Australian (ASX) Stock Market Forum

Gold Price - Where is it heading?

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POG up some $570 since January.
Record closing price ends the week.
Middle east tensions likely to keep POG elevated, delaying the pullback which we would normally expect given the recent spike kicked of some 7 weeks ago.
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EVN's quarterly report during the week highlights what is to come for the producers. In EVN's case, for example, their large margin was based on an AUD price that is currently about AU$500/oz less than POG's average price trending into this June quarter. With EVN proposing to knock out over 200koz on this quarter, that's going to deliver a lot more upside than we got from its March quarter result.
 
rcw1 said:

​

Who is the ‘massive player with deep pockets’ behind gold’s surge?​

A powerful force is stalking the world’s gold market and it is operating in the shadows. Whoever it is – or they are – seems insensitive to cost.

Ambrose Evans-Pritchard
AFR Apr 17, 2024 – 8.53am

A powerful force is stalking the world’s gold market. It is operating in the shadows.

None of the normal footprints are visible on the London bullion market or the Chicago Mercantile. Retail gold bugs have not been buyers: ETF gold funds have been shrinking since December. The crowd is piling into the Bitcoin scam instead.
Yet gold has smashed through a four-year barrier around $US2000 an ounce, rising in parabolic fashion since mid-February, and hitting an all-time high of $US2431 on April 11. Is somebody preparing for an escalation of the shadow Third World War?

“It is not a Western institution behind this. It is a massive player with very deep pockets. I have never seen this kind of buying before,” said Ross Norman, a veteran gold trader and now chief executive of Metals Daily.
Gold has been ratcheting up fresh records against the headwinds of a strong dollar, a 70-point jump in 10-year US Treasury yields, and hawkish talk from the Federal Reserve. This mix would normally spell trouble for gold.

Whoever it is – or they are – seems insensitive to cost. Central banks do not behave like this.
“They buy on the London benchmark, and they don’t chase the price,” says Norman.
This rally is happening off books in the OTC market.

Yes, China’s central bank has been adding to its declared gold reserves for 17 consecutive months, part of the gradual portfolio shift away from US Treasuries and European bonds by the Global South.

Dollar weaponisation since the war in Ukraine has unnerved every country aligned with the authoritarian axis of China and Russia.

None can feel safe parking money in Western securities after Russia’s foreign reserves were frozen. Yet, the scale is modest. The World Gold Council said central banks bought a net 18 tonnes in February: 12 in China, six in Kazakhstan and India, four in Turkey, partly offset by Russian sales. This hardly moves the needle.


The Chinese people certainly have been buying gold, creating traffic jams at the Shuibei jewellery hub. Precious metal is the only refuge from the property crash and the slump on the Shanghai bourse. Tightening capital controls make it hard to smuggle serious sums abroad.

But this alone cannot account for the price surge, either. Norman says the gold flow to Asia has been within normal bounds.

Solving the mystery​

So let me take two stabs at this mystery – one geopolitical and one financial.

It has been clear for three years that Russia, China and Iran are operating in collusion, each feeding opportunistically on each other. All three have fostered belligerent hyper-nationalism as a means of regime survival, and all aim to press their advantage against a fatally complacent West before the window of opportunity closes. This menace on three fronts has reached a dangerous juncture. None of the major democracies have put their economies on a war-time footing despite the obvious threat.

The West has dropped the ball on Ukraine – or worse, it is preventing Ukraine from hitting Russian oil facilities – and has therefore left the door wide open for a knock-out blow by the Kremlin this northern summer. Iran has been emboldened by Russian President Vladimir Putin’s military comeback. It is also flush with money.

US President Joe Biden is so worried about rising petrol prices that he has turned a blind eye to sanctions busting, letting Iran sell as much crude as it wants. This has enabled Tehran to advance its pawns in the Middle East, and now to risk a direct missile strike against Israel.

The third shoe has yet to drop, but China knows the West has run down its stock of military kit trying to contain these other two crises. Chinese President Xi Jinping may never have a better moment to tighten the noose on Taiwan with a naval and air blockade, gaining a stranglehold over the West’s supply of advanced semiconductors that can then be used as a bargaining chip.

