Tag Archives: Precious Metals

Commodities

Commodities Markets: What Causes Changes in Gold Prices?

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Commodities Markets: What Causes Changes in Gold Prices?

Why do investors want to know about the history of gold prices? When buying and selling precious metals, investors always need to know about the dominant market trend. Knowing about the history of gold prices will help you make good decisions. Not only in minerals but other markets, as well. It is important to know more about the history of your business. It sheds light on what you should do and when. In gold, you will know why the prices change the way they changed. You also know about the high and the low season. Gold is seen as the most precious metal among the others. Its value is mostly higher than the others. Gold, until today, is used as a store for wealth. This will continue to be the case because of the changing values of fiat and paper currencies. 

Gold prices change but they still remain at a reasonable point. Therefore, gold is the best measure of wealth. This is a continuation of the traditional norms. Kings and queens stored their wealth in the form of gold. Many decades ago, gold was used as money. Our forefathers traded products for gold. Today, all that has not been eliminated. In some nations, gold is used in making coins. Though, in a small amount, gold is of great value. In some museums, you will find a collection of these coins that were fully or partially made of gold. The prices of gold have however faced changes in recent years. Today, gold is traded in electronic trading platforms. In 2011, it managed to rise up to over $1,900 before it started going down. This is to show you how much gold is valued. It is making headlines not only in physical form but also virtually.

History of Gold Prices in the U.S

Starting from the year 1791, the prices of gold in the U.S experienced changes. In 1791, the price of gold was $19.49 per ounce. 43 years down the line, the price went up to $20.69 per ounce. Increasing with $1.2 only after 43 years doesn’t seem right. In 1928, the Federal Reserve increased interest rates. This led to a recession in 1929. This made people redeem the normal currency into gold. Gold had more value compared to the dollar at this time. Due to the high demand for gold, the Federal Reserve was asked to raise the interest rates. 

In 1931, the value of the dollar increased and there was a decrease in demand for gold. In 1933, a law was stated that did not allow anyone to own bullion and gold coins. The gold was sold to Federal Reserve since private ownership was now illegal. Ever since the history of gold prices in the U.S became more interesting. The strength and weakness of the dollar have contributed to the price changes for gold. In 2011, the price of gold was at $1,895 per ounce. This was a result of the debt crisis. 

Before investing in gold, you should be aware of factors that contribute to the change in price in gold. They will enable you to know the best time to invest and when not to. There are many factors that have contributed to these changes and some of them are;

Demand and Supply of Physical Gold

Gold has many uses from making jewelry to being used as a store for wealth. When gold is in high demand and the supply is low, the prices tend to go up. This is one cause of changes in gold prices. It is not different from other markets. Any product that has a low supply compared to demand increases in price. When gold is in high supply and the demand is low, prices go down. This is because sellers have more than what the market needs. 

Inflation and Deflation

This is a sign that the economy is growing. A higher rate of inflation leads to higher prices of gold. Inflation is a result of stable political factors and motivation in economic growth. For instance, gold did not perform well during the world war. Before the beginning of World War 1, some nations adopted the gold standard. The gold standard was used to compare domestic currencies before setting the prices, to the value of a certain amount of gold. However, this came to an end when the war began. During this period, economic growth was not experienced either. Deflation happens when there is no upward growth in the economy. It is a time when there are fewer employment opportunities and investments. This leads to a decrease in gold prices.

Central Banks

Central banks are in charge of the amount of money circulating in a country. It also has a mandate to limit the amount of gold in supply. This can lead to a change in prices. Another thing is, when the central bank increases interest rates, the price of gold rises. Central banks, therefore, play a vital role in changes in gold prices.

Strength and Weakness in the U.S. Dollar

Gold is dollar-denominated. When the value of the dollar goes high, the price of gold decreases. It is also true that gold price increases with a weakening dollar value. This is because, when the dollar becomes weak, the currency in other nations become stronger. When this happens, the demand for products go up, gold is one of them. Its demand goes high leading to a rise in its price. 

