Gold Pushes Back Near 2 Year High, Silver Tops $21; Bank Of America Warns Of More Post-Brexit Pain For Stocks; What To Watch For This Week
Gold and silver have been on a tear so far in 2016; and, they show no signs of reaching a near term top. While our stock market is closed as we celebrate our nation’s independence, money still moves across the globe. Overnight, gold reached a peak at $1,357.60 per ounce; and, is $1,354.80, up $15.80, or +1.18 percent, as I write this note. Meanwhile, silver climbed more than 7 percent overnight, “benefiting from a surge of buying in China,” according to CNBC, before its current price of $20.60 — a gain of $1, or +5.12 percent. Spot silver prices have gained 19 percent, since the June 23 Brexit vote, while gold is up just 7.8 percent in the same time frame.
Swiss Asia Capital’s Singapore Managing Director and Chief Investment Officer, Juerg Kiener told CNBC that “gold prices may hit all-time highs in the next 18 months, amid low to negative global bond yields.” “The continued cratering of bond yields has also blunted the advantage fixed income instruments held over their shiny counterparts,” wrote Huileng Tan on CNBC’s July 3, 2016 website. Gold reached $1,900 per ounce in August, 2011.
Of course, not all traders and institutions feel that way — and, that’s what makes a market, as they say. Credit Suisse’s Chief Investment Strategist Jack Sui, said in a note last week, that their firm “had a neutral view on the precious metal, with their price target at $1,300 an ounce in the next three months, and $1,150 per ounce in the next 12 months.” Jeffrey Currie, Global Head of Commodities Research at Goldman Sachs, told CNBC last week that he thought gold’s upside from the $1,300 level was limited; and, his firm has a twelve month target price of $1,300. As for silver…….
“Silver always moves faster than any other,” [precious metal], said ABN Amro analyst, Georgette Boele, to CNBC. “Thefre is momentum in the market, gold is already up a lot [25 percent ytd.] and silver is still relatively cheap. It is also benefiting from [safe] haven demand. You have a combination on the one hand of safe-haven demand because of the Brexit vote; and, at the same time, the pricing out of the Fed rate hike expectations, which is positive for precious metals.”
I believe gold is likely going to $1,450 in the next few months, as more negative fallout from Brexit will push investors to seek safety in precious metals. I invested in GDX, a gold-miners fund, and wish I had also gotten in to the silver ETF, SLV. I may still get an investment foot-print in silver this week.
Bank Of America Warns Investors That More Post-Brexit Pain Is Inevitable; And, Says Stocks Will Take A Hit
Savita Subramanian, Bank of America (BoA)’s Head of U.S. Equity And Quantitative Strategy, during a CNBC interview last week, that just because the S&P Index recovered more than 90 percent of its post-Brexit losses, doesn’t mean that the U.S. [equities] are out of the woods. Ms. Subramanian warned that “it’s only a matter of time until companies start to reveal just how hard Brexit is hitting them — and, it could soon get quite ugly for stocks.”
Subramanian predicted that 2017 will be the year when Brexit will inflict the most pain on U.S. companies. “A decent chunk of U.S. company sales come from Europe, 20 percent or more, and that’s going to be the risk.” Of note, Ms. Subramanian is the most bearish year-end target on the street — as far as where she sees the S&P 500 ending the year some 100 points below its Friday closing price.
I also do not believe the Fed will raise rates this year and, central banks around the globe aren’t through with monetary stimulus and easing — something which will drive investors to both stocks, and precious metals.
What To Watch This Week
This week begins second quarter earnings and third quarter outlook for U.S. companies. Better than expected earnings/outlook will aid stocks going higher; and, a poorer earnings and outlook will likely be punished. Aside from earnings, investors will continue to react to post-Brexit news; and, growing concern with European banks. On Friday, we will get the all important, Non-Farm Payroll number on the number of net new jobs created in the U.S. in the month of June. Consensus at this time is for a number at/near 180,000. Something substantially above, or below is likely negative for stocks. June’s job number will be closely watched, as May’s number of just 38,000 new jobs was shockingly low and greatly surprised the market. V/R, RCP