed faltered this week in the wake of the hawkish FOMC minutes. However, there is surely more to say than this; after all, gold and silver prices actually rallied in the weeks and months after the Fed first raised rates last December.
The upshot is that gold can still rally especially if U.S. wage and price pressures continue to build. Indeed, even our forecasts assume that the Fed will continue raising rates only gradually and to a still-low level by past standards, which may fuel concerns that it is falling behind the curve on inflation.
Gold can rise after a lag: And Jessops analysis echoes July 2015 research from HSBC showing that gold advanced after the Fed lifted rates on four prior occasions to its December rate hike.
History shows that gold prices also fall leading into a rate hike and generally rise, though sometimes with a lag, after the first rate hike. Investors are apt to unload gold in anticipation of tightening monetary policies. This negative pressure is sustained until the Fed announces a rate hike, which then eases the negative sentiment towards the yellow metal. This explains the subsequent rallies in gold that occurred shortly after the Fed announced the first rate hike in the last four tightening cycles.
Negative correlation inconclusive: And going further back in time, The Secular Investor blogger studied golds behavior during rate increases (1972-74; 1977-80; 1980-81; 1983-84; 1986-89; 1993-95; the late 1990s; and 2004-06) and verified that hikes do not definitively serve as a coffin nail for bullion prices.
His findings? How can any serious person conclude that gold will, without any doubt, trade lower in the next interest rate cycle? he wrote. Statistically, we just proved that it was the case in only 2 of the 7 instances.
1980s high hit amid rocketing rates: And Ben Kramer-Miller of The Cheat Sheet also likes golds odds during rate-hike periods. A rising Fed funds rate has, more often than not, coincided with rising gold prices, he noted. This is exemplified by golds bull market in the 1970s. From 1971 through 1974, the Fed funds rate went from roughly 5% to 10%, during which time the price of gold rose from $35 per ounce to roughly $200 per ounce. The Fed funds rate fell back to 5%by 1975 as the price of gold fell by nearly 50%. The Fed funds rate soared from 1977, peaking at more than 20% in 1980, and during that time frame, gold reached a peak of $850 per ounce. If we look at the modern-day bull market, we similarly see strength in the gold price as interest rates rose from 2004 through 2007, and we saw gold hit its major $1,000 per ounce peak just as the Fed funds rate began to plummet.
Higher rates bearish for stocks, bonds: Finally, Adam Hamilton of Zeal Research has performed an exacting analysis of golds correlation with Fed tightening and concluded: Golds mighty secular bull of the 1970s, which greatly dwarfed the 2000s one, happened during a time of high and rising interest rates!And then golds subsequent multi-decade secular bear in the 1980s and 1990s unfolded during a long span of interest rates relentlessly falling on balance.Gold rallying with rising rates and slumping with falling rates?Thats not in the script.
Rising and higher interest rates are actually bullish for gold for one simple reason.And that is they are actually very bearish for stocks and bonds.Gold is an alternative asset that shines the brightest when the conventional asset classes are suffering.And nothing pummels stock and bond markets like rising interest rates.That is the sole reason the Fed has been so darned slow in normalizing interest rates!
April minutes no hike guarantee: Therefore, gold investors might have nothing to fear but fear itself if the Fed carries through with its threatened rate hike this year. And that remains a big IF. Investors may be misjudging how hawkish the minutes from the Federal Reserve’s April meeting really were, one Bloomberg analyst speculated at the start of a word-parsing exercise of the latest Fed minutes.
Indeed, contrarian economist Marc Faber is just one of numerous analysts who think the Fed is bluffing about a June rate hike. My view is that in June they will not move, that they will not increase rates. And that the market will begin to perceive that the Fed wants to support asset markets, which they have stated on numerous occasions before, and that gold, which from now on may correct about 5% or so, will start to move up again.
Buy the dip, says Citi in raising its gold-price forecast again
Posted onThe bearish move in gold prices this week hasnt stopped one of the worlds biggest banks from raising its price targets.
Citi Research is predicting the yellow metal will average $1,280 in the current quarter, $1,300 in the July-September period, and $1,250 in the final three months of the year. Its full 2016 average price target is now $1,255 up from a late January estimate of $1,070.
The forecast is slightly counter-intuitive because it projects strength during the summer months, when prices are normally weaker, and a dip in the fourth quarter, normally a robust period for gold demand.
