Gold set a new record over the weekend as prices surpassed $1,920 an ounce, the previous all-time high set in 2011, but momentum may not stop until $4,000 an ounce is taken out, according to Frank Holmes, CEO of U.S. Global Investors, who based his prediction on the effects that monetary stimulus had on gold during the last recession.
It’s important to take Holmes’ forecast into context.
Although gold has already breached all-time highs in several foreign currencies, this is the first time since 2011 that the yellow metal has seen new highs in U.S. dollar terms.
As of 7:00 am EST, spot gold traded at $1,944 an ounce.
In 2011, gold did not consolidate around the peak and form a plateau; rather, the metal retraced almost immediately, beginning a long-term bear trend that troughed in December, 2015.
This pull-back from the highs of nine years ago needs to also be taken into context; September, 2011 was already three years past the start of the last Great Recession, and gold was already in the final innings of a three-year bull rally that started in November, 2008, at the beginning of economic downturn.
Since 1979, there have been five recessions, including the current one that started in February, 2020, as designated by the National Bureau of Economic Research (NBER).
It’s important to note that gold did not rally during any of the prior four recessions, and only saw a bull market manifest after the end of two recessionary periods: 2001 and 2008-2009, as can be evidenced in the chart below.
The chart above shows the Federal Reserve funds rate (blue line), plotted next to the gold price (orange line). From 1979 to 2008, gold and the Fed funds rate moved in lockstep; as interest rates saw a long-term secular decline from the late 1970s to the mid-2000s, so too did gold follow this downtrend. The multi-decade bear cycle in gold prices bottomed in the early 2000s and steadily rose in tandem with rising interest rates until 2007.
The first deviation between gold and interest rates occurred in 2008, when the start of the recession prompted several rounds of quantitative easing, bringing interest rates to near zero, where rates remained until they were hiked in late 2015.
During this period of dovishness from the Federal Reserve, which brought rates down to a level never before seen, gold continued to rise until it reached its peak in 2011.
What set the 2000s apart from prior decades was sharp rises in gold prices that followed drops in interest rates, once in 2008, and more recently this year as the COVID-19 pandemic broke out.
Many analysts attributed this unusual pattern to record levels of monetary stimulus.
“In the next three years, if we look back, if [history] repeats itself, from 2008, 2009 to 2011, that three year run saw gold go from a $750 – $800 range up to $1,900. If we forecast that because we have the same expansion of the balance sheet of the Fed then it would project, if cycles are exactly the same, gold could go to $4,000,” Holmes said in an interview.
He noted that while the Fed has already set records on the level of monetary stimulus injected into the economy, quantitative easing will not stop until the central bank’s balance sheet surpasses $10 trillion .
“This is going to cost the U.S. government approximately $10 trillion in fiscal and monetary policy to get the economy back, so I think that number you’re seeing after 2008, 2009 after Lehman Bros. went bankrupt, you saw the balance sheet expand from $1 trillion to $3 trillion. I think it’s got to hit the overall $10 trillion,” he said.
Holmes is not alone in his long-term bullish forecast. Dan Oliver, founder of Myrmikan Capital, sees prices headed to $10,000 an ounce.
“The Fed, as you know, has been on a massive purchasing spree because of the virus situation, and so therefore the equilibrium price of gold is going up commensurately, and so the numbers now to balance that balance sheet are enormously high,” Oliver said in an interview. “My [forecast for gold prices] has changed. I’m at $10,000 now.”
Still, some analysts see prices overheated in the short-term.
Rick Rule, president of Sprott U.S., said that the possibility occurs for a price correction before a more substantial rally takes place.
“If you asked me my gold price outlook over the two-year or three-year term, I’m bullish to the point of being wildly bullish,” Rule said in an interview. “If you asked me my gold price outlook over the next two months, my suspicion is that it might have come too far, too fast.”
Rule added that investors can expect lots of volatility for gold in the coming months.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
