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INTL FCStone Sees Gold Testing $1,180/Oz During October

Friday October 03, 2014 2:34 PM

INTL FCStone looks for gold to test the 2013 double-bottom of around $1,180 an ounce sometime during October. Prices fell during September on a number of factors, the firm says. “Most importantly, the surging dollar hit gold hard, as did the still-buoyant U.S. equity markets,” the firm says in its monthly commodities outlook. “Although we did get two rather serious equity corrections this week and last, the selling did not result in much of a rally for gold. Secondly, the Fed will now likely be the ‘first mover’ in raising rates -- just as other central banks are easing -- and this is also weighing on gold by strengthening the dollar even more. Third, although there are a host of hotspots all over the world, these are not doing much for gold, as they are not generating economic dislocationsthat would be normally be bullish for the precious metal.” The metal also cites reports of subdued physical and “anemic” exchange-traded-fund demand. “From the looks of things, we are on track to retest and break the $1,180 low set on Dec. 31st, 2013 and get to $1,150 at some point in October,” the firm says. “On the upside, resistance at $1,240 looks safe.”

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


Barclays: Pressure On PGMs ‘Overdone;’ Gold ‘Vulnerable’ To More Dollar Strength

Friday October 03, 2014 1:41 PM

Barclays says the recent weakness in platinum group metals may be “overdone” but says gold remains “vulnerable” if the U.S. dollar keeps rising. Platinum has hit five-year lows, silver four-year lows, palladium six-month lows, and gold has given up its gains for the year. All remained under pressure as the dollar rose after a strong U.S. jobs report Friday. Much of the focus in the metals markets will be on the strength of Chinese demand next week after Golden Week holidays end.  Ahead of the holiday, platinum buying picked up on the lower price environment, and Shanghai Gold Exchange volume rose 7% in September as prices fell 6%, Barclays says. “We expect support to materialize when markets reopen, but the strength of buying will be pivotal,” the bank says. “Given price sensitivity has risen in recent weeks in both gold and platinum, we would expect the demand response to be healthy, albeit volumes are likely to be lower compared to the response to previous price declines given the restocking which took place last year.” Barclays says a premium continues for sponge, which are PGMs in power form used for industrial purposes, implying still-healthy demand from industrial consumers. Underlying demand trends, although softer, remain supportive for both metals, the bank says. “In turn, we think the sell-off in PGMs appears overdone, with the platinum-gold spread falling to its lowest since May 2013, while gold remains vulnerable given the scope for further dollar strength and the prospect of rising rates.”

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


HSBC Analysts Trim Gold, Silver Forecasts

Friday October 03, 2014 8:07 AM

HSBC metals analysts have downwardly revised their price forecasts for gold and silver in response to the bank’s foreign-exchange forecasts released this week. The forex team says “we are only at the early stages of a USD bull run.” Metals analysts note that there is normally an inverse relationship between gold and bullion, although this is not the only factor affecting the bullion market and thus their forecasts. “We have changed our average (gold) price forecast for 2014 to USD1,265/oz from USD1,292/oz, previously,” HSBC says. “For 2015, we envisage a trading range of USD1,120/oz to USD1,225/oz, with an average price of USD1,175/oz, but we expect gold prices to end the year slightly lower at 1,165/oz. For 2016, we forecast average prices of USD1,275/oz, down from USD1,345/oz previously. For long-term prices, we forecast USD1,325/oz, a downward revision from USD1,350/oz previously. For silver, we revised our 2014, 2015, 2016 and long-term average price forecasts to USD19.30/oz, USD17.65/oz, USD20.50/oz and 24.00/oz from USD19.50/oz, USD19.25/oz, USD21.50/oz and 25.00/oz, respectively.”

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


HSBC: ‘Potential For Platinum Or Palladium To Benefit From A Short-Covering Rally Is Significant’

Friday October 03, 2014 8:07 AM

There is “significant” potential for platinum group metals to be boosted by a short-covering rally, says HSBC, with analysts adding that supply/demand fundamentals are still favorable for the longer term. Platinum and palladium have been under sharp pressure lately. “While we do not believe platinum and palladium prices reflect the PGMs underlying fundamentals, this does not appear to be an issue with market Participants,” HSBC says. “The technical momentum is lower and we believe the fundamental argument, while sound in the long term, will not necessarily bring buyers in immediately. As we stated previously, weak gold prices have also weighed on platinum. That said, the potential for platinum or palladium to benefit from a short covering rally is significant, we believe, given the growth in short positions and reduction in longs in recent weeks. But in order for this to occur, there has to be some decoupling of platinum from gold.” The platinum-gold spread has contracted to near $50 an ounce, HSBC notes. “This narrowing may begin to encourage bargain hunting as traditionally platinum does not usually yield much more ground to gold,” the bank continues. “Also, we may see more interested investors from China when Golden Week ends. Until we see heavier trade and end user buying emerge, the PGMs may fall further.”

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


TDS: Gold Ripe For Short-Covering Rally If U.S. Economic Data Weak

Friday October 03, 2014 7:46 AM

Gold could stage a short-covering rally if economic data should be weak, says TD Securities. The metal has been under pressure since mid-August. “The choppy nature of the current (economic) recovery is likely to prompt the market to adjust its interest rate expectations, which would reduce the discount rates for zero-yielding assets such as gold and may force short covering,” TDS says. Friday’s U.S. nonfarm payrolls report “could be the catalyst that convinces traders that higher interest rates sooner are not a riskless bet.” Many investors have dumped metal from their portfolios on the expectations the U.S. Federal Reserve will start reducing monetary accommodation sooner rather than later and due to the expectations that rates will rise faster when this process does start. “Of course, the specs also played a very significant role in gold's recent sharp move lower—taking aggressive short positions and cutting long exposure,” TDS says. “Real money managers all assumed that the U.S. economy will recover along a fairly smooth trajectory. If the assumption that the U.S. recovery will be robust and smooth changes, short covering may be the order of the day for some as the interest rate projections change.” In particular, jobs growth below 200,000 could prompt specs to reduce their short exposure, TDS says. “The jobs data would have to be very strong to break through support, as the market is still not ready to believe that the economy is ready to handle higher Fed funds rates,” the firm says.

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



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