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Gold Going Through ‘Digestion’ Before Heading Back Above $2000

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Gold Going Through ‘Digestion’ Before Heading Back Above $2000

Frank Holmes, the CEO and CIO of U.S. Global Investors, was recently interviewed by Kitco News to get his thoughts on the recent run-up in gold prices. They also asked him about where he sees the gold market headed.

When asked about gold prices lately and the inability to break back above $2,000 per ounce, Holmes said it was simply “digestion.”

“Going through the $2,000 level, the euphoria of Warren Buffett all of a sudden buying a gold stock, it’s the normal process. Going straight up is only going to lead to a powerful crash, so I love this sort of stair-stepping. It’s a perfect market.”

With gold prices pulling back, Holmes said smart investors are buying on the dips. He also mentioned that these investors choose to take profits when gold advances too quickly.

“If you’re not long you’ll be wrong. On every one of these big pullbacks, even the shorter ones, you’ve got to understand the daily volatility of bullion. It’s plus or minus 1% on a daily basis. If it falls 2% or more, 3% in a day, that’s when you want to be buying, if it surges 3% in a day that’s the time you want to be taking some profits.”

The recent slump in gold price is normal, says Holmes. This is given how far gold surged in the last 60 trading days. He now expects a bit of consolidation before companies report their third-quarter numbers.

“Over 60 trading days, it was just normal after going up 2 standard deviations that we would get a correction of 10%. So I just feel like it’s going nicely sideways for me, building, the companies are going to do phenomenally well… the numbers are excellent, high free cash flows, something that the Buffett’s love.”

He said he expects the entire gold mining industry to report incredible numbers when earnings season kicks off.

“Get ready for more free cash flow to show up in this industry, and I think come the end of this quarter, it’ll be even more breathtaking when you compare it to the overall S&P 500.”

Kitco also asked about Federal Reserve Chairman Jerome Powell’s recent remarks that the Fed would allow inflation to creep higher to offset a recent run of low inflation. Regarding this, Holmes scoffed at the idea that only 1% inflation right now exists.

“The old algorithm, the old model for determining what CPI (consumer price index) is, when gold hit $850 and silver hit $50 an ounce in 1980, that algorithm that defined what inflation was has morphed many times. And if we use that model today, inflation is at 8%. What is he going to do to slow down inflation? Housing is up 10%, I could go on with a whole list of things that are much greater than this 1% inflation that they are talking about… why worry? Get long gold on corrections!”

For investors looking for exposure to gold stocks, Holmes mentioned a few that he likes. He also emphasized that the gold mining companies now pay a larger dividend than 10-year bonds.

“When you look at stocks like Newmont, Barrick, and I can go on, now Gran Colombia is starting to pay a dividend, Wheaton Precious, these dividends are higher than what you are getting on a 10-year government bond. So you want to be long those companies that have the capacity to pay dividends in a rising scenario.”

Looking to the future, Holmes expects gold prices to rise for one simple reason. No matter who wins the election in November, “What won’t end is all the money printing.”

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Gold ‘Frenzy’ To Build Around Election, Platinum Could Soar 50% By Year-End

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Gold ‘Frenzy’ To Build Around Election, Platinum Could Soar 50% By Year End

Peter Hug, head of the precious metal division at Kitco, believes the Fed’s decision to hold interest rates at near-zero through at least 2023 is bullish for precious metals and particularly gold. He also mentioned the road platinum can head to by the year’s end.

“About three Fed meetings ago they indicated they would hold rates at pretty much zero through the end of 2021 into early ‘22, today they’ve extended that by an additional year, there have been some analysts that are suspecting they will keep rates at zero right through 2024, so we’ve got another almost four years of zero interest rates to look forward to,” said Hug.

“The Fed being a bit more accommodative on inflation indicates to me that it’s a very positive environment for hard assets in general but I think the metals as well will continue to move higher over the next period of time based on the dovishness of the Fed, global central banks and the uncertainty of the US election coming up in about six weeks.”

The State of the Gold and Silver Markets

Hug said the current consolidation phase is a great sign of the overall health of the gold and silver markets. This comes after the frenzy in the gold and silver markets about a month ago.

