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Walsh's Lusk: Gold Selling Has Been Liquidation, May Be 'Temporary'

Sean Lusk, director of commercial hedging with Walsh Trading, describes much of the selling pressure in the gold market over the last couple of weeks as long liquidation in Comex futures, but nevertheless suggests any continuation of this likely will be “temporary.” Two weeks, back, he suggested some liquidation (selling to exit long, or bullish, positions) in order to capture profits while traders had them, particularly with some Federal Reserve officials seemingly more hawkish and the U.S. dollar stronger. Data from the Commodity Futures Trading Commission confirms liquidation, he suggests, since the net long positioning of large non-commercials (funds) and non-reportables (smaller, retail traders) has declined to some 289,000 contracts from more than 350,000 a few weeks back. “This tells me that liquidation is the theme instead of fresh selling entering into the market,” Lusk says. “Should continued liquidation emerge, I believe it will temporary given banking contagion and currency devaluations in Europe that will have ripple effects throughout the global economy. The hyper-sensitivity to each headline in the market has created choppy trading in many markets despite the liquidation in the metals.”

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

 

Platinum Group Metals Remain Near Multi-Month Lows

Wednesday October 12, 2016 09:36

Platinum group metals have fallen to multi-month lows amid worries about key producer South Africa after the country’s finance minister was accused of fraud this week, analysts report. As of 9:25 a.m. EDT, Nymex January platinum was down $4.60 to $941.20 an ounce, its lowest level since March. While December palladium had gained $2.90 to $651.05, the contract has fallen as far as $645.75, its weakest level since July. “Prices are no doubt facing headwind from South Africa, where the South African rand is depreciating significantly because the country’s finance minister appears to be facing imminent dismissal,” says Commerzbank. News that the minister had been summoned to court over alleged fraud catapulted the dollar against the rand and “helped to significantly undermine confidence” in platinum group metals during a sell-off on Tuesday, says MKS (Switzerland) S.A. “This is overshadowing other price-supportive news,” Commerzbank says. For instance, the bank cites data from the China Association of Automobile Manufacturers showing that 2.27 million cars were sold in China in September, which is 29% more than in the same month last year. This means more industrial demand for the metals since they are used in auto catalysts.

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

 

BBH: U.S. Election, FOMC Among Key Factors For U.S. Dollar In 4Q

Wednesday October 12, 2016 09:36

Key factors for the U.S. dollar in the fourth quarter are the U.S. presidential election, any Federal Reserve decision on interest rates, the future of European Central Bank asset purchases, political developments in Germany and Italy, and the U.K.’s autumn statement from the chancellor of the exchequer, says Brown Brothers Harriman. Analysts describe the U.S. election between Republican Donald Trump and Democrat Hillary Clinton as the most important event for investors for the remainder of the year. A Trump presidency could mean U.S. commitment to organizations such as the World Trade Organization and NATO may be questioned by other nations, and the risk of a trade war would escalate, BBH says. “In the most extreme example, if global economic integration were to begin unwinding, we suspect the U.S. would be at an initial disadvantage, even though it relies less on exports than many other high-income economies,” BBH says. “The net international investment debtor position suggests the U.S. dollar could come under pressure. The premium international investors demand for holding U.S. Treasuries would likely increase.” Meanwhile, markets are watching to see if Fed policymakers hike before year-end. “One rate hike in 2015, followed by another in 2016, cannot be described as impatient or incautious,” BBH says. “The Federal Reserve’s economic objectives of full employment and price stability have nearly been achieved. There is concern from some investors and Fed officials that the central bank’s third objective, financial market stability, may be put at risk by ‘imprudent prudence.’ Also, a hike would help ease pressure on other central banks that may be nearing the end of their reasonable ability to ease monetary policy.”

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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