2019 - Page 6 of 6 - Border Gold

The Week Ahead In Gold

February 19, 2019/in Commentary, Market Updates/by Border Gold Corp.

The last several weeks have seen some very encouraging signs for the bulls, and Friday’s session was no exception. Spot gold moved higher by nearly $9.00/oz despite some factors that would typically act as significant headwinds.

The dollar index was stronger on Friday to end the week. Although the currency wasn’t up a huge amount in percentage terms, the rally in gold even as the dollar rose was a breath of fresh air for the bulls. Many of the gold market’s largest net percentage gains or declines in recent months have been the direct result of large moves in the greenback.

Stocks were also higher Friday to cap off the week, and equities went out in dramatic fashion. The benchmark Dow Jones Industrial Average rose by nearly 444 points while the broad-market S&P 500 saw a gain of nearly 30 points. Equities saw strong buying interest as appetite for risk increased. Indications are that ongoing U.S./China talks over trade that took place last week in Beijing were productive and negotiators have now laid out a framework for further talks.

The price action seen in gold and other outside markets to end the week may be considered quite bullish for gold. The metal typically does not see significant strength in the face of a stronger dollar or sharply higher equity prices. Not only that, but the fact that gold was sharply higher despite strong investor appetite for risk may also be very telling.

The gold market is showing some undeniable signs of strength and is being bid higher with or without supportive outside markets. This can only mean one thing: that higher prices are likely ahead as demand strengthens. The recent strength in gold and current uptrend that has been in place for some time now may simply be further indication of an unfolding bull market.

The gold market could still face some obstacles in the weeks and months ahead. Stocks could continue to work higher again; the dollar could strengthen further, and investors may become increasingly comfortable taking on risk. These hurdles would likely prove transitory, however, as numerous key market fundamentals paint a very different picture.

The global economy is slowing, and even with a deal on trade, both the U.S. and China (the world’s first and second-largest economies) could see a very bumpy road ahead. As the next major recession approaches and takes hold, the U.S. and other nations may lack the tools necessary to effectively and swiftly combat the slowdown. Interest rates are still well-below pre-financial crisis levels, and many central bank balance sheets remain overinflated with previous asset purchases.

In short, global central banks could potentially be forced to resort to even riskier and untested measures to fight the next depression. This could not only lead to lower equity and asset prices but could put a significant dent in currency values. Such a scenario has the potential to be extremely bullish for gold and hard assets, and prices could rise substantially from recent levels.

The next several months will provide some important clues about the state of the global economy. If further weakness is seen in the data stream or if stocks again turn decidedly lower, central banks could be forced into action. Some may argue that such a scenario is not only likely, but inevitable. This idea may keep gold on the offensive in the weeks and months ahead as an increasing amount of “smart money” looks diversify in alternative asset classes and avoid the next major collapse in equities.

The Week Ahead In Gold

February 11, 2019/in Commentary, Market Updates, Market Updates/by Border Gold Corp.

After a brief period of consolidation, the gold market could potentially be headed higher in the weeks ahead. This week; markets will remain focused on U.S. macro data as well as the potential for another U.S. Government shutdown.

There are numerous wildcards that could drive price action in the week ahead. The deadline for a deal on Trump’s proposed wall along the country’s southern border is February 15th. If a deal to fund the wall is not reached, Trump appears ready and more than willing to shut down the government again. This scenario could potentially send gold prices higher as it did in late December when the government was closed for business.

Any shutdown-based rally may prove transitory in nature, however, as shutdowns have historically not had much of a long-term impact on gold prices.

Markets will also keep an eye on any commentary from the Fed. `Although there is no FOMC meeting this week, there are several Fed officials speaking at various engagements. After making a large swing from the hawkish to the dovish side of the ledger in recent weeks, the Fed is now faced with an interesting dilemma: How to balance a strong labor market and resilient U.S. economy against the backdrop of weakening global growth. The Fed is also likely to take the stock sell-off that marked a weak end to 2018 into account and may look to rock the boat as little as possible. Dovish expectations have possibly been overblown at this point, however, and at least one rate hike from the central bank this year cannot be ruled out.

