Gold rides to a record, with prospects for $2,000 an ounce stronger than ever
GOLD FUTURES POSTED A RECORD settlement on Friday, along with their strongest weekly performance since early April, with calls for the never-before-seen level of $2,000 an ounce for the precious metal coming in louder than ever, reports MarketWatch
“Gold and silver bulls will face a real challenge over the next two weeks,” said Chintan Karnani, chief market analyst at Insignia Consultants, in a Friday note. But if tensions between China and the U.S. escalate, and the U.S. sees a sharp daily increases in COVID-19 cases, “then gold and silver will only rise.”
He believes that price corrections, if any, will be “mild.” The $2,000 mark for gold will be “very easily broken.”
August gold rose $7.50, or 0.4%, to settle at $1,897.50 an ounce on Comex Friday, after trading as high as $1,904.60. For the week, prices rose 4.8%, the biggest weekly percentage climb since the week ended April 9.
The contract topped the mostactive contract settlement record of $1,891.90 from August 22, 2011, based on records going back to November 1984, according to Dow Jones Market Data. The record most-active intraday level still stands at $1,923.70 an ounce from Sept. 6, 2011.
The front-month July gold contract, which trades on significantly lower volume, notched a record for a second session in a row. It settled at $1,897.30 Friday, up $8.20, or 0.4%, for the session. That’s a record for the front-month contracts, based on data going back to 1975.
“There are lots of push-and-pull factors in the backdrop” of gold’s rally, said Barani Krishnan, senior commodities analyst at Investing. com. “You have stimulus expectations worldwide after the [European Union] $750 billion coronavirus relief plan, even as Congress goes back and forth on its own CARES 4.0 package for Covid-19 that should bring another $1 trillion into the mix.”
The U.S. dollar also continues to “break down, pushing precious metals higher, though simmering U.S.-Chinese tensions are supporting the greenback from a complete meltdown,” he said in emailed commentary.
Silver prices, meanwhile, also recently rallied to their highest settlement since 2013, with the September silver contract on Wednesday settling at $23.144 an ounce. It ended Friday at $22.85, up 15.6% for the week.
“Ordinarily this is the quiet time for gold—summer doldrums,” said Ross Norman, chief executive officer of precious metals news and information provider Metals Daily. “Well, not this year.”
In a forecast issued to the London Bullion Market Association in December 2019, he had forecast that gold prices would achieve an all-time high this year. Given that, he said there’s “no surprise it has achieved it.” The move has “just been quicker than we had expected.”
“In reality, virtually everything is going gold’s way—record debt, epic increase in money supply, silver catching up, negative real yields, and even a dollar correction,” Norman told MarketWatch.
George Gero, managing director at RBC Wealth Management, told MarketWatch that gold’s upward momentum is “caused by perfect storm of pandemic headlines, benign dollars and interest rates, as global economic stimulus grows.”
“This may last longer than usual cycles” as the pandemic casts a shadow on Europe, South America, the Far East, as well as the U.S., he said.
Contributing to gold’s haven appeal are escalating tensions between China and the U.S., the upcoming U.S. election, worries about an increase in debts from continuing stimulus, and unrest everywhere, said Gero.
Gold prices have climbed by around 50% since the summer of 2018, when the metal bottomed under $1,200 an ounce, said Adrian Ash, director of research at BullionVault. That’s the fastest twoyear gain since New Year 2012, he said.
The yellow metal also has climbed around $400 an ounce from March’s COVID-19 crash, “its steepest 17-week gain since the very tops of September 2011 and before that January 1980,” said Ash, adding that trading volumes on BullionVault, an online platform for physical precious metals, reached $28.9 million, which was the third busiest day ever, after March 17 when the COVID crisis really broke, and June 24, 2016, the day of the U.K.’s Brexit referendum result.
“Hot money’s finally joined in,” said Ash.
THE INTERNATIONAL FUND FOR AGRICUL TURAL DEVELOP MENT (IFAD) Nigeria has disclosed that it has partnered with Olam Nigeria and the Nigerian Federal government to set aside a sum of $329 million or N118.44 billion for Value Chain Development Programme (VCDP) in Nigeria.
Nadine Gbossa, IFAD country representative, disclosed this in a briefing on the development in the agricultural sector to empower smallholder farmers across the country in order to improve their livelihoods as well as ensure food security in Nigeria.
According to Gbossa, the budgeted $329 million will be financed by the involved parties, which will see the federal government collaborating with Olam Nigeria to contribute $79 million, while the International Fund for Agricultural Development (IFAD) will fund the project with $250 million.
Gbossa said, “Before the IFAD, OLAM and VCDP partnership, many of the smallholder farmers were involved in subsistence farming. However, they are now able to market their produce because a firm like Olam purchases over 90 per cent of paddy rice.
“Data show that the smallholder farmers have increased their income by 79 per cent. The number of children attending secondary schools from VCDP households has increased by 17 per cent, so it means that more of the farmers can send their children to secondary schools when the norm then was just sending them to primary schools.
“FAD is an international financial institution and a specialised agency of the United Nations (UN) that functions to address hunger and poverty in rural areas of developing countries. The VCDP project is a partnership between the Federal Government of Nigeria, Olam Nigeria and IFAD, in which the project will see IFAD contribute $250 million while Olam and the FG will donate $79 million,” the IFAD country representative said.
Also speaking during the meeting, Reji George, Olam Nigeria vice president, farming initiatives, said, “About 50 per cent of the total capacity of Olam’s rice mill in Rukubi,
Nasarawa State, is obtained through the direct buy-back from these programmes from different states.”
George further explained: “We expect a higher scope this year because while we had 9,757 farmers in 2019, we have doubled the number of registered farmers this year, which is about 18,646 registered farmers. What is significant to us is that this programme has helped us to meet up with the requirement rice paddy for the rice mills in Rukubi in Nasarawa State and Amarava Mill in Kano State.”
“Currently, we can attest to the fact that since the agricultural development launched in 2014, smallholder farmers had increased their yields to average of 4 metric tonnes (4 MT) per hectare from the initial average of 2 metric tonnes per hectare in 2015