Australia; It almost feels like anything China touches turns to gold for ASX share investors. You only need to look at what Chinese demand for iron ore and infant milk powered has done for the Rio Tinto Limited (ASX: RIO) share price and A2 Milk Company Ltd (ASX: A2M) share price. The next group of stocks that may benefit from the Asian Midas Touch could be our gold producers as the Chinese central bank continued to buy the precious metal for the sixth consecutive month in May, according to multiple news reports. This is good news for our gold stocks like the Newcrest Mining Limited (ASX: NCM) share price, Evolution Mining Ltd (ASX: EVN) share price and Regis Resources Limited (ASX: RRL) share price. China buying gold Central bankers from Australia’s most important trading partner snapped up close to 16 tonnes of gold last month to take its gold reserves to 61.6 million tonnes. They’ve bought 74 tonnes of gold since the end of November, according to precious metal trader Kitco. “China’s total foreign-exchange reserves climbed $6 billion in May to $3.101 trillion, according to data from the central bank,” said Kitco. “In dollar terms, China’s gold reserves rose to $79.83 billion in May from $78.35 billion in April.” What’s more, the Chinese aren’t the only ones adding to their gold reserves. Global central banks have been net buyers of the commodity and have collectively increased their holdings by 651.5 tonnes in 2018 – which the World Gold Council data indicates is the most in nearly 50 years. Trade war is good for gold I suspect we will see this trend continue and it’s probably largely due to US President Donald Trump. The US dollar is the reserve currency of the world but Trump’s volatile policies has weakened the status of the greenback, in my opinion. It’s hard to view the US currency as a safe harbour when the country’s president is causing the turmoil as he weaponises trade tariffs to get the world to bend to his bidding. Throw in the fact that markets have fully priced in one or two rate cuts from the US Federal Reserve, and you can see why the US dollar may continue to trade on the backfoot, particularly as the bond market indicates a likely US recession over the next 18 months. In this uncertain environment, gold is likely to shine brighter than other safe haven assets, particularly given the falling interest rate environment we find ourselves in. Gold better than cash If the interest payments on term and bank deposits are sitting under inflation (and the vast majority of these accounts are), it’s better to be in gold as the value of the commodity tends to rise with inflation (all things being equal). Those who don’t have any gold exposure in their portfolio may want to add some as the macroeconomic storms that have buffeted global markets are likely to abate anytime soon! Fool.com.au
Gold price in AUD has been going gangbusters. Would not be surprised if it has topped and due for a breather. 5 year chart.
Inter day, the GLD hit a new 52w high, and slowly, at a measured pace, gave back almost all it's gains for the day. Technically, with an RSI just above 70, and making a new inter day high, I would expect a pullback also. However, there are dynamics in play that would leave me to believe that the trend is higher. Possibly significantly higher.
Getting lucky today after living thru a 10% drawdown, up nearly 18% so far today and position now 10% in the green. Just need some more follow thru luck to give the icing.
"If gold is a relic of history, why do Central Banks + the IMF still hold over $1T of gold? If it's meaningless, why is everybody still holding it?" - Alan Greenspan
He was also against irrational exuberance and created the biggest bubble of all. Most understand the grandfatherly FedHead should have been sent to "Shady Acres" long ago.
June 24, 2019 China's splurge on gold adds intriguing twist to trade war. There are some interesting aspects to the surge in the gold price to its highest level in nearly six years, not the least of which is that China has been buying gold while selling US Treasury bonds. In fact it’s not just China. Central banks generally have been diversifying their reserves away from US Treasuries. According to the World Gold Council they bought 145.5 tonnes of gold in the first quarter of this year, the most since 2013 In the past week alone the price shot up almost 10 per cent, to $US1408.80 an ounce, with the depreciation of the Australian dollar pushing the price in local currency terms to record levels above $2000 an ounce. The movement in the past week points to one of the factors driving the price. The 9.8 per cent spike appears to have been a direct response to last week’s US Federal Reserve Board’s meeting, which signalled likely cuts to US official interest rates later this year. With the European Central Bank also talking about resorting to more stimulus to try to reflate a spluttering eurozone economy, and China’s economy slowing as the Trump administration’s trade war bites, the prospect of lower growth and even lower rates in an already low-rate global environment are encouraging risk-averse investors towards the safe haven of gold. Gold is sensitive to interest rates, to the value of the US dollar and to heightened concerns about economic growth and geopolitical instability. All those are present today in the global economy. The emergence of China as a significant buyer adds another dimension to the resurgence of gold. The People’s Bank of China has bought more than 70 tonnes of gold since December after having being virtually out of the market for the previous two years. Russia has also been a massive buyer, adding about 274 tonnes to its reserves last year. Even as it was splurging on gold, China has been selling US Treasuries. Its holdings of Treasury bonds peaked at $US1.32 trillion in late 2013. Today they are about $US1.1 trillion ($1.6 trillion). China’s ownership of US public debt peaked at about 14 per cent of the debt on issue in 2011; today it is about half that level. China’s banks could effectively be shut out of the US-dominated global financial system if the administration decided to deploy its nuclear option in the trade war. The gradual lowering of its buying of Treasuries has sparked concern that China could retaliate against the US imposition of tariffs on $US250 billion of its exports to the US, and the threat of tariffs on the remaining $US300 billion or so, by dumping its bond holdings. With the issuance of Treasuries at record levels of around $US1 trillion a year thanks to Trump’s $1.9 trillion of tax cuts, that would force US government borrowing costs up sharply, spilling over into the cost of all debt in the US and choking US growth rates. It isn’t likely that China would do that. Apart from the losses it would incur if it simply dumped a large proportion of its US bond holdings, really large-scale selling would cause the US dollar to depreciate heavily against the renminbi, undermining China’s competitiveness and creating the potential for a destabilising flight of capital. There’s also the small matter of finding somewhere else for it to park the funds it would release – the US Treasury bond market is the deepest and most liquid of markets and, unlike the other major sovereign bonds markets in Europe and Japan, offers still solidly-positive yields. Nevertheless, China and Russia’s gold-buying points to a desire to diminish their exposure to the US market and a direct exposure to the US dollar. One potential concern would be the way in which the Trump administration has weaponised the US dollar, using its status as the world’s reserve currency and the dominant currency for world trade to enforce its sanctions against Russia and Iran. With the administration only recently (but perhaps predictably) announcing new rules that would enable it to arbitrarily impose "countervailing duties" – tariffs – on countries that "artificially’’ lower the value of their currencies, China might be concerned that Trump will seek to use the threat of other forms of sanction as leverage in its trade conflicts. China’s banks and other organisations could effectively be shut out of the US-dominated global financial system if the administration decided to deploy its nuclear option in the trade war. That possibility, while perhaps faint, also explains why both China and Russia have been trying to encourage the use of the renminbi and rouble in global trading and while the Europeans, also targeted by Trump, have been trying to devise mechanisms at arms’ length to their traditional banking channels for circumventing the chilling effect of the renewed US sanctions on Iran. Insurance against the aggression of the US may be one aspect of gold’s appeal to other central banks. But that deterioration in the relationships between the US and its major trading partners, and the increasing impact it is having on global growth, would by itself promote a diversification of foreign exchange reserves and exposures away from the US and, in the process, an increase in the gold price. https://www.smh.com.au/business/mar...guing-twist-to-trade-war-20190624-p520pi.html