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Deutsche Bank Sees $20 Silver If Gold-Silver Ratio Keeps Declining

Silver, often referred to as “poor man's gold" or “high-beta gold,” could rise to $20 an ounce in the foreseeable future if the gold/silver ratio continues to fall to historical levels, says Deutsche Bank. The metal often outperforms gold to both the upside and downside, and has been rallying strongly lately in what many have described as a catch-up move to gold’s early-year gains. Silver is now up some 25% year to date, versus 18% for gold, the bank points out. “We think momentum could carry silver as high as $20/oz in the near term,” Deutsche Bank says. However, “in order to see a continued rerating of silver versus gold, we need to see a number of financial conditions either continue or for momentum to continue.” For now, a dovish Federal Reserve is helping gold. Deutsche Bank also looks for positive momentum in the U.S. and Chinese manufacturing purchasing managers indexes, which bodes well for silver since more than half of its demand is industrial in nature, compared to maybe 10% for gold. The gold/silver ratio measures how many silver ounces it takes to buy an ounce of gold, with a declining number meaning silver is outperforming. This ratio was around 80 as recently as a couple of weeks ago but has fallen to 72.5. If gold remains range-bound around $1,250 an ounce, a rerating in the ratio to 66.6 (the average from 1983 to 2003) would take silver up to $18.80, Deutsche Bank says. A rerating in the ratio to 61.1 (the average since 2003) would take silver as $20.50, the bank adds.

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

 

Commerzbank: ‘Gold Demand Has Clearly Shifted Somewhat From East To West’

Friday April 22, 2016 08:14

Swiss trade data suggest gold demand has shifted from Eastern nations back to Western ones, says Commerzbank. Analysts cite customs data showing Switzerland exported 118 tonnes of gold in March, more than in February but less than March 2015. “Exports to Asia were further down on even the previous month’s weak figure, which points to subdued demand there,” Commerzbank says. “The lowest volume in 15 months was shipped to India, for example, while exports to China and Hong Kong combined dropped to an eight-month low. By contrast, gold exports to Great Britain increased to 44.2 tonnes, their highest level since September 2012. This was doubtless due to ETF (exchange-traded-fund) demand, which was still high up to that point….Gold demand has clearly shifted somewhat from East to West again, in other words.”

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

 

HSBC: ‘We Think Gold Will Go Higher, But Not Yet’

Friday April 22, 2016 08:14

HSBC says gold may need a period of consolidation after “stellar” gains in the first quarter. “In the case of gold, after running up sharply in the first quarter, builds in the ETFs (exchange-traded funds) have stalled and we have not seen material accumulation recently,” the bank says. Further, net-long speculative positioning on Comex is high, rising around 21 million ounces this year, HSBC says. “We think gold will go higher, but not yet,” the bank says. “Prices may need to consolidate around $1,250 first. Similarly for silver, we favor the market above $17/oz, but expect volatility and further gains may be hard to hold. On the positive side, it appears that solar-panel demand is up and retail demand is solid for silver.”

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

 

HSBC: Supply/Demand Fundamentals ‘Gradually Tightening’ For PGMs

Friday April 22, 2016 08:14

HSBC looks for platinum group metals to rise on “gradually tightening fundamentals.” The bank points out that top South African producer Anglo American reported higher primary production in the first quarter but lower refined output, with the latter materially impacted by a planned stock take at the Precious Metal Refinery and safety stoppages that closed the refinery for 12 days. “Consequently, refined platinum production decreased by 52% to 261,000 ounces, with similar decreases for palladium and rhodium,” HSBC says, describing this as supportive for the metals since it shows limited upside for output. Meanwhile, imports by the world’s largest PGM consumer, China, were strong in the first quarter, HSBC continues. March palladium imports were down by 21% year-on-year in March, but were up by 61% for the entire first quarter, HSBC points out. Platinum imports were up 11% for the quarter. “We attribute strong palladium imports to good auto demand, which absorbs the bulk of palladium sent to China,” HSBC says, citing a jump in Chinese vehicle production late last year. Meanwhile, low platinum prices appear to have stimulated greater purchases of this metal for jewelry, HSBC adds.

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

 

 

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