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Citi: European Election Risks Could Limit Gold's Downside

Kitco News

Gold futures have been pressured lately by expectations for higher U.S. interest rates, but the downside may be limited by uncertainty about approaching European elections, say Citi analysts. Gold briefly dipped below $1,200 an ounce Friday after a strong U.S. employment report. The 10-year U.S. Treasury yield got as high as 2.615%, its loftiest level since early December. "The 18-20bps (basis points) back-up in 10Y TIP yields is a headwind for the yellow metal given the negative beta between gold prices and real medium-term U.S. rates albeit EU election risks could keep levels supported above $1,175/oz until later in 2Q, allowing gold trading to dislocate a bit from bearish rates/strong USD trends," Citi says.

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

 

U.S. Dollar Eases Despite Fed Rate-Hike Expectation

Monday March 13, 2017 08:38

Analysts say Friday’s 235,000 rise in U.S. February nonfarm payrolls all but assures a U.S. rate hike this week from the Federal Open Market Committee, although one observer adds that dollar has eased for now with this outcome already factored into markets. “Friday’s strong NFP number should allow the FOMC to hike rates on Wednesday by 25bp (basis points), although markets are more likely to focus on signals from the committee on future hikes and balance sheet developments,” says BNP Paribas. The French bank adds that its economics team anticipates three U.S. hikes this year, plus a December announcement to reduce the balance sheet. Despite the rate-hike expectation, however, the euro was up to $1.06748 as of 8:18 a.m. EDT, compared to $1.06716 late Friday. FXTM Chief Market Strategist Hussein Sayed says the dollar’s pullback is due to the “buy-the-rumor, sell-the-news” market adage. “Investors are almost convinced that the Fed will move forward in tightening monetary policy, with speculators pricing in 89% chance of a rate hike, according to CME’s FedWatch Tool,” Sayed says. “Friday’s robust nonfarm payrolls report removed all doubts and now even skeptical investors believe that three rate hikes are the base scenario for 2017.” Metals traders closely monitor U.S. dollar moves since gold and other metals often move inversely to the U.S. currency.

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

 

MKS: Gold Underpinned In Asia; Market Eyes $1,200/Oz Support

Monday March 13, 2017 08:38
 
Spot gold should find nearby support around the $1,200-an-ounce level that the market has reclaimed following a dip below on Friday, says MKS (Switzerland) S.A. As of 8:28 a.m. EDT Monday, spot gold was nearly steady for the day at $1,204.30 an ounce. Gold dipped below $1,200 after a strong U.S. jobs report Friday, but has managed to claw back above it again as Monday’s North American trading gets under way. An outflow of more than 325,000 ounces from gold exchange-traded funds on Friday makes that day’s recovery “even more impressive,” says Sam Laughlin, senior precious-metals trader with MKS. He says “the bid tone continued during Asian hours,” with the on-shore Shanghai premium relative to London gold above $15. “Participants will be looking for gold to hold $1,200 this week, with European elections still creating geopolitical risks that should underpin the metal now that uncertainty around the FOMC meeting has largely dissipated,” MKS says. “Support initially sits at $1,200, while below this broad interest around $1,190-$1,195 should restrict downside moves. Topside targets come in at $1,207.50 (100-day moving average) and above this multiple Fibonacci retracements between $1,210- $1,220.”

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