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This summer’s massive gold price rally could be a sign that the market is losing confidence in the U.S. dollar as the world’s reserve currency, according to Horizons ETFs portfolio manager Nick Piquard.
“The rally is telling investors that the financial system with the U.S. dollar as the reserve currency, [might need] some changes,” Piquard told Kitco News last week.
Global debt and unlimited money printing are deteriorating the confidence in the U.S. dollar as the global reserve currency.
“The U.S. dollar system has worked so far. But we’re getting to the point where there’s so much debt in the world and with this new crisis, there’s even more debt,” Piquard explained. “People are figuring out that maybe they will have to make some changes to how the U.S. dollar acts as a reserve system. The U.S. is probably going to have to print a lot of dollars to bail out all this debt. That’s really fuelling the gold rally.”
The market is also realizing that higher gold prices are inevitable due to the situation the Fed and the U.S. government have been forced into.
“Investors are seeing that this COVID crisis isn’t going to go away anytime soon. The cases keep going up globally. And the longer it takes, the more debt needs to be created,” Piquard said. “Congress is debating right now about how many trillions of dollars they’re going to have to spend for a new stimulus after having already spent trillions of dollars.”
And even once the COVID crisis is behind us, the economy is going to be weak for a while, Piquard pointed out.
“After all that money has been spent, it’s not like you’re going to be able to raise taxes to get that money back, or it’s not going to be easy to raise rates,” he said. “The market is anticipating that the Fed is going to have to do more. And all those things are just beneficial for gold.”
The Federal Reserve cannot just go back to normal. “That will just be negative for everyone. Nobody really wins in that scenario,” Piquard noted.
Inflation vs. deflation argument
There are currently two camps out there: inflationary and deflationary one. In the inflationary scenario, gold will do great, while in the deflationary one, the yellow metal will perform poorly, Piquard explained.
“The deflationary guys think that gold is going to go a lot lower, stocks are going a lot lower and the U.S. dollar is going to go a lot higher,” he said. “Basically, what they’re saying is that there’s all this debt in the world and everyone has borrowed U.S. dollars and they’re going to have a hard time paying it back, especially with a weak economy … When they have to pay back that debt, everyone’s going to scramble for the U.S. dollars and that will drive down asset prices, which drives the U.S. dollar up.
The gold bulls believe in the inflationary argument that sees the Fed intervening and not letting deflation take over.
“All the Fed needs to do is buy what is being sold. And that’s kind of what they’ve done,” Piquard said. “They’ve been buying bonds first. Now, they’re saying they’re going to buy corporates. Central banks around the world have already been doing this. The Japanese have been buying stocks for who knows how long, the Swiss central bank has been buying stocks.”
Based on the inflationary scenario, the Fed will continue to intervene, print more money and weaken the U.S. dollar. “That’s positive for gold, which is the only asset that you can’t print,” Piquard said.
Inflation doesn’t even need to go much higher, the portfolio manager added. “All we need is for rates to be extremely low for extremely long and for inflation to be a little bit higher. As long as as the real yields are negative, that is good for gold.”
How to tell the gold price rally is over
The gold market has not seen its top yet with more upside potential still ahead of the precious metal, Piquard stated.
One major sign of a market top in gold is silver prices catching up and hitting their all-time highs of $50 an ounce.
“Silver price generally makes new highs towards the end of a gold bull market,” Piquard said. “The reason for that is because silver is more of an industrial metal, which is used more in the economy. So when silver starts rallying, that implies that the economy might be picking up.”
So far, silver has risen but it is still significantly below its record highs. At the time of writing, September Comex silver prices were trading at $24.365, up 0.62% on the day.
“Gold has made new all time highs and I think we need silver to reach its old highs as well. Then, there might be an indication that the economy’s doing better. Once we see silver catching up, then maybe it’s a sign that the bull rally has less room to go,” Piquard said.
Another sign of a market top is the economy recovering and the Fed’s 2% inflation target being breached on a sustainable basis. “The Fed said they’re only going to raise rates once inflation recovers above their 2% benchmark. That that could take some time — a year or more,” Piquard noted.
Gold miners present a unique buying opportunity
In this very competitive market, gold miners present an interesting buying opportunity, according to the portfolio manager.