The ongoing U.S./China trade negotiations appear to have hit a snag, and the deadline for a deal by March 1st is quickly approaching. A U.S. delegation will be in Beijing to continue previous talks, but as of right now it does not appear that President Trump and Chinese Leader Xi Jinping will be meeting any time soon. If significant progress is not seen in the weeks ahead, the agreed upon deadline will likely come and go without so much as the initial framework for a deal in place. The trade war has made a clear dent in the economies of both countries, and the longer it continues the deeper the global slowdown may become.

The pieces for a long-term sustainable rally in gold appear to be in place. The market seems to now find itself in a win/win situation regardless of what the Fed does or doesn’t do and stands to see further upside as global economic and geopolitical risks rise. The market’s intermediate-term uptrend remains intact, and buyers have thus far been willing to step in and scoop up the yellow metal on any dips. The market has also benefited from some recent weakness in the U.S. dollar, but will likely need a further breakdown in the greenback to really start making significant upside headway.

An increasingly dovish-Fed and the potential for rate cuts this year or next could set the stage for a major dollar decline. Such a decline would also likely coincide with a rising risk of recession, increasing risk aversion and lower equity markets. Put together, these factors form what could be the ideal recipe for significantly higher gold prices in the months and years ahead.

The Week Ahead In Gold

February 4, 2019/in Commentary, Market Updates, Market Updates/by Border Gold Corp.

The last couple weeks have demonstrated just how quickly things can turn in modern financial markets. Without question, last week’s FOMC meeting will remain a primary market-driver and subject of debate in the months and years ahead.

Has the Fed Lost All Credibility?

This is the question that investors may now be asking. Last week’s Fed meeting took even the most-dovish expectations and turned them upside down. The Fed’s actions-or lack thereof-could set the stage for significant dollar declines and higher asset prices. Put another way, the central bank is not willing to pop a bubble of its own making.

Not long ago, the Fed seemed willing to take the heat that stemmed from criticism of its ongoing policy “normalization.” Just a few months back, Fed Chief Jerome Powell had suggested that rates had a way to go before entering neutral territory. That opinion changed soon thereafter, when Powell said that rates may be closer to neutral than previously thought. The Fed then went ahead with previous plans to hike the Fed Funds rate by another 25 basis points in December.

The markets did not take the rate hike lightly, and the month of December saw a significant rise in volatility as equity markets suffered steep declines. Although numerous issues such as the ongoing trade war with China and arguably overstretched valuations likely played a role in the stock market pullback, most analysts seem to agree that a hawkish Fed was the primary culprit behind the sell-off.

The last few months have seen a steady stream of Fed criticism, with everyone from Mad Money hostJim Cramer to President Trump voicing their displeasure with the Fed’s course of action. The Fed has tried to maintain its independence, however, and as recently as several weeks ago reiterated its plans for further hikes this year.

Those plans now seem to have been thrown right out the window. In an abrupt about-face, the Fed has not only reversed its position on further rate hikes but has also said it will halt its ongoing balance sheet reduction.

In effect, the Fed has announced that it will keep “priming the pump.” Whether this decision came about as a result of increasing political pressure or significant changes in the central bank’s outlook, the central bank’s reputation is likely to take a major hit.

For investors, however, this makes one key issue crystal clear: The markets simply cannot do without ongoing Fed stimulus.

Not only has the Fed now halted all of its quantitative tightening measures, it has suggested that it may need to start easing again. The problem is, with the current Fed Funds rate at 2.25%-2.50% and the central bank still holding nearly $4 trillion in securities on its balance sheet, the Fed will have little ammunition to fight the next recession.

The smart money seems to recognize this. Recent inflows and bullish price action in the gold market may suggest that many investors see the writing on the wall and are looking to position accordingly. Although stocks may get an initial bump from these developments, the bubble will burst at some point. When it does, look out below. If price action related to previous Fed balance sheet expansion and contraction are a good indication, stocks could eventually decline by 50% or more.