“The market has been consolidating, which is a very good sign, especially for gold. Gold has been consolidating between our support level of 1925 and 1975 for the better part of two weeks. Silver seems to be between $26.50 – $27.50 range and consolidating as well. The fact that people are not selling into a market that is as frenetic as it was a month or six weeks ago, indicates to me that this market is setting up for the next leg higher once we get through this consolidation phase.”

Availability and Premiums

The gold and silver markets are taking a bit of a breather and the mania has slowed a bit. With this, Hug said the availability of gold and silver coins is getting better. He said premiums are coming down as well.

“On the gold and silver side, dealers are starting to show inventory. That’s not a result of increased production, it’s more a result because of this consolidation phase, retail investors have started to pull back on the markets so there’s not as much buying frenzy in the physical space right now, I think that changes if gold gets north of $2,000 again. But this consolidation of $50 range in gold and the $1, $1.50 range in silver has basically dried up the demand at these levels.”

“So production is still coming on board and dealers are starting to build inventory. And because of that you are seeing premiums come down. Silver maple leafs you can get, again, depending on quantity, somewhere between $5-6 over spot, Eagles are down somewhere between $5-7 over spot, so you are starting to see as this market stays sideways and we don’t see another rush into the buying side from the retail investor, you give it another 2-4 weeks and I think there will be reasonable inventory on the market and premiums should come down.”

Volatility to Return Soon?

Hug said that if you are looking to acquire gold and silver coins, you shouldn’t wait long as we could see volatility return very soon.

“I caution that past October 15 the market is going to be very volatile as we go into the election.”

Other than gold or silver, Hug sees a huge opportunity in the platinum space. There, he expects prices to climb 50% by the end of the year.

“I’m constructive platinum. It is also consolidating in the $900-950 range, but I do anticipate platinum to be north of $1000 and then look to $1200 possibly $1400 before year end.”

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US Billionaires Got Richer During Pandemic by $845 Billion

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US Billionaires-featured

US billionaires got richer during the pandemic by a tune of $845 billion. This represents a 29% increase from the time the Covid-19 lockdowns started until now. While the stock market crashed during the early days of the pandemic, it has since recovered. Along with recovery are net worth increases for America’s billionaire. Among the pandemic’s big winners of 2020 were Jeff Bezos, Elon Musk, and Mark Zuckerberg. Also in the list were investor Warren Buffett, Oracle CEO Larry Ellison, and ex-NY Mayor Michael Bloomberg.

RELATED: Jeff Bezos Is Now Worth $200 Billion

In a report released Thursday, the Institute for Policy Studies and the Americans for Tax Fairness (ATF) said the total net worth of 643 of the nation’s richest people rose from $2.95 trillion to $3.8 trillion.  

This is equal to a 29% increase between March to September. The report based the numbers on Forbes’ annual billionaire’s report and real-time data. 

Big Winners

Jeff Bezos, the founder, and CEO online retail giant Amazon is now the world’s richest man. The pandemic forced people indoors and played right into Amazon’s online strategy. As millions switched to online shopping, demand for Amazon’s services skyrocketed. Amazon shares zoomed along with 40% in 2020, as the company racked up billions in orders. People bought groceries, medicine, household products, and entertainment items on Amazon’s sites. As the company grew richer, so did its CEO and majority stockholder. On August 19, as stock prices of Amazon went up, his net worth exceeded $200 billion. As of September, Amazon stock has fluctuated and Bezos’ current worth is $184 billion. 

Another rich guy that got even richer was Tesla’s founder and CEO Elon Musk. Tesla’s value grew five times its January price. By August, the company’s stock split pushed his personal shares to $104 billion. This allowed him to join the coveted centibillionaire club. Compared to his March net worth of $24.6 billion, he’s now over four times that. As of September, with Tesla dropping value, Musk’s worth has dropped as well to $88 billion. 

Facebook’s Mark Zuckerberg, who was worth $107.6 billion in August (now down to $93.7 billion). Facebook stock rose from $209 in Jan to $303 in August, making his 13% stake worth over $100 billion. Like Musk, he also joined the centibillionaire club this year. 