“In terms of relative value, miners offer good [deal]. At over $1,900 an ounce, most miners are making money. Miners are significantly below the prices that they were at back in 2011,” he said. “Not all miners are equal but if you buy a portfolio of them, they offer more margin of safety because even if gold goes down a little bit, they’re still making some money.”By Anna Golubova
Source : Kitco News
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A coronavirus vaccine being developed by the University of Oxford and AstraZeneca is safe and shows signs of inducing an immune response, according to early clinical trial results published Monday in the medical journal The Lancet.
The trial did not look at whether the vaccine prevents coronavirus infection, however. That’s a question that will be answered in trials that are currently ongoing.
The trial results found that it generated two “strong” immune responses: the production of both antibodies and T cells, which find and attack virus cells.
“We’re getting both sides of the immune system stimulated and that is fairly unusual for vaccines,” Adrian Hill, director of the Jenner Institute at Oxford University, told NBC News.
It is “good news — another step forward on the long road” to having a COVID-19 vaccine,” said Dr. William Schaffner, an infectious disease expert at Vanderbilt University Medical Center in Nashville. Schaffner was not involved in the vaccine research.
Heads of state and global health leaders today made an unprecedented commitment to work together to accelerate the development and production of new vaccines, tests and treatments for COVID-19 and assure equitable access worldwide.
The COVID-19 pandemic has already affected more than 2.4 million people, killing over 160,000. It is taking a huge toll on families, societies, health systems and economies around the world, and for as long as this virus threatens any country, the entire world is at risk.
There is an urgent need, therefore, while following existing measures to keep people physically distanced and to test and track all contacts of people who test positive, for innovative COVID-19 vaccines, diagnostics and treatments.
“We will only halt COVID-19 through solidarity,” said Dr Tedros Adhanom Ghebreyesus, WHO Director-General. “Countries, health partners, manufacturers, and the private sector must act together and ensure that the fruits of science and research can benefit everybody.”
Work has already started. Since January, WHO has been working with researchers from hundreds of institutions to develop and test vaccines, standardize assays and standardize regulatory approaches on innovative trial designs and define criteria to prioritize vaccine candidates. The Organization has prequalified diagnostics that are being used all over the world, and more are in the pipeline. And it is coordinating a global trial to assess the safety and efficacy of four therapeutics against COVID-19.
The challenge is to speed up and harmonize processes to ensure that once products are deemed safe and effective, they can be brought to the billions of people in the world who need them. Past experience, in the early days of HIV treatment, for example, and in the deployment of vaccines against the H1N1 outbreak in 2009, shows that even when tools are available, they have not been equally available to all.
So today leaders came together at a virtual event, co-hosted by the World Health Organization, the President of France, the President of the European Commission, and the Bill & Melinda Gates Foundation. The event was joined by the UN Secretary General, the AU Commission Chairperson, the G20 President, heads of state of France, South Africa, Germany, Vietnam, Costa Rica, Italy, Rwanda, Norway, Spain, Malaysia and the UK (represented by the First Secretary of State).
Health leaders from the Coalition for Epidemic Preparedness Innovations (CEPI), GAVI-the Vaccine Alliance, the Global Fund, UNITAID, the Wellcome Trust, the International Red Cross and Red Crescent Movement (IFRC), the International Federation of Pharmaceutical Manufacturers (IFPMA), the Developing Countries Vaccine Manufacturers’ Network (DCVMN), and the International Generic and Biosimilar Medicines Association (IGBA) committed to come together, guided by a common vision of a planet protected from human suffering and the devastating social and economic consequences of COVID-19, to launch this groundbreaking collaboration. They are joined by two Special Envoys: Ngozi Okonjo-Iweala, Gavi Board Chair and Sir Andrew Witty, former CEO of GlaxoSmithKline.
They pledged to work towards equitable global access based on an unprecedented level of partnership. They agreed to create a strong unified voice, to build on past experience and to be accountable to the world, to communities and to one another.
“Our shared commitment is to ensure all people have access to all the tools to prevent, detect, treat and defeat COVID-19,” said Dr Tedros. “No country and no organization can do this alone. The Access to COVID-19 Tools Accelerator brings together the combined power of several organizations to work with speed and scale.”
Health leaders called on the global community and political leaders to support this landmark collaboration and for donors to provide the necessary resources to accelerate achievement of its objectives, capitalizing on the opportunity provided by a forthcoming pledging initiative that starts on 4 May 2020. This initiative, spearheaded by the European Union, aims to mobilize the significant resources needed to accelerate the work towards protecting the world from COVID-19.