Dear PGM Capital Blog readers,
Thursday, June 30th marked the end of the second quarter and first half of 2016.
THE GOLD PRICE:
Gold futures advanced 8.5% in June, 6.9% in the second quarter, and 24.6% in the first half of 2016.
On Friday July 1st, the yellow metal, rose with US$ 19,09 or 1.45% an ounce to settle at its best level since July 11, 2014 as can be seen from below 3-year chart.
THE SILVER PRICE:
Silver futures rallied 16.4% in June, advanced 20.4% in the second quarter, and surged 34.9% through the first half of this year.
On Friday July 1st, the Silver, rose with US$ 1,19 or 6.39% an ounce to settle at its best level since August 14, 2014 as can be seen from below 3-year chart.
GOLD & SILVER MINERS:
Gold and Silver miners, which has leverage did it even better than the metals.
The vanEck Vector Gold Miners ETF (NYSE: GDX) rose on Friday with US$ 1.34 or 4.84% a share to close at a 26-week high of US$ 29,05 a share as can be seen from below chart.
The Global X Silver Miner ETF (NYSE: SIL) did it even better and rose with US$ 2.63 or 6.07% to a 26-week high of US$ 45.95. a share as can be seen from below chart.
YIELD 10-YEAR NOTE:
U.S. government debt prices were higher on Friday, building on a global bonds rally, as investors looked to the release of a host of data ahead of the Fourth of July weekend.
On Friday, July 1st, the yield on the benchmark 10-year Treasury note deceased with 0.032 or -2.15%, to settle at its lowest level since January 1st 1962, of 1.4560%, as can be seen from below chart.
The yield on the 30-year Treasury bond was also lower at 2.241 percent after hitting a new all-time low.
PGM CAPITAL ANALYSIS AND COMMENTS:
Brexit:
Rating agency Standard & Poor’s said, the EU referendum result is a ‘seminal event’ that means Great Britain no longer deserves a gold-plated AAA rating, for which reason on Monday June 27, it downgraded the country credit rating by two notches, to AA, with negative Outlook.
S&P warned that the Brexit vote will lead to “less predictable, stable, and effective policy framework in the UK” and will hurt growth.
Fitch, another major credit rating, has also downgraded the credit rating of the county to AA from AA+, with a negative Outlook.
Due to this, Bank of England Governor Mark Carney warned on Thursday, June 30th that further stimulus measures may soon be needed for the U.K. following the country’s vote to leave the European Union.
Based on this the British Pound decreased to a 5-year low of 1,3269 against the US Dollar, as can be seen from below chart.
Gold in a New Bull Market:
The main four reasons for owning gold at today’s prices and why gold is now in a new bull market:
- Global gold mining production has plateaued despite the recent bounce in gold prices:
According to the World Gold Council’s Q1 2016 Gold Demand Trends report, global mine supply totaled 774.0 tonnes during the 1st quarter of this year.
This is up 8% on a year-over-year basis (mainly due to an uptick in producer hedging), but is nearly 14% below the peak of 897.0 tonnes achieved during the 4th quarter of 2014. - Both the Global Monetary and Fiscal Policy Outlooks Remain Highly Expansionary:
Currently, over one-third ($10 trillion) of the world’s sovereign debt is yielding negative interest rates, for which negative rates in Japan has boosted demand in Q1-2016, with 35 precent. There is increasing evidence that investors and global reserve currency managers are flocking to gold as a means to preserve capital. E.g. global gold investment demand during the 1st quarter of this year soared to a seven-year high, and is the second-highest quarterly of investment demand on record. - Future Political en economical uncertainties:
Trading activity has eased since the rush for gold that immediately followed Britain’s referendum result, when investors moved toward safe-haven assets to guard against market uncertainty. Wider market uncertainty could be a boost to gold in future months. The Fed is likely to delay an interest-rate increase further given the news from the U.K., as well as political uncertainty ahead of the U.S. presidential election later this year. - Chinese and Indian demand for gold will continue to rise:
By far the most important drivers in gold demand in India and China are income levels and urbanization, as gold jewelry is regarded as a luxury consumer item in both countries.
Chinese real wages continue to rise at over 10% year-over-year, Indian wages are rising at similar rates (10 million Indian civil servants just received a 23% pay raise). From a structural standpoint, both Indian and Chinese gold demand should rise over the next several years as income levels and urbanization continue to rise.
Based on the above, we believe that gold remains a solid, long-term investment and the time to buy gold is now, this in anticipation of much higher gold prices in the near future.
The PGM Component 50 Index:
The PGM Component 50 Index, which is heavy weighted with precious metals and other wealth preservation’s securities, closed on Friday, July 1st at fresh new all-time high and has also beaten all major markets YTD as can be seen from below chart.
Due to this we have proven to be your trusted partner in these turbulent times.
The last four year, via several interviews and blog articles we have been warning investors, of turbulent times ahead and that Gold and other precious metals are the only insurance against it.
Based on this the following quotes of Warren Buffet might be applicable.
Warren Buffett;
“Time is the friend of the wonderful business, the enemy of the mediocre.”
“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”
John Maynard Keynes;
“The market can stay irrational longer than you can stay solvent“.
Last but not least, before following any investing advice, always consider your investment horizon, risk tolerance and financial situation and be aware that prices of precious metals and the stock of their producers might be very volatile and that sharp corrections may happen in the short term.
Until next week.
Yours sincerely,
Eric Panneflek