Gold Price Update: Q1 2021 in Review
What happened to gold in Q1 2021? Our gold price update outlines key market developments and explores what could happen moving forward.
The post Gold Price Update: Q1 2021 in Review appeared first on Investing News Network.
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Click here to read the previous gold price update.
On the heels of a record-breaking performance in 2020, the gold price fell flat through Q1 2021.
The yellow metal entered January just below US$1,900 per ounce and continued to slip over the three month session. By the end of March, an 8.1 percent decline had sent values to US$1,744.
The main catalysts for gold’s poor showing were soaring US 10 year Treasury yields mixed with the growing value of the American dollar. These factors were compounded by higher risk appetite from investors, which benefited bitcoin and weighed on gold.
As COVID-19 vaccines began to be shipped and administered early in the year, risk aversion waned and gold’s quarterly high of US$1,950, reached in early January, proved unsustainable.
Gold’s Q1 2021 price performance. Chart via the World Gold Council.
As the correction continued to erode dollars from the safe haven asset’s value, gold shed more than US$100 in 10 days. A brief rally pushed the yellow metal back to the US$1,870 range before more headwinds drove it down again.
Gold price update: 10 year Treasury yields hinder growth
After dipping to a five year low as markets fell in March 2020, 10 year Treasury yields have been on the rebound as investor confidence has increased.
“This sharp rise in yields reflected a combination of factors, including economic optimism due to the roll-out of vaccines and the announcement of fresh fiscal stimulus in the US,” reads an April report from Metals Focus. “Related to this has been an increase in inflationary expectations as markets factored in a swifter demand recovery led by stimulus checks and falling virus cases.”
Rising from a low of 0.58 percent in July 2020, yields had topped 1.74 percent by March 30.
For Junior Stock Review’s Brian Leni, the correlation between gold and Treasury yields is a key relationship to watch moving forward.
“In my view, the Fed is handcuffed and won’t be able to let rates continue to rise,” said Leni.
“What’s the tipping point? I don’t know, but I can’t see it getting much higher,” he continued. “Yield curve manipulation, by talk or actual participation, will be a big sign to investors that the tide is changing.”
Since reaching a 12 month high, yields have steadily trended lower and now sit in the 1.58 percent range.
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The increasing value of the US dollar was another key contributor to muted gold prices for the quarter.
While 2020’s declining dollar value aided gold’s move to an all-time high, the greenback’s 2021 ascent has countered the yellow metal’s early quarter gains.
In the face of a higher dollar and stronger yields, Gerardo Del Real of Digest Publishing is looking for gold to hold its own.
“I’ve insisted for years that in order to see real all-time highs that are sustained it will have to happen — at least for a bit — alongside a higher dollar, record-breaking stock markets and higher crypto prices,” he said. “We’ve checked two of those boxes, stay tuned.”
Gold price update: Inflationary tone gets louder
The second month of the year saw anticipation over inflation support gold; however, it wasn’t enough to counter the larger effects of rising interest rates.
“While higher interest rates may continue to pose headwinds for gold in the short and medium term, inflation expectations are also likely to move higher,” reads the World Gold Council’s 2021 Gold Outlook. “Historically, gold has performed well in high inflationary environments globally.”
Watch Marc Lichtenfeld of the Oxford Club discuss inflation and quantitative easing above.
For his part, US Federal Reserve Chair Jerome Powell has committed multiple times, most recently on April 8, to not letting inflation rates overshoot 2 percent.
“We do not seek inflation that substantially exceeds 2 percent, nor do we seek inflation above 2 percent for a prolonged period,” he wrote in a letter to Senator Rick Scott. “I would emphasize, though, that we are fully committed to both legs of our dual mandate — maximum employment and stable prices.”
However, for Del Real the dovish stance is indicative of a bigger problem.
“It will be inflationary because central bankers fear deflation more than inflation, and so they will ignore the obvious signs that are already manifesting themselves and overshoot on the inflation targets until it is no longer in their hands and the market calls central bankers’ bluff,” he said.
Gold price update: Producers rewarded in bull cycle
Historic gold price performance. Chart via Trading Economics.
