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UBS: Gold Builds Upward Momentum Above 200-Day Average

Kitco News

UBS describes gold’s price action as “encouraging,” particularly with the market now well above the 200-day moving average that stood around $1,255 an ounce as of the bank’s Wednesday research note. Spot metal was at $1,274.90 an ounce just before 11:30 a.m. EDT. “The pullback in the dollar and U.S. rates has been supportive,” UBS says. “French elections ahead and recent geopolitical headlines have also contributed to gold's strength of late, highlighting gold's role as a diversifier amid broader uncertainty and a hedge against tail risks. Gold implied volatility has picked up of late, reflecting rising concerns and overall upside bias.” Still, UBS cautions that gold reactions to geopolitical risks tend to be volatile and headline-driven, which “could make it difficult to trade purely on the back of these factors.”

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

 

Metals Focus: Silver To Eventually Outperform Gold

Wednesday April 12, 2017 09:04

Metals Focus looks for silver to outperform gold late this year or early next year, although the metal could undergo a downward correction first. Gold has been the main beneficiary of geopolitical worries, such as the U.S. airstrike on Syria, the consultancy says. With real interest rates remaining low around the globe, investors are likely to favor silver as they look for yield, Metals Focus says. Meanwhile, a potential correction in U.S. equities is likely to mean a rotation into precious metals. “Overall, signs have already emerged this year of the growth in speculative interest in the silver market,” Metals Focus says. However, the consultancy says a build in gross long positions in the futures market means silver “could be vulnerable to a correction in the near term.” Further, the “likelihood of disappointment in Trump’s economic policies should also lead to a sell-off in industrial commodities, including silver,” Metals Focus says. “This could potentially see the gold:silver ratio jump (meaning gold outperformance). However, we believe the impact will be temporary. Furthermore, looking ahead to late 2017/early 2018, silver is likely to ultimately benefit from increased investor inflows. This, together with silver’s smaller market, should see the price eventually outperform gold, which in turn is likely to see the ratio break out to the downside from the current range.”

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

 

Gold ETF Holdings Rise Amid Geopolitical Uncertainties

Wednesday April 12, 2017 08:51

There has been a rise in exchange-traded-fund holdings of gold lately as the metal attracts safe-haven buying, analysts report. Early Wednesday, gold hit a five-month high in U.S. dollar terms and an eight-month high in euro terms, Commerzbank reports. “Gold is presumably in considerable demand at present as a safe haven, its price doubtless being driven up by the growing geopolitical risks such as the dispute between the U.S. and Russia over Syria and the verbal saber-rattling between the U.S. and North Korea,” Commerzbank says. “In addition, there is political uncertainty, especially in Europe.” In particular, analysts cite upcoming elections in France. “The interest-rate spread between French and German government bonds has widened noticeably of late, which is an expression of this uncertainty,” Commerzbank says. “As well as speculative buying, physical buying interest in gold has also picked up again; gold ETFs have seen 7.6 tonnes of inflows in the last two days.” MKS (Switzerland) S.A. reports that ETF holdings rose by around 180,000 ounces Tuesday for the largest increase in two months. Gold ETFs trade like a stock but track the price of the commodity, with metal put into storage to back the shares.

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

 

Nichols: New Entrants Do Not Want To Miss Gold’s ‘Next Big Move Up’

Wednesday April 12, 2017 08:51

Economic and political developments are likely to continue favoring gold, attracting new market participants who do not want to miss out on the next big rally, says Jeffrey Nichols, managing director of American Precious Metals Advisors and senior economic consultant for Rosland Capital. The veteran analysts points out there has been a “massive shift” in gold ownership from Western markets to Asian markets, particularly China and India. “Asian investors buying small bars and investment-trade jewelry are mostly long-term hoarders who are likely to hold on to their precious-metals purchases for decades, if not longer, passing ownership from generation to generation,” he says. “We think the news — both economic and political — will continue to favor the long side of the market, with gold more likely than not to ratchet up into a higher and wider trading range in the next few weeks.” Much of the recent trading has been by a small number of hedge funds and institutional speculators, he says. “But the market is beginning to attract broader participation with new entrants not wanting to miss out on the next big move up,” Nichols says. “At the same time, retail dealers report fresh demand for bullion coins and small bars. Here, too, we anticipate the rising price will attract fresh buyers.” 

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