How would the democracies respond to this?

A pandemic of spending​

There is a strong suspicion among gold experts that China is behind the surge in buying, building up a war-fighting bullion chest through state-controlled banks and proxies.

But others, too, can see that we are living through a fundamental convulsion of the global order, and that the dollarised financial system will not be the same at the end of it.

Gold is the hedge against dystopia.

However, there is a parallel explanation. COVID-19 finally broke our spendthrift governments. The talk in hedge fund land is that some big beasts are taking bets against “fiscal dominance” across the West.
It is a collective judgment that too many countries have pushed public debt beyond 100 per cent of GDP and beyond the point of no return under prevailing economic ideologies and political regimes.

Budget deficits have broken out of historical ranges and are running at structurally untenable levels for this stage of the cycle.

Central banks will bottle it – under this scenario – to mop up issuance of treasury bonds. They will let inflation run hot to help states whittle down debts by stealth default. You might argue this is what they already did by letting rip with extreme money creation during the pandemic.

The Bank of Japan is refusing to raise rates above zero or halt bond purchases, even though core inflation is 2.8 per cent and the Rengo wage round is running at 5.2 per cent.
This is what a debt trap looks like. With a debt-to-GDP ratio above 260 per cent, Japan cannot return to sound money without risking a fiscal crisis.

Olivier Blanchard, global debt guru and former IMF chief economist, once told me how this would unfold by the mid-2020s. “One day the BoJ may get a call from the finance ministry saying, ‘Please think about us – it is a life-or-death question – and keep rates at zero for a bit longer’,” he said.

The European Central Bank is also in a debt trap. It continued to buy buckets of Club Med bonds even when inflation was over 10 per cent.

This was patently a fiscal rescue for semi-solvent states.

The ECB has backed off for now but will be forced to shield Italy again with fiscal transfers disguised as QE in the next downturn.

The Fed has largely monetised the Trump-Biden jumbo deficits.

It now faces an invidious choice: either it stays the course against inflation, at the risk of a US funding crisis, a commercial property/banking crisis, and recession, all ending in a return to QE and fiscal dominance; or it cuts rates hard and fast before inflation is under control, also ending in fiscal dominance.

Is gold sniffing this out?

Of course, the gold spike may be nothing more than wolf-pack speculation by funds orchestrating a squeeze on bullion shorts through the options market, knowing this sets off a self-fuelling feedback loop. If so, the rally will short-circuit soon enough.

My bet is that a big animal with a Chinese accent is bracing for geopolitical or monetary disorder on a traumatic scale.
Click to expand...


So this article surmised that the 'Whale' buying gold was China. Highlight mine.

No.

Far more of a bombshell:

Screen Shot 2024-04-20 at 5.14.48 PM.pngScreen Shot 2024-04-20 at 5.15.18 PM.png

The US Treasury.

You will need to re-read this post: https://www.aussiestockforums.com/threads/gold-price-where-is-it-heading.2366/page-750#post-1275016

Yellen needs a weaker USD. Weaker against what? China already floating CNY against gold.

Float USD against gold and have a weaker USD against gold, same as the Chinese.

The ultimate aim is CHEAPER OIL. Energy is the bedrock of the economy.

Which means there is now a TREASURY PUT on gold at $2400. Only 1 direction this goes now. LOL.

jog on
duc
 
If it is true that the UST is buying gold surreptitiously then it is not unreasonable to assume the following:

1. It is buying through a proxy so as to not cause a panic and so it can soak up as much gold as possible for the best price.
2. The gold buying in itself is a tacit admission that the fiat system is broken and the gold being bought is insurance against a paradigm shift in our conception of currencies, value and the mechanics of economic exchange.
3. We could be on the cusp of the greatest precious metals boom in history.

Of course, i am biased so take what I say with a large grain of salt but I feel like the wheels are finally wobbling on the clown car and we may well be heading towards a serious economic crisis that will make the GFC look like a walk in the park.
 
