Market Nuggets
Standard: Gold To Consolidate, Tracking Treasury Market
Standard Chartered looks for gold prices to consolidate in the foreseeable future, unless the market gets a boost this week from U.S. economic data or rhetoric following a two-day meeting of the Federal Open Market Committee on Wednesday. Analysts say gold’s strong correlation with the U.S. dollar has broken down, suggesting that prices are likely to trade range-bound at lower levels in the near term. “Gold had a strong correlation with the USD after the Brexit vote, but is now tracking 10-year U.S. Treasuries most closely,” Standard says. “We do not expect the Fed to hike rates at its 3 May meeting, and our rates strategists expect a benign outcome to coming risk events that should support 10Y USTs in the 2.30-2.65% range.”
By Allen Sykora of Kitco News; asykora@kitco.com
INTL FCStone Sees Gold In $1,240-$1,310 Range During May
Monday May 1, 2017 09:06
INTL FCStone is constructive on gold for May, calling for a range of $1,240 to $1,310 an ounce. “We see gold maintaining a relatively higher trading range in May as tensions with North Korea -- yet another missile was fired this weekend -- will command more attention now that the bearish impact of the French election is out of the way,” INTL FCStone says. “Other supportive factors include an expected weaker dollar, dovish stances taken by the ECB and the BOJ (European Central Bank and Bank of Japan) at their recent meetings and the fact that physical and ETF (exchange-traded-fund) demand seems to be picking up. Silver is expected to be in a steady trading range following gold, but we see platinum as remaining weak on account of rising supply.” Meanwhile, the palladium charts look “very constructive and prices are in breakout mode,” INTL FCStone says. Still, analysts add, “While we still could move somewhat higher on palladium, prices are approaching historically overbought levels.” The firm sees silver in a May range of $16.60 to $18.25, platinum trading between $910 and $990, and palladium between $760 and $870.
By Allen Sykora of Kitco News; asykora@kitco.com
Walsh’s Lusk: Gold Needs Dovish Fed, Tepid U.S. Jobs Report
Monday May 1, 2017 08:43
Gold may need dovish Federal Reserve commentary this week and a soft U.S. jobs report on Friday to avoid weakness in early May, typically a seasonally weak month for the metal, says Sean Lusk, director of commercial hedging with Walsh Trading. The metal fell last week, but remains above the 200-day moving average that stands at $1,263.70 for Comex June gold. As of 8:30 a.m. EDT, the contract was trading at $1,264.70, down $3.60 for the day. Geopolitical uncertainties and soft U.S. reading on gross domestic product Friday meant prices didn’t slip further, Lusk says. This will be a busy week for investors as the Fed begins a two-day meeting on Tuesday with a policy announcement on Wednesday, followed by monthly nonfarm payrolls Friday. “Geopolitical events will be followed of course with the French presidential election next weekend,” Lusk says. “First and foremost, though, aside from anything else entering into the market, it will be the Fed’s purview of the economy and on rates that will ultimately drive prices and therefore trend going forward. The market has discounted any rate hike in May and will wait for the Fed’s commentary on whether June is viable for the year’s second rate hike.” He points out that May “has been the worst-performing month for gold over the last five years,” meaning the gold market needs dovish Fed commentary and “at best a tepid jobs” report.
By Allen Sykora of Kitco News; asykora@kitco.com
BBH: Fed Likely To Keep Signaling ‘Gradual Removal Of Accommodation’
Monday May 1, 2017 08:43
Brown Brothers Harriman doubts there will be any major changes in the Federal Reserve’s view of the economy when policymakers release a statement after a meeting this week, with BBH anticipating the communiqué will continue to point to gradual lifting of soft monetary policy. The Fed is likely to note that inflation is near target, BBH says. “The continued gradual removal of accommodation will be justified, though there is no reason to expect an explicit signal that it intends to hike rates at the June meeting,” BBH says. “With the cycle under way, there is no need for that level of forward guidance. It is also unreasonable to expect fresh revelations about the balance-sheet strategy. Discussions are ongoing, and there is no need for any decision yet.” Officials may be disappointed with the 0.7% growth in first-quarter gross domestic product report on Friday; however, they do not appear to put much stock in the quarterly growth numbers, which are subject to statistically significant revisions, BBH says. “Also, there are some elements of GDP that are not necessarily subject to monetary policy, like government spending, inventory accumulation and foreign demand,” BBH says. Analysts later add, “Moreover, there is a good reason to expect that growth is already re-accelerating. Part of the weakness in consumption was a fluke due to warmer weather and utility usage.”