Even though gold is off its all-time high, it is still holding at historical levels. The rush to gold as pandemic lockdowns stretched through last summer aided both producers and explorers on the mining side.
A higher gold price translates to more upside from current projects, and makes exploration more rewarding — that’s a trend Leni expects to restart as gold edges higher into the year.
“I do fully expect to see interest in mining companies increase with a rising gold price. We saw it happen last year, and now that we are in a bull market I fully expect investors to embrace their inner greed once the trend upward is confirmed,” he said
“The second leg of the bull market, in my estimation, will be very strong, stronger than what we saw last year,” continued Leni. “If the gold price doesn’t rise, I still fully expect to see positive appreciation in the prices of the best junior and senior companies.”
Some producers are flush with cash after last year’s market pushed all-in sustaining costs to US$828 per ounce. The previous record was marked in 2011 at US$666 an ounce.
“Gold producers had some of the healthiest margins and balance sheets in years; there’s been a resurgence in exploration across the commodity space, and the market is finally starting to reward companies that found success with the drill bit,” said Del Real.
As Leni explained, miners weren’t the only winners in last year’s gold cycle.
“Producing and royalty companies are still generating record profits and, as long as the gold price doesn’t fall below US$1,400, I expect this general trend to continue,” he said.
“Second, many junior mining companies have taken advantage of the uptick in interest in the sector and have raised significant amounts of money.”
Although investor sentiment has shifted somewhat since last year, heightened demand in 2020 has led to a need for new discovery and production.
“We should see the fruits of this first wave of investment dollars as action plans are executed. There is nothing like a good discovery to spur interest in the market,” Leni added.
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Del Real believes gold’s recent price activity is building a solid base for growth.
“I think gold is putting in an excellent floor. At these prices producers are profitable, exploration budgets are on the rise and companies excel,” he said. “I suspect by year end we see new all-time highs coupled with increased volatility.”
Gold price update: Uncertainty will drive values higher
Although more than 928 million COVID-19 vaccine doses have been administered globally, the pandemic is still infusing uncertainty into markets. The volatility may not be as widespread or impactful as 2020’s disruptions, but gold is poised to gain regardless.
“The COVID-19 pandemic may be over, but we are nowhere close to being done with the economic crisis which has resulted from the lockdowns and debt accumulation over the last year,” said Leni.
The economic impact will undoubtedly lead to inflation, according to the market watcher.
“The Fed has made a public decree that they are targeting inflation,” Leni explained. “They are doing this because it’s their only hope of dealing with the debt they have accrued.”
The problem will be how uncontrollable the inflation may be.
“In my view, they will be successful at spurring inflation. The unfortunate part about that is that we have seen throughout history that inflation can’t be controlled; it isn’t like a light bulb which can be turned off and on,” he added. “Gold is insurance against this coming disaster.”
Against that backdrop, he expects gold to move north of US$2,100 before the end of the year. “Once that happens, I think that it will be awhile before we see it drop below US$2,000 again — years,” Leni said.
Del Real has a similar forecast for the rest of 2021. “End of Q2 I see US$1,800 gold,” he told INN. “End of (the) year I see gold above US$2,300.”
In the meantime, the co-owner of Digest Publishing is keeping an eye on several factors. “I’m watching real rates; I’m watching central banks and have been adding to my copper-gold exposure aggressively the past few months.”
Don’t forget to follow us @INN_Resource for real-time updates!
Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
The post Gold Price Update: Q1 2021 in Review appeared first on Investing News Network.
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Uncategorized
Mortgage rates fall as labor market normalizes
Jobless claims show an expanding economy. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.
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Everyone was waiting to see if this week’s jobs report would send mortgage rates higher, which is what happened last month. Instead, the 10-year yield had a muted response after the headline number beat estimates, but we have negative job revisions from previous months. The Federal Reserve’s fear of wage growth spiraling out of control hasn’t materialized for over two years now and the unemployment rate ticked up to 3.9%. For now, we can say the labor market isn’t tight anymore, but it’s also not breaking.
The key labor data line in this expansion is the weekly jobless claims report. Jobless claims show an expanding economy that has not lost jobs yet. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.
