This is Jalonomi's weekly review of interesting precious metal news from various sources around the world. Our goal is to provide the reader with a concise and quick access to important news on a weekly basis. We particularly focus on news related to investment gold.
This week in our review:
- Business Daily: Central banks behind gold demand
- Sharps Pixley: The usage price could rise to $15-20,000
- CNN: Preparing for inflation in the style of legendary investors
- Forbes: Investor market anxiety is reflected in the price of gold
Business Daily: Central banks are behind the demand for gold
“There is no sensible reason not to own gold. I believe that gold should be a part of every investment portfolio because it acts as a diversification,”
Ray Dalio, the chief investment officer of Bridgewater, in 2012. Business Daily clarifies in its article what gold is: a rare precious metal, yellow in color, which clearly differs from other precious metals like platinum, silver, and palladium in that it is used both as a consumer good and as an investment. Gold has symbolic value that has almost become a global obsession. Since 2010, the largest buyers of gold, according to Business Daily, have been central banks around the world, particularly in emerging markets, and this trend has continued the same way until the fourth quarter of 2019. At that time, record-high gold reserve purchases by central banks were observed. Why is this?
The article explains that in 2019, the global economy began to show negative signs and global markets became uncertain. Central banks responded by expanding their portfolios into asset classes that could provide safety, returns, and liquidity. In particular, Russia and China reassessed the role of gold in their investment portfolios, and large institutional investors followed in their footsteps by investing in physical gold or the NewGold ETF, which is linked to physical gold. According to Business Daily, this tells us something: it is worth considering gold as a hedge for your portfolio and to improve your risk-return profile.
Read full article in English/ 16.9.2020 Michael Mgwaba
Sharps Pixley: Lassonde predicts the price of gold will be $15-20,000
Described as a gold enthusiast, Pierre Lassonde predicts according to Sharps Pixley that the price of gold could reach $15,000 to $20,000 per ounce, although he does not specify a clear timeline for this increase. Lassonde has significant achievements in his career in the gold industry and is a founding member of Franco Nevada as well as the CEO of Newmont Mining, which is currently the world's leading gold mining company by annual production.
Sharps Pixley reports that Lassonde has predicted for years that the price of gold will eventually reach the same level as the Dow Jones Industrial Average (currently around 28,000). This could happen if the DJIA index drops sharply, which in turn would lead to a massive flight to safety and reflect in the rising price of gold. This would also pull along silver, notes the article's author, Lawrie Williams, who specializes in precious metals.
Lassonde also highlighted the "incredible" margins of gold mines at the current price in an interview with the magazine – let alone at the higher price predicted by Lassonde. Additionally, affordable energy supports the position of gold mines. These factors together will eventually lead to a rush of gold juniors to start mining, although this will not be reflected in global production numbers for many years due to the slow nature of the production process.
Read full article in English/ 16.9.2020, Lawrie Williams
CNN: Legendary investors are already preparing for inflation, you should too
Investors like Warren Buffett and Ray Dalio are adjusting their portfolios to protect against potential inflation. An article from CNN encourages others to do the same. Additional stimulus packages that increase government debt are on the way, and inflation is expected to rise quickly as the Fed monetizes debt through money printing. According to Jim Paulsen, chief strategist at Leuthold Group, declining valuations and the weakening of the US dollar will lead to rising inflation.
Physical asset classes are the best protection against inflation, the article claims. Gold and silver are the most popular safe havens in this regard, but owning real estate can also be a profitable long-term hedge, according to the article. As the Fed continues to buy government debt with printed money, inflation is soaring alongside the national debt. As a result, asset prices are rising and the dollar is losing value. Cash is also continuously losing its purchasing power, CNN writes.
Read full article in English/ 20.9.2020, Chimay Pandya
Forbes: The rise in gold prices may indicate investors' market anxiety
Forbes writes in its article about the reasons behind the rise in gold prices. The price of gold has increased by an average of 30% since mid-February; at the same time, the price of 10-year U.S. Treasury bonds has also risen, and the yield has turned negative when adjusted for inflation. Meanwhile, the stock market has celebrated since the drop in March. However, the dollar index has fallen by about 10% against the currencies of major trading partners. According to Forbes, all these developments are interconnected: gold is priced in dollars, and a weak dollar means a higher price for gold. Therefore, the Federal Reserve's loose monetary policy is at least partly responsible for the dollar's weakening. This pushes real interest rates lower, which in turn makes gold even more attractive.
However, according to Forbes, investors are very uncertain about their expectations regarding the development of the economy. The situation is causing feelings similar to anxiety in the markets. Subsidies and stimulus packages are masking the true state of the real economy caused by the pandemic, and governments may still have to increase their budget deficits. Forbes writes that investors' interest in gold may not just be a form of protection but a direct preparation for a possible collapse of the monetary system.
Read full article in English/ 17.9.2020, Yuwa Hedrick-Wong
