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INTL FCStone: ‘Gold’s Technicals Continue To Deteriorate’

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Gold has edged down to fresh lows for the year and is below the major moving averages, points out INTL FCStone. Comex June gold bottomed at $1,284 an ounce, its weakest level since December. “The [precious-metals] complex held up yesterday because of the uncertainty with regard to the North Korean situation, but funds are apparently not that interested to stay long in a prolonged news vacuum,” INTL FCStone says. “Meanwhile, gold’s technicals continue to deteriorate as moving averages are turning bearish.” As of 8:41 a.m. EDT, Comex June gold was $3.50 lower to $1,288 an ounce. This took the market below the most widely followed moving averages: the 10-day at $1,308, the 20-day at $1,314.10, the 50-day at $1,328.40, the 100-day at $1,331 and the 200-day at $1,315.70.

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

 

FXTM: Strengthening U.S. Dollar Leaves Gold 'Vulnerable'

Thursday May 17, 2018 09:00

Gold has fallen below its $60 range from the last four months and remains “vulnerable,” says Lukman Otunuga, research analyst at FXTM. “The primary culprit behind gold’s steep decline could be growing expectations over the Federal Reserve potentially raising U.S. interest rates four times this year,” Otunuga says. “An aggressively appreciating dollar has also left gold vulnerable to steep losses, with prices sinking towards a fresh yearly low at $1,285....With appetite for the zero-yielding metal at risk of eroding in a high interest-rate environment, further losses could be on the cards.” Based on the technical charts, the bears won a tug-of-war following the breakdown and a daily close below the $1,300 support level, the analyst says. “Previous support could transform into a dynamic resistance that encourages a decline towards $1,280.”

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

 

Commerzbank: U.S.-German Yield Differential Works Against Euro, Gold

Thursday May 17, 2018 08:18

The widening differential between yields of U.S. and German government bonds is hurting gold, says Commerzbank. As of 7:34 a.m. EDT, spot gold was down $2.30 for the day to $1,288.40 an ounce. “The firm U.S. dollar and rising U.S. bond yields are continuing to exert pressure,” Commerzbank says. “Yields on 10-year U.S. Treasuries have climbed further to 3.12% today. The yield advantage over German government bonds of the same maturity has meanwhile reached 250 basis points. The last time it was any higher was almost 30 years ago. This argues in favor of the U.S. dollar, against the euro and also against gold, which yields no interest.”

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

 

MKS: Rising Treasury Yields Halt Gold's Rally Attempt

Thursday May 17, 2018 08:18

Rising U.S. Treasury yields thwarted gold’s attempt to bounce during Asia-Pacific hours, says Sam Laughlin, senior trader with MKS (Switzerland) S.A. “Headlines out of China regarding tariff concessions on U.S. products weighed upon the greenback around the Chinese open, supporting bullion price action to take the yellow metal to the session high of USD $1,294.10,” he says. “The bid tone was, however, short lived as the U.S. 10-year yield broke above 3.11%..., paring gains and taking the yellow metal underneath $1,290 leading into European trade.” Laughlin puts near-term support for gold around $1,285.50 and below this $1,278, adding that a break through these levels could mean an extension toward $1,250. “Bulls will be looking toward geopolitical tensions to halt the yellow metal's slide against the rampant greenback; however, layered offers from $1,295 [to] $1,300 will be difficult to break through.” As of 7:34 a.m. EDT, spot gold was down $2.30 to $1,288.40 an ounce.

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

 

BBH: Dollar Strengthens As U.S. Yields Edge Higher

Thursday May 17, 2018 08:18

The increase in U.S. Treasury yields is underpinning the U.S. dollar, says Brown Brothers Harriman. As of 7:34 a.m. EDT, the euro was down to $1.17876 from $1.18112 late Wednesday, while the dollar was up to 110.678 Japanese yen from 110.283.After convincingly breaking above 3%, the U.S. 10-year Treasury yield is continuing to probe higher,” BBH says. “It is through 3.1% level now.  In Q1, rising U.S. yields were not sufficient to offset the upside pressure on the yen.  Since then, the correlations have improved and the dollar has convincingly broken above the JPY110 level.  The yen is off 3.3% over the past month.  It is the weakest of the major currencies today, off about a quarter percent.” Metals traders closely monitor moves in the U.S. dollar since base and precious metals alike often move inversely to the greenback.

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

 

BMO: Platinum Market Looks For India For Growing Jewelry Demand

Thursday May 17, 2018 08:18

India may be a key country for growth in platinum jewelry, says BMO Capital Markets. Analysts reported on the Platinum Guild International Jewelry Business Review Wednesday that was a part of Platinum Week events. “There was acknowledgement that the business model needs to change with millennials becoming the most important consumer segment over the coming years, with a notable push towards increased branding and industry consolidation to increase sales margins,” BMO says. Analysts cite data showing Japan remains the highest per-capita consumer of platinum jewelry and had 2.1% growth in sales in 2017 to around 550,000 ounces. China remains the largest global market with 12 million pieces sold each year, although retail sales in this area dropped 2.8% last year and are expected to decline 3% to 8% this year with intensified competition from gold. “India offers the key growth area at present, with fabrication growth running at +34%,” BMO says. Analysts note PGI anticipates 220,000 ounces of potential volume for India in 2018, with retail sales up 20% to 25%.

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

 

Goldman Sachs: Case For Commodities Strengthens

Thursday May 17, 2018 08:18

Goldman Sachs says the rally in the commodities sector “likely has room to run” even though this has been the best-performing asset class so far this year with a 10.3% rise in the S&P GSCI commodity index. “Oil fundamentals are now more bullish as robust demand faces supply disappointments,” Goldman says. “We are raising our 12m [12-month] S&P GSCI returns forecast to 8% from 5% yet markets remain complacent.” Analysts say physical markets ignore growth concerns, rising rates and the stronger U.S. dollar. “Only financial markets care, which is why only gold has traded substantially lower with the risk-off sentiment,” Goldman says. “Growth concerns will likely prove temporary, realized demand remains robust and OPEC has never been able to catch late-cycle demand growth to replenish inventories before a recession occurs. And even if growth were to decelerate further, it would take global GDP [gross-domestic-product] growth collapsing to 2.5% yoy [year-on-year] to simply balance the oil market!” Most of the Goldman report focuses on the oil market, with analysts saying growth in U.S. shale output cannot offset supply problems. Analysts say oil demand is likely to cross 100 million barrels per day this summer, creating a 1 million-barrel-per-day deficit without an OPEC/Russian response.

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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