Welcome to SurvivalBlog’s Precious Metals Month in Review, by Steven Cochran of Gainseville Coins where we take a look at “the month that was” in precious metals. Each month, we cover the price action of gold and examine the “what” and “why” behind those numbers.
What Did Gold Do in June?
Gold started the month at $1,212.70 an ounce and ended June at $1,321.70 an ounce, for a gain of $109.00. The worst payroll report in years and the Brexit vote were the main factors in favor of gold. Silver was the big winner in June. It handily beat gold, ending at a 22-month high.
Factors Affecting Gold This Month
Non-farm Payrolls
The worst job gains since 2010 smashed stocks and the dollar, as the odds of the Fed raising interest rates fell past zero. Odds began growing that the Fed would cut rates back down to 0.25% instead of raising them, after such a slowdown.
Central Banks Out Of Options
Weakening growth in Europe and Japan, even after their central banks cut interest rates into negative territory, pushed gold prices to two-year highs.
Brexit
There was nothing else happening in June that affected gold prices more than the EU referendum in Britain, a.k.a. the Brexit vote. Stocks, bonds, currencies, and gold all moved according to whether the “Remain” side or “Leave” side was ahead in the polls. With everyone certain on voting day that the Remain side had it all locked up, gold had fallen under $1,300 an ounce while stocks were up sharply.
So, it was a huge shock to the establishment when the Leave side quickly pulled ahead on the vote count. Stock futures sold off, the pound sterling dropped to 31-year lows, and gold shot up by $104 an ounce at one point, to $1,360 an ounce. Speculators, of course, sold into the rally to reap huge profits, and spot gold closed the next day at $1,315.60 an ounce for a gain of $59.30 (4.72%).
The day after the vote, many people who voted to Leave were shocked that the UK was going to exit the EU. Known as “Regrexit”, these people voted Leave to “send a message” and never thought it would actually happen. A poll that was started to ask Parliament for a “do-over” had more than three million signatures within two days.
This just added to the uncertainty over what would happen to the economies of the EU and UK and kept gold well-bid through the end of the month.
On the Retail Front
There was a huge run on physical gold in the UK ahead of the Brexit vote, with the showroom of famous gold company Sharps Pixley selling out the gold bars and coins of incoming shipments before they even arrived at the showroom.
Sales of 2016 American Silver Eagles slowed in June, with a bit more than 2.8 million ounces sold.
The Perth Mint says that the phone has been ringing off the hook, as people clamor for gold bars and coins and opt to have them stored in the Perth Mint vault.
Market Buzz
In Venezuela, the Socialist government has been selling off all its gold to pay bills, while President Maduro’s goon squads beat opposition leaders and starving people protesting the lack of food.
Over in Argentina, a former senior government official was caught burying duffel bags packed with $8.5 million in cash on the grounds of a convent.
Bill Gross warns that those ineffective negative interest rates that are having the opposite effect than intended are a “supernova” ready to explode. Global bond yields at their lowest point in 500 years? So much for your pension!
Gross weighs in on the Brexit controversy, saying that there is a 30-50% chance that Britain will drag the U.S. economy into recession.
Investing legend George Soros was batting .500 in June. Famous for making over $1 billion betting against the pound in 1992, he became known as “the man who broke the Bank of England”. Well, he ended up on the wrong side of that bet on June 23rd, by betting heavily on the pound gaining on a “Remain” Brexit vote.
On the other side, he had the sense to buy into gold miner stocks and gold ETFs on his concerns over central bank policies and currency devaluation.
Marc Faber says the chaos in Europe over the Brexit vote will spill over to the U.S. and force the Fed to begin QE 4.
The SPDR Gold Shares ETF (GLD) is the world’s largest physically-backed gold fund. It got $18 billion larger in the first half of this year, as investors pour into gold bets.
First Majestic Silver is the second-largest silver producer in Mexico. The CEO predicts $140 silver in the future, as secondary sources of silver fall. If that’s too tame for you, Steve St. Angelo at SRSrocco Report says $12,000 gold and $360 silver are in the cards. The experts over at Sprott Global lay out the technical signs that we are in a new bull market for gold.
Our good friends over at Casey Research lay out how Brexit and negative interest rates by the European Central Bank are threatening an EU banking collapse that will spread into a global banking crisis.
Our own Everett Millman takes a look at how nations are building their gold reserves once again, to have hard assets backing their currencies.
Looking Ahead
The CME Group FedWatch tool at press time shows a zero percent chance of a rate hike by the Fed, through February 2017.
The Bank of England is already announcing stimulus measures, while the Bank of Japan can’t stop the yen from getting stronger on safe haven demand, even though interest rates are negative.
The middle of summer is usually the quiet time for gold, until the fall wedding season starts up in India. The concerns over Brexit and the possible failures in the Italian banking system may keep gold jumping through the summer.
We end this month with the story of a British treasure hunter who turned lead into gold.