From the Fed: In the week ended March 2, initial claims for unemployment insurance benefits were flat, at 217,000. The four-week moving average declined slightly by 750, to 212,250
Below is an explanation of how we got here with the labor market, which all started during COVID-19.
1. I wrote the COVID-19 recovery model on April 7, 2020, and retired it on Dec. 9, 2020. By that time, the upfront recovery phase was done, and I needed to model out when we would get the jobs lost back.
2. Early in the labor market recovery, when we saw weaker job reports, I doubled and tripled down on my assertion that job openings would get to 10 million in this recovery. Job openings rose as high as to 12 million and are currently over 9 million. Even with the massive miss on a job report in May 2021, I didn’t waver.
Currently, the jobs openings, quit percentage and hires data are below pre-COVID-19 levels, which means the labor market isn’t as tight as it once was, and this is why the employment cost index has been slowing data to move along the quits percentage.
3. I wrote that we should get back all the jobs lost to COVID-19 by September of 2022. At the time this would be a speedy labor market recovery, and it happened on schedule, too
Total employment data
4. This is the key one for right now: If COVID-19 hadn’t happened, we would have between 157 million and 159 million jobs today, which would have been in line with the job growth rate in February 2020. Today, we are at 157,808,000. This is important because job growth should be cooling down now. We are more in line with where the labor market should be when averaging 140K-165K monthly. So for now, the fact that we aren’t trending between 140K-165K means we still have a bit more recovery kick left before we get down to those levels.
From BLS: Total nonfarm payroll employment rose by 275,000 in February, and the unemployment rate increased to 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, in government, in food services and drinking places, in social assistance, and in transportation and warehousing.
Here are the jobs that were created and lost in the previous month:
In this jobs report, the unemployment rate for education levels looks like this:
- Less than a high school diploma: 6.1%
- High school graduate and no college: 4.2%
- Some college or associate degree: 3.1%
- Bachelor’s degree or higher: 2.2%
Today’s report has continued the trend of the labor data beating my expectations, only because I am looking for the jobs data to slow down to a level of 140K-165K, which hasn’t happened yet. I wouldn’t categorize the labor market as being tight anymore because of the quits ratio and the hires data in the job openings report. This also shows itself in the employment cost index as well. These are key data lines for the Fed and the reason we are going to see three rate cuts this year.
recession unemployment covid-19 fed federal reserve mortgage rates recession recovery unemploymentUncategorized
Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month
Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month
Last month we though that the January…
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Last month we though that the January jobs report was the "most ridiculous in recent history" but, boy, were we wrong because this morning the Biden department of goalseeked propaganda (aka BLS) published the February jobs report, and holy crap was that something else. Even Goebbels would blush.
What happened? Let's take a closer look.
On the surface, it was (almost) another blockbuster jobs report, certainly one which nobody expected, or rather just one bank out of 76 expected. Starting at the top, the BLS reported that in February the US unexpectedly added 275K jobs, with just one research analyst (from Dai-Ichi Research) expecting a higher number.
Some context: after last month's record 4-sigma beat, today's print was "only" 3 sigma higher than estimates. Needless to say, two multiple sigma beats in a row used to only happen in the USSR... and now in the US, apparently.
Before we go any further, a quick note on what last month we said was "the most ridiculous jobs report in recent history": it appears the BLS read our comments and decided to stop beclowing itself. It did that by slashing last month's ridiculous print by over a third, and revising what was originally reported as a massive 353K beat to just 229K, a 124K revision, which was the biggest one-month negative revision in two years!
Of course, that does not mean that this month's jobs print won't be revised lower: it will be, and not just that month but every other month until the November election because that's the only tool left in the Biden admin's box: pretend the economic and jobs are strong, then revise them sharply lower the next month, something we pointed out first last summer and which has not failed to disappoint once.
In the past month the Biden department of goalseeking stuff higher before revising it lower, has revised the following data sharply lower:
— zerohedge (@zerohedge) August 30, 2023
- Jobs
- JOLTS
- New Home sales
- Housing Starts and Permits
- Industrial Production
- PCE and core PCE
To be fair, not every aspect of the jobs report was stellar (after all, the BLS had to give it some vague credibility). Take the unemployment rate, after flatlining between 3.4% and 3.8% for two years - and thus denying expectations from Sahm's Rule that a recession may have already started - in February the unemployment rate unexpectedly jumped to 3.9%, the highest since February 2022 (with Black unemployment spiking by 0.3% to 5.6%, an indicator which the Biden admin will quickly slam as widespread economic racism or something).
