TDS: Any Dip Below $1,200/Oz Gold ‘Should Be Bought’
Tuesday November 22, 2016 08:40
TD Securities does not anticipate a complete collapse in gold and suggests any price dips below the $1,200-an-ounce level “should be bought.” Gold tumbled over the last two weeks on a higher U.S. dollar, steepening yield curve and expected rise in so-called carry costs, TDS says. Higher yields and a strong dollar could drive still more traders away from still-elevated long positions, TDS says, meaning potential for gold to slip below $1,200. “But a rout is not expected, as the U.S. central bank is likely to continue to message a very measured approach,” TDS says. “At the same time, the market is pricing perfection from the new administration and Congress—pricing out any possibility of a trade war and assuming all the tax cuts and spending programs mentioned in the election campaign will materialize as proposed.” Meanwhile, TDS points out that Chinese demand has been strong, as reflected by a “remarkable” increase in the Shanghai gold premium versus loco London spot pricing. This has been as high as $15 an ounce lately. “The November drop in spot gold prices has clearly sparked Chinese physical traders to step up their buying,” TDS says. TDS later concludes “So, while we think that $1,200/oz is very strong support for gold, any dip below should be bought (just as the Chinese are doing) for better times in 2017.”
By Allen Sykora of Kitco News; asykora@kitco.com
Platinum, Palladium Rising With Other Industrial Metals
Tuesday November 22, 2016 08:40
Platinum and palladium are higher with other industrial metals so far Tuesday, says a trader. Nymex December palladium has been as strong as $741 an ounce, its most muscular level since August. January platinum has peaked at $952.10 an ounce, its strongest level since Thursday. The trader cites a “Trumpflation” theory that an incoming Donald Trump administration will boost U.S. infrastructure spending and advocate pro-business policies. Against this backdrop, he says, “platinum and palladium have grabbed onto the industrial story and have been on the rise this morning.” As of 8:20 a.m. EST Tuesday, copper, aluminum, zinc, lead and tin were all up more than 1% on the London Metal Exchange. Nymex January platinum was up $7.40 to $943.90 an ounce, while December palladium was up $10.60 to $737.15.
By Allen Sykora of Kitco News; asykora@kitco.com
BBH: Dollar Consolidates But Yield Differential Still Widening
Tuesday November 22, 2016 08:40
The U.S. dollar has entered into a consolidation phase after previously running higher since Donald Trump was elected the next U.S. president, says Brown Brothers Harriman. “Yesterday was the first session since the U.S. election that the euro rose above the previous day's highs,” BBH says. “It is doing so again today, but the new highs are fought hard. Initial resistance is seen in the $1.0660 area and then $1.0720. The euro's downtrend does not appear over.” Widening interest-rate differentials between the U.S. and Germany lately have been one of the key factors supporting the dollar against the euro. The two-year Treasury premium is still rising and has hit 180 basis points, BBH continues. “It is up 7 bp on the week, though the euro is up a little more than half a cent,” BBH says. “The premium widened by 22 bp last week and 9 bp the week prior. The 10-year premium is hovering around 3.0%. Through various business cycles, the U.S. premium rarely has been greater going back to the last 1990s.” Metals traders closely monitor moves in the dollar, since precious and base metals alike often move inversely to the U.S. currency.
By Allen Sykora of Kitco News; asykora@kitco.com
MKS: Softer Dollar Lifts Gold; Far East Premium Around $10
Tuesday November 22, 2016 08:40
Gold drew a bid overnight in Asia-Pacific trade as the recently stronger U.S. dollar pulled back and the premium in the Far East remains robust, says MKS (Switzerland) S.A. As of 8:22 a.m. EST, Comex December gold was up $4.70 to $1,214.50 an ounce and earlier traded as high as $1,220.90. “Gold found support in Asian trade today as USD/JPY (dollar/yen) softened following the news that Japan experienced a magnitude 7.4 earthquake in the early hours of Tuesday morning,” MKS says. “As the story developed during the Comex close, gold opened well bid in Asia to test the overnight high leading into the Shanghai open. The Far East continued to trade at an elevated premium over loco London gold, extending to over $10 and showing little sign of abating. Initial interest out of Shanghai saw the metal through $1,220, before profit-taking around the figure pared gains back to pre-Shanghai levels.”
By Allen Sykora of Kitco News; asykora@kitco.com
