SEMI-MONTHLY FISCAL/MONETARY UPDATE – PRECIOUS METALS ACT WELL, AS FUNDAMENTAL AND TECHNICAL FACTORS BOTH SUPPORT MUCH HIGHER PRICES !!

FUNDAMENTALLY:

David Rosenberg, one of the most highly regarded investment strategists, and not a perennial “gold bug” by any means, just this morning wrote “WHY GOLD HAS ALLURE”.

(1) The Fed is set to cut rates, which will send the fed funds rate into negative territory in real terms.

(2) Geopolitical risks, including Iran’s behavior, are increasingly bothersome.

(3) Trade talks with China do not seem to be making progress, and Beijing has “tools” to hit back, including the ability to weaken their currency and/or continue reducing their US Treasury holdings.

(4) The economic war between the US and France is heating up, as Emmanuel Macron imposes a tax on American large cap tech companies. At the same time, trade tensions increase between the US and Japan, as well as South Korea.

(5) The Chinese economy, as well as the entire Asian economy, as clearly in retreat, adding to the prospect of worldwide monetary ease.

TECHNICALLY

In terms of supply of demand for physical gold:

(1) Russian and Chinese Central Banks continue their steady accumulation.

(2) India,  between their central bank and their population,  perennially the second largest accumulator of physical gold,  imported 78 tons in May alone, running 49% ahead of a year earlier.

(3) The price charts, for gold as well as gold mining shares, indicate much higher prices. Gold bullion has broken out to a five year high, though still 25% below the 2011 high. The gold mining shares are at three year highs, still 60% below the 2012 high.

SUMMARY

There are never any certainties, especially in the short run, but it seems like both fundamental and technical considerations are in gear, and indicating much higher prices.

Roger Lipton