Gold Enters a Bull Market with 30-Year Record High Demand
Gold Enters a Bull Market, According to JP Morgan
One of Wall Street’s largest institutions, JP Morgan Private Bank, is betting on the gold rally to continue. Solita Marcelli, the bank’s head of fixed incomes, commodities and currencies, holds the view that gold could hit at least $1400 per ounce by the end of the year. Gold’s retreat on prices this week is, in her assessment, a healthy market correction before its next climb. Gold ended Friday on a positive note, recovering some of the gains from the previous days. JP Morgan is one of many financial institutions recommending their clients position for a new and very long gold bull market.
Why this matters to precious metals investors:
These projections are positive for both gold and silver. Both precious metals are sensitive to the same market factors. Silver has already been out-performing gold this year, so it is safe to assume both metals have entered this bull market.
What Jobs Report Data and Fed Policy Means for Gold Market Rally
Gold climbed a substantial amount last Friday after the Bureau of Labor Services reported much fewer jobs created in April than had been anticipated. This is a sign that the economy is not doing as well as hoped. Banks like Merrill Lynch and Goldman Sachs (among others) are changing their projections for interest rate hikes happening because of the negative economic data. A policy of negative interest rates – which is what the Federal Reserve is currently pursuing – is favorable to gold. Many investors were hoping for a policy reversal and interest rate hikes by June, and are now finally adjusting to the reality that it isn’t likely to happen.
Why this matters to precious metals investors:
When the economy is weak, gold is strong. Unemployment rates are on the rise and the dollar is losing steam. Investors in all financial sectors are starting to realize this and adjust expectations accordingly. Investing in gold now is a safe way to stave off risk with the rise of these negative economic indicators.
Central Banks’ Policy Direction Points Leading Hedge Fund Managers to Gold
Investment experts continue to push gold as the safest investment in this environment. Gold just had its best quarter in thirty years and is on the rebound. Global investors are becoming increasingly uneasy about the unprecedented monetary easing policies from the world’s central banks and its ramifications for inflation. Several eminent hedge fund managers are making gold their largest currency allocation. Investor confidence in central banks is weakening by the day leading to a revitalized demand for gold. Even Goldman Sachs, whose outlook for gold bullion has been more conservative than others, bumped up its gold forecast this week. Billionaire hedge fund manager Paul Singer recently said in an April 28th letter to his clients:
“It makes a great deal of sense to own gold. Other investors may be finally starting to agree. Investors have increasingly started processing the fact that the world’s central bankers are completely focused on debasing their currencies.”
Why this matters to precious metals investors:
Some of these hedge fund managers flocking to gold are among the most successful in their field. The stock and equity market volatility has become too dangerous for many investors. If inflation continues to rise, gold will become even more attractive as a safe haven against a weak dollar. Buying now will stave off these risks later.
Q1 of 2016 Sees Highest Demand for Gold in a First Quarter Ever
Concern over China’s debt problem, volatility in the equity market, and the Federal Reserve’s negative interest rate policy drove gold into its best quarter in thirty years. Demand soared to the second highest level on record. The metal attracted private investors and some of the world’s largest hedge funds alike. Stanley Druckenmiller, founder of Duquesne Capital Management, believes the equity bull market is “exhausted” and gold is now the company’s largest currency allocation.
Why this matters to precious metals investors:
With this kind of data, the run on gold that we’ve been seeing the past couple weeks has some definite support. It is not just a short-term fluke in the market. Demand and price are directly correlated, and as demand continues to rise, so will price. Demand at levels like this is not likely to quickly reverse, so gold has nothing but bright prospects for this year.
Here are some articles from the web discussing the topics in this week’s post:
Gold Has Entered a Bull Market, According to JP Morgan
Read Here
What Jobs Report Data and Fed Policy Means for Gold Market Rally
Read Here
Central Banks’ Policy Direction Points Leading Hedge Fund Managers to Gold
Read Here
Q1 of 2016 Sees Highest Demand for Gold in a First Quarter Ever
Read Here
As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at 602-955-6500 or toll-free at 877-354-4040.
