Gold Moves Higher

by Barry Dawes

Key Points

Gold heading to US$1600 and higher
Silver ready to move
ASX ETFs available
- for Gold (Gold.asx)
- Silver ETPMAG.axw
- GDX.axw
World Gold Council data for 2019
- Gold ETFs bought net 325 tonnes to record 2885t
- Central banks were net buyers for 10th consecutive year with 650t to 34,500t
- ETFs and Central Bank purchases offset decline in Asian demand
- Gold mine production fell slightly (-1% to 3463) – first decline in ten years
- Scrap supply increased with higher gold price
US jewellery demand grew 2% to 10 year high of 131t.
A$ gold hits new record high A$2370/oz
JP Morgan probe into gold price rigging could result in gold moving higher
Gold stock technicals also very constructive
US$ and global equities heading higher
Decade of Prosperity ahead – MUST WATCH video link https://www.ccmmarketmodel.com/short-takes/2020/2/8/the-most-important-stock-market-and-investing-video-you-will-ever-watch
Gold is becoming Metal of Prosperity
My latest Proactive video https://youtu.be/25Rmc8q-acw

Call me to participate:
bdawes@mpsecurities.com.au
+61 2 9222 9111

Gold is a many splendoured thing and means different things to different people.

Concerns over debt, the Coronavirus or an overvalued stock market could be reasons for higher gold prices but I still consider gold now to be the Metal of Prosperity.

Asian demand is from rising prosperity and sales to Asia from the West represents a short position for many banks. The probe into JPMorgan gold price rigging may force cover of these short positions, especially in silver.

ETF and Central Bank purchases of gold in the Dec Half of 2019 offset declines in Asian demand but rising prosperity in the US pushed gold jewellery demand to the ten-year highs.

The US is experiencing a momentous acceleration in its Trump Blue Collar Boom. Just watch employment, housing and autos (the coming EV boom).

Economic Confidence Index is at the highest level in almost 20 years.

Gullup's Economic Confidence Index, 1992-2020

This long term demographic/technical graphic shows the US market is in the early days of a major bull market. Demographic changes are driving it.

Capital flows are showing bonds have peaked and are flowing into equities. And Property and commodities and gold.

Watch this video!!

https://www.ccmmarketmodel.com/short-takes/2020/2/8/the-most-important-stock-market-and-investing-video-you-will-ever-watch

Gold has continued to move higher in all currencies and achieved Friday monthly close on 31 January at US$1588.

The technical setup is for gold to now move higher in the near future.

US$1600 is an important level so a break above this should see gold rise almost US$200 to around US$1775 in a reasonably short time frame.

Moves to US$1800 are likely in 2020 and the previous high of US$1923 might be met or exceeded this year.

The longer-term picture is for a much higher gold price than this.

Gold in A$ is moving higher and the technical are suggesting a coming move into the next channel.

Gold can be traded using the ASX-listed ETF GOLD.ASX.

Silver is also setting up for continuation higher after its strong move in Sept last year.

As with gold, the long term pattern is suggesting a move that will take silver above its 1980 and 2011 high of US$50/oz.

Silver can be traded using the ASX-listed ETF ETPMAG.AXW

World Gold Council Data

The recently published 2019 data from the World Gold Council provided some interesting market trends.

Gold-backed ETF holdings reached an all-time high in Dec Qtr 2019 at 2885 tonnes, up 325 tonnes.

Europe now has almost as much in gold ETFs as the US.

Gold in Euros seems to be ready for a strong move as well.

The Euro still looks very weak to me and so the US$ will remain strong.

The US$ Index seems to be now ready to move higher.

Central banks were net buyers for 10th consecutive year with 650t to 34,500t and this gain, similar to

that in 2018, was the most in 50 years.

World Gold Mine production was 1% lower at 3463 tonnes and the first mine output decline in ten years.

Interestingly, this data shows the rate of change of gold production has a declining trend.

China has been declining from a record 453 tonnes (453,00kgs here) to 420 t but these figures may be optimistic. Peru gold output fell 9% in 2019.

Gold production in China has been from numerous small mines so the longer-term production is not assured despite official forecasts.

Other major gold producers Australia, USA and Russia were marginally higher.

Production costs as measured by AISC figures are rising again but this is more likely to be a function of declining cutoff grades rather than input factor costs.

On this graphic, ~6% of global gold production is still loss-making basis AISC data.

Recycling rose 11% to reflect the higher prices bringing out scrap.

The data showed gold in Indian Rupees drew out some selling.

Gold stocks

Gold stocks in North America continue to consolidate and after breaking through some technical resistance should move sharply higher again.

The unhedged HUI index is constructive.

The Philadelphia Gold Index has major long term resistance at 110 so a breakthrough this soon into 2020 will provide an acceleration to 150-170.

The GDX ETF seems to be tracking the XAU but may be stronger.

This GDX is tradable on ASX under code GDX.AXW.

Also, a North American Goldstock portfolio BetaShares ETF MNRS.AXW (non ASX companies) is available on ASX.

Individual stocks like Newmont

And leading royalty company Franco Nevada, are doing well.

Overall, Nth American Gold stocks are now breaking upwards against the S&P 500.

And looking very positive against gold itself.

Here in Australia the ASX S&P Gold Index looks very constructive. New highs above 2011 were seen in 2019 but the Index (~39% NCM) has pulled back to good support where the 2 December Dawes Points BUY NOW was issued. Once XGD breaks out to new highs a strongly accelerative action is likely to take place.

NST is well on its way to A$20 and beyond.

And NCM is far too cheap. Haveiron will be a real winner for NCM by converting Telfer from a marginal operation to a long life very profitable mine. Recent rains should also remove any concern for water for Cadia.

ASX gold stocks are very cheap now.

All these constructive technicals for gold and silver ( and platinum ) are telling me the artificial down pressures on gold are being removed and a significant revaluation is coming.

But this and so much else is also telling me that US equities and hence global equities are looking very strong for at least a decade.