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Nichols: Market Can't Ignore Gold's Safe-Haven Appeal Forever

Thursday February 19, 2015 2:11 PM

The gold market has ignored geopolitical uncertainty in Europe and the ongoing crisis in Ukraine, and instead is focusing on U.S. interest rates and the U.S. dollar, but this trend can’t continue says Jeffrey Nichols, senior economic advisor to Rosland Capital, a precious metal asset firm. “As the dollar has appreciated, gold denominated in U.S. dollars has depreciated – a tendency that has been exacerbated by the pull of higher equity prices and the flow of funds from under-performing gold to over-performing stocks,” he says. “This situation can’t and won’t continue forever.  Eventually, markets must reflect realities.  The U.S. dollar may be the most attractive - or least unattractive - runner in today’s currency derby, but fundamentally it remains unhealthy.” Nichols adds that gold’s short-term volatility has little to do with its long-term fundamental bullish outlook. “We expect the price of gold will move to new historic highs in the next few years as more people and institutions around the world have the means and desire to hold more of their wealth in gold.”

By Neils Christensen of Kitco News; nchristensen@kitco.com


Gold Could Retrace Kneejerk Fed Rally - Triland Metals

Thursday February 19, 2015 1:21 PM

The dovish minutes from the January Federal Open Market Committee (FOCM) meeting was the tonic needed for a faltering gold market, says analysts from Triland Metals. However, they note that there is strong resistance around $1,225 an ounce and there could be some weakness in the near-term as prices reached that level overnight. "It's typical for gold to often correct the kneejerk moves generated by the Federal Reserve so don't be surprised to see a pullback toward the $1,200 area again; base building from around $1,206.50 would be healthy and a weekly close above the 61.8% [retracement level] at $1,198.20 [would be] imperative for the medium term bullish sentiment," they say.

By Neils Christensen of Kitco News; nchristensen@kitco.com


Capital Economics: Global Markets Continue To Under-Price "Grexit"

Thursday February 19, 2015 10:49 AM

Although markets continue to ignore Greece's financing problems, economists at Capital Economics say that this "calm may not last." They note that failed funding negotiations in the last two weeks have pushed Greece closer to exiting the eurozone. The country is now even one step closer after Germany rebuked the latest proposal Thursday. "The risk of Greece leaving the euro-zone remains high," they say. "What's more, the mechanisms in place to prevent contagion are not as robust as many think, so we would expect to see a seismic reaction across global markets." The U.K.-based research firm has been positive on gold prices as a result of the uncertainty in Europe and adds that markets are currently under-pricing a 'Grexit.' "Admittedly, such a 'Grexit' would probably cause less of an upheaval now than it would have done three or so years ago. But it is hard to see how at least the initial reaction would be anything other than positive for safe-haven assets and negative for others," they say.

By Neils Christensen of Kitco News; nchristensen@kitco.com


RBC's Gero: Gold Traders Taking 'Wait-And-See' Approach

Thursday February 19, 2015 9:49 AM

Dovish Fed minutes, uncertainty in the eurozone as Greece is unable broker a deal for new bailout funds and continued conflicts in Ukraine are attracting some bargain hunters to the gold market, says George Gero, vice president and precious-metals strategist with RBC Capital Markets Global Futures. However, he adds open interest in the futures market is lagging, which indicates there are fewer buyers and could limit gains in the near-term. In general, he says there is still "anxiety" in the market and traders are taking a "wait-and-see" approach.

By Neils Christensen of Kitco News; nchristensen@kitco.com


BNP Paribas: U.S. Dollar Will Remain Supported As Fed Hikes Rates In H2

Thursday February 19, 2015 9:19 AM

The U.S. dollar saw some selling pressure following the release what most economists are calling dovish Federal Open Committee minutes, but currency analyst at BNP Paribas say that they still expect to see more dollar strength in the near-term. “Our view is that as long as markets continue to anticipate Fed hikes beginning in the second half of 2015, the USD will continue to find support,” they say. The analysts also note that although the minutes were deemed dovish, the statement from the January monetary policy meeting was seen as hawkish. They add that Fed Chair Janet Yellen’s biannual testimony, before congress, next week should provide more clarity on when the central bank is expecting to raise interest rates. Some commodity analysts note that the gold market could struggle to hold on to fresh gains as the U.S. dollar continues to attract buyers.

By Neils Christensen of Kitco News; nchristensen@kitco.com


UBS: Economic Data Will Have More Impact On Gold After ‘Ambiguous’ FOMC Minutes

Thursday February 19, 2015 8:49 AM

A dovish tone in the minutes of the January Federal Open Market Committee (FOMC) meeting helped gold to hold overnight gains Thursday morning, says analyst at UBS. Comex April gold futures last traded at $1,215.3 an ounce, up $15.10 or 1.26% on the day. But they add that the possibility of a June rate hike is still on the table as the minutes were “ambiguous and offers little direction for policy expectations.” Analysts and traders will now look to the economic data to try to foreshadow the Fed’s next move, they say. “Given the lack of clarity and limited guidance from the Fed, economic data prints up ahead should take on even more prominence in influencing gold price action, at least until the FOMC meets again in March. Any changes in the Fed's outlook and policy stance would have important implications on gold price expectations for the rest of the year,” they say.

By Neils Christensen of Kitco News; nchristensen@kitco.com


Lower Oil Prices May Be Helping Gold…But In India – HSBC

Thursday February 19, 2015 8:49 AM

Although weaker oil prices have caused a strain in the commodities sector, HSBC says it may propel the Indian government to reduce gold tariffs moving forward. “We think the rationale for the high import tariffs on gold is fading,” HSBC analysts said on Wednesday. “The current account deficit [in India] did contract in 2014, partly due to the drop in gold demand. But a bigger factor has perhaps been the fall in oil prices,” they added. Gold import tariffs were introduced in India last year in order to defuse the growing account deficit in the country and reduce demand for the metal. Although HSBC expects the current account deficit to run in the foreseeable future, the analysts said the deficit is likely to be low and at manageable levels over the next two years. “In our view, this gives the authorities the chance to potentially reduce the tariffs on gold imports,” they add.

By Sarah Benali of Kitco News; sbenali@kitco.com



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