By: Frank E. Holmes, Chairman/CEO/CIO of U.S. Global Investors, Inc.
- The best performing metal this week was platinum, up 2.61 percent, followed closely by palladium, up 2.39 percent. Both platinum and palladium experienced strong demand as hedge funds pushed their net-long positions to five and three-week highs, respectively. Gold traders and analysts were mostly bullish in the weekly Bloomberg survey due to renewed concerns over a trade deal between the U.S. and China. The latest rate cut by the Fed helped remove a negative characteristic of gold – that it doesn’t pay any interest. With real yields now negative, the yellow metal is comparatively attractive.
- Gold saw its fifth monthly gain in October after benefitting from haven buying amid increased geopolitical tensions. Turkey’s official gold reserves rose $72 million from the previous week to now total $26.5 billion. According to central bank data, Turkish gold reserves are up 42 percent year-over-year. American Eagle gold-coin sales from the U.S. Mint more than doubled in October, versus September and were the highest since March, with total sales of 11,500 ounces.
- The yellow metal initially fell after the Fed cut rates for the third time on Wednesday, but then quickly regained those loses despite policy makers hinting they might put further cuts on hold. Bloomberg reports that the Fed looks prepared to stop cuts in order to assess the impact on the economy of their reductions over the past three meetings. Dan Pavilonis, senior market strategist at RJ O’Brien & Associates LLC, said “there’s a lot of moving parts now that are creating a theme to be bullish on gold.”
- The worst performing metal this week was silver, with a slight gain of 0.44 percent, despite setting a five-week high on futures net long positions. The ISM Index rose in October by lower than estimates and signals a third straight month of contraction for U.S. manufacturing. The index rose to 48.3 from a 10-year low of 47.8 in September, compared with median projections of 48.9. Bloomberg reports that the low reading highlights challenges for manufacturers such as the ongoing trade war, slowing global growth and a strong dollar.
- The Chicago PMI reading also missed estimates, posting the lowest reading since 2015 at 43.2 for the month of October. Bloomberg analysis shows that the index has never dipped this low out of a recessionary period except for the 2015-2016 oil and China growth scare. Market reactions to the reading were very negative, which makes sense given its recessionary prediction history.
- The Perth Mint reported that gold coin and bar sales totaled 32,469 ounces in October, down from 46,837 ounces the month prior. Silver sales did increase at 1.39 million ounces, versus 1.35 in September. Gold consumption in China fell 9.6 year-over-year in the first nine months of 2019 at 768.31 tons, according to the China Gold Association. Demand in the world’s largest consuming country was hit by higher prices and downward pressure on the economy.
- Bloomberg’s Eddie van der Walt says that gold’s bullish performance even as the S&P 500 continues to hit record highs suggest that gold has “unfinished business” at $1,550 an ounce. “While U.S. GDP has so far held up in the face of slowing manufacturing, there’s still plenty of bears out there wary of stocks near record highs – they will probably be pivotal in pushing the metal back to the highs for a re-test.”
- Torex Gold reported strong third quarter earnings. The company had revenue of $198.2 million on sales of 132,535 ounces of gold and produced 138,145 ounces during the quarter. Torex will be appointing Jody Kuzenko as its new CEO at the annual general meeting in June 2020, which is a huge step for gender diversity in the mining world. Evolution Mining’s Executive Chairman Jake Klein cautioned companies to practice responsible capital spending and not rush into acquisitions. Klein says “fundamentally, I don’t see it as our business, or our position, to buy assets on the basis that the gold price is going to go up.”
- Zimbabwe is hoping that a platinum mining boom will help revive its economy. Platinum projects valued at more than $8 billion have been announced by Cypriot and Russian investors, but the country still remains politically and economically instable. Zimbabwe is home to the world’s third largest platinum-group metal deposits and has announced 2.79 million ounces in output by 2024, almost triple current output levels.
- The market for bulletproof vehicles is skyrocketing and demand in the U.S. is higher than ever, according to a Bloomberg news story. Philip Nadjafov, whose family founded Isotrex, says business has risen in the last three years to fulfill UN and government contracts and that “people are investing in their security.” This is a troubling sign of the times and highlights the wealth gap of more consumers able to afford six-figure bullet proof personal vehicles. ArmorMax CEO Mark Burton says “people are worried about random acts of violence.”
- Well-known hedge fund manager Paul Tudor Jones says that the S&P 500 will fall 25 percent if Democrat Elizabeth Warren wins the 2020 presidential election – one of many on Wall Street who are predicting doom if there’s a shakeup in the White House. However, just a few years ago strategists were predicting a big drop if Donald Trump was elected, which did not happen. Point being there will be many political risks from now until the 2020 election and no one can say for sure how the stock market will respond to anyone becoming elected, or re-elected.
- The U.S.-China trade deal still seems unlikely after China is said to doubt that any long-term deal with President Trump will be possible. Another turn is that Chile cancelled an economic summit in a few weeks where the U.S. and China were meant to meet and sign phase 1 of a deal.