Gold on Friday pulled back from Thursdays monster $53 gain but still logged its biggest weekly move since the financial crisis in 2008.
Tempered by a positive U.S. retail-sales report and a rebound in stocks and oil prices, gold lost about 1%, falling near $1,237 by midday. Nevertheless, the yellow metal booked a more than 7% rise for the week, its largest advance since December 2008.
Biggest inflows since 2010: A new analysis by Bank of American Merrill Lynch found that a total of $1.6 billion of investment capital went into gold and other precious metals this week. In total, $1.6 billion was spent on gold, silver, and other metal. Only one week since 2010, early in 2015, saw higher inflows into precious metals, Business Insider reported. Meanwhile, the bank tracked huge outflows from risk assets such as equities, junk bonds, and emerging-market debt.
Inflows into the biggest gold ETFs could continue to offer major support for the metal, UBS speculated. The biggest ETF, the GLD, already has taken in $2 billion in 2016, essentially recouping last years $2.2 billion full-year outflow. UBS also noted growing interest in gold ETFs in Europe. The growth in the share of European gold ETFs in a sense adds stability to global holdings as these are likely to be resilient. Negative interest rates in Europe and lingering macro risks continue to make a case for holding gold as an alternative asset and an insurance against tail risks.
Breakout targeting $1,350: Golds been like a hurricane drawing strength from different sources as it swept higher, Andy Pfaff of MitonOptimal Group told Bloomberg, while Adam Finn of Triland Metals added, The black-swan-esque panic that engulfed the markets this week has driven gold up faster than even the most bullish could have hoped for.
“Gold could test $1,260 or even $1,300 in the next few weeks, but I wouldn’t be surprised if we also see some profit-taking,” Commerzbank analyst Carsten Fritsch told Reuters. And BTIG technician Katie Stockton told CNBC that the last gold “breakout easily targets about $1,350.
Besides market turbulence, the biggest catalyst for gold this week has been the growing realization that central banks are slowly unveiling a new arrow in the quiver in the fight to induce inflation: negative interest rates. But the dangers of negative rates are numerous, for stocks to everyday savers.
Bond guru predicts $1,400: The potential for negative rates in the U.S. had DoubleLine Capital bond guru Jeff Gundlach reiterating his ultra-bullish $1,400 price forecast for gold Thursday. The evidence that negative rates are harmful and not helpful has piled up to the point that the ‘In Central Banks We Trust’ mantra has finally been laid bare as a hoax,” Gundlach said.
HSBC went a step further in its own note, predicting a forthcoming new bull market that will probably boost gold back up to $1,500 with the potential eventually to exceed the speculative frenzy seen in 2011.
3 reasons (twice) why this run is real: Negative rates are key planks in two separate three-point arguments for why this latest gold run is real. U.S. Global Investors CEO Frank Holmes lists these three reasons: 1) Stocks are making investors nervous; 2) global demand is scorching hot; and 3) the chance of negative interest rates spreading to the U.S.
Meanwhile, Barry Dawes of Paradigm Securities outlined his own three-part case for gold in a CNBC appearance: 1) Demand is exceeding supply from mines and scrap; 2) jewelry demand in India and China comprises about 55% of the 4,200 tons of annual gold consumption and outranks the investment side by 2.5-to-1; and 3) banking instability thanks to negative rates, which will make people very concerned about having cash in banks. People feel a lot safer having gold, which has no obligation to anyone and at the end of the day will be worth more, Dawes predicted.
So were in a bull market, he added. Weve got a long, long way to run. It started in 2000 and rallied for 11 years. Its had 4 years of pullback. Were getting to the time of it turning up. Gold stocks are telling us its going to go a lot higher. I think well get to $1,300.
Analysts scramble to revise outlooks: Golds surprise resurgence is causing numerous banks and analysts to revamp their price targets. Our existing end-2016 forecast for the gold price is $1,250 per ounce, said Julian Jessop at Capital Economics Ltd. We will probably be revising it up.
Two months into 2016, prices have surged past three-quarters of the peak forecasts in a mid-January survey by the London Bullion Market Association, whose members operate in the largest spot market for the metal, Bloomberg confirmed. In the LBMA survey last month, only eight of the 31 members polled considered a maximum price for the year above $1,250.
I have been a mega-bear, but for me this is a change in trend, Georgette Boele of ABN Amro Bank NV told the news agency. Our forecasts are under review.
JPMorgan expert urges gold: One analyst who doesnt have to revise his forecast is JPMorgan guru Marko Kolanovic, whose unblemished track record of accurate market calls is second to none, Zero Hedge gushed.
According to a recent note, Kolanovic advised: Since the end of last year, we have been advocating increased allocation to gold, cash and VIX. Specifically on gold, we have argued that it would benefit from the main market concern, which is the rising risk of a global recession, as well as potential mitigation of these risks: the Fed turning more dovish and a weaker dollar removing pressure from emerging markets and the commodities sector. In an unlikely tail scenario that we see as a temporary loss of confidence in central banks, gold would likely benefit as well. Since the beginning of written history, countless currencies and governments emerged and failed while gold kept approximately the same purchasing power (albeit with some volatility, and positive correlation to levels of risk).
Given whats happened this week and over the past few months, gold belongs in every portfolio as an indispensable insurance policy.