An opportune moment for buyers: Nonetheless, now is the time to invest in bullion, the bank said. While prices have fallen 3% (month to date) in May, we believe this may in fact prove to be an opportune moment to buy the dip, strategists wrote in a note issued Tuesday, titled Let the Sunshine in as Commodities Enter New Age of Aquarius.
In fact, the bank has become bullish on a large section of the commodities complex, especially oil. Commodities markets appear to have turned the corner and, led by the petroleum market, are accelerating their price recovery from the lows of the last year, they wrote.
Brexit could put breaks on Fed: While acknowledging the Federal Reserves hawkish tone in its April minutes, Citi nonetheless doesnt think the central bank will raise interest rates in June.
The risk of Brexit (U.K. exit from the European Union) is likely to complicate matters for U.S. policymakers, and we do not expect the Fed to move until after the June referendum, the note said. With the presidential election in November, the Fed likely can pull off only one rate hike this year, it added, effectively limiting the likelihood of a correction in gold prices for the next two quarters.
The new forecast contrasts with a note Monday in which Citi warned that gold could fall to $1,050 or even below $1,000 a level it hasnt seen since September 2009 if the ICE Dollar Index (DXY) returns to 100 or higher.
Of course, ongoing and future dollar strength is predicated upon one or more Fed rate hikes. Sure, the Fed could boost rates by 25 basis points at some point this year in order to give itself a cushion to cut again later, but it can only go so far. One and done at most, and that means the overall long-term picture for gold remains bullish.
Gold entering new bull market? 3 reasons to invest now
Posted onWe think that the recent setback in gold prices is temporary and drivers will turn more positive again, leading to higher gold prices later this year and next year, ABN AMRO strategist Georgette Boele wrote in a note this week.
The Dutch bank remains bullish on the yellow metal, and here are three more reasons why golds ascent isnt over, summarized from recent commentary from other respected financial analysts:
Seasonal weakness is normal: With summer about to begin, golds pullback is no surprise. The price tends to follow seasonal patterns, with the hotter months historically serving as its low point for any given year.
As U.S. Global Investors CEO Frank Holmes noted, citing a chart covering the past 30 years, in all periods, gold contracted in May to early summer, then rallied in anticipation of Ramadan this year beginning June 4 and Indias festival of lights and wedding season. India has one of the largest Muslim populations in the world, and for at least 5,000 years theyve adhered to the tradition of giving gold as gifts during religious and other celebrations.
Predictably so, the yellow metal has retreated somewhat this month, following its best start to a year in 30 years and its best-ever first quarter for demand. Thus, the price lull were seeing now is nothing new.
Most oversold since December: With the gold price falling to four-week lows under $1,230 Tuesday, the metal is ripe for the taking by bargain hunters. Right now, just looking at the Relative Strength Index, gold is the most oversold its been since mid-December, so this is an ideal opportunity for those who have not gotten in to get in now, Lindsey Group strategist Peter Boockvar told CNBC on Tuesday.
All the more reason to buy now is that Boockvar sees a rebirth starting for gold. This is just the beginning of a new bull market in the metals, he said predicting that the price would top the 2011 nominal record high above $1,900. I dont think the Fed is going to be able to get away with more than one rate hike. On the new price record, he cautioned, I dont know when it will happen; I do think it will happen, though. And if it is a new bull market, if Im correct with that, well, typically, new bull markets exceed the prior bull market peak at some point. Whether it happens in a couple of years, Im not sure, but Im pretty confident that it will get up to those levels and will likely exceed those levels, as markets tend to overshoot.
A Fed rate hike could pound stocks: Interest-rate hikes will hurt equities, which have become dependent on easy-money policies from the Fed. Equity markets will probably go down 10%, which they did, or close to it, twice before, once August 2015, the second time January 2016, gold expert and author Jim Rickards told RT this week. Both times the markets fell off a cliff, and in January you had a more than 10% technical correction. And the reason for this is that throughout most of quantitative easing, QE1/QE2/QE3, the Fed was trying to operate through what they call the portfolio channel, which is, Ill make fixed income so unattractive for you, with such low rates, that youll go out and buy stocks and real estate, pump up the asset values, create a wealth effect, people will lend and spend. The problem is theyve created two bubbles. Theyve got a real-estate bubble; theyve got a stock bubble. Those channels arent working anymore. The stock market really peaked out in kind of May 2015. Thats not the technical high; but its just gone sideways with a certain amount of volatility for over a year at this point. My guess is they wont raise rates, but if they do, look out below.