The Fed’s actions are likely to make the next recession longer and deeper than the previous. The central bank’s inability to continue tightening is also likely to cause significant dollar weakness in the process. Any way you slice it, the current environment is highly bullish for gold and recent gains in the yellow metal could simply be the tip of the iceberg.

The Week Ahead In Gold

January 21, 2019/in Commentary, Market Updates, Market Updates/by Border Gold Corp.

The gold market lost ground in light trade Monday as markets were closed in observation of the Martin Luther King Holiday. Driving price action across markets was the latest economic news out of China.

On Monday, China reported the slowest pace of economic growth since 1990. The world’s second-largest economy reported a growth rate of 6.6% for 2018. The fourth quarter was especially trying for the country as growth slowed to a pace of 6.4% from Q4 last year.

The ongoing U.S./China trade war is certainly having a clear effect on China’s economy. Chinese exporters were forced to lay off employees and the damage control doesn’t end there. Companies also reported slashing capital expenditures, cutting prices and even cutting wages. The squeeze on corporate profits and employment could potentially cause the slowdown to deepen further and some analysts are of the opinion that economic conditions may be far worse than the data suggests.

Further evidence of a drastic slowdown in China could impact markets this week and beyond. Stock and commodity prices could both come under pressure as Chinese demand weakens further and as risk appetite fades.

Outside of China, the U.S. is dealing with plenty of issues of its own that could drive market volatility. The U.S. economy has also shown signs of slowing, and the manufacturing sector has become a particular source of concern. A downtrend has been established in manufacturing across various regions as the effects of the trade war become increasingly apparent. To make matters worse, the Federal Reserve has thus far stuck to its planned rate hikes and balance sheet contraction.

The Fed has recently begun to sing a different tune, however, as the slowdown gathers steam. Although the Fed still has two more rate hikes penciled in for 2019, traders are betting that no hikes will take place. In fact, some are even wagering that the central bank could be forced to cut rates before the end of the year.

Recognizing the recent string of weakness, the Fed will follow the data before making any further decisions. If the Fed elects to keep rates at current levels, or to begin cutting again, the effects on the dollar could be substantial. Dollar strength in recent months has been a primary obstacle to higher gold prices and any significant weakness in the greenback could pave the way for the next major leg up in gold.

As a major consumer of gold, Chinese weakness has the potential to weigh on the metal. That weight may be counterbalanced, however, by a weaker dollar and rising risk aversion. The gold market may also begin to see fresh inflows if equity markets resume their recent downtrend. Although stocks have posted some solid gains in recent sessions, the market is now at a large resistance area that could potentially act as a key turning point.

After making one significant attempt to crack key upside resistance, the gold market has pulled back. Although buyers have been quick to jump in and buy dips in recent weeks, the metal’s failure to make a fresh high may make the market increasingly vulnerable to a larger sell-off.

The Week Ahead In Gold

January 14, 2019/in Commentary, Market Updates, Market Updates/by Border Gold Corp.

The gold market will likely pick up where it left off this week. The yellow metal has been lingering near the key $1,300 level and has thus far made one serious attempt at a breakthrough.

The market has several key factors currently working in its favor, one of which is a recent shift in thinking at the Fed. Several Fed officials spoke last week (each with a seemingly different opinion) and the minutes from the latest Fed policy meeting were released. Of note is the fact that some members felt a December rate hike was not necessary and that the central bank should hold off on further tightening.

Although the Fed followed-through with its plans for a final hike in 2018, the central bank has adopted an increasingly dovish tone in recent weeks. The central bank currently has two further hikes penciled in for 2019, though that could change. Traders are currently betting on zero rate hikes this year, with some even suggesting that the Fed could end up cutting rates again this year.

Inflation data released on Friday showed consumer prices declining by .1% on a month-over-month basis and rising by 1.9% on an annual basis. These figures may work in gold’s favor. Tame inflationary pressures may allow central banks in the U.S. and elsewhere more wiggle room in terms of policy tightening and could lead to a considerably-less hawkish outlook.

