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Standard Chartered: 'Gold Has Fulfilled Its Role'

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Gold “fulfilled its role” by providing liquidity when investors needed it during a recent sell-off in global equities, says Standard Chartered. Whereas such stock-market sell-offs sometimes lead to safe-haven buying, gold declined in this instance, with a number of analyst saying some investors liquidated their gold holdings to raise needed cash. “While gold’s price weakness may reflect a lack of conviction and some uncertainty over the relevance of gold exposure in the current environment -- as indicated by the surge in short interest in GLD, the largest gold-backed exchange traded product -- in our view gold has fulfilled its role,” Standard Chartered says. “Investors turn to liquid assets in order to meet margin calls amid market volatility, and gold exposure was redeemed as a readily available asset.”

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

 

Standard Chartered: India’s Budget Good For Gold In Long Term

Wednesday February 14, 2018 09:18

India’s annual budget is good for gold but only in the longer term, as authorities did not deliver the cut in duties that market participants had been lobbying for, says Standard Chartered. “However, in our view, two announcements in particular will support the evolution of the industry and boost demand longer term,” the bank says. “First, the government proposed to focus on growth in rural income and infrastructure, aiming to double farm income by 2022.” Much of the country’s gold demand is driven by buying from people living in rural areas. “The second is the initiative to formulate a comprehensive gold policy, including establishing a regulated gold exchange and developing gold as an asset class,” Standard Chartered says. Back in 2013, India increased the import duty on gold to 10% in an attempt to reduce its current-account deficit that in turn is driven by the country’s dependence on oil imports. Analysts note that the World Gold Council estimates that India’s gold demand reached 726.9 tonnes last year, recovering from the 2016 low of 666.1. “The budget does not provide a short-term boost; instead price volatility, inflation and weather effects will be key,” Standard Chartered says. The bank says it looks for India’s gold demand to continue to recover and hit 760 tonnes in 2018 and breach 800 tonnes in 2019.

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

 

Commerzbank: ETF Gold Outflows Come To Halt

Wednesday February 14, 2018 09:18

Gold holdings by global exchange-traded funds finally rose again on Tuesday, points out Commerzbank. These products trade like a stock but track the price of the commodity, with metal put into storage to back the shares. “The gold ETFs tracked by Bloomberg ended a seven-day phase of outflows totaling 22 tonnes yesterday,” Commerzbank says. “Holdings were increased by almost six tonnes yesterday.”

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

 

Metals Focus: UAE Gold-Jewelry Imports ‘Severely Depressed’

Wednesday February 14, 2018 09:18

Higher taxes appear to be a growing issue for gold-jewelry wholesalers in the United Arab Emirates, although other issues are also at play, says Metals Focus. The consultancy cites two tax changes in recent years -- a 5% import duty on jewelry at the start of 2017 and a 5% value-added tax this year. “This has accompanied a slump in gold jewelry imports into the UAE, with last year’s inflows roughly half those in 2014,” analysts report. Gold jewelry consumption in the UAE has been fallen from just over 64 tonnes in 2013 to under 43 tonnes last year, Metals Focus says. Drivers include political tensions and armed conflicts in the region, weak energy prices, lower government revenues, rising living costs and deteriorating consumer sentiment. However, analysts say they also believe that the UAE has, to some extent, declined in importance as a hub for wholesaling. For instance, jewelry imports into Iran and Iraq are thought to have grown last year, while Italian data show that through October, Italian gold-jewelry shipments to Turkey rose 35% year-on-year and to Lebanon by 75%. Further, there has less buying by Indians visiting the UAE due to reduced price differentials between purchases at home and in the UAE. “Industry sources…inform us that jewelry imports into the UAE this year so far are severely depressed,” Metals Focus says. “To an extent, this is partly due to some importers pulling forward imports into December last year to beat the 1st January deadline [for higher taxes]. Some are hopeful that the worst damage has now passed and that a tentative recovery could soon start, in part as wholesalers and their customers adjust to the new regime. However, it seems highly likely that imports will remain sluggish for the entire first quarter and perhaps for the whole of 2018 due to further market share loss to other wholesaling hubs, greater purchasing at home by Indian consumers and poor sales within the UAE itself.”

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

 

BBH: ‘Unease’ Hangs Over U.S. Equity Market

Wednesday February 14, 2018 09:18

Brown Brothers Harriman says that an “unease” continues to hang over the stock market after last week’s downdraft.  “It is as if a shoe fell last week, and most investors seem to be waiting for the other shoe to drop,” BBH says. “It is hard to imagine the kind of body blow that the equities took last week without some kind of follow-through and knock-on effects.” There are worries about inflation after a rise in January average hourly earnings, although BBH says the focus on the Consumer Price Index Wednesday morning may be “too much.”  Analysts say they look for U.S. inflation to edge higher this year, but see it as beginning later in first quarter and running through early in the third quarter. Further, they point out that the market has “nearly fully discounted” another 25-basis-point U.S. rate hike next month, with a 60% chance of a follow-up hike in June.

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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