Feds hollow rate-hike threat could be another gift to gold investors
Posted onGold has predictably fallen this week in the wake of some hawkish statements from various Federal Reserve members, as well as the central banks April minutes. But the dip near $1,255 on Thursday represents another buying opportunity before the gold bull resumes its march higher. Heres why:
Although the Fed minutes were interpreted as a firm signal that an interest-rate increase is coming this summer, a quick reading reveals that the Chairwoman Janet Yellen and company are just up to their same-old same old in other words, wait-and-see nonaction papered over with tough talk.
Fed still weighing incoming data: Members generally judged it appropriate to leave their policy options open and maintain the flexibility to make this decision based on how the incoming data and developments shaped their outlook for the labor market and inflation as well as their evolving assessments of the balance of risks around that outlook, the minutes read.
Taking the statement at face value, the minutes do not suggest that an increase in rates next month is a done deal it is the same old data dependent Fed trying to have it both ways, wrote Komal Sri-Kumar of Sri-Kumar Global Strategies.
Brexit vote gives Fed an out not to hike: Frankly, there are too many land mines ahead to allow the Fed to act. Just days after the banks June 14-15 meeting, voters in the United Kingdom decide in a June 23 referendum whether to leave the European Union in a Brexit. At present, the likely result is too close to call. Thus, if the Fed raised rates and thus strengthened the U.S. dollar, it would be doing so without clarity on the Brexit situation with potentially volatile effects on global markets.
Moreover, the Fed is unlikely to raise rates at a meeting that is unaccompanied by a subsequent press conference from Chairwoman Janet Yellen to explain the policy decision and soothe rattled markets. Such a conference is scheduled for just after the June meeting, but there isnt one after the July meeting, so that also lessens the likelihood of a rate hike then, unless Yellen were to conduct one spontaneously.
U.S. election to keep rate hike at bay: The next post-meeting press conference doesnt occur until September. But by that time, the campaigning for the U.S. presidential election will be in full frenzy, and the Fed dares not raise rates unless it risk being accused of interfering in politics. The Nov. 1-2 meeting on the eve of the election therefore also is out. That leaves us with the Dec. 13-14 meeting for the Feds final opportunity in 2016.
So gold investors shouldnt buy into the Feds bluster, but rather should see this rhetoric-induced gold-price weakness as a chance to buy bullion.
Gold under pressure from shorts: A couple of other factors also could keep gold prices from resuming their ascent for the time being. For one, according to Gold Newsletter publisher Brien Lundin, there is massive net short position by the large commercial category of paper gold traders, recent futures data show.
These traders are aligned with gold miners and refiners who hedge positions in order to lessen overall risk. Lundin sees the chance for a significant correction in the price at some point over the next month or so.
Cycle lows could spark big uptrend: Conversely, if some unexpected event transpires thats negative for equity markets, gold could benefit through short covering. However, if some event or economic data point sparks a spike in gold and forces these commercials to cover their shorts, we could see a major rally emerge, Lundin said.
And in a separate analysis, noted technician Tom McClellan sees the potential for gold to hit a cyclical low later this year. However, that could be short-term pain for longer-term gain. We should expect a big uptrend to commence out of that major cycle bottom, he wrote. It will be hard for gold bugs to be patient and wait for that major cycle low to arrive, but the long-term cycles say that the ensuing rally should be worth the wait.
Gold now in seasonally weak period: Morever, gold is just entering its historically weak seasonal period, which begins in late spring and continues until the fall. Since gold began trading freely in the U.S. in the early 1970s, bullion has produced an annualized return of only 1.2% in the March-August period, versus 13.4% in the other six months of the year, observed Mark Hulbert at MarketWatch.
Demand usually picks up once the summertime lull is over and Indias gold-buying festival and wedding seasons begin, running from October to December. Thus, while soft prices could lie ahead, experienced gold investors know that this temporary situation offers a strategic buying opportunity.
If I werent already long gold, Id be buying on this dip as I dont see it falling much lower, Adam Koos of Libertas Wealth Management Group told MarketWatch.
Fundamentals still favor gold: And as Altavest chief Michael Armbruster reminds us, the global backdrop for gold remains bullish, with negative interest rates from Japan to Europe being a game changer for gold. Beyond interest rates, currencies around the world are being devalued via central bank policy. Chinas currency is still overvalued and likely to weaken further, he said. So, the picture really doesnt change for gold unless the Fed hikes rates more than 100 basis points from here.
