00:00 Speaker A
Gold prices have been surging to unprecedented heights, hitting new record highs here as US rate cut expectations rise for more on the upside potential for the precious mail and the state of commodities. Let’s get to Blue Line Futures chief market strategist. That would be Philip Streible. Phil, always great to see you on the show. So, let’s talk gold here, Phil, which has been on a tear this year. First and foremost, what do you chalk that up to Phil? Is that is that just US dollar weakness? Let’s keep it simple.
00:36 Speaker B
I mean it’s been several drivers that have really aligned and we really could see a continued move up through 4,000 in the next summer. It has been the rate cuts, that’s what started this thing moving and we’re expecting 25 basis points next week, but it’s 100 basis points over the next six months, which keeps the tailwind in place. You look at the September 17th meeting, you got about an 88% chance that they cut 25 basis points and we’re even seeing in light of some of this recent weakness in the labor market, an 11% chance of a 50 basis point interest rate cut. So you get a steeping yield curve, meaning that real yields decline and that fuels the weaker dollar and you come into the current economic environment which is stagflation back tested that’s been one of the best economic environments for gold.
01:21 Speaker A
Let me ask you Phil in the more sort of just near and immediate term here, I do see even some gold gold bulls pointing out that positioning they say is going getting a bit crowded here on the long side. Is that what you see?
01:37 Speaker B
Well, the beyond Central Bank buying, we’re really seeing a broadening of the participation with retail investors expanding their exposure and diversifying into gold. So if you look at total gold ETF flows, they’ve risen about 13% year to date and up to about 94 million ounces. It is the highest level since May of 2023. So, yes, there is some froth in there, but what we’re seeing also is that the traditional investor, the traditional wealth advisor is now incorporating some of these commodity names like holding gold, holding oil, holding silver within that core portfolio and what it’s done is it’s balanced some of the risk, especially with heightened geopolitical tensions, rising inflation and things like that.
02:26 Speaker A
Let me let me put a number on this uh Phil, I just want to get your take on it. Goldman Sachs is telling their clients, bull case prices could climb they say toward 5,000 by the end of next year. That makes sense to you?
02:42 Speaker B
Yeah, but there the the backdrop on that story is that the Fed independence is really questioned whether or not they’ll be able to, you know, remove some of these fed officials, implant that dovish fed official and then really accelerate the rate cuts, which would cause a lot of jeopardy, a lot of questioning about, you know, the US integrity, perhaps an attack on our Treasury markets, the dollar index, the credibility would be attacked there as well. So, I think coming up with these price targets that are significantly higher based upon assumptions that that things could, you know, deteriorate. I don’t necessarily like that type of argument. That’s like with the crude oil when we had the Iran, Israel, you know, US conflict here going on and we’re dropping literally bombs on nuclear facilities, people were calling for $150, $200 crude oil. and look at crude barely got over $80 before falling back.
03:47 Speaker A
Let me ask you we’re talking about the metal here. What about the miners?
03:52 Speaker B
The miners look fantastic as well. I mean, it’s driving a lot of their profitability and a lot of these miners they’ve got other metals involved that have done well, like silver, continuing to push higher. That’s another metal that people are really going on after and you’re seeing falling inventories, limited mining supply, recycled silver is continuing to decline and you’ve got this transformation where green energy, electronics, EV vehicles, they require all these key minerals and elements that a lot of these miners are able to develop and bring up online and it’s just really seeing a perfect storm for them.
04:37 Speaker A
We’ve been talking about gold, what about silver, Phil? How did the charts look there?
04:42 Speaker B
Yeah, it’s still on the ETF flows 13% year to date. So they are really starting to push into it. The problem with silver right now, you do have a $42 resistance point we’ve been unable to close above. If we can get above that, you go back to 2011 where we’re at this high. It was a consolidation between 42 and 44. If we break loose to the upside though, it is entirely possible that we see $50 silver and above, but we need the industrial demand to really pick up because that makes 54% of silver’s demand um, you know, viable. So you’ve got to see that pick up on the industrial side to get those higher silver prices.