Make Kitco Your Homepage
Market Nuggets

Barclays Sees Potential Headwinds For Gold

Barclays says expectations for a Federal Reserve interest-rate hike are likely to keep weighing on gold prices. The bank says real interest rates are likely the most important macroeconomic factor for gold, with the others being U.S. dollar strength and safe-haven demand. “We are near the beginning of the rate-raising cycle and our economists expect the Federal Reserve to have (its) first rate hike in September,” the bank says. “The rate hike expectation is likely to continue (to) weigh on gold prices.” The bank’s foreign-exchange analysts expect the dollar to keep strengthening, which also is negative for gold. One potential source of buying is emerging-market demand. “The demand response is yet to be seen and we do not expect a 2013-style buying spree from China, given its existing onshore stock, as well as the fact that buyers in 2013 are now making a loss,” Barclays says. Support from the production cost likely would be the level of average cash costs instead of average all-in sustainable costs, Barclays says. “This suggests that (the) cost-supported floor should be just under $1,000/oz. However, $1,000/oz is also an important level in terms of ETF holdings.” Many holdings below this would become loss-making, meaning potential for liquidation, the bank adds.

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

 

Silver Remains ‘Dreadfully Weak’ Ahead Of FOMC – iiTrader

Monday July 27, 2015 10:20

Silver remains “dreadfully weak” as markets await the Federal Open Market Committee two-day meeting to conclude on Wednesday, says iiTrader.First resistance today comes into play at $14.94-15.00.  Don’t be surprised if silver makes a run at this level in the next couple of days,” say iiTrader analysts in a morning report. “Ultimately the longs continue to need a close above $15.68 to turn the trend north.” The analysts say that this week will be big for silver as markets await the FOMC meeting, which has “traders anticipating a lot of excitement although the reality is that these FOMC meetings have been nothing more than a Janet Yellen hot air balloon for most of the last 18 months.”

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

 

TDS: Gold Could Dip Below $1,000/Oz, But $1,200 Seen In 2016

Monday July 27, 2015 10:12

Gold faces a risk of dropping below $1,000 an ounce for a short time in the several months before and after the Federal Reserve starts hiking U.S. interest rates, says TD Securities. However, analysts also say they see a “meaningful move” higher toward $1,200 an ounce in 2016, as inflation picks up and the U.S. dollar weakens relative to other currencies. “Even something as non-fundamental as a modest spec position adjustment may force gold below $1,000/oz, given how technicals now look on the charts,” TDS says. “The continued rise of the U.S. dollar, rising real yields, and a general lack of appetite for all things commodity are likely to be the catalysts that prompt technicians to force gold lower.” Longer term, however, TDS looks for the Fed to become only “moderately less accommodating” and might allow inflation above the implied target of 2%, which could lower short-term real rates next year and weaken the dollar. “While these set of expectations won't likely lift gold now, they could well serve as positives next year,” TDS says. “Consistent and methodical Fed funds hikes should have a diminishing negative impact on gold, as inflation trends higher along with the recovering economy into 2016.”

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

 

Citi Looks For Gold To Touch $1,000/Oz In Next Three Months

Monday July 27, 2015 10:12

Citi Research has reduced its gold price target from now to three months out to $1,000 an ounce and its six- to 12-month level to $1,025. “The disappointing PBOC (People’s Bank of China) gold reserves data was just the straw that broke the yellow metal’s back and exacerbated a gold-market unwind that was irrespectively trending towards fresh multi-year lows,” the firm says, referring to recent news that China upped its gold reserves over the last six years by less thanwhat market participants had expected. “At this juncture, Citi expects macro sentiment towards gold is unlikely to rebound and could worsen as the Fed approaches lift-off this fall with another 75 bps (basis points) of hikes in 2016. With macro drivers weighing so heavily on gold, it is unlikely that physical consumption will support prices to any significant degree in the short run. Indeed, though 4Q Asian demand sometimes sees a boost during Indian festival and wedding season, any impact will probably not be enough to bull markets up again.”

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

 

China June Gold Imports Plummet, But Demand To Pick Up In H2 – Capital Economics

Monday July 27, 2015 09:41

Although mainland China’s gold imports from Hong Kong fell in June, analysts expect imports from the Far East to increase in the coming months. Data released from the Hong Kong Census and Statistics Department showed that China’s imports via Hong Kong fell by 48% month over month, and by 8% year over year, to the lowest level since August 2014, says Simona Gambarini, commodities economist for U.K.-based research firm Capital Economics. She adds that this data suggests that gold’s price drop still has to feed through into higher buying. “However, we expect total imports by China and India to pick up in the second half of the year as low prices attract a fresh wave of buying,” she says. Gambarini adds that the Swiss Federal Customs Administration also revealed that China’s imports via Switzerland fell in June by 25% month over month, but are up 368% year over year. “We think investors are becoming increasingly worried about a more pronounced correction in China’s stock market and will return to gold to diversify their portfolios,” she notes. As such, she adds that the firm expects an overall increase in consumer demand of 4% from India and 3% from China year over year.

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

 

Gold’s Focus Turns To FOMC & Options Expiration - iiTrader

Monday July 27, 2015 09:32

As markets continue to digest Chinese stocks’ big one-day selloff, analysts at iiTrader turn their focus to gold options expiration scheduled tomorrow. “We have seen a lack of safe-haven buying this morning as commodities are taking heat along with equities and the dollar as margin calls are likely causing liquidation after China’s Shanghai Composite Index plunged 8.5%, the worst one-day loss since February 2007,” they say. “As we head into option expiration tomorrow, we expect volatility to remain high.” The analysts say that a breach above resistance at 1106-1108.9 could spark a short-covering rally, even taking the metal up to 1130-1135.3. “A close below 1093.3-1094.1 will be a disappointment to the bear camp while a close below 1088.3 will likely put further pressure on the metal in the near term.”

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

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
kitco news