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UBS: Gold Likely To Be Well Supported

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UBS looks for gold to continue drawing support, commenting that the metal’s ability to hang onto recent price levels is encouraging. “We had seen bits and pieces of interest from more strategic players around the recent lows -- although there appeared to be no urgency to build large positions, it suggests to us that gold continues to be viewed as a diversifier and this should help keep the market supported overall,” the bank says. Physical demand has been “steady at best,” although seasonal patterns suggest “not much can be expected” at the current time, the bank says. “A more dramatic selloff, perhaps towards the lows at the start of the year, is probably needed to get a reaction from physical buyers at this point,” UBS says. “Looking ahead though, indicators of healthy demand in India and expectations of a good monsoon suggest that buying should pick up during the wedding and festival season in the coming months.” Still, UBS adds, Indian gold imports for the first half of the year of around 525 tonnes were strong compared to past years, which could mean second-half volume will be slower. “Overall we expect gold demand in India this year to be around historic averages,” UBS says.

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

 

UBS: Gold Short Covering More Likely Than Fresh Longs For Now

Wednesday July 19, 2017 9:05

UBS figures buying in gold is more likely to be short covering than fresh longs in the immediate future. Short covering is when traders who have short, or bearish, trades opt to buy to exit or cover those positions, while “longs” refers to fresh buyers. “Positioning has been in gold's favor, with most recent data showing that net length is at the lowest level since January last year,” UBS says. “In addition, shorts have started to become more active in recent weeks, raising upside risks in the near term [should those traders buy to cover].” In fact, the bank adds, the recovery from the low $1,200s over the past week was likely short covering, while longs are “likely taking their time and are in no rush to jump in for
now.” This may understandable as market participants wait for further guidance from a European Central Bank meeting Thursday and the U.S. Federal Open Market Committee next week, UBS adds.

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

 

Commerzbank: Gold Rally Fueled By Speculators; ETF Holdings Fall

Wednesday July 19, 2017 8:32

Recent strength in gold prices appears to be the result of speculative buying, which is a double-edged sword since an exodus by these short-term players can also undercut the market, says Commerzbank. Analysts note that global gold exchange-traded funds Tuesday posted renewed outflows of 4.6 tonnes. “Outflows since the beginning of the month have totaled a good 37 tonnes,” Commerzbank says. “Thus the $40 rise in the gold price since early last week was driven first and foremost by speculation, which puts it on a less solid footing. After all, speculative financial investors can jettison their positions just as quickly if their expectations of rising prices are disappointed. It therefore makes sense to keep an eye on the 200-day moving average, which is currently at just shy of $1,230. A fall below this threshold would presumably spark follow-up selling.” Spot gold was roughly steady for the day as of 8:13 a.m. EDT, trading at $1,242.20 an ounce.

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

 

Metals Focus: Platinum Output Falls Far Less Than Prices Since 2011

Wednesday July 19, 2017 8:32

Global platinum production has fallen only 5% since 2011 even though prices have fallen some 50%, says Metals Focus. Companies have maintained their output largely as a result of cutting total cash costs, the consultancy explains. South African output is down slightly more – at 9% -- since this is primary output rather than platinum mined as a by-product of other metals. “However, a 9% drop since 2011 with prices down 50% is nonetheless a somewhat surprising performance,” Metals Focus says. “During 2011 [in South Africa], the average total cash cost of producing an ounce of platinum equivalent was $1,264/oz and $1,569/oz on an all-in sustaining cost basis; all other things being equal, the entire South African industry would be loss making at today’s prices.” However, by 2016, the average total cash cost had fallen to $868, or $975 on an AISC basis. The main factor behind lower costs has been the sharp depreciation of the South African rand. “That being said, some 50% of the industry was still under water during 2016 using the AISC basis,” Metals Focus says. Still, with South African unemployment of some 25%, companies would face a political backlash if they cut too many jobs, Metals Focus continues. “In addition, the mines are large, complex operations with high sunk costs, making mine closures a last resort,” Metals Focus adds.

 

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