Conclusion

The story of gold prices starts way back in history. However, today it remains highly valued. As time went by, gold coins were used instead of gold bars. Today, gold remains to be a treasure. If you have gold, you feel that you are rich. This is because of the value it has and how much it is worth. A small piece of gold will go for dollars. Most importantly, people in the buying and selling of gold should not overlook its journey.

Gold, Precious Metals

Precious Metals: Gold Is Basing For Next Bullish Wave

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Precious Metals: Gold Is Basing For Next Bullish Wave

In 2019, one of the market’s most surprising stories has been the massive bull trend movement that has been established in gold.  Additionally, a series of unpredictable changes occurred in the realm of monetary policy, as the Federal Reserve has already broken with its long-standing position to raise interest rates as a way of preempting continued expectations for growth.  In the U.S., the latest evidence in the national GDP readings implies growth rates that are close to zero for the fourth quarter. Overall, this is not a bullish scenario for stocks —even with the S&P 500 trading near its record highs. 

My regular readers know that I often tend to look at market inflow activity in some of the precious metals industry’s most popular exchange-traded funds (ETFs).  This would also include instruments like the VanEck Gold Miner’s ETF, which is a topic I have discussed in a prior article.  Ultimately, this type of approach to baseline fundamental analysis can provide important clues that help identify price trends that are likely to begin reversing relatively soon.  

Most directly, we can see that recent activity in the SPDR Gold Trust ETF (NYSE: GLD) has shown outflows worth $1,308.7 million over the last four weeks.  However, this figure might paint a very different picture when compared to various time horizons. In the last 13 weeks, GLD has seen inflows of $2,330.9 million but this figure actually grows to $7,191.3 million over the past 26 weeks.  Overall, these are significant differences that give us a fundamental reason to believe that there will be underlying strength in any technical trading events that are generated as a result of 2019’s bullish trend moves.

Gold GLD

Traders should define the major rallies in precious metals as a development the occurred after the beginning of summer.  However, the true origins of that really actually began much earlier (as commodities markets were confirming their lows near the end of 2017).  In this chart, I have outlined a series of levels that could prove to be pivotal in the event we see a true bearish reversal in the price of precious metals.  

Using the price valuations in GLD, we can isolate these important price levels as falling near $106.80, $112.05, and $126.50.  This first level marks the lows from December 2016 while the second level marks the lows from August and September 2018. The third level on the GLD price chart shown above is meant to mark the highs from February 2019.  This final price zone will now be expected to act as support once the GLD valuation overcame resistance at these levels.

Gold GLD

Shorter-term, the confluence of these technical factors suggest we are likely to begin basing above the $126.50 region.  Evidence supporting the bearish outlook would include the slowing momentum levels that are present on the daily charts. In my own trading, I will be paying special attention to the technical indicator readings in the Commodity Channel Index (or CCI).  I expect to see the first clues of short-term reversal in the CCI reading. Longer-term charts (weeklies) are clearly positive and it seems to be just a matter of time before that prior uptrend resumes.  

Initial resistance levels suggest traders will likely target $147.10, which was the price high from September.  However, the price targets that could be reached if these levels are broken could be outrageous. Long-term readings in market momentum remain favorable and the short-term retracements we have seen to the downside could create some new buying opportunities in the weeks ahead.  For additional information on how I use the Commodity Channel Index to gauge price momentum, readers might be interested to see my Momentum Trading Tutorial which explains in greater depth some of the ways these technical charting tools should be interpreted.

 

Gold, Precious Metals

Silver: This Under-Achiever Is Ready To Shine

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Silver: This Under-Achiever Is Ready To Shine

For most of 2019, the emerging trends in the precious metals space have been undeniably strong.  Many analysist (possibly a majority of the financial analyst community) seemed to think that these types of events were impossible, given the fact that the S&P 500 was on a clear course to continue posting record highs.  

