Gold To Drag Silver Prices Down In 2016, 2017 – CIBC

Canadian bank CIBC is expecting to see gold prices struggle at least until 2017, also dragging down silver prices in turn. In a report published Thursday, the CIBC analysts say that they expect the gold/silver ration to remain around 75 and with gold prices expected to average $1,150 an ounce in 2016 and $1,200 an ounce in 2017, they are lowering their expectations for silver. They now see silver averaging $15 an ounce in 2016, down from the previous forecast of $17. For 2017, they see the grey metal averaging $16 an ounce. “As much as we'd have liked it to be different, the constant grind lower across the commodity space is taking a toll on our metal price forecasts as well,” analysts say. CIBC sees the $15 area as a “proverbial wall” for the silver market as that price will put many silver producers in “tough positions.”

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

Gold Year-End Forecast $1,200/oz, $1,400 For 2016 – Capital Economics

Thursday October 08, 2015 10:03

Although gold now seems to be on its way to end the year below its January high of $1,300, having backed off from recent gains, analysts from one U.K.-based research firm say it may see some relief ahead. “[G]old should benefit further from a recovery in other commodity prices – notably copper and oil, consistent with a revival in demand from emerging markets and a pick-up in inflation expectations,” says Julian Jessop, head of commodities research for Capital Economics, in a report Thursday. A major headwind for the yellow metal has been concerns about a sharp slowdown in China, which would undermine gold demand, he explains. “However, we expect the news from China to improve in the coming months, lifting the prices of both copper and gold,” he adds. Another factor weighing on gold has been the lack of demand for inflation hedges, he says. “Correspondingly, if we are also right that oil prices are set for a gradual recovery, gold should benefit too,” he notes. “Overall, we remain very comfortable with our relatively upbeat view on the medium-term prospects for the gold price, reflected in our end-2015 and end-2016 forecasts of $1,200 and $1,400.”

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

UBS: Any Bounce In Platinum/Palladium Ratio Likely To Be Limited

Thursday October 08, 2015 09:01

The platinum/palladium ratio could have further upside, but gains are likely to be limited since palladium was probably oversold and platinum still faces uncertainty surrounding the Volkswagen emissions scandal, says UBS. The ratio measures how many ounces of palladium it takes to buy an ounce of platinum. The platinum/palladium ratio tumbled from 1.85 in late August to a low of 1.30 last week, before edging up to 1.35, the bank notes. The declining ratio means palladium outperformed, and the metal was probably due for a rebound since third-quarter weakness was “exaggerated by external forces and was no longer fully justified by fundamentals,” UBS says. “This suggests that gains over the past month or so are likely to be quite sticky.” A similar argument could be made for platinum, except now there is much uncertainty about auto-related demand due to the VW situation, UBS says. Platinum is used for auto catalysts diesel-powered vehicles, and there is potential for the VW incident to impact consumer behavior. “The platinum/palladium ratio could have room for further upside as overextended conditions unwind, but gains are likely to be limited,” UBS says.

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

Commerzbank: Silver ETF Holdings Fall To Lowest Level Since July 2013

Thursday October 08, 2015 08:26

Holdings in global silver exchange-traded products have slid two days in a row and are at the lowest level in more than two years, Commerzbank says. “The silver ETFs tracked by Bloomberg recorded sizeable outflows yesterday for the second day running – just shy of 54 tons following a good 59 tons the day before,” Commerzbank says in its daily commodities report. “As a result, holdings have slid below the 19,000-ton level for the first time since July 2013. The gold ETFs tracked by Bloomberg also registered outflows in the past two consecutive days, though at 2.2 tons in total they were by no means excessive.”

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

BBH: FOMC Decision To Keep Rates Steady Likely ‘Finely Balanced For Individual Members’

Thursday October 08, 2015 08:26

Brown Brothers Harriman figures the Federal Open Market Committee decision to leave interest rates unchanged last month was a close call even though the vote itself did not suggest this. FOMC Chair Janet Yellen “seemed to suggest it was not close while comments from others suggest it was,” BBH says. “Both are right. It was not a close vote overall. There was only one dissent in favor of a hike. It was a close vote in the sense that it was a finely balanced decision for individual members.” The question now becomes what is needed to shift the balance toward a hike, BBH continues. “Some believe that the Fed's decision to stand has already been redeemed by the weakness of the U.S. jobs data,” the firm says. “However, we note that the Fed (members) did not cite concerns about the labor market in their decision.  They were likely as surprised as the market was by the September jobs data.  Moreover, that argument also presumes that the Fed will see the softer jobs data as a particularly worrisome sign instead of focusing on the cumulative improvement in the labor market.” Traders will be watching for the release of FOMC minutes for the September meeting, due out at 2 p.m. EDT, for further clues on what policy-makers were thinking.

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

HSBC: Long-Term PBOC Gold Purchases To Be ‘Important Component Of Secondary Demand’

Thursday October 08, 2015 08:26

Continued long-term accumulation of gold by China’s central bank should benefit bullion prices, says HSBC. “An important source of physical gold demand is central-bank purchases,” HSBC says. Analysts cite data from the World Gold Council this week showing that central banks added a net 47 tonnes of gold to their foreign-exchange reserves in August, although this is down from July. China and Russia were the biggest buyers with 16 and 30 tonnes. HSBC also notes that data from the People’s Bank of China suggest that the central bank added another 15 tonnes of gold in September. With its large forex reserves, China is the most likely source of official-sector demand for the rest of this year and next, HSBC says. “The low levels of China’s official gold holdings as a percentage of foreign-exchange reserves strongly suggest there is likely to be further official-sector gold purchases,” HSBC says. “While this may not be a significant on a month-to-month basis, a long-term gold accumulation strategy by China or any other emerging-market central bank would constitute an important component of secondary demand and could be good for gold prices. It could also influence other central banks to increase their holdings.”

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

HSBC: Power Issues, Mine Closure Reflect Tightening Platinum Supplies

Thursday October 08, 2015 08:26

A mine closure and power issues in the news this week reflect the longer-term supply issues that could be supportive for platinum prices, says HSBC. The bank cites news that Zimbabwe, a producer of platinum group metals, urged big mines to cut power use by 25% to ease electrical shortages. Further, commodities giant Glenore is closing its South African Eland platinum mine, which produced 35,000 ounces of platinum in the first quarter of this year. “The closure of a, albeit small, platinum mine and electricity cuts in a second-level producer, while not significant enough to impact prices near term, does illustrate a slow tightening of supply,” HSBC says.

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

U.S. Bank Looks For Fed Rate Hike Yet This Year To Support Dollar, Pressure Gold

U.S. Bank Wealth Management still looks for the Federal Reserve to hike interest rates this year, which would pressure gold, even though many other analysts are backing off from this stance since Friday’s weaker-than-forecast U.S. jobs report. The bank says in a weekly commodities report that “gold prices have seen some price increases when data seems to indicate Fed lift-off may be postponed into next year. Ultimately, price gains have been modest in the face of softer data. We anticipate the Fed will ultimately increase rates in 2015 and the expected U.S. dollar strength will likely lead to further pressure on gold prices.”

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