Good evening
Meant to post this article earlier ... but got tied up ... enjoy

Commodity markets perplexed why gold keeps going up​

Alex GluyasMarkets reporter AFR
Apr 19, 2024 – 11.45am

Gold’s record-breaking rally is confounding the world’s top commodity analysts and fund managers as the precious metal defies traditional price drivers to make history this year. Prices have surged 20 per cent over the past two months to record highs above $US2400 ($3754) an ounce despite elevated real bond yields, which account for inflation, and a robust US dollar. Both of those have historically worked against gold’s favour.

Instead, analysts have attributed gold’s returns to accelerated central bank purchasing, particularly in emerging markets, and strong retail demand in China and the US. Rising geopolitical risks in Europe and the Middle East have only added to gold’s appeal. RBC Capital Markets acknowledged that while those are relevant factors for gold, they have rarely been overriding determinants of its price. The broker’s gold models rely more heavily on macroeconomic drivers such as rates and the US dollar.

“By most of those measures, gold is actually quite overvalued, especially when looking at single factors,” said Helima Croft, head of global commodity strategy at RBC. “Perhaps this is a signal to re-adjust our expectations? Or perhaps the gravity indicated by macro drivers is just not important right now?”

Goldman Sachs agreed that the breakdown in gold’s correlations means a new framework is needed. It suggested gold as a barometer for “fear and wealth”. The broker is far more bullish than RBC, which believes the market hasn’t fully recognised the metal’s vulnerabilities, and predicts prices will average $US2248 an ounce in 2024.


Oxford Economics thought it was already bullish on gold, but it too has seen its forecasts thumped. It warned that prices are now vulnerable to a short-term pullback, and subsequently closed its long position that it opened in October last year. Oxford believes the rally has been supported by an increase in investment managers taking long positions, which have spiked over the last month to the highest since the pandemic broke out in 2020.

“We think that the rally has run out of steam among speculators who won’t continue buying gold at the same pace,” said economist Diego Cacciapuoti.


In contrast, Goldman last week upgraded its year-end price forecast to $US2700 an ounce, from $US2300 an ounce previously. It believes that US Federal Reserve rate cuts arriving later this year will likely stem the outflows being suffered by exchange-traded funds that buy physical gold. Indeed, ETFs have shed around 900 tonnes of physical gold since holdings peaked in the fourth quarter of 2020, Citi noted. ETF providers buy and store gold to match demand for their securities.

But any outflows appear to have been absorbed by central banks, whose gold purchases hit their second-highest level in 2023, buying around 1037 tonnes collectively.

And Citi expects that trend to continue, projecting more than 1000 tonnes of central bank purchases this year, which would be the third-highest volume since the Nixon shock in 1971, the last time foreign governments could exchange their dollars for gold.

Citi this week upgraded its forecasts to its “bull case scenario”, triggering a 6.8 per cent increase to its 2024 projection to $US2350 an ounce, and an “admittedly massive” 40 per cent lift in 2025 to $US2875 an ounce.

Laggards​

The broker believes that an eventual interest rate cutting cycle by the Federal Reserve and a rally in Treasuries could be the kicker to boost gold to $US3000 an ounce in the next 12 months.

But while analysts scramble to retool their forecasts, investors are also wondering when the surging gold price will flow through to the valuations of gold producers. Indeed, the VanEck Gold Miners ETF has underperformed the gold price by around 30 per cent over the past three years. But UBS noted this week that the ETF has begun to close the gap.

The broker argued that if gold holds at current levels, it amounts to 20 per cent upside to 2024-25 earnings for gold miners under its coverage.

While UBS acknowledged that wet weather in Western Australia will keep pressure on FY24 guidance and costs, that wouldn’t be enough to take the shine off the surging gold price.

“While recent WA rainfall is the latest production challenge, making meeting the bottom end of guidance a beat, in this price environment there are few bad gold stocks to hold,” said UBS analyst Levi Spry.

Wilsons Advisory agreed that the sector’s leverage to the gold price will outweigh the impacts of cost inflation in the medium term – a dynamic which is not yet adequately reflected in consensus earnings.

Have a very nice Sunday.