However, when this type of enthusiasm in equities reaches an extreme, it’s often a good idea to start looking at the precious metals space as a protective buffer against the growing potential for downside volatility.  This was the basis for many of my bullish commentaries (and actual trades) during these periods and recent price moves have largely confirmed the accuracy of those forecasts.

If we take a long-term view of the SILVER/USD chart history (weekly), we can see that the initial surge in price activity became apparent during the May-June trading period.  The first major signal that the paradigm had shifted developed once prices forcefully broke through the Ichimoku Cloud structure. Prior to this event, the most significant price lows formed toward the end of May (just below $14.30) and SILVER/USD soon rallied by more than 37.5% to reach new highs of $19.65 in roughly five weeks.

Silver Price Chart
Silver Price Chart

For some investors (particularly those focusing on cryptocurrencies), these rallies might not seem all that significant.  However, we must consider the fact that SILVER/USD had been caught in a dramatic long-term downtrend that had produced very little upside price movement since July 2016.

If we look at this same catalyst event on the SILVER/USD daily charts, we can see that Kumo support lies within close proximity to the current market valuation.  This is another highly encouraging element for anyone bullish on assets tracking the value of silver. As long as markets can hold these levels (and not break downward through the Kumo), the implication is that SILVER/USD will be in a position to move above the September highs of $19.65.

Silver Price Chart
Silver Price Chart

Of course, all of that will depend on price performances seen in the shorter-term charts.  Interestingly, we are starting to see similar events unfold on the SILVER/USD hourly charts (and this largely supports the broader thesis).  

Silver Price Chart
Silver Price Chart

Traders that are familiar with the practice of Fractal Analysis might view these recent developments as particularly exciting, given the ways they suggest an extension of the prior bull move that generated the May-June price breakout in SILVER/USD.

Silver Price Chart
Silver Price Chart

What’s notable here is that the short-term Ichimoku Cloud break (on the hourly charts) shares many of the same features that were present during the May-June catalyst event.  On the hourly charts, there is a bit more distance present between price and the Kumo, so this actually suggests we could still see some further downside without eroding the bullish bias for SILVER/USD.

Silver Price Chart
Silver Price Chart

Furthermore, this recent break of cloud resistance on the SILVER/USD monthly charts was accompanied by an overbought surge in the Connors RSI indicator reading.  When I use the Connors RSI indicator, I will generally look for bullish/bearish divergences rather than instances of price extremity. The reason for this is that the indicator tends to send many more signals when compared to the traditional RSI reading.  

In this case, the Connors RSI projected upside price moves (based on the divergence) and this is another factor that points to an eventual re-test of the September highs.  For more information on how I interpret these specific indicator readings, I encourage readers to review my Connors RSI Trading Tutorial for a detailed explanation of how I conduct my price analysis. 

Commodities, Gold

Gold Markets: Bullish Trends in First Quarter Performance

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Gold Markets: Bullish Trends in First Quarter Performance

Gold prices gained in value during the first quarter even as upside moves were also tallied in the S&P 500 Index (NYSE: SPY), the NASDAQ Composite Index (NYSE: QQQ), and the Dow Jones Industrial Average Index (NYSE: DIA).

Each of these markets gained positive benefits from the Federal Reserve, as the central bank reversed its hawkish position near the beginning of the year. Further optimism came from progress in trade talks between China and the United States, and this helped push the markets higher during the quarter. Gold prices held steady even as investors saw reduced need for safe-haven assets.

Central drivers for the underlying price of gold in 2019 may develop as a result of the Federal Reserve’s changing tone and the market’s expectations for an extended decline in international growth rates. Negative sentiment that stems from a potential global slowdown has diminished investor concerns of higher interest rates. If these concerns persist (and if the yield curve remains inverted), demand for gold should continue to increase.

Performances from Gold Miners

One of the most popular exchange-traded funds is the VanEck Vectors Gold Miners Trust (NYSE: GDX), which rose by 6.3% in the first quarter of this year. Performances in gold mining stocks have varied widely during the period (depending largely their individual fourth-quarter valuation changes and the different company outlooks for 2019).