“COVID crisis supercharges inequalities”

Chuck Collins, director of the Institute for Policy Studies’ Program on Inequality, and co-author of the report said he was somewhat shocked by the figures. He added that the COVID crisis is “supercharging America’s existing inequalities.” He said, “I would have thought maybe six months into this that things would have shaken out – that everybody would take a hit.” 

“The difference is stark between profits for billionaires and the widespread economic misery in our nation. It sort of dramatizes the unequal sacrifice and profiteering element of the wealth accumulation at the top.”

Meanwhile, Covid-19 infected 6 million Americans and killed more than 200,000. As businesses collapse, the economy outside of Wall Street is in recession. More than 50 million jobs vanished in the pandemic. At present, 14 million Americans remain unemployed. Even those lucky enough to still have jobs got hit. Average work income fell by 4.4.%, per Bureau of Labor Statistics data. Outbreaks are still prevalent, even as a vaccine remains under development. 

As such, the economy’s reopening remains slow. 

Even local governments are feeling the pressure. States and cities are hamstrung with crippling deficits. California declared a $54 billion deficit, while New York City is looking at a $9 billion loss in revenue. From now until 2022, state budgets face a $555 billion deficit. This is according to the Center on Budget and Policy Priorities.

COVID-19’s unique effect made those with better plans during the pandemic fares better than most. In the case of Amazon, people flocked to their site when going out posed safety issues. For the others, the rise in stock reflected more on how they handled their business during the crisis. Some people are just quicker to seize on opportunities, even those coming from a crisis.

Watch this as Bloomberg reported last July 2020 on how billionaires got $637 billion richer during the pandemic:

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Should we begrudge the rich getting richer, especially at a time like this? Do they deserve this success? Let us know what you think by leaving your thoughts on the comment section below.

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Fed Keeps Rates At Zero, Powell Says More Fiscal Support Needed

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Fed Keeps Rates At Zero, Powell Says More Fiscal Support Needed

The Federal Reserve wrapped up its last meeting before the November elections. It announced that it would keep rates at essentially zero until at least 2023. This serves as a signal that it doesn’t see inflation as an issue at all for the foreseeable future.

Fed Chairman Jerome Powell said, “We’re going to continue to monitor developments, and we’re prepared to adjust our plans as appropriate.”

“With inflation running persistently below this longer run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved,” the Fed’s post-meeting statement said.

Uncertainty and the Stock Market

However, the Fed’s latest projections have core inflation staying below their 2% target until 2023. This leaves many observers unsure of the Fed’s actual plan to spur the inflation they desire. This uncertainty caused the stock market to drop after the announcement.

“He noted that targeting an inflation overshoot for ‘some time’ as the statement says, means that they are not targeting a ‘sustained’ overshoot. So how long is ‘some time’ if it isn’t sustained?'” asked AB economist Eric Winograd. “That imprecision is a problem that the committee is going to have to solve to reap the full benefits of the framework shift. It’s not a coincidence that the stock market, which had been in positive territory, flipped negative after the chair’s comments.”

“He’s the great and powerful Oz. Investors got duped. They thought enhanced forward guidance meant something, but when they peeked behind the curtain they realized the Fed didn’t do anything, and the market rolled over,” said Michael Arone, chief investment strategist at State Street Global Advisors.

Jon Hill, a senior fixed-income strategist at BMO, added “This is dovish – lower rates for longer, higher equities, weaker dollar. The Fed is saying we’re not hiking in 2023, maybe in 2024 … What they’re saying is these are our goals. We expect to have just barely met them and even then, they’re not raising rates.”

Stimulus and Economic Recovery

Stepping ever-so-slightly into the political realm, Powell said that Congress should pass another stimulus package to support the economic recovery. He then identified unemployment aid, small business relief and funding for state and local governments as three key areas.

“More fiscal support is likely to be needed,” Powell said. “The details of that are for Congress, not the Fed.”

Republicans have repeatedly stated that they won’t provide additional funding to bailout poorly managed cities and states as part of any additional stimulus bills.

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