The Fed will now almost certainly take no action until the second quarter at the earliest. The central bank will take a wait-and-see approach over the next several weeks. Given the recent string of poor manufacturing data in the U.S. and worrisome figures coming out of China, the potential for further equity market declines and volatility exists. Any further downside in stock markets or sharp increases in volatility could give the Fed further reason to remain on hold.

The gold market will also be watching the dollar this week. The greenback recently touched a three-month low and could remain under pressure. Investors will likely pay close attention to the Fed, looking for any clues as to the timing and extent of any further tightening. If the central bank decides to adjust its current outlook from two hikes to one, or even none, the dollar could see significant selling pressure.

Of course, these issues will need to be dealt with as the U.S./China trade war continues and as the U.S. Government remains shutdown. Although there has been some recent optimism over trade negotiations, there has thus far been nothing concrete that investors can “take to the bank.”

The ongoing government shutdown will become increasingly problematic for the U.S. With the newly-democratic House of Representatives willing to stand their ground while President Trump has insisted that he will not budge on his position, the potential for geopolitical fireworks may be on the rise.

Given the number of unknowns and the various risks currently being faced by global markets, equities and risk assets may continue to see decreasing inflows. As this asset rotation continues to gain steam, gold may finally have the horsepower to punch through key resistance and embark on a fresh leg higher.

The Week Ahead In Gold

January 7, 2019/in Market Updates/by Border Gold Corp.

As investors come back from the holidays, the next several sessions could potentially set the tone for the weeks and months ahead. Investors may look for stocks to stabilize after heightened volatility in recent weeks and market participants will be keeping their ears open for any potential clues from the Fed about their monetary policy plans going forward.

Stocks have seen some upside in recent sessions although it is too early to tell if the recent rally is sustainable. On Friday, the U.S. reported blockbuster job creation as the country added 312,000 jobs in December. The jobs figure blew the doors off estimates which were looking for less than 200,000 jobs created.

The employment data gave investors reason to buy stocks and appetite for equities increased further following some comments from Fed chief Jerome Powell. Although the non-farm payrolls report is a key piece of data, much of Friday’s massive rally could likely be attributed to an increasingly dovish Fed. Powell indicated that the central bank is willing to adjust its current policy and markets appear to be breathing a sigh of relief as the New Year gets underway.

The strong jobs data bucked the trend of recent disappointment. Key areas of manufacturing have been showing signs of slowing and the housing market continues to show further weakness. Consumer confidence recently sank to a six-month low and the services sector is also an area of concern. In addition to these and other local concerns, the data stream coming out of China remains worrisome.

The question now may be whether the strong jobs data is enough to keep the Fed on a more hawkish trajectory in order to prevent accelerating inflation. Markets are currently expecting no rate hikes for 2019 and are even pricing in a small chance for a rate cut. The Fed is in a very tricky position and could potentially reignite recent volatility if it takes a more aggressive stance.

Risk assets are also getting a boost currently from renewed optimism for a U.S./China trade deal. U.S. officials kicked off a round of two-day talks in Beijing on Monday and there are hopes that the discussions can build upon the framework set by President Trump and President Xi Jinping.

Despite some of the recent positives, many investors remain highly skeptical. Some analysts have suggested that the recent break from stock declines is simply the “calm before the storm” and that the most serious downside is yet to come.

It is also noteworthy that the democrats have now taken control of the U.S. House of Representatives. This has the potential to act as a major market wildcard as the U.S. geopolitical scene is likely to heat up even further.

In a sign of underlying market strength; the gold market has given up very little ground even as stocks have rallied. Gold remains within striking distance of key resistance around the $1,300 area and buyers appear happy to step in and buy any dips.

The gold market will need to see recent gains extended in the sessions ahead, however, or will become increasingly vulnerable to a more significant sell-off. That being said, the bulls may be simply biding their time until the next major wave of volatility hits risk assets.