(Source: NASDAQ, NYSE)

In Q12019, each of the senior and intermediate gold miners saw bullish trends in their stock values, with the exception of IAMGOLD (NYSE: IAG). The stock dropped 5.7% during the quarter. In contrast, Eldorado Gold (NYSE: EGO) gained by the most in the group (at 60.8%).

Other key names in the industry include Goldcorp (NYSE: GG) and Yamana Gold (NYSE: AUY), which gained by 16.7% and 10.7%, respectively. Mid-level performances were generated by Agnico Eagle Mines (NYSE: AEM) and Kinross Gold (NYSE: KGC), which gained by 7.7%, 6.2%, respectively. Quarterly performances from Newmont Mining (NYSE: NEM) and Barrick Gold (NYSE: GOLD) lagged somewhat, but still posted gains 3.2%, and 1.3%, respectively.

Weaker Gains from Barrick Gold

Senior miner Barrick Gold (NYSE: GOLD) underperformed many of its peers and also lagged behind the performances of key exchange-traded funds NUGT and GDXJ in the first quarter of 2019. The underlying bullish trends in metals did help Barrick stock prices rise by 1.3% in the first quarter, while the benchmark fund GDX produced much more impressive returns (at 6.3%).

(Source: Barrick’s Quarterly Filings)

Disappointing stock trends from Barrick might prove to be short-lived, however, as the company’s fourth-quarter earnings results did beat analyst expectations. Earlier euphoria stemming from Barrick’s announced merger plans with Randgold Resources (which finalized on January 1st) may have reached a point of exhaustion, and profit-taking in bullish positions could be responsible for the weaker performances we have seen recently.

At the moment, analysts are waiting to see material earnings benefits from the proposed execution plans between the two companies. Once this occurs, the stock may have a chance to run higher. Recent guidance indicates potential gold production output of 5.1–5.6 million ounces in 2019 (which would be an increase of 18% year-over-year).

Barrick has reported lower production rates for eight straight years, but the company’s declining production profile could be helped by its deal with Randgold. Barrick’s production costs imply a potential rise of 11% in 2019 (when compared to company data from 2018).

In combination with Barrick’s weaker production guidance, the company also reported a year-over-year decline in its reserves of 3.4%. The average grade of the Barrick’s reserves was unchanged from 2017 (1.56 grams per ton). Barrick continues to maintain the highest grades in the industry (as Goldcorp, Kinross Gold, and Newmont Mining all have lower grades).

Five Gold Stocks Loved by Wall Street

Most of the time, gold mining stock work as a leveraged way of playing gold prices. In 2018, the VanEck Vectors Gold Miners fund dropped by 9.3%, in moved amplified by the 1.9% drop in gold prices.

The Direxion Daily Gold Miners Bull 3X fund (NYSE: NUGT) and the Direxion Daily Junior Gold Miners Bull 3X fund (NYSE: JNUG) saw dramatic price action that surpassed these trends by a large margin. In 2018, NUGT and JNUG weathered losses of 45% and 48%, respectively. Year-to-date in 2019, the benchmark fund GDX has gained 10.3%.

(Source: NYSE)

Of course, gold miners are impacted by company-specific issues in addition to gold’s price movements. So far, several company-specific factors have influenced the performances of the gold miners — and this will likely support prices as investors find out where to sell gold coins in 2019. Barrick Gold finished its planned merger with Randgold Resources in January, and it has also been influenced by problematic factors at its mines.

Similarly, Kinross Gold and Eldorado Gold experienced government interference and stresses after mining code changes. Newmont Mining also announced a merger with Goldcorp in January of this year.

Commodities

Gold Prices: Precious Metals Rally to 5-Week Highs

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The SPDR Gold Trust ETF is now trading at 5-week highs.  Stalling momentum in stock markets and the prospects of lower interest rates policies in the US suggest that precious metals could rally in the first half of 2018.  Generally speaking, there is a strong divergence between the activity that is seen in the stock markets and the precious metals markets so we will watch to see if this continues in the financial markets during the next few months.