Rising yields and a stronger dollar from earlier this week have put pressure on gold, but the long-term macroeconomic fundamentals have not changed for the metal’s bullish outlook, said Peter Hug, global trading director, who added that we are still in the early innings of a bull cycle. “I think gold has been mirroring the dollar and the dollar has been strengthening in the beginning of this week on the 10-year [yield] surging. Last Friday when we spoke the 10-year was trading around 1.12%, 1.14%, it’s now at 1.32%. So the yields on the 10-year have been going up this week and that has moved some assets into the dollar,” Hug said.
Gold has been stuck in a range and it's kind of rebounding on Friday today. Up $11 as we speak. Peter hug, global trading director of kickoff metals is back to talk about the price action and where he sees gold headed. Next, Peter, welcome back to the show. Good to be here, David dollars down a bit today.
Do you think that, uh, has any, has had any impact on Gold's price? I think gold has been mirroring the dollar and the dollars, uh, sort of, uh, you know, been strengthening, uh, at the beginning of this week on the, uh, tenure, uh, surgeon, uh, think last Friday when we spoke, uh, that tenure was trading around, uh, One 12, if I remember right, one 12, one 14, it's now one 32.
So the yields and the ten-year have been going up this week and, uh, that has moved some assets, uh, into the dollar. Um, but this morning, uh, as Europe was closing, uh, the dollar took it on the chin. The Euro started last. Last Friday was a trading close to about the one 23 level got down to one 20 earlier this week.
And it's now back in the mid one 20 ones. So, um, uh, it seems to be consolidating at this level, but I still anticipate dollar weakness coming up. Okay. Well, let's talk about sentiment now and I'll ask the audience first. If you're watching this on YouTube comment down below on whether or not you think gold is going to stay flat, go up or down.
What's your take over the next couple of weeks. Peter, do you think generalist investors are losing interest in the yellow metal right now? I, I would imagine that, uh, uh, that retail investors are, are, are disappointed in the price action in gold. And, uh, again, uh, you know, I, I was asked this morning again, where do you see gold next week?
Are you bullish bearish or neutral? I mean, you know, to be honest with you, I just don't know because, uh, it really depends on the context that you look at the market, uh, from, and, um, You know, I've been saying forever, I sound like a broken record. I mean, if, if you are buying precious metals as a position in your portfolio, uh, and you have a specific reason, I E you want to hedge against the balance of your portfolio, um, then, you know, look at this thing every day, you just holding metals and, uh, you know, as a, as an allocation, as a, as a percentage of your portfolio, I mean, if you're a trader.
It's a totally different ball game. I mean, right now I can tell you that my sentiment looks bullish next week. Uh, uh, I like the fact that gold is a regained the 200 day moving average from a technical perspective. Uh, I would rather be long this market as a trader, as opposed to being short, the market, uh, specifically, uh, referenced to gold.
Uh, but on Monday, uh, you know, I may get something else that will change my mind in the short term and, and, uh, and, and I'll be out of the market, uh, possibly short the market, but so it's, uh, it's just a totally different psychology, uh, Uh, but from an investors perspective, the macro picture has not changed.
Uh, uh, I mean the fed is going to continue easing policy. The, uh, uh, Biden administration is going to do its best to pump up the stimulus package. Um, The COVID situation is certainly not behind us. There's going to be more stimulus coming into the market. If you look at the PPI numbers that came up this week, they were considerably higher than anybody expected.
So there there's all this pent up demand. That's sitting in the market right now. And, you know, if we get some kind of normalization in the economy, this is going to spill over and there's going to be a ton of spending. And you just, in that scenario, Uh, it would be a hard argument to suggest that inflation is not going to accelerate.
Uh, and that is on a macro basis, extremely bullish for commodities. So again, um, it's a matter of patience, uh, I guess is the best way to say it. If, uh, if you're looking for a quick pop at $3,000, I don't think you're going to get it. Um, but, uh, It's a matter of patience and it's a matter of how you allocate your portfolio.
So it really is on who I'm speaking to here. When you ask me that question. I understand, uh, the macro picture you were speaking of that hasn't changed. What factors are you looking out for? Are you talking about inflation? Uh, monetary stimulus, monetary policy, uh, the economic recovery from COVID last year.
What are some of the variables that are most important to you? Peter? Well, I mean, if you look at the other metals, if you look at the industrial metals, uh, I mean, if you just look at the ratio basis, I mean, silver is almost at, at where it was when gold was trading at 2190, you know, goal is back some $400 from the high, and you've got silver about a dollar 50 away from the high ignoring.
