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Gold ticks up as U.S. pending home sales surge in May

Gold attempted to recover some of its early-morning losses as the U.S. pending home sales surprised on the upside in May.

The U.S. pending home sales were up 8% in May, rebounding after April’s 4.4% drop, the National Association of Realtors (NAR) said on Wednesday. Consensus forecasts were calling for a decrease of 0.8%.

The pending home sales index came in at 114.7 in May, marking the highest May reading since 2005.

Also, pending home sales were up 13.1% from a year ago as low mortgage rates drove demand.

“May’s strong increase in transactions – following April’s decline, as well as a sudden erosion in home affordability – was indeed a surprise,” said Lawrence Yun, NAR’s chief economist. “The housing market is attracting buyers due to the decline in mortgage rates, which fell below 3%, and from an uptick in listings.”

Even all-time high housing prices and record-low inventories are not stopping the buyers from lining up, added Yun.

“While these hurdles have contributed to pricing out some would-be buyers, the record-high aggregate wealth in the country from the elevated stock market and rising home prices are evidently providing funds for home purchases,” Yun said. “More market listings will appear in the second half of 2021, in part from the winding down of the federal mortgage forbearance program and from more home building…read more.

Gold summer doldrums return after two-year hiatus

Two weeks ago in this space, I mentioned the $1850 level in gold had cleared the upside on a monthly closing basis and successfully back tested its breakout. The $1850 level at that time coincided with the upper boundary of the downtrend channel from its all-time high at $2089. Once the downtrend line at $1850 was cleared last month, the gold price appeared to break out of a symmetrical triangle to the upside.

At the time, this signified the likelihood that the rally from a daily double bottom in late March had moved into a higher gear. Bullion had also broken through $1900 on a monthly closing basis and the next level in its crosshairs was the January 2021 high at $1960. But the gold price quickly fell back into the triangle during a sharp decline last week, and now appears to be headed towards its uptrend line near $1700 that has been in force since late 2018.Last Wednesday provided the catalyst for an over 6% reversal, when the Federal Reserve jawboned a stop-loss run of a $150 waterfall decline to strong support at $1760 in Gold Futures. A subsequent oversold bounce on Monday was quickly reversed before reaching the all-important $1800 level, which has become strong resistance once again.

All it took to run the stops below $1800 in gold was for the world’s largest central bank to go from “not even thinking about thinking about raising rates” to “thinking about thinking about raising rates” at the June FOMC meeting. Click here for full article.

Trevor C. from Calgary won a 10oz silver coin courtesy of our friends at Border Gold. Thanks to all our Inside Edge subscribers, and a special welcome to all the new registrants.

Secretive World of Diamonds Is in the Grips of a Buying Frenzy

 

(Bloomberg) — At the latest De Beers diamond auction this week, buyers shopping for the kind of stones used to make an average engagement ring were in for a sticker shock: some prices had ballooned by 10% since the last sale. News of the unusually sharp increases spread swiftly through the community of 80-odd handpicked De Beers customers, according to people familiar with the discussions. But what followed was even more remarkable: within hours, some of those same stones were trading hands at a further 10% markup, as buyers who have access to De Beers flipped them to traders and manufacturers that don’t.

The spiking prices — and buyers’ willingness to pay them — are the latest sign of roaring demand in the secretive rough-diamond trade. Just nine months ago, the industry had been brought to a standstill by the pandemic. Now, the cutters and polishers who form the backbone of the global diamond market are competing fiercely for stones.

There’s several reasons behind the surge: major retailers in the U.S. and China are buying aggressively to keep up with strong sales, while rough diamond supply is tight because De Beers and rival Alrosa PJSC have limited supply to put onto the market. Perhaps most importantly, polished diamond prices — which have long weighed on the industry — are finally rising.

Read more at: https://www.bloombergquint.com/business/buying-frenzy-drives-price-surge-in-the-hidden-world-of-diamonds
Copyright © BloombergQuint

It’s time to officially bury Goldbug Macro

 

You know, the school of thought that’s always warning about dollar debasement and inflation as a result of money printing.

Here is a chart of gold over the last 10 years. It’s up about 10%. During this period we’ve run large deficits the entire time, and in fact over the last year, some of the biggest fiscal stimulus of all time. During this time the size of the Fed’s balance sheet rose to nearly $8 trillion from under $3 trillion. Not only has gold performed poorly, the dollar is still dominant.

Not only that, inflation has been mild, contra to what all the Goldbug Macro types would have predicted. Of course, they would probably come back and say that inflation is actually being mis-measured and that it’s way higher if only you look at it the right way. Or that it’s showing up in asset values or something like that. Even if you were to grant all that as true, gold hasn’t benefited, so their case hasn’t been helped much. As we saw in the wake of the Great Financial Crisis and over last summer, gold seems to do well during periods of stagnation plus aggressive Fed easing. But that’s about it. After two huge crises in just over a decade, plus fiscal and monetary stimulus the likes of which we haven’t seen before, we now have enough evidence to bury the economic fantasies of gold’s most ardent believers.

Gold Production Expected to Rise in 2021

In their recent Industry report Raymond James analysts Farooq Hamed and Judith Elliot expect significant rebounds for precious metal producers in 2021.

According to Mr. Hamed, “in general, precious and base metals producers continued to generate positive [free cash flow] in the fourth quarter of 2020, however at lower levels than in the previous quarter due to lower quarterly average gold prices. We expect increasing production over the next three years.”

In most cases, this involves a return to ‘normal’ operations after 2020 was marked by downtime caused by Covid-related shutdowns. Among precious metal producers the report expects strong production gains from are firms like Agnico Eagle, Yamana Gold and Calibre Mining.

Interesting to note that Raymond James has Calibre (TSX:CXB) as a “strong buy”, and BMO Nesbitt Burns has also started Calibre Mining coverage with a “market perform” rating. You can watch Ryan King’s complete Calibre Mining presentation from the 2021 World Outlook Financial Conference, along with 15 other precious metals companies HERE.

Elsewhere Mr Hamed and Ms. Elliott see exploration spending ticking up across the sector. With improved balance sheets and a focus on replacing reserves, producers are providing forward looking guidance of significant increases in 2021 exploration budgets.

At the same time operating costs are generally expected to be higher year over year as companies factor in additional health and safety costs related to Covid protocols and higher inputs on cost inflation.