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Citi: Feb. Gold ETF Holdings Rise; Prices May Lift Scrap Supply

Holdings of gold by exchange-traded funds have risen with gold prices this month, although higher prices also could lead to increased scrap supply, says Citi Research. Analysts say global ETF inflows have surged over 40 tonnes so far this month after a plateau in January, with large daily builds of around 10.5 tonnes on Feb. 1 and 7. “In light of recent ETF builds, we suspect a similar positive trend in U.S. gold Eagle coins could also emerge this month,” Citi says. “However, following the 17% rise in global gold scrap availability…in 2015, per Scrap Register estimates, we caution that further gold price increases could accelerate scrap rates. This in turn could dent fabricator demand for ‘new’ doré in the coming months, especially in Western and Middle Eastern markets.”

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

 

Gold’s Pullback: ‘Same Old, Same Old,’ Says RBC’s Gero

Monday February 13, 2016 09:18

One market veteran doesn’t seem too concerned over gold’s most recent pullback. The metal is under pressure Monday as the U.S. dollar index moves higher and U.S. stock-index futures rally. “Gold’s pullback is same old, same old…higher stocks, higher dollars, approaching Fed [rate-hike) probability in March,” explains George Gero, managing director at RBC Wealth Management, in an email Monday. He adds that equity-market investors are buying up more dollars to pay for U.S. equities, which is also hurting gold. However, Gero expects money to flow back into the gold market, once the metal proves to be a good bargain. “Asset allocators are still waiting for a deeper pullback under these conditions to add to longs,” he says. April Comex gold futures last traded at $1,226.70 ounce, down $9.20 on the day.

By Sarah Benali of Kitco News; sbenali@kitco.com

 

BBH: Markets To Focus On Three Issues During Yellen Testimony

Monday February 13, 2016 09:18

Markets will focus on three issues when Federal Reserve Chair Janet Yellen provides semiannual testimony on U.S. monetary policy before the Senate Banking Committee Tuesday and the House Financial Services Committee Wednesday, says Brown Brothers Harriman. “First is the economic assessment,” BBH says. “Little has changed since the FOMC statement. The Federal Reserve appears more confident in the resilience of the economy and the continued recovery in price pressures. She is unlikely to pre-commit the central bank to raising rates at any meeting, but will likely reiterate that the commitment to gradually normalizing monetary policy.” The Fed leader is likely to be asked about the Fed’s balance sheet, as several regional Fed presidents have broached the issue. “The official position, as has repeatedly been expressed in FOMC statements, is that when the normalization process is well under way, the balance sheet will be addressed,” BBH says. “Yellen will be reluctant to commit to any fixed time frame, maximizing the Fed’s flexibility.” Third, Yellen may be asked about the impact of fiscal policy on monetary policy, BBH says. “However, while there is little doubt that Fed officials are monitoring the progress of the tax proposals in the negotiating process, it still does not reach the threshold of a policy variable yet,” BBH says. “It may before the mid-March FOMC meeting when forecasts will be updated.”

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

 

Mitsubishi Lists Gold Scenarios Under Potential Trump Moves

Monday February 13, 2016 09:18

Mitsubishi lists several scenarios in which gold could be either hurt or helped by U.S. policies under new President Donald Trump. Anticipated tax cuts, including corporate taxes, could boost corporate earnings and add to the U.S. equity-market rally, while boosting the U.S. dollar, Mitsubishi says. However, “neither an equity nor a dollar rally are particularly good news for the precious-metals complex,” analysts continue. Reductions in personal taxes could also lead to higher consumer confidence and spending, which might be negative for gold as a risk hedge but more favorable to platinum group metals, such as if there were increasing PGM offtake as car sales rise, Mitsubishi says. The firm cautions, however, that “there is some way to go” before any tax reform is enacted since major changes can take time even if the legislative and executive branches are broadly in agreement. In the meantime, Mitsubishi says to “expect this to be a factor that periodically comes back to spook the precious-metals markets in the months ahead.” For the longer term, however, analysts raise a question – how can a potentially lower tax base be reconciled with higher government spending? Analysts say “one possible outcome is that a rising budget deficit spills over into a loss of confidence in the dollar and higher precious-metal prices as both dollar-denominated commodities and risk hedges. A nascent border adjustment tax, currently being mulled over by Republicans in Congress, which may form a part of eventual tax-reform measures, is also a source of some upside support for precious metals over the longer term as investors hedge against retaliatory protectionist trade measures or currency wars.”

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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