And then there were average hourly earnings, which after surging 0.6% MoM in January (since revised to 0.5%) and spooking markets that wage growth is so hot, the Fed will have no choice but to delay cuts, in February the number tumbled to just 0.1%, the lowest in two years...
... for one simple reason: last month's average wage surge had nothing to do with actual wages, and everything to do with the BLS estimate of hours worked (which is the denominator in the average wage calculation) which last month tumbled to just 34.1 (we were led to believe) the lowest since the covid pandemic...
... but has since been revised higher while the February print rose even more, to 34.3, hence why the latest average wage data was once again a product not of wages going up, but of how long Americans worked in any weekly period, in this case higher from 34.1 to 34.3, an increase which has a major impact on the average calculation.
While the above data points were examples of some latent weakness in the latest report, perhaps meant to give it a sheen of veracity, it was everything else in the report that was a problem starting with the BLS's latest choice of seasonal adjustments (after last month's wholesale revision), which have gone from merely laughable to full clownshow, as the following comparison between the monthly change in BLS and ADP payrolls shows. The trend is clear: the Biden admin numbers are now clearly rising even as the impartial ADP (which directly logs employment numbers at the company level and is far more accurate), shows an accelerating slowdown.
But it's more than just the Biden admin hanging its "success" on seasonal adjustments: when one digs deeper inside the jobs report, all sorts of ugly things emerge... such as the growing unprecedented divergence between the Establishment (payrolls) survey and much more accurate Household (actual employment) survey. To wit, while in January the BLS claims 275K payrolls were added, the Household survey found that the number of actually employed workers dropped for the third straight month (and 4 in the past 5), this time by 184K (from 161.152K to 160.968K).
This means that while the Payrolls series hits new all time highs every month since December 2020 (when according to the BLS the US had its last month of payrolls losses), the level of Employment has not budged in the past year. Worse, as shown in the chart below, such a gaping divergence has opened between the two series in the past 4 years, that the number of Employed workers would need to soar by 9 million (!) to catch up to what Payrolls claims is the employment situation.
There's more: shifting from a quantitative to a qualitative assessment, reveals just how ugly the composition of "new jobs" has been. Consider this: the BLS reports that in February 2024, the US had 132.9 million full-time jobs and 27.9 million part-time jobs. Well, that's great... until you look back one year and find that in February 2023 the US had 133.2 million full-time jobs, or more than it does one year later! And yes, all the job growth since then has been in part-time jobs, which have increased by 921K since February 2023 (from 27.020 million to 27.941 million).
Here is a summary of the labor composition in the past year: all the new jobs have been part-time jobs!
But wait there's even more, because now that the primary season is over and we enter the heart of election season and political talking points will be thrown around left and right, especially in the context of the immigration crisis created intentionally by the Biden administration which is hoping to import millions of new Democratic voters (maybe the US can hold the presidential election in Honduras or Guatemala, after all it is their citizens that will be illegally casting the key votes in November), what we find is that in February, the number of native-born workers tumbled again, sliding by a massive 560K to just 129.807 million. Add to this the December data, and we get a near-record 2.4 million plunge in native-born workers in just the past 3 months (only the covid crash was worse)!
The offset? A record 1.2 million foreign-born (read immigrants, both legal and illegal but mostly illegal) workers added in February!
Said otherwise, not only has all job creation in the past 6 years has been exclusively for foreign-born workers...
... but there has been zero job-creation for native born workers since June 2018!
This is a huge issue - especially at a time of an illegal alien flood at the southwest border...
... and is about to become a huge political scandal, because once the inevitable recession finally hits, there will be millions of furious unemployed Americans demanding a more accurate explanation for what happened - i.e., the illegal immigration floodgates that were opened by the Biden admin.
