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TD Securities: Gold's Near-Term Technical Prospects Improved

Monday January 06, 2014 2:43 PM

Gold’s near-term technical picture has improved, says TD Securities. Spot metal last week fell around the $1,182 level, rejecting the lows just below this from last June. The “solid rebound” since Dec. 31 means potential for the market to extend near term towards the $1,259.70/1,269 area of the 55-day moving average and high/low resistance, TDS says. “Short-term trend momentum signals are gold-positive so minor corrections lower from here should be limited to the $1,220 area,” TDS says. “On the weekly chart, the bullish rebound in gold noted above looks more impressive. Over the past three weeks, the market has carved out a solid low/reversal formation around the $1,185 area -- we have to consider $1,180/85 as major support now -- via a weekly ‘morning star’ bull reversal. These are usually reliable reversal signals in our experience.” Still, TDS later cautions, “while there is plenty of constructive evidence from price action—a major reversal from a spot where the market has already recovered strongly in the recent past—we are not getting carried away just yet. The weekly picture only allows for a little more upside -- towards key trend resistance at $1,276.50 -- than the daily chart so we have to consider the $1,260/80 range as a zone of significant resistance for the next few weeks, from where this recovery is likely to turn lower again.”

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


TDS: Underperformance Of Services Sector A 'Worrying' Sign

Monday January 06, 2014 11:03 AM

The latest data shows that the service sector is underperforming the manufacturing sector says Gennadiy Goldberg, U.S. strategist at TD Securities. This is a mixed sign as manufacturing is positive for economic growth, but the service sector accounts for the most jobs and if this remains weak, growth prospects will be limited, he says. The Institute of Supply Management’s non-manufacturing index for December showed a reading of 53 for December, down from November’s reading of 53.9.  Goldberg notes it is “encouraging” that the employment component increased to 55.8 in December from a previous reading of 52.5; however, he adds “the sharp fall in new orders is quite concerning. New orders declined to 49.4 from 56.4 last month, the weakest reading in this indicator since May 2009.” Goldberg says it will be important to watch the trend in new orders as more weakness is “likely to lead a pullback in the employment component of the services survey, potentially suggesting a slowing in payroll growth.”

By Neils Christensen of Kitco News nchristensen@kitco.com


Barclays: 2013 Gold ETP Outflows Hit 874 Metric tons

Monday January 06, 2014 8:17 AM

Outflows of gold from global exchange-traded products totaled 874 metric tons in 2013, almost a third of total holdings from the start of last year, according to preliminary data from Barclays. “Disinvestment, led by ETPs, placed immense pressure upon prices last year and in 2014 we believe ETPs are likely to face further downside pressure, particularly if equity markets remain firm with prices below the $1,200/oz mark, given that an almost 100 tons of holdings becomes loss making,” Barclays says. “Instead of slowing down, net redemptions accelerated in December -- 77 tons. Thereafter, ceteris paribus, outflows are likely to slow.”

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


BBH: Differential Widening Between U.S., German Two-Year Yields

Monday January 06, 2014 8:16 AM

The yield differential between U.S. and German two-year notes has widened to almost 19 basis points presently, the highest level since mid-November, from just below 7 basis points in mid-December, says Brown Brothers Harriman. The differential can impact the price of the euro against the dollar. “The U.S. two-year yield has crept higher from about 25 bp on Nov. 20 to almost 40 bp now, perhaps helped by the positive data surprises,” BBH says. “There is also a sense among some money managers that the market is vulnerable to stronger U.S. growth and a more hawkish Federal Reserve. On the other hand, the German two-year yield, which had fallen to about 5 bp in early November as speculation that ECB (European Central Bank) would adopt a negative deposit rate reached a crescendo, peaked around 26 bp in mid-December and has trended a bit lower since. Softer eurozone data and some growing ideas that low inflation and the continued contraction in private sector lending could drive the ECB may move again.”  

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



MKS: Chinese Physical Gold Demand Remains Strong

Monday January 06, 2014 8:07 AM

Chinese physical demand continues to provide an underpinning for gold, says Alex Thorndike, senior trader for precious metals and forex with MKS (Switzerland) SA. Trade opened with a softer tone overnight as Japanese participants liquidated to capture profits after the run-up in prices while they were away for a several-day holiday to start the New Year, he says.  “As was the case for all of last week in the hour leading up to the SGE (Shanghai Gold Exchange) open, traders and macros were in buying the precious,” he says. “China opened and once again there was a surge of physical interest….,” he continues, commenting that gold jumped through the New York highs for the third day in a row. Comex February gold peaked at $1,245.70 an ounce, its strongest level since Dec. 17, before easing back. As of 7:54 a.m. EST, the contract stood at $1,235.80, down $2.80 for the day. Gold rose on Friday, which Thorndike attributes to seasonal physical demand out of Hong Kong and China in the lead-up to the Chinese New Year, as well as short covering. “Technically the $1,180-1,190 area is looking even stronger than previously and should pose fairly formidable support,” he adds.

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


Barclays: Risks Skewed To Downside For Gold

Monday January 6, 2014 8:06 AM

Barclays says it sees risks in the gold market skewed to the downside as 2014 gets under way. The bank lists a 2014 forecast of $1,310 an ounce, above current prices but down on the 2013 average of $1,412. “From both a macro and underlying fundamentals perspective, gold is likely to struggle to find supportive catalysts in 2014,” Barclays says. “Although the U.S. balance sheet continues to expand, inflation has yet to materialize. Slower-than-expected tapering (of U.S. quantitative easing), weaker equity markets and a softer dollar could help to revive gold in the short term, but a more structural shift in market dynamics, such as signs of inflation, delayed interest rate hikes or greater-than-expected demand from China, and from the official sector in particular, would be required to turn the tide for gold. In the absence of a shift in sentiment, we believe risks are skewed to the downside in light of the potential for hedging; slowing physical demand; and, most importantly, a macro backdrop which consists of modest growth, reduced tail risks and a stronger dollar.”

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


Citi: 2014 More Likely To Offer 'Stabilization Than Big Upside' For Base Metals

Monday January 6, 2014 8:05 AM

Citi says “there is little encouragement” in the supply/demand balances for base metals to suggest that 2014 will be a positive year for these markets, and the metals may have to rely on factors such as a weaker U.S. dollar or further safe-haven purchases. Base metals demand benefits from a revival in the global economy, but the upturn is expected to be modest – “in other words, not strong enough to eat into base metals inventories significantly but just enough to convince investors that the peak of global systemic risk is behind us,” Citi says. Supply was previously boosted by an increase in investment to meet demand from developing economies. “It would therefore be wrong to enter 2014 and argue that, because 2013 was such a poor year for natural resources and commodities, that 2014 must surely provide a big and exciting bounce-back,” Citi says. “History has shown that commodity down-cycles can have substantial longevity so 2014 is more likely to offer some stabilization than big upside.”

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



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