And dont look now, but the major U.S. stock indexes are again in negative territory for the year at this latest rate-hike threat. As we saw earlier this year in the wake of the Feds December rate increase, such hikes can actually be good for gold because they divert investment capital from stocks and drive it into the safe haven of gold.
So, the message to take away from this weeks Fed news is:
- Although the Fed could raise rates in June, its unlikely because of the Brexit vote. And if it doesnt act in June, chances are it wont until at least December because of the presidential election.
- The weakness were seeing in gold is at least partly because of annual seasonal trends, and history tells us that gold almost always recovers by the fall.
Keep in mind, too, that despite the latest dip, gold is still up roughly 20% on the year. For the savvy gold investor, the recent pullback is a chance to get in on the cheap.
Another JPMorgan exec bullish on gold as Fed signals potential June rate hike
Posted onGold lost ground Wednesday after the minutes from the Federal Reserves April meeting showed some support among the central bankers for a potential interest-rate increase as soon as June.
Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen and inflation making progress toward the committees 2% objective, then it likely would be appropriate for the committee to increase the target range for the federal funds rate in June, the minutes said. Still, the Fed continued to emphasize its longstanding data-dependent outlook, which leaves policymakers plenty of room not to hike rates in June or later.
Rate-hike talk also dents stocks: The minutes follow hawkish statements from Fed branch chief Dennis Lockhart and John Williams on Tuesday, in which they declared the banks June meeting live, plus a Consumer Price Index report for April that showed inflation rising at its fastest pace in three years.
Rate-hike odds spiked after the minutes were released, and gold dipped about 1% to trade near $1,266. But U.S. stocks also were pressured, and arguably they have more to lose than bullion if the Fed acts in June. A rate hike could revive volatility in equities and result in new capital fleeing to gold as a safe haven, as occurred as the start of the year.
But odds are that the Fed wont move to raise rates because its June 14-15 meeting comes just days before the United Kingdom votes on a potential Brexit from the European Union a referendum that has the potential to rattle currency, bond, and stock markets across the globe.
U.S. Mint coin sales soaring: Regardless of what the Fed does at its upcoming meetings, the overall attitude toward gold remains positive. Just look at the U.S. Mints bustling bullion sales. According to a recent Coin World report, gold coin sales are well ahead of 2015 levels, with 1-oz. gold American Eagles double 2015s totals at the same time last year.
Through May 16, about 381,500 ounces of gold Eagles were sold, versus 197,500 ounces during the first full five months of 2015. Gold American Buffalo coin sales this year also are beating last years totals, with 89,500 sold versus 75,500. And silver American Eagle coins are maintaining their record-breaking pace, with 21.576 million sold through May 16.
Very, very bullish trend for gold: And this week another top JPMorgan executive pronounced blue skies ahead for the yellow metal in a CNBC interview, following Solita Marcellis appearance earlier this month in which she predicted $1,400 gold.
JPMorgan Asset Managements global chief investment officer and head of fixed-income and commodities, Bob Michele, doesnt think the Feds rate-hiking pace this year will be aggressive to golds benefit. If the Fed marches on its path [from] a zero real fed funds rate to something like 2%, obviously thats going to put a lot of pressure on gold, he said. However, I dont think theyre going to get there. I think theyll struggle to do one more hike this year, and I think that again will unleash the gold bugs into the market.
Therefore, Its certainly a time that people want to get into gold, he said. I think theres no doubt that central-bank policy response has unleashed the gold bugs. One of the big knocks on gold for a long time had been that it had no yield. Well, if youre in Europe, if youre in Japan, no yield is high yield. You throw on top of that, there is a currency-devaluation war under way; its in Europe, its in Japan. You toss into the mix China and Australia, and suddenly gold is an alternate currency, certainly to paper money. So I think the intermediate and longer-term trend for gold is very, very bullish.
Surprising how resilient gold has been: For Michele, golds recent dip from $1,300 is no big deal. Theres no doubt when you look at spec positions, theyre at 10-year highs. You need some sort of consolidation here, he said. When I look at the charts, I could see a pullback to the $1,200 level, maybe $1,204, but Ill tell you: All the interest that I see circling around gold, Im not so sure well get there.
Asked whether more quantitative easing by foreign central banks might boost the dollar at bullions expense, he said, I think the buyers will come in anyway. I think that when you look at gold, its surprising how resilient its been. Its done well on days when theres been dollar strength, when theres been dollar weakness, on risk-on, risk-off. I think that theres a lot of value in gold here and I think that its under-owned. So Ive been surprised myself at the widespread interest.