Which is also why Biden's handlers will do everything in their power to insure there is no official recession before November... and why after the election is over, all economic hell will finally break loose. Until then, however, expect the jobs numbers to get even more ridiculous.
International
Angry Shouting Aside, Here’s What Biden Is Running On
Angry Shouting Aside, Here’s What Biden Is Running On
Last night, Joe Biden gave an extremely dark, threatening, angry State of the Union…
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Last night, Joe Biden gave an extremely dark, threatening, angry State of the Union address - in which he insisted that the American economy is doing better than ever, blamed inflation on 'corporate greed,' and warned that Donald Trump poses an existential threat to the republic.
But in between the angry rhetoric, he also laid out his 2024 election platform - for which additional details will be released on March 11, when the White House sends its proposed budget to Congress.
To that end, Goldman Sachs' Alec Phillips and Tim Krupa have summarized the key points:
Taxes
While railing against billionaires (nothing new there), Biden repeated the claim that anyone making under $400,000 per year won't see an increase in their taxes. He also proposed a 21% corporate minimum tax, up from 15% on book income outlined in the Inflation Reduction Act (IRA), as well as raising the corporate tax rate from 21% to 28% (which would promptly be passed along to consumers in the form of more inflation). Goldman notes that "Congress is unlikely to consider any of these proposals this year, they would only come into play in a second Biden term, if Democrats also won House and Senate majorities."
Biden once again tells the complete lie that "nobody earning less than $400,000/year will pay additional penny in federal taxes."
— RNC Research (@RNCResearch) March 8, 2024
FACT: Biden has *already* raised the tax burden on Americans making as little as $20,000 per year. pic.twitter.com/VrZ1m0rzG3
Biden also called on Congress to restore the pandemic-era child tax credit.
Immigration
Instead of simply passing a slew of border security Executive Orders like the Trump ones he shredded on day one, Biden repeated the lie that Congress 'needs to act' before he can (translation: send money to Ukraine or the US border will continue to be a sieve).
As immigration comes into even greater focus heading into the election, we continue to expect the Administration to tighten policy (e.g., immigration has surged 20pp the last 7 months to first place with 28% in Gallup’s “most important problem” survey). As such, we estimate the foreign-born contribution to monthly labor force growth will moderate from 110k/month in 2023 to around 70-90k/month in 2024. -GS
SEE IT: Biden gets boo-ed while talking about his immigration bill. WATCH pic.twitter.com/O5FmkYx3xM
— Simon Ateba (@simonateba) March 8, 2024
Ukraine
Biden, with House Speaker Mike Johnson doing his best impression of a bobble-head, urged Congress to pass additional assistance for Ukraine based entirely on the premise that Russia 'won't stop' there (and would what, trigger article 5 and WW3 no matter what?), despite the fact that Putin explicitly told Tucker Carlson he has no further ambitions, and in fact seeks a settlement.
‼️ Breaking: Putin wants a negotiated settlement to what’s happening in Ukraine.
— Ed (@EdMagari) February 9, 2024
In a surprising turn of events, Tucker Carlson could be the key to peace, potentially playing a crucial role in ending the current conflict????️ pic.twitter.com/IKN8ajlEUX
As Goldman estimates, "While there is still a clear chance that such a deal could come together, for now there is no clear path forward for Ukraine aid in Congress."
China
Biden, forgetting about all the aggressive tariffs, suggested that Trump had been soft on China, and that he will stand up "against China's unfair economic practices" and "for peace and stability across the Taiwan Strait."
SOTU FACT CHECK:
— Wesley Hunt (@WesleyHuntTX) March 8, 2024
Biden claims we’re in a strong position to take on China.
No president in our lifetime has been WEAKER on China than Biden. pic.twitter.com/Y73JsIzmM3
Healthcare
Lastly, Biden proposed to expand drug price negotiations to 50 additional drugs each year (an increase from 20 outlined in the IRA), which Goldman said would likely require bipartisan support "even if Democrats controlled Congress and the White House," as such policies would likely be ineligible for the budget "reconciliation" process which has been used in previous years to pass the IRA and other major fiscal party when Congressional margins are just too thin.
So there you have it. With no actual accomplishments to speak of, Biden can only attack Trump, lie, and make empty promises.
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