What happened a couple of weeks back when we got that level, uh, pops or Joe over the weekend. Uh, but. And if you look at platinum it's it's, it's cruising around the $1,300 level, uh, rhodium is North of $24,000. I mean, copper is, is, is, is moving, um, a substantially higher. If you look at the industrial base of metals, they're all indicating that the, that the demand side is expected to increase and it will also be benefited from inflation.
Uh, gold. Billy generally leads the pack. Uh, but this time it may follow the pack, but it will be pulled along with, uh, with the industrial demand in the metals. So that's, that's one, uh, one part of the equation. The second part of the equation is I do believe that inflation. We'll run hotter, uh, considerably hotter.
Uh, and that's, if you use the government numbers, I mean, if you go to the grocery store, you already know it's running hotter. Um, then the 2% target the fed has got, uh, in its window. And there is absolutely no way the fed is going to put on the brakes on this, on there. Um, uh, fiscal stimulus, uh, Until at least mid 20, 20, 22, in my opinion.
And so you have a situation where the fed and most central banks in the world are likely to get behind the curve. And if they get behind the curve, um, we could have a tight, uh, seventies type of scenario where inflation gets out of control and then the fed has to react, but until they react. And they start to tighten, uh, I mean, I just think you have to be constructive the metals, and yet it's disappointing.
Gold is trading a self of $1,800. But again, if you're a retail investor and you're holding it as part of your portfolio, this is noise of anything I would add to the position, uh, at these levels. And if you're a trader. Yeah. You've got to be a bit more nimble because the market is moving on sort of a news bites on a daily basis about cycles with me before I like to revisit this topic one more time.
How long does a typical commodity bull or bear cycle last? And how far are we into the current cycle? Generally runs seven to 10 years. I think we're probably less than two years into this cycle. Okay. So we're still in the very early innings. So I leave now, again, take it off the rails, the whole economy collapses, and we go into a major recession, depression, whatever you want to call it.
No amount of stimulus is going to get up, get us out of it. I think that scenario would have to be a, uh, a virus type of related news event where, um, The variants get out of control and we need to shut down the entire economy. Yeah. That to me would be the white Swan where I would probably see the metals dropping significantly as people raise cash.
Uh, I don't think that scenario is, uh, uh, a high probability, but it is a possibility. So those are, uh, those, uh, that, that is one, uh, one scenario that I'd be watching closely. Uh, but assuming that scenario does not play out in the vaccine takes hold and sometime mid to late summer, we're back at what I would consider normal.
I'm not even sure what that's going to look like, but normal. Uh, I just think the pent up demand in the economy, uh, from the retail side and the amount of money sitting on the sidelines is massive. Uh, it's just hard for me to believe that that's not going to create an inflation spike. Yeah. So in other news, the, uh, Shares of Barrick held by Warren buffet and Berkshire Hathaway were dumped co a couple of days ago.
Of course, the full picture is that he sold a lot of shares in them. I I'd be careful on the reporting there. Uh, if you read the news release, I mean, he acquired the position second quarter of last year. So almost at the bottom, if I remember the pricing, it was somewhere in the mid teens that he bought Barrack.
Okay. And his liquidation, although it ended in the fourth quarter of last year, started in the third quarter of last year. And he was getting, I would say on average, uh, he probably got North the North of $28 a share for it. Uh, he got, he got some off in the thirties and then he got some off 22 to 25.
Excuse me, if you read the filing. So this is old news. I mean, it's not like he went out yesterday and he sold his, uh, Barrack. Um, you know, his filing indicated this happened in third, fourth, quarter of last year, so it's not relevant, uh, to, uh, today's market for all we know in the first quarter of this year, he's rebought the position.
We won't know that until he does his filing after the first quarter at the end of March. So. You know, buffet has a tendency of being a very long-term investor when he's in it. And it is true. He's always been negative gold, but he's not an idiot. Um, and when he saw an opportunity early last year and in second quarter with everybody spending money and Trillium's going into the economy and in the us and globally.
He saw this as a, as an opportune time to buy gold and he was right. And, uh, now he sees possibly the economy starting to recalibrate. He's maybe not that concerned about inflation until down the road a little bit. And he took his profits, uh, late last year. Uh, when the vaccines were announced, I mean, uh, You know, it doesn't always hold a position for a longterm.
