07
Jun
2017

Gold Breaks 6-Year Downtrend On Safe Haven and 50% Surge In Chinese Demand

– Gold prices break 6 year down trend on safe haven demand (see charts)
– Chinese gold demand set to surge 50% to 1,000 metric tonnes
– Chinese demand for gold bars on track to surge more than 60 percent in 2017
– Geopolitical risk internationally leading to safe haven demand

– UK election, terrorism and rising tensions in Middle East supporting gold after attacks in London and attacks in Iran today
– Gold is 12.5% higher for year and outperforming stocks (see table)

Gold prices have broken out above the six year long downtrend (see charts) due to a 50% surge in Chinese demand and increasing safe haven demand internationally.

Goldchartsrus.com

Gold is now 12.5% higher year to date in dollar terms and technical analysts say that the breakout is important technically. When combined with the very uncertain geo-political and positive supply demand backdrop, it is a bullish development.

Gold jumped more than 1% yesterday on concerns of conflict in the Middle East after the Saudi coalitions aggressive move against gas rich Qatar and Iran. Today there have been terrorist attacks in the Iranian parliament and at least seven people have been killed.

Finviz

Gold likely also received a safe haven bid due to heightened terrorism concerns after the terrorist attacks in London and the possibility that a left leaning Labour government under Corbyn may come to power in the UK.

Chinese gold demand has increased very substantially again and Chinese gold imports are seen jumping 50% back to 1,000 metric tonnes as reported by Bloomberg.

The world’s biggest gold market looks set to increase imports through Hong Kong by about half this year as Chinese investors seek to protect their wealth from currency risks, a slowing property market and volatile stocks, according to the Chinese Gold & Silver Exchange Society.

Chinese demand for gold bullion bars is surging and is on track to surge more than 60 percent in 2017.

Goldchartsrus.com

Gold is now just a fraction from its highs for the year so far and the 12.5% gains means that gold is outperforming most international stock indices. The S&P 500, the Euro Stoxx 50 and the Nikkei are just 8.7%, 8.4% and 4.5% higher respectively (see table above).

Bloomberg

It is also breaking out from the long term downtrend line left from the bear market as noted by many technical analysts and Bloomberg today:

“Gold is breaking out of a six-year slump as investors search for safe havens during a period of global upheaval and bets that historically low U.S. interest rates will endure. After breaching a six-year downtrend line, gold is at the highest level since Nov. 4, and has advanced 12.7 percent this year. An uptick in bullion imports in China, as a hedge against currency risk, and a tepid pace of U.S. monetary tightening could fuel the next leg-up in the rally, say analysts.”

After breaking the 2012 downtrend at $1,290, the next level or resistance is the psychological level of the round number $1,300 per ounce and above that the next level of resistance is $1,350 per ounce.

There is a risk of gold weakening before and on the day of the Federal Reserve interest rate announcement on June 14. However, the risk posed by the Fed tightening is exaggerated and even if the Fed does tighten by a meager 25 basis points, there are increasing doubts as to whether there will be further interest rate rises due to fragile U.S. and global economic growth.

News and Commentary

Gold Makes Run Toward $1,300 as Risk Flares From U.K. to Mideast (Bloomberg.com)

Gold holds near 7-mth high, political worries buoy safe-haven demand (Reuters.com)

China’s gold imports seen jumping 50% as haven demand booms (Bloomberg.com)

CFTC Finds Trader David Liew Engaged in Manipulation of the Gold and Silver Markets (CFTC.gov)

Top overseas footballers seeking euro pay packets (FT.com)

Gold Prices Break Through a 6-Year-Long Downtrend Line (Bloomberg.com)

Gold Breaks Major Resistance Trendline (ZeroHedge.com)

Platinum shortage could throw a wrench into a class of green cars (BusinessInsider.com)

Raoul Pal Slams Bitcoin: “It’s Not The Store of Value People Thought It Was” (ZeroHedge.com)

Saudi Dispute With Qatar Has 22-Year History Rooted in Gas (Bloomberg.com)

Chats by Ex-Deutsche Bank Metals Trader Reveal Spoofing ‘Tricks from the Master’ (Bloomberg.com)

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Gold Prices (LBMA AM)

07 Jun: USD 1,292.70, GBP 1,001.07 & EUR 1,146.62 per ounce
06 Jun: USD 1,287.85, GBP 997.31 & EUR 1,144.77 per ounce
05 Jun: USD 1,280.70, GBP 992.41 & EUR 1,136.88 per ounce
02 Jun: USD 1,260.95, GBP 980.39 & EUR 1,123.88 per ounce
01 Jun: USD 1,266.15, GBP 984.81 & EUR 1,128.01 per ounce
31 May: USD 1,263.80, GBP 987.79 & EUR 1,129.96 per ounce
30 May: USD 1,262.80, GBP 982.46 & EUR 1,132.23 per ounce

Silver Prices (LBMA)

07 Jun: USD 17.60, GBP 13.64 & EUR 15.71 per ounce
06 Jun: USD 17.56, GBP 13.61 & EUR 15.62 per ounce
05 Jun: USD 17.52, GBP 13.58 & EUR 15.59 per ounce
02 Jun: USD 17.19, GBP 13.37 & EUR 15.33 per ounce
01 Jun: USD 17.13, GBP 13.33 & EUR 15.26 per ounce
31 May: USD 17.31, GBP 13.48 & EUR 15.43 per ounce
30 May: USD 17.27, GBP 13.42 & EUR 15.49 per ounce


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Mark O'Byrne
Executive Director

  • Willem Xodus Gold

    Good article Mark!

    Stansberry sent out similar analysis this morning.