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Metals Focus: Equity Correction May Trigger Decline In Gold/Silver Ratio

Kitco News

The consultancy Metals Focus looks for the gold/silver ratio to eventually decline, perhaps whenever a meaningful stock-market correction occurs. The ratio measures how many ounces of silver it takes to buy an ounce of gold, with a smaller number meaning silver is outperforming, and vice-versa. Last week, the ratio neared 80:1, the highest since July. Metals Focus says professional investors and those with a long-term approach, such as pension funds, may be deterred by silver’s smaller market size. Meanwhile, silver is more of an industrial metal than gold, thus may have been dragged lower lately with other base metals in part on concerns about growing debt levels in key commodity consumer China, Metals Focus says. A recovery in gold prices should help silver, Metals Focus says. “With a December [U.S.] rate rise now largely factored into current prices, the scope for further downside should be limited,” the consultancy says. Ultimately, Metals Focus says, the big stock-market rally may prove unsustainable as U.S. tax plans are likely to be either “watered down” or a deal is delayed or fails to materialize. Any stock-market correction should bolster the case for investment in precious metals, the consultancy adds. “The fact that the size of the silver market is smaller and hence less liquid than gold will amplify the impact of speculative interest on the price, which will eventually lead to a decline in the gold/silver ratio,” Metals Focus concludes.

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

 

FXTM: Gold's Next Move Likely Hinges On FOMC Policy Statement

Wednesday December 13, 2017 09:18

The next major event that may affect gold’s trajectory is a monetary-policy statement from the Federal Open Market Committee after a two-day meeting ends on Wednesday afternoon, says Lukman Otunuga, research analyst at FXTM. “While it is widely expected that the Federal Reserve will be raising U.S. interest rates, much focus is likely to be directed towards the tone of the meeting,” the analyst says. “A hawkish Fed meeting may expose the zero-yielding metal to further losses, with $1,230 acting as a level of interest. Alternatively, a statement which expresses concerns over low inflation and a failure to offer fresh insight into the policy outlook beyond 2017 may offer gold a boost.” The technical-chart picture for gold remained bearish at the start of the day, Otunuga says. Prices were below the 20-day moving average and an indicator known as moving average convergence/divergence had crossed to the downside. “Previous support around $1,250 could transform into a dynamic resistance that opens a path lower towards $1,230,” the analyst adds. Shortly before 9 a.m. EST, spot gold was up 75 cents to $1,244.20 an ounce.

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

 

RBC’s Gero: Gold Futures Boosted By Short Covering

Wednesday December 13, 2017 09:18

Gold has rallied on short covering, in which traders buy to exit previous bearish trades, as market participants await the outcome of a two-day meeting of the U.S. Federal Open Market Committee, says George Gero, managing director with RBC Wealth Management. A little before 9 a.m. EST, Comex February gold was up $4.70 to $1,246.40 an ounce. “We have a good short-covering rally ahead of today’s Fed notes, which could be less hawkish than expected,” Gero says. Financial markets anticipate another 25-basis-point rate hike but will be watching to see what hints policymakers might offer on future monetary policy.

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

 

Commerzbank: Palladium ETFs Draw Biggest Inflow Since August

Wednesday December 13, 2017 09:18

Palladium has widened its premium over platinum to a fresh 16-year high, and exchange-traded-fund investors have begun moving into palladium, reports Commerzbank. Palladium prices have been strong despite ETF outflows, with the metal widely regarded as in a supply deficit for the year. Palladium’s premium over sister metal platinum has increased to around $135. “The last time platinum was this cheap as compared with palladium was in April 2001,” Commerzbank says. “ETF investors are still remaining loyal to platinum. Despite the steep price slide, especially in the past two weeks, only a few thousand ounces have been withdrawn from platinum ETFs. Palladium ETFs recorded their first inflow in two weeks again yesterday. At just shy of 19,000 ounces, this was the highest since mid-August. This reduces outflows since the start of the month to approximately 90,000 ounces.”

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