Make Kitco Your Homepage
Market Nuggets

MKS, Commerzbank: Shanghai Gold Premium Hits Multi-Year High

The Shanghai Gold Exchange premium soared to multi-year highs overnight, with Commerzbank citing recent news reports that China’s government may restrict the number of import licenses and MKS (Switzerland) S.A. reporting that dollar weakness also boosted the appeal of gold. “The early-session USD weakness gave gold a boost right from the open, surging through the Friday high leading into the Shanghai session, before taking a further leg higher courtesy of Chinese interest as the SGE premium continued to trade elevated,” MKS says. “After opening at an onshore premium of around $22 over loco London gold, interest drove the premium as high as $28 and with it spot gold to USD $1,197.70, before participants took the opportunity to buy the USD and cap any further gains.” Last week, Reuters reported that the premium hit a three-year high on worries about a supply shortage tied to Beijing’s efforts to restrict import licenses. “According to industry sources, the Chinese government has reduced the number of import licenses,” Commerzbank says. “According to Thomson Reuters, this drove premiums in China as compared to world market prices to their highest level in nearly three years at the end of last week (roughly $25 per troy ounce). Premiums could also remain high for the time being given that Chinese gold traders and jewelry manufacturers are likely to require large quantities of gold in the run-up to the Chinese New Year festival at the end of January.”

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

 

BBH: Confidence Grows That Federal Reserve Will Hike Interest Rates

Monday November 28, 2016 09:18

There is growing confidence that the Federal Reserve will hike U.S. interest rates next month, and then some more next year, says Brown Brothers Harriman. “Nevertheless, the market does not have two Fed hikes priced in for next year, which suggests scope for additional adjustment,” BBH says. “Two hikes next year will likely be the base case for many forecasts. The dramatic rise in long-term Treasury yields is the direct consequence of anticipation of fiscal stimulus when the economy is already growing toward trend.” Both U.S. presidential candidates called for fiscal stimulus. “Trump's was larger and included significant tax cuts as well,” BBH points out. Analysts say this week’s heavy slates of U.S. economic data is unlikely to alter views on rates but “may strengthen the appreciation of the solid economic performance” since struggles from the fourth quarter of 2015 to second quarter of 2016. BBH points out that the 10-year Treasury yield finished last week around 2.35% after it was just over 1.30% four months ago.

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

 

BNP Paribas Bearish On Euro Vs. U.S. Dollar

Monday November 28, 2016 09:18

Analysts with BNP Paribas say they remain bearish on the euro against the U.S. dollar, with the currency cross likely to be impacted more by news in the U.S. than in Europe. Markets have been factoring in expectations for higher U.S. interest rates and fiscal stimulus from president-elect Donald Trump. “In Europe, markets are increasingly turning to the upcoming political agenda,” BNP Paribas says. The second round of the French Republican presidential primary was held Sunday and, as expected, former Prime Minister Francois Fillon won with 66.5% of the votes. The next key events are on Dec. 4: the Italian constitutional referendum and the Austrian presidential election. Market participants also will be watching for clues on what the European Central Bank may do with monetary policy next, with ECB President Mario Draghi speaking on Monday and Wednesday, BNP Paribas adds. “However, we think EUR/USD will still be mainly driven by the USD and we remain bearish, targeting $1.04 by end Q1 2017,” BNP Paribas says. Metals traders monitor the dollar closely, since base and precious metals alike often move inversely to the U.S. currency.

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

 

SP Angel: Indian Gold Premiums Impacted By Currency Liquidity Issues

Monday November 28, 2016 09:18

Indian gold premiums have fallen and risen due to local currency liquidity issues, says brokerage SP Angel. “The Indian government is rooting out tax evasion and corruption within India,” SP Angel says. “The move to cut large-denomination bank notes has caused consternation among many Indians who have rushed to change larger bank notes for smaller ones but who have been frustrated by queues and difficulties in converting their cash. The move appears to have caused the market for gold to freeze up as gold traders were not keen to accept larger denomination notes and many Indians do not have bank accounts. There are signs that Indian demand is rising again as local gold premiums pick up as the mad rush to change currency abates. We suspect a few more Indians now have bank accounts and the government will be better able to contain the bribery and corruption which serves to constrain its economy.”

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

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
kitco news