Kind regards
rcw1
 
rcw1 said:
Good evening
Meant to post this article earlier ... but got tied up ... enjoy

Commodity markets perplexed why gold keeps going up​

Alex GluyasMarkets reporter AFR
Apr 19, 2024 – 11.45am

Gold’s record-breaking rally is confounding the world’s top commodity analysts and fund managers as the precious metal defies traditional price drivers to make history this year.

I

Kind regards
rcw1
Click to expand...

Perhaps its merely telling us that the experts and the gifted ones know no more than us mere mortals.
Mick
 
I'm always suspicious of analysts that change their predictions at the slightest headwind..
Most of them have ulterior motives, "most of them publish what they are told to publish"..
As a contrarian i just don't believe them, they get spooked way too easily IMO..
 
As a Contrarian, I just do not believe them, Do they just get spooked too easily ?, or do they really want to buy back in at lower prices ?.
Technically, there is no tested Resistance anywhere above the current SP, So, atm the magical 2400 suits their needs...
 
So from the above article:

Screen Shot 2024-04-21 at 2.28.40 PM.png

CBs have been buying and they have been buying for a number of years. Physical. The leverage of paper to physical is breaking down.

The real issue is that their 'model' is no longer relevant. China et al have broken the USD monopoly.

Screen Shot 2024-04-21 at 2.28.55 PM.png

Interesting that they chose $2400. That is the rumoured Treasury PUT price. LOL. GS are in the loop certainly.

Screen Shot 2024-04-21 at 2.29.41 PM.png

These charts come from pg 274 of this thread:

Screen Shot 2024-04-21 at 2.38.02 PM.png

JPM is now joint custodian along with the LBMA in London. JPM have been transferring physical from London to NY. JPM are definitely in the loop as they have always been the Treasury's agent.

Screen Shot 2024-04-21 at 2.38.29 PM.png

Which is exactly right. Yellen NEEDS a LOWER USD. Buy gold (sell USD) and then revalue. FDR did this EXACT same thing in 1933.

Pay attention to history. When was the last SOVEREIGN DEBT crisis? Correct the 1930's and the hangover in debt from WWI.

jog on
duc
 
I am seeing early 70's style inflation ' fractal ' . I suggest the go look at '70's gold PA , I wouldn't be surprised to see gold at multiples of what it is today by end of decade . I am so time poor atm otherwise i'd do a deeper dive post on this .
 
200.gif

Maybe the government here will follow a presumed lead from the U.S at some point of desperation and confiscate citizens' privately held gold? The Aust government might see it as a convenient way to restock some of what Monash Uni 'educated' treasurer Pete Costello threw away? Pete was such a modern thinker. Just a paranoid notion. The Australian government (especially a Labor one) might say, "The Australian people want their fair share of windfall super profits"

Australia Gold Confiscation—1959

"The Australian government similarly nationalized gold.
The law, part of the Banking Act in 1959, allowed gold seizures of private citizens if the Governor determined it was “expedient so to do, for the protection of the currency or of the public credit of the Commonwealth.” In other words, they made it legal to seize gold from private citizens and exchange it for paper currency.

The country’s Treasurer stated in a press release that followed, “All gold (other than wrought gold and coins to a limited extent) had to be delivered to the Reserve Bank of Australia within one month of its coming into a person's possession.”
The law also said you weren’t allowed to sell gold, except to the Reserve Bank of Australia (their central bank). Nor could you export any gold (send it outside the country) without the bank’s permission.

While it is unclear whether or not the country moved ahead with active seizures, or just how many citizens complied, the law still destroyed the local private gold market overnight.
Like the US ban, this rule wasn’t short lived either. Reports indicate it stayed on the books until 1976, a full 17 years, before being “suspended.” "

Article from the ABC!! dated Mar 2010

"In November 1997 the then Treasurer, Peter Costello, shocked some people when he announced he'd signed off on the sale of $2 billion worth of Australian bullion. On the day he announced the sale the price was around $US306.00 an ounce. At the time, according to Mr Costello, gold "no longer plays a significant role in the international financial system"."
www.abc.net.au

Worth its weight in gold

It wasn't that long ago gold was on the nose, especially in Australia, but now, everyone wants it.
www.abc.net.au www.abc.net.au
 

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