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INTL FCStone: Sidelined Fed Should Underpin Gold During August

INTL FCStone sees potential for gold to retest its July high in the month ahead, with the Federal Open Market Committee expected to refrain from any U.S. interest-rate hikes until the end of the year. INTL FCStone does anticipate another hike beyond the 25 basis points from last December, but not right away. “The Fed will likely abstain from doing anything in September or October as that will likely be too soon to make a move,” INTL FCStone says in its monthly commodity outlook. “A move in November is possible, but unlikely given that it is an election month. Most of the focus now seems to be on December and in this regard, the latest odds show a rate increase for that month at roughly 45%, while September is around 18%. A sidelined Fed between now and year-end should theoretically weaken the dollar and lead to some commodity complexes pushing higher, notably precious metals. In this regard and at least over the short term, we think that gold has a good chance of retesting its early July high of $1,377 this month, with an outside chance of possibly getting to $1,400. Silver may take a stab at $21.50 as its high.” Meanwhile, INTL FCStone describes platinum and palladium as “overextended” after recent gains, calling for them to be range-bound in August.

By Allen Sykora of Kitco News; asykora@kitco.com

 

Commerzbank, Citi: July Gold ETF Holdings Rise But At Slower Pace

Monday August 1, 2016 08:45  

The amount of gold held to back global exchange-traded funds rose again in July although not as dramatically as in June and other months this year, say Commerzbank and Citi Research. “Gold ETFs recorded by Bloomberg showed an inflow of 5.7 tonnes on Friday,” Commerzbank reports. “Stock levels increased by a good 55 tonnes overall in July, compared to almost 110 tonnes in June. Since the beginning of the year, inflows have reached 546 tonnes.” Most gold ETFs trade like a stock but track the price of the commodity, with metal put into storage to back the shares. Citi Research says these holdings have been “sticky” at around 2,000 tonnes, commenting that these tend to be less volatile than positioning in Comex gold futures. Still, Citi adds that ETF holdings are “showing some signs of slowing this quarter” after rising by a rate of some 90 to 100 tonnes in the first half. Citi adds that “gold price downside remains limited” in an environment where European bank risk remain elevated and negative interest rates are still a dominant theme in some of the major economies.

By Allen Sykora of Kitco News; asykora@kitco.com

 

Citi: Palladium Outshining Gold In Quarter To Date

Monday August 1, 2016 08:45  

Palladium has outshined gold in the third quarter so far on macroeconomic data that have been mostly positive for the platinum group metal, says Citi Research. As of an overnight Citi research note, palladium prices were up some 18% for the quarter to date to $710 per ounce, compared to 2.5% gains for gold. “Following solid U.S. macro data and a multi-month peak in the U.S. Citi Economic Surprise Index in the past month, which has since pulled back, mid-July saw a raft of consensus-beating data bolster sentiment for palladium, including improved car sales in China during the main driving season,” Citi says. “As the single largest market for palladium auto-catalyst consumption, we expect Chinese auto sales to remain robust and grow 9% y/y (year-on-year).” Further, Citi analysts point out that CPM Group data indicates global demand for palladium in automobiles will rise nearly 3% to a record in 2016. The palladium market has “seemingly shaken off” previous anxiety and “adopted a more constructive view,” Citi says.

By Allen Sykora of Kitco News; asykora@kitco.com


 
BBH: RBA, BOE, Japanese Stimulus, U.S. Jobs Report Keys For Week

Monday August 1, 2016 08:45

Brown Brothers Harriman lists four key news events for financial markets this week – meetings of the Australian and U.K. central banks, Japanese stimulus and the U.S. monthly jobs report. “The Reserve of Bank of Australia is first,” BBH says. “It is a close call, though the median in the Bloomberg survey favors a cut, including most of the banks in Australia that participate in the poll.” Investors are more confident that the Bank of England will trim rates, BBH says. “After the recent dismal survey readings, indicative prices suggest that a 25 bp (basis-point) rate cut is fully discounted,” BBH says. The BOE is also expected to consider other measures. “A little more than 80% of those who expect the BOE to do more than cut rates expect the funding for lending scheme to be extended,” BH says. “Participants are nearly evenly split on the prospects for a new round of asset purchases.” Meanwhile, Japanese Prime Minister Shinzo Abe is expected to provide more details about a fiscal package, BBH says. “The U.S. July employment report caps the week,” BBH continues. Economists do not expect a repeat of June's 287,000 rise in nonfarm payrolls. “The median guesstimate is for an increase of around 175K, which is above the three- and six-month averages (147K and 172K, respectively),” BBH says. “The unemployment rate may tick down to 4.8%.  Average hourly earnings need to increase by 0.2% to maintain the 2.6% year-over-year pace.”

By Allen Sykora of Kitco News; asykora@kitco.com

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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