Sometimes you see some opportunity and he sells it. And if the, uh, the filings are accurate, the way they were reported, you know, he made himself 70, 80% on his investment. I mean, he's not going to reenter the position if he thinks it makes sense. You're right. Yeah. The, uh, he, he did sell some positions a few months after he purchased the shares.
Is that a, is that just a coincidence? I mean, he must have timed that very well, pretty much near the highs of, uh, of gold prices last well, run up to 2190 slot and run into resistance. It started the stall. Then better news came out. Yes, we have a vaccine and he probably figured look, uh, uh, you know, I've got 50, 60, 80% in here.
I'm going to take some off the table. Totally normal. That doesn't mean that he will not reenter the gold market. It doesn't mean he might not have switched it in early January and bought silver. And we won't know that until the end of March and again, but it's, it'll be a story that's not even relevant anymore because it'll already be three months old.
Maybe, maybe he doesn't, it's not a goal. Maybe it's not a gold play necessarily for maybe he just likes Barrack for, or has liked it for a while. Maybe he just liked the company, you know? Um, because he could have bought, he could have bought the GLD ETF. You could have bought more direct ways of, of being positioned in, in gold or silver.
He could've, he could've. But, uh, again, uh, I mean, I don't know how he does his trading, but I mean, uh, uh, when he trades the trades blocks and it might've been a bit more. Or less liquid treating it on the ETF. And, uh, you know, maybe he went in again, if you went in early second quarter last year, remember the gold price dropped a couple of hundred bucks before it ran up.
Um, so, you know, maybe people out there were nervous that gold was going to collapse and they had a position in Barrack and he stepped up and said, I'll take it off your hands. And he bought a block. Uh, again, you don't know the details, so it's difficult just to make a broad assumption. Well, he's of his barracks, therefore, uh, the gold market is going down.
I mean, I don't necessarily think there's any correlation in those two things. Uh, I've spoken to several money executives and they all said that silver is likely to outperform gold this year. I wonder why do you have any idea as to why the, uh, the miners are having this opinion? And do you share this opinion?
I think that is silver has a two-edged sword when you have, uh, and continue to have serious shortages of small investment, uh, sized bars and silver. So retail investors are still chasing the silver market. And so there is a, uh, there is a significant demand function, uh, still going into the cash silver market.
Uh, it's difficult to pick up inventory, uh, and when you pick it up, uh, even at. Premiums that I consider ridiculous, uh, you know, four to $5 on a hundred down silver bars, anywhere from eight to $15 on coins, silver points, I personally would rather not. I'll be in the market, then pay those kind of premiums for physical product, but that's just, but there you, you, you have this container, he was demand on the physical side of the market.
Uh, you still have the mints that are in a LL patient mode. Still have logistics issues coming out of, uh, uh, with the airlines get 40% capacity on the airlines. A lot of this middle flies in the cargo hold of, uh, commercial airliners. Uh, and you've got a 60% reduction in traffic there. So it's hard to find space.
Logistics costs have gone up anywhere from five to 800% depending on location. Uh, some of the mines in Mexico are having trouble producing the silver and getting it moved. Um, so that's the short-term issue. The more medium term issue for silver is that there is an expectation that the economy is going to recover.
And now you add to this equation of retail demand and physical demand for investment product. You add to that equation. The, uh, the demand that comes from industrial use, uh, and especially with the Biden, uh, being, uh, the president. And if he gets his Greenville set, there's going to be much more, uh, demand for silver on an industrial basis.
So you add that to the equation and you can see that this sort of supply tightness in the silver market is likely to last for the foreseeable future. And as long as that continues, you're going to have this a variation of price with silver elk, performing gold silver ratio to gold. Uh, early, early last year, uh, was probably in about the 80 to one, uh, range announced training and 65 to one or better.
Um, so I, I see that continuing, um, and even with gold getting hammered, I mean, you know, uh, two weeks ago at 1850 now at 1780, silver is basically up, uh, in that same time window. Uh, again, take the aberration of that happened two weeks ago, but it's trading at know the mid 20 sevens. So there's obviously a continuous demand and supply issues with silver.
And I don't see that changing in the foreseeable future. Okay. Well, Peter, thanks very much for your update as always. Great talk and I'm happy to catch up with you again next week. Okay, David, take care. Have a good weekend. You too, Peter. And thank you for watching Kitco news. I'm David Lynn. .