The Case for Gold
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PLEASE NOTE THAT THIS INFORMATION EXPRESSES THE VIEWS AND OPINIONS OF SEABRIDGE GOLD MANAGEMENT AND IS NOT INTENDED AS INVESTMENT ADVICE. SEABRIDGE GOLD IS NOT LICENSED AS AN INVESTMENT ADVISOR.
What Does The Jobs Report Mean?
Today, we got a very surprising (to some) US jobs report for September. The number of new jobs fell well short of expectations, wages were flat, hours worked were down and the job totals for July and August were also marked down sharply.
Short Covering Propels Gold Rally: Will New Longs Follow?
At last, a short covering rally seems to have begun in gold. After a number of bear raids that failed to break the gold price below $1100, the shorts appear to be throwing in the towel, at least for now. Going into today, large speculators were sporting outsized short positions and small speculators, the proverbial contrary indicator, were likely holding a record net short position.
The Bear Thesis on Gold Unwinds
As we have been saying for many months, the powerful anti-gold thesis ultimately depends on confidence in the Fed. Today, that confidence took a very serious hit.
The Gold Basis: Pointing the Way Higher?
In our view, the gold basis is indicating that market players are positioning for a move lower in the dollar and higher in gold.
Raising Rates: Just How Will the Fed Do It?
Everyone seems to assume that if the Fed decides to raise the short term interest rate, all they will have to do is wave their wand and the rate will magically go where they want. Historically, that's not how it was done. The Fed sold securities into the market, reduced liquidity and the market took the rate higher.
It's Not Just China
The Friday-Monday stock smash was blamed on China's market crash and slowing economy. The proof, according to market commentators, was the short-lived recovery in US equities on Tuesday after the People's Bank of China "stepped up its credit-easing efforts by slashing interest rates and flooding its banking system with new liquidity, its second such combo move in two months aimed at battling a deepening economic slowdown and its worst stock-market selloff in decades." (Wall Street Journal, August 25, 2015).
Risk Aversion Grows: Good for Gold?
Gold generally trades inversely to financial assets. When investors are willing to take on more risk and pay up for financial assets, gold does not do well. When they become more risk averse, gold tends to do better.
Stars Align for Gold as Reality Begins to Hit
Gold was ridiculed and reviled when it broke its November, 2014 low of $1135 in July. The Fed was going to raise rates in September, the dollar was going to the moon, the economy was going to have a great second half and why own anything other than stocks. Gold was going to $1000, $850, $350, pick a number.
Where is the Recovery? Part 2
Gold bears have been pounding gold on the short side because they think the US economy is in, or will soon be in, a strong recovery which means the Fed will raise rates, the dollar will soar and gold will decline further. But the data does not confirm a recovery. We believe the gold bear premise is fundamentally wrong.
Where is the Recovery?
Gold bears have been pounding gold on the short side because they think the US economy is in, or about to be in, a strong economic recovery which means the Fed will raise rates, the dollar will soar and gold will decline further.