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RBC's Gero: Gold Breaks Higher Out Of Trading Range

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Gold has broken higher out of its prior trading range, said George Gero, managing director with RBC Wealth Management. Comex August gold has traded as high as $1,317.80 an ounce early Monday, its most muscular level since late March. Gero said global economic fears and the resulting moves in bond prices and yields “awoke the sleeping gold giant,” enabling the metal to break out of the roughly $1,275-$1,300 range from most of the last one and one-half months. “Opportunity costs for owning gold decreased, and global tensions [and] tariff fears added to safe-haven needs,” Gero said. Further, rising agricultural futures are inflationary, he said. “Now [with] gold over $1,300, we may see asset allocators return and already investors [are] asking, ‘Is it time to get back to gold?’” Gero said. As of 8:45 a.m. EDT, Comex August gold was $10.50 stronger at $1,316.30 an ounce.

By Allen Sykora of Kitco News; asykora@kitco.com

 

Commerzbank: Investors Seeking Gold As Safe Haven

Monday Jun 3, 2019 09:40

Investors are currently snapping up gold as a safe haven, Commerzbank said. The metal topped the psychologically important $1,300-per-ounce mark on Friday and has continued to climb, trading up $12.20 to $1,317.10 an ounce as of 8:33 a.m. EDT Monday. “The price has also been boosted by technical buying after the technically important 100-day moving average was overcome,” Commerzbank said. Analysts said several factors are contributing to gold buying. “Market participants are concerned mainly about the damage being done to the global economy by the trade disputes between the U.S. and China and between the U.S. and other countries,” Commerzbank said. “A recent sharp fall in stock markets and bond yields also makes gold a more attractive alternative investment. Then there is the nuclear dispute between the U.S. and Iran. The budget dispute between the EU [European Union] and Italy is also likely to flare up again now that the European Commission has sent Italy a warning letter about its public finances. The country is likely to face punitive proceedings in the near future given that the Italian government this evening looks set to officially reject the EU’s calls for more budgetary discipline. And last but not least, political uncertainty in Germany has increased.” 

By Allen Sykora of Kitco News; asykora@kitco.com

 

BBH: U.S. Yield Curve Continues To Invert

Monday Jun 3, 2019 09:40

U.S. rates interest-rate markets are becoming increasingly even more pessimistic about the economy, said Brown Brothers Harriman. “The three-month to 10-year curve continues to invert,” BBH said. At minus 23 basis points, yields are the most inverted in this cycle. “Elsewhere, the Fed funds futures strip is leaning even more dovish,” BBH said. “The implied yield on the January 2020 contract is 1.78%, which is fully pricing in two cuts this year. Furthermore, the implied yield on the January 2021 contract is 1.46%, which is nearly pricing in two cuts next year. WIRP sees an 18% chance for a cut at the June 19 FOMC [Federal Open Market Committee] meeting, up from around 5% last week.” Meanwhile, BBH noted that the U.S. dollar reversed lower on Friday.  The dollar index has stabilized today, but BBH analysts said they think it's way too early to call an end to the dollar rally. “For now, the Fed will not be pushed into cutting rates prematurely,” BBH said. “Like it or not, the Fed cannot be bullied into shifting monetary policy in response to the possible impact of a new tariff regime.”

By Allen Sykora of Kitco News; asykora@kitco.com

FXTM: Investors Seek Safe Havens, Cautious About Risk Assets

Monday Jun 3, 2019 09:40

Demand for so-called safe havens, including gold, remains strong amid uncertainties about global trade, said Han Tan, market analyst at FXTM. “Investors are expected to tread very carefully towards adding risk in their portfolio amid the delicate market conditions,” the analyst said. “Gold has managed to break past the $1,309 handle after having surged by about 2.7% since May 30. The Japanese yen is holding around its strongest level against the U.S. dollar since January, hovering around the lower-108 region at the time of writing. Ten-year U.S. Treasury yields [which move inversely to the price] have sunk below 2.13% to their lowest since September 2017. With global equities having just posted its first monthly loss of 2019, putting more risk on the table doesn’t appear to be a viable option for investors at this point in time. Unless President Trump makes a sharp U-turn and starts caring more about the global economy against his campaign promises, markets will have to come to terms with an investment climate that’s dominated by trade tensions and heightened insecurities.”

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