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UBS: Consolidation Would Be 'Healthy' For Gold, Provide 'More Attractive' Prices

Gold is consolidating some of its sharp gains for the year and any further weakness after this week’s U.S. Federal Open Market Committee meeting would provide investors a chance to buy metal at “more attractive levels,” says UBS. “The market has had a good run so far this year and some more consolidation would be healthy at this juncture, especially given the rebound in equities and recent positive surprises in U.S. employment and inflation data,” UBS says. “The pullbacks in gold this year have generally been relatively shallow and short-lived, not really providing investors with many chances to get in at better levels. But FOMC risks up ahead suggest that this week's pullback could offer market participants who have so far opted to stay on the sidelines the opportunity to build gold exposure at more attractive levels.” Fed policymakers are not expected to hike rates this week, but recently stronger U.S. data may keep officials from signaling a more dovish outlook, thereby creating an FOMC risk for gold, UBS explains.

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

 

UBS: Gold Physical Market Likely To Remain Subdued Due To Seasonality

Tuesday March 15, 2016 10:08

The physical market for gold may remain subdued for a while largely due to seasonal factors, UBS says. “The loco swap rate between Zurich and London continues to indicate the absence of physical demand and the presence of scrap metal,” UBS reports. “While lower prices should encourage some physical demand, we don't expect a significant response during this seasonally slow period.” The prevailing sentiment in China at the moment is to sell rallies, with interest more likely to perk up when gold strength is sustained further, suggesting the Chinese are more likely to buy into momentum. A deeper price pullback likely would encourage bargain hunting in Japan, UBS adds. “Generally speaking, currency moves tend to complicate the near-term impact on gold from policy easing outside the U.S., but ultimately accommodative policies should be positive for gold,” UBS reports. “In Europe, there seems to be some retail physical buying, but volumes are nothing to get excited about and not enough to move the needle on the physical demand picture at the moment.”

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

 

Commerzbank: Gold ETFs Post Outflow But Silver ETF Inflows Continue

Tuesday March 15, 2016 09:28

Global gold exchange-traded funds just saw their largest daily outflow since late last year but metal continues pouring into silver ETFs, says Commerzbank. Precious-metals ETFs trade like a stock but track the price of the commodity, with gold or silver put into storage to back the shares. Gold ETFs posted an outflow of 5.3 tonnes Monday, the largest daily outflow since December, Commerzbank points out. Overall, there has been a large inflow so far in 2016. “Somewhat unnoticed by market observers, silver ETFs are enjoying considerable popularity at present; holdings in the silver ETFs tracked by Bloomberg were expanded yesterday for the ninth consecutive day,” Commerzbank says. “Inflows have totaled 474 tonnes since the beginning of the year, thus reversing almost all of last year’s outflows (524 tonnes) again. The ETF inflows are likely to have prevented any more pronounced fall in the silver price, which is trading this morning at around $15.30 per troy ounce.”

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

 

TD Securities: Gold To Correct Lower If Fed Fails To Deliver ‘Dovish Enough’ Message

Tuesday March 15, 2016 09:28

Gold is at risk of a correction if the Federal Reserve does not deliver a “dovish enough” message after a two-day meeting this week, says TD Securities. The metal has been stronger in 2016 as U.S. and global economic data disappointed, causing further Fed rate-hike expectations to get priced out for the year and beyond. “However, with calmness blanketing the global markets recently, as central bankers return to and implement more of their easing ways, gold has seen a loss of upside momentum over the past month,” TDS says. “U.S. economic data has not all been poor and Fed rate hikes are once again a topic of conversation for 2016. With the FOMC meeting looming this week, gold looks at risk of a near-term correction with $1,200/oz-$1,180/oz providing the next good support zone.” Fed policymakers likely do not have enough confidence in the U.S. economic recovery to hike rates yet, TDS says. However, there is a risk that the market does not construe the Fed to be “dovish enough” in the so-called “dot plot” showing expectations of individual officials, TDS adds. “Seeing that spec flows have rapidly shifted to a much more bullish stance lately, and with swap dealers (bank traders) once again holding very hefty put option positions, anything less than relatively more-dovish expectations could see swap dealers push for lower prices in a bid to make profits on their puts, and an unwind of the latest weak bullish spec hands could provide downside impetus too,” TDS says. However, analysts add, they also do not see much downside below $1,200 to $1,180 until there is more certainty about the U.S. recovery and the Fed begins signaling greater intent to raise rates further. “This is more likely to occur later in 2016,” TDS says. “So for now, gold still has the potential to trend a little higher yet to $1,300/oz, but this week could provide a short-term correction.”

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

 

Morgan Stanley Trims Global GDP Forecast, Says Fed Only Central Bank Expected To Cut Rates

Tuesday March 15, 2016 09:28


Morgan Stanley has scaled back its expectations for global economic growth this year and looks for the U.S. Federal Reserve to be the only major central bank that hikes interest rates. Morgan Stanley sees global gross domestic product growing 3% this year and 3.4% next. “Lowering our global forecasts, we are no longer looking for an acceleration in 2016 GDP growth,” Morgan Stanley says. “The risk of a global recession has increased and we now attach a 30% probability to it. However, solid consumer spending, subdued oil prices and expansionary monetary policy argue against a recession materializing.” Analysts say they do not look for inflation to get back to central-bank targets before 2018. Morgan Stanley analysts say they now expect only one hike from the Fed in late 2016, an additional 10 basis points of easing in the deposit rate from the European Central Bank, and 20-basis-point cut from the Bank of Japan before July elections.   

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

 

 

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