- The best performing precious metal for the week was platinum, up 6.11 percent and finishing the month up 11 percent. Palladium, however, was even stronger, surging 17 percent for the month. Both metals have benefited from better auto sales in China and concerns over potential labor strikes in South Africa.
- Energy and mining investment has collapsed to its lowest level in nearly 15 years, according to Macquarie Research, and appears to have hit bottom. This could be a sign that it is due for a rotation upwards with the recent strength in precious metal prices.
- In addition, healthy inflation has returned, according to the core PCE price index, which increased at a pace of 1.9 percent annualized in the first half of the year. Private sector wages and salaries also increased 2.6 percent over the last year.
- The worst performing precious metal for the week was gold, although still positive, up 2.16 percent. Most of the gains came after the Federal Open Market Committee (FOMC) meeting, as the U.S. durable goods orders dropped 4 percent in June, more than expected and the most since August 2014. Gross domestic product rose at an annualized rate of just 1.2 percent last quarter, while forecasts had called for a 2.5 percent increase.
- Gold showed some weakness in trading sessions earlier in the week, related to rising speculation that the Fed will raise rates sometime this year. In addition, the Bloomberg Dollar Spot Index gained for three weeks in a row, and purchases in gold-backed exchange-traded funds have backed off from their three-year high earlier in the month.
- The chief investment officer of TD Asset Management, Bruce Cooper, has shifted to a “maximum overweight” allocation to gold for its portfolios. The firm oversees more than $230 billion. Cooper is watching for Germany to shift away from its austerity approach and notes that if Hillary Clinton and the Democrats win the election and unveil fiscal stimulus, inflation could pick up in the global economy.
- Amid the gold rally this year, Barrick Gold Corp. plans to continue its plans to sell off peripheral assets, starting with its share in the Australian Kalgoorlie Super Pit. Barrick reported that it made $968 million in debt repayments this year, nearly half of the target amount. Gold producers have had a mixed quarter for earnings as Newmont Mining and Agnico Eagle Mines beat estimates while Goldcorp and Kinross Gold missed. In fact, Agnico Eagle’s CEO, Sean Boyd, is optimistic for the future, stating that it’s not too late for investors to participate in this rally. Boyd cited the “tremendous amount of debt in the system,” along with strong demand from China and India.
- SkyBridge Capital, a firm which profited from gold during the surge in 2010 and 2011, now puts forth a cautious outlook for gold. A senior portfolio manager at the investment firm states that bullion’s rally could be hindered if the Fed decides to raise rates more quickly than expected, even though the fundamentals for gold are supportive. SkyBridge managed $12.6 billion as of May 31 and does not have any exposure to gold and precious metals currently.
- Macquarie Research published a report this week with the outlook that fiscal policy will result in “financial repression for decades.” The firm calls the low rate policies an “implicit tax on savings” leading to weak consumption, and in turn, lack of investment by companies and stagnant wage growth. In addition there is a lot of pressure on entitlement programs such as pension funding.
CEO and Chief Investment Officer
U.S. Global Investors
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