Adrian Day: Gold Correction Ahead But Market To Remain Strong

Fund manager Adrian Day sees a correction ahead in gold but also sees potential for further upside this year. Even with Wednesday’s pullback, the precious metal has risen sharply so far in 2016. “There are certainly reasons to think that gold could correct,” says the chairman and chief executive officer of Adrian Day Asset Management. “After all, we have seen a very strong rally, with the strongest February on record; it would be foolhardy to expect that to continue without a pause. And the first quarter is seasonally strong, with the April-to-June period typically soft.” There is potential for profit-taking by speculative futures traders, he adds. “But there are strong reasons for thinking that we have further to go this year,” Day continues. Supportive influences that he cites include low interest rates, a likelihood that the U.S. dollar has peaked, volatility in equities, a return to gold by many institutional investors and general resilience in the metal, with “each mini-pullback swiftly reversing.”

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

Walsh’s Lusk Cites Potential For Profit-Taking In Gold After Gains So Far In 2016

Thursday March 24, 2016 08:01

Sean Lusk, director of commercial hedging with Walsh Trading, sees potential profit-taking in gold after gains this year. “While I still like gold to the upside for the long term, one has to be cognizant on the potential timing on when pullbacks in the market may take place,” he says. He lists several potential reasons for profit-taking. “One, we are approaching month end; second, the end of the first quarter; and third, option expiration for the April futures contract on Monday, March 28th,” he says. “Gold ranged lower this week, following through from the weakness we saw last Friday, March 18th. However, the market recovered, trending higher in the early-morning hours (Tuesday) following the horrendous terror attacks in Brussels. Technical traders used the rally to short the market again off of a downtrend resistance line at $1,257 basis April futures....Considering gold has impressively rallied over 18% for the first quarter as of last Friday’s close, profit-taking could be seen soon if nothing else enters into the market.”

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

Barclays: Increased Commodity Investment Probably Not Start Of Long-Term Trend

Thursday March 24, 2016 08:01

Barclays expresses doubt that large inflows into commodity investments this year are the start of a “new wave of enthusiasm” for long-term, broad-based exposure, particularly considering the increase in gold investment. Net inflows into commodity investments totaled over $20 billion in January and February, the strongest start to a year since 2011, Barclays says. The combination of large inflows plus price appreciation means commodity assets under management have surged by almost 12% since the end of 2015 to hit a six-month high of $186 billion, the bank continues. “However, in our view, recent price appreciation does not seem to be very well founded in improving fundamentals and upward trends may prove difficult to sustain, so the risk is growing that any setback will result in a rush for the exits that could once again see commodity prices overshoot to the downside,” Barclays says. “Precious metals -- mainly gold -- have attracted the largest portion of investor inflows with around a third of the total ($7billion), which suggests a substantial amount of investor uncertainty about the future, rather than a vote of confidence in the outlook for commodity fundamentals.”

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

Societe Generale: Chinese PGM Demand ‘Impressive’ In Last Two Months

Thursday March 24, 2016 08:01

Chinese demand for platinum group metals has gotten off to a strong start in 2016, says Societe Generale. Metals analyst Robin Bhar cites Chinese data from early in the week showing that the country’s platinum and palladium imports over January and February jumped 71% and 135% year-on-year, respectively. “Low prices have encouraged industrial and automakers to build inventory,” Bhar says. “Implementation of stricter emissions limits is boosting palladium demand, while a rebound in jewelry demand is a key driver for platinum.” The “impressive” demand was reflected in the domestic premium for platinum, which rose to 9%, the highest level on record, Bhar adds.

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

Citi: ‘Robust’ European Auto Sales To Underpin Platinum; Gold Outlook Reiterated

Thursday March 24, 2016 08:01

Citi Research looks for “robust” European car sales this year, which should be supportive for platinum. The metal is required for auto catalysts in diesel-powered vehicles such as those popular in Europe, whereas gasoline-powered cars tend to rely on sister metal palladium. As of late Wednesday, spot platinum was up 8% for the year to date. Citi points out that European auto registrations rose for the 30th consecutive month in February, up 14.3% year-on-year to 1.1 million units. Healthy gains were reported in Italy, France and Spain. Citi says bank economists continue to forecast positive economic growth in the euro zone, which should point to improvement in employment and household income. “We therefore reiterate our expectations for robust car sales in 2016,” Citi says. Conversely, palladium “has struggled to shake-off disfavor amongst investors” and was up a more modest 4% for the year to date. “Market sentiment towards the gasoline catalyst has been decidedly negative over the last nine months, and we expect continued macro-uncertainty to weigh on prices in the short term, especially in light of weaker-than-consensus industrial production in China YTD of 5.4% versus 6.8% the year prior,” Citi says. The bank looks for platinum to average $950 in the fourth quarter and rise to an average of $1,090 in the final three months of 2017. Palladium is seen averaging $560 in the fourth quarter of this year and $680 in the fourth quarter of 2017. Meanwhile, Citi reiterated its gold forecast calling for short-term support but with a more bearish view into year-end. Citi sees gold averaging $1,250 in the current quarter but $1,100 in the final three months of 2016, but recovering to $1,140 in the fourth quarter of 2017.

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