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Barclays: Tactical Investors Favor Gold But Physical Demand Not Picking Up Yet

Friday August 8, 2014 1:05 PM

Interest in gold from short-term tactical investors has picked up amid geopolitical unrest, but there has not been a big recovery in physical demand so far, says Barclays. “Dollar strength has been trumped by concerns over military action escalating in Ukraine and weaker equity markets spurring short-term positioning in gold…,” the bank says. This has meant higher net-long futures positioning than the start of the year; however, exchange-traded-product holdings are down 53 metric tons for the year to date and mostly flat so far in the second half, Barclays says. Softer physical demand is “not surprising,” given the slower seasonal summer period, the bank continues. “That said, there is little sign that demand will improve when the seasonally strong period for consumption materializes,” Barclays says. “The much-anticipated curb in the Indian gold import duty failed to be implemented; furthermore, cumulative rainfall in India has been below normal. Conditions improved in July and there are still two months of the monsoon season left, but our economists believe that even if rainfall is close to normal for the remaining two months, the overall shortfall will be close to 10%.” Lower Indian rains can hurt farm incomes and thus gold demand. Also, Barclays notes Chinese gold imports from Hong Kong for June were the weakest since January 2013.

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

 

CME Group Reports Record In Overall Open Interest

Friday August 8, 2014 1:05 PM

CME Group reports that open interest in all of its asset classes collectively hit a record high of 103,387,860 positions on Thursday. Open interest refers to the number of open positions at the end of the business day. The record exceeds the prior all-time high of 103,056,895 contracts reached on Aug. 25, 2011. Curiously, open interest in gold futures – a small portion of overall CME Group volume – has actually been soft lately. Gold open interest hit a five-year low of 358,996 contracts on Aug. 1 (see related story), although it has since bounced to 367,745 as of Thursday.

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

 

BNP Paribas: Volatility In Base Metals Picks Up; Geopolitics, Chinese Data To Be Focus

Friday August 8, 2014 1:05 PM

London Metal Exchange volatility has picked up and geopolitical factors and Chinese economic data may be the key drivers for the base metals next week, says BNP Paribas. “Although base metal prices collectively are ending the week little changed, this masks increased volatility and greater divergence,” the bank says in an end-of-week report. “Aluminum and lead held on to most of their gains of Monday, whereas zinc retreated 5% from its late-July high and copper spent much time below $7,000 (per metric ton). Overall, the metals fared quite well considering the heightened risk aversion on Iraq and Ukraine, which certainly hit stock markets. The LME released commitments of traders-style data for the first time, showing that money managers were net long in all of the metals as of Aug. 1, BNP Paribas notes. “It is likely that grim geopolitics will remain center stage in the coming week, which will also see key Chinese economic data,” the bank concludes.

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

 

Comex Gold Rally Comes After Market Holds Earlier In Week Near 200-Day Average

Friday August 8, 2014 10:13 AM

Gold may have drawn a bid from geopolitical tensions this week, but one trader still ascribes much of the move to technical factors. In particular, he cites the metal’s ability to hold near the 200-day moving average. The Comex December futures dipped below this but not convcingly and since rallied. The contract was at $1,312.50 an ounce as of 10:07 a.m. EDT Friday. The 200-day average was at $1,289. “That was a pivotal point,” the trader says of this long-term average. “When we came up, gold found strong support. It’s mainly technical.” Additionally, the yellow metal moved above all of the other most widely followed moving averages. For the Comex December futures, these include the 100-day average of $1,297.90, the 50-day average of $1,297.40, the 20-day average of $1,302.60 and the 10-day average of $1,298.70. Volume is low but volatility has picked up, the trader adds.

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

 

RBC’s Gero: Gold Gives Up Gains On Profit-Taking; Geopolitical Concerns Remain Supportive

Friday August 8, 2014 9:30 AM

Comex gold hit a three-week high overnight but gave up the gains in a market responding to geopolitical events. The initial run-up was linked by several traders to news that President Obama authorized air strikes in Iraq, enabing the December futures to get as high as $1,324.30 an ounce. But they have since pulled back and were down 90 cent to $1,311.60 as of 9:28 a.m. EDT. George Gero, vice president and precious-metals strategist with RBC Capital Markets, cites what he describes as unconfirmed news reports that Russia “is willing to talk” and perhaps de-escalate tensions with Ukraine. “That turned S&Ps around,” he says. “They were down 9 (points) and are now up about 4 ½. We had profit-taking in the gold because of that from the get-me-out-for-the-weekend crowd.” Still, he adds, geopolitical tenions remain a focus on several fronts – Ukraine, the failure of a cease-fire between Israel and Hamas and news of U.S. air strikes in Iraq. “So I don’t see any geopolitical improvements so far anywhere,” Gero says. “That means there will still be haven seekers either in Treasurys or gold.”

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

 

Gartman: 'When War Is In The Air, Gold Goes Bid'

Friday August 8, 2014 7:58 AM

Fears about another military conflict boosted gold, says Dennis Gartman, investor and publisher of The Gartman Letter. President Obama has authorized limited air strikes against Sunni militants in Iraq to protect U.S. personnel and in response to a genocide threat. Meanwhile, Russia-Ukraine tensions persist. “War is in the air and when war is in the air, gold goes bid,” Gartman says. “What else can gold do? Capital is fleeing to the safe corners of the world, and when that happens it flees to gold.” Comex December gold hit a three-week high of $1,324.30 an ounce overnight, although it has pulled back from its strongest levels. As of 7:48 a.m. EDT, December gold was $4.30 higher to $1,316.80 an ounce. Gartman favors trading gold against the euro and Japanese yen. He notes the yellow metal has climbed above 975 euros and looks for it to take out 1,0000 euros “if geopoltical events unwind as badly as we fear they might.”

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

 

Deutsche Bank: Gold Range-Bound But May Fade When Fall In Treasury Yields Ends

Friday August 7, 2014 7:56 AM

Gold has been range-bound for several months now but may fade whenever long-term U.S. Treasury yields rise, says Deutsche Bank in a weekly commodities report. Since the start of April, the Comex December gold futures have been in a trading band of $1,347.50 to $1,241.70 an ounce. “The gold price’s range-bound nature over the past few months most likely reflects the positive forces of falling long-term U.S. real yields and ongoing geopolitical risk being offset by the negative forces of a stronger U.S. dollar and, until recently, rising equity markets,” Deutsche Bank says. “Of the group, we view the decline in long-term yields as unsustainable over the medium term, suggesting gold’s resilience may start to fade.”

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

 

 

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