(Kitco News) – The Federal Reserve surprised markets earlier in the week with an emergency 50-basis-point interest rate cut. This, in turn, has helped the gold market see its best weekly performance in 11 years.
With benchmark bond yields continuing to fall and markets expecting to see even lower interest rates in the near future, analysts say that it is difficult to be bearish on gold next week. According to some analysts, the biggest driver for gold remains the 10-year bond yield, which continues to hit fresh all-time lows.
On Friday, the yield on 10-year bonds fell to 0.70%. Meanwhile April gold futures last traded at $1,675 an ounce, up nearly 7% from last week. Many analysts have said that it’s only a matter of time before gold prices push above $1,700 an ounce.
Some analysts have noted that the three-week sell-off in equity markets and the precipitous drop in oil leaves gold as the best performing asset so far this year.
Mike McGlone, senior commodity strategist at Bloomberg Intelligence, said that gold should remain at the top of the investment spectrum compared to other commodities that are facing major demand issues in an environment of weak global growth. In a report release Friday, he said that he sees gold prices marching towards $1,800.
“Gold at the top of the macro-performance scorecard vs. crude oil — and copper near the bottom — are trends that we believe are gaining endurance, while the coronavirus outbreak simply aggravates preexisting conditions,” he said. “Gold is straightforward: Fed easing, increasing stock-market volatility and the lowest bond yields in history firm the foundation for the quasi-currency, store of value.”
Gold continues to look good, but risks remain
However, gold’s uptrend is expected to remain in place for most of the year, and analysts are warning investors to use some caution as volatility remains high.
On Friday the gold market was hit with some late-morning selling pressure, which removed some short-term momentum away from the precious metal. Looking ahead to next week, investors should get used to seeing this type of near-term price action, according to analysts.
Ryan McKay, commodity strategist at TD Securities, said that liquidity traps in the marketplace will be a significant risk for gold in the near-term as they eye a move towards $1,700 an ounce.
“As volatility picks up, you will see these rushes to liquidity that can cause gold to drop sharply,” he said.
Despite the risks in the marketplace, McKay added that the drops in gold are becoming shallower and shallower as investors’ demand for safe-haven assets dominate the market.
“Maybe you shouldn’t try to catch a falling knife, but after the drop when gold prices start to stabilize, these could be interesting buying opportunities for investors,” he said.
Ole Hansen, head of commodity strategy at Saxo Bank, said he also sees strong potential in gold, but added that the yellow metal will be vulnerable to deleveraging in the marketplace because of massive volatility.
“I don’t think we have seen the last of the deleveraging. Maybe it will take the VIX pushing to 50 to spark another deleveraging, but one will come and that is a risk for gold.”
However, Hansen added that weak economic growth will continue to support lower bond yields, which in turn are bullish for gold.
“I think you simply have to be bullish on gold. We haven’t even seen the worst for the global economy,” he said.
The ECB to following the Fed’s easing it’s just a question of how
Helping to drive gold prices will be continued easing by global central banks. Both the Reserve Bank of Australia and the Bank of Canada followed the Federal Reserve in easing interest rates this past week.
“All this money sloshing around financial markets, because of all this loose monetary policy, will be good for gold,” said Colin Cieszynski, chief market strategist, SIA Wealth Management.
All the attention will be focused on the Bank of England and the European Central Bank as they will both hold monetary policy meetings next week. The only problem these two central banks face is that interest rates are already so low. The ECB already has negative interest rates.
McKay said that TDS expects that the ECB won’t lower interest rates at its meeting next week but will announce “target measures.” He added that TDS economists see a rate cut in the second quarter.
Hansen said that there is no question that the ECB will have to act next week as the global economy is in difficult shape.
“The ECB is going to have to provide a life-line for the European economy. We don’t know what it will look like, but we know it will ultimately be good for gold,” he said.
More easing from the Fed?
Although the ECB will be in the spotlight next week, the Federal Reserve will remain a hot topic. Even after the Fed’s emergency cut markets are pricing in a more than 50% for another 50-basis-point cut following its March 18 meeting.
It’s more than just interest rates, fiscal stimulus will also help gold
Although all eyes are on the Federal Reserve, some analysts have noted that monetary policy will be ineffective in combating the coronavirus’ effects on economic growth. Analysts have said that fiscal programs that drive government debt higher could be the next major leg in gold’s long-term rally.
The comments come after President Donald Trump signed into law Friday an $8.3-spending program Congress created.
The funding measure includes over $3 billion for research and development of vaccines, test kits and medical treatments, $2.2 billion to aid public health activities on prevention, preparedness and response, and $1.25 billion to help international efforts aimed at reining in the virus.
Levels To Watch
With markets extremely bullish on gold in the near-term, most analysts and investors are watching critical resistance at $1,700 an ounce, which would also represent a new seven-year high for the precious metal.
“In this environment, I don’t think you can really look at a solid price target. I think you just look to the upside,” said Hansen.
On the downside, analysts say they are keeping an eye on initial support at $1,650 and then at $1,600.
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.
