Friday July 25, 2014 8:26 AM

Bullion rose Friday on a risk reversal as U.S. equities broke off from their record-setting pace, says HSBC. As of 2:03 p.m. EDT, Comex August gold was up $11.60 to $1,302.40 an ounce, while the Dow Jones Industrial Average was down by 154.86 points. “Gold (was) buoyed by ‘risk-off’ sentiments along with the traditional safe-haven assets such as the USD (dollar) U.S. Treasuries,” HSBC says. “The U.S. dollar index rallied to a five-month high of 81.1 from the previous close of 80.9 and 10-year U.S. Treasuries tightened to 2.47% from the previous close of 2.50%. U.S. equity markets fell and broke from three consecutive days of all-time highs and provided support for gold.” Gold swung around the psychological $1,300 level. “We attribute this to a pick-up in options activity with the August option contracts on the Comex expiring (Monday),” HSBC says. “We expect gold to remain in choppy trading given thin summer conditions.”

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

 

Gartman: Gold Has Established Progressively Higher Lows Since 2013 Bottom

Friday July 25, 2014 8:26 AM

Investor and newsletter writer Dennis Gartman describes gold’s ability to hold the 2013 low for a full year as technically significant. “Gold has obviously been under some pressure in the course of the past several days, as stock prices have gone on to new highs and as capital has gone there rather than to the gold market; however, we caution everyone to be aware of the fact that although there shall be a great deal of conversation in the media today about gold’s weakness, it is worthy of note…that gold even in U.S. dollar terms has held its lows for the past full year and that the low made eight and nine weeks ago were above the lows made in December of last year,” Gartman says. “This is the first time in quite some long while that seemingly important interim lows have held at progressively higher levels. The psychology of the market may seem bearish, but the price action in broad terms is not.” On a futures continuation chart, gold bottomed at $1,179.40 in June 2013, put in a slightly higher low of $1,181.40 in December and held at $1,240.20 on a pullback this June. The metal is now just shy of $1,300 an ounce.

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

 

Walsh’s Lusk: Gold Around Key Support But Traders Awaiting FOMC Outcome

Friday July 25, 2014 8:26 AM

Comex gold is right around a number key chart points, but could pause until traders see the outcome of next week’s meeting of the Federal Open Market Committee, says Sean Lusk, director of commercial hedging with Walsh Trading. As of 8:09 a.m. EDT, Comex August was at $1,295.70 an ounce after bouncing from a one-month low of $1,287.50 on Thursday. The 50-day moving average lies near $1,293, which is also around the 50% retracement of the rally from the June low to the July high. The 200-day moving average lies near $1,288. This area provides “big-time support,” Lusk says, meaning “look out below” if the 200-day average fails. “With all of that being said, keep in mind we have option expiration for the August gold contract on Monday and the Fed begins a two day FOMC meeting -- with a policy announcement to follow -- next Tuesday and Wednesday,” Lusk says. “Although the market may dip below these aforementioned levels, I don’t see any major moves until the Fed speaks next week. While the market isn’t anticipating anything out of the ordinary from (Chair) Janet Yellen and the voting members of the FOMC, I would contend the market would want confirmation before resuming any trends in the market. Having said that, any major dips in the market should become buying opportunities as the market enters into traditionally the biggest physical demand period for gold in the calendar year.”

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

 

Deutsche Bank: Short Selling May Return To Gold Market

Friday July 25, 2014 8:26 AM

Deutsche Bank sees potential for short selling to return to the gold market next week. “Short-term traders continued to hammer the gold price lower (Thursday),” the bank says. “Of course, economic data, on both sides of the Atlantic, remained largely upbeat and the corresponding sovereign bond yields ticked modestly higher as a result. But, once again, we do not believe this was the reason for traders’ aggressive treatment of the metal. Rather, they have recognized over the past few days that sales meet very little opposition, so they are rewarded for selling short. As it is Friday today, there might be some short covering as traders take profits. However, we suspect the assault may well resume next week.

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

 

HSBC: Stable Inflation May Keep FOMC On Hold For Longer, Supporting Gold

Friday July 25, 2014 8:26 AM

The lack of inflation may support gold since it may mean the U.S. Federal Open Market Committee keeps interest rates low for longer, suggests HSBC.  Chief U.S. economist Kevin Logan says inflation is not expected to accelerate much beyond the Federal Reserve’s 2% target in the medium term. Inflation expectations appear to be more stable than in the past and should help limit the inflationary impact of tighter labor markets, he says. If this is the case, the FOMC may be justified in adopting a cautious approach to the lift-off of short-term interest rates, Logan continues. HSBC’s U.S. economists expect the FOMC to keep interest rates on hold until the third quarter of 2015. “While gold is historically sensitive to inflation expectations, the Fed has indicated in the mid-July policy statement that it would be appropriate to maintain the current target range for the Federal funds rate for a considerable time, especially if…inflation continues to run below the committee’s 2.0% longer-run goal,” says HSBC precious-metals analyst Jim Steel. “Highly accommodative monetary policies are historically supportive for gold.”

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

 

TD Securities: Gold Could Make Another Leg Lower If 200-Day Moving Average Fails

Friday July 25, 2014 8:26 AM

Gold could be poised for another move lower if U.S. economic data turns the Federal Reserve more hawkish and the market falls below the 200-day moving average, says Mike Dragosits, senior commodity strategist with TD Securities.  He notes much of the U.S. economic data was constructive this week, including existing home sales, initial jobless claims and the Richmond and Kansas City Fed manufacturing indicators. “This sets us up nicely for further strength going into next week's (nonfarm) payrolls and FOMC (Federal Open Market Committee) meeting, where expectations are gaining traction that the Fed will continue to upgrade its growth outlook for the U.S. economy,” he says. “This could put us on a course towards a potentially more hawkish outcome in the September meeting, should the economy maintain its current trajectory. This also lends support to base metals, but has particularly pulled the rug from under the gold market on Thursday.” Gold would fall if speculative flows into the metal slow, he continues. “With gold prices moving back into the cluster of moving averages, we're nearing a breakdown lower once again,” he says. “The final stop before much lower prices, down into the $1,250/oz area, is the 200 DMA at $1,285/oz.”

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

 

BNP Paribas: ‘Normalization’ Of Gold Trade Helps Reduce Turkey’s Trade Deficit

Friday July 25, 2014 8:26 AM

Turkey’s trade deficit, although wider than expected, narrowed in June as gold imports declined, says BNP Paribas. The June deficit narrowed by around 9% to $7.9 billion, with the 12-month cumulative deficit down $800 million to $88.7 billion. ”The lion’s share in the decline of the deficit is because of the gold trade; Turkey has been a net gold importer of USD 1.1bn in June versus USD 1.8bn a year ago,” BNP Paribas says. “According to the seasonally and calendar adjusted figures, exports remained broadly flat on monthly basis – minus 0.1% -- whereas imports decreased by 1.2% m/m (month-on-month). Imports excluding gold and energy, however, remained broadly unchanged from previous month at USD 14.7bn on a seasonally adjusted basis, according to our calculations.” BNP Paribas later adds, “The normalization of the gold trade continues to support the decline in the current-account deficit and overstates the rebalancing of economic activity from domestic demand to external demand.”

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