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Mitsubishi: Sagging Dollar To Lift Gold; Rate Hikes Already Factored Into Prices

Kitco News

Further U.S. rate hikes have already been factored into the markets while there is potential for monetary tightening in Europe, all meaning potential for weakness in the U.S. dollar and conversely strength for gold in 2018, says Mitsubishi. The dollar weakened in 2017 despite three Fed rate hikes. “Nonetheless the Fed hikes and strong growth had already been priced into the dollar, whereas economic growth in the euro zone together with plans to scale back quantitative easing came as something of a surprise,” Mitsubishi says. “With the European Central Bank likely to dial back further on quantitative easing and possibly end it in 2018, the euro probably has some further ground to gain. The dollar has probably already digested the U.S. Federal Reserve’s clear intentions to raise rates a further three times in 2018, meaning the Fed would have to become much more aggressive on rates in order to improve the dollar’s prospects.” Even the potential repatriation of overseas assets by U.S. companies, which some say may be encouraged by tax reform, may be less dollar-bullish than some think since companies tend to hold small cash reserves to minimize forex risk, Mitsubishi says. Further, any economic benefits coming from personal tax cuts are largely already factored into markets. “All of this paints a relatively bearish picture for the U.S. dollar and is generally positive for U.S.-denominated commodities, especially gold as a currency in its own right,” Mitsubishi concludes.

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

 

Mitsubishi: Gold Posts Highest January Opening Since 2013

Thursday January 04, 2017 07:56

Gold began 2018 with its highest opening price for a calendar year in five years after rising by some 13% in 2017, says Mitsubishi. Spot metal finished 2017 just above $1,300 an ounce and has been above this psychological level since. “Gold begins 2018 at the highest level since last September, and the highest January opening since 2013. This marks only the fourth time ever that gold has opened the year above $1,300/oz,” Mitsubishi says. “Bullion rose by over $150 (13%) last year, the best annual performance since 2010’s 30% rise. In large part, the performance of gold, and indeed the performance of many dollar-denominated asset prices, can be explained by the weakness of the US dollar, which fell by 10% last year against a basket of major traded currencies – the worst yearly performance since 2003.”

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

 

Commerzbank: Indian Gold Demand Recovers In 2017

Thursday January 04, 2017 07:56

Indian gold demand recovered last year, says Commerzbank. Analysts cite data from Thomson Reuters GFMS showing the country’s gold imports in 2017 soared by 67% year-on-year to 855 tonnes. “Jewelers had replenished their stocks, particularly in the first half of the year, while a good monsoon season contributed to high gold demand among the rural population,” Commerzbank says. 

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

 

SP Angel: Gold Down From Recent High After Fed Minutes

Thursday January 04, 2017 07:56

Gold has not been able to regain Wednesday’s multi-month highs after minutes from the last meeting of the U.S. Federal Open Market Committee signaled continued monetary tightening, with technical factors also working against the yellow metal for now, says commodities brokerage SP Angel. Analysts cite a portion of Fed minutes, released late Wednesday, saying policymakers favor “continuing a gradual approach to raising the target range” for the benchmark policy rate, thereby reminding investors that the FOMC still anticipates three rate hikes in 2018.The minutes also said there is a possibility that inflation pressures could build if output expands too much or as a result of fiscal stimulus or “accommodative” financial conditions. “The precious metal looks set to continue its fall, with technical indicators showing the metal was in overbought territory for past two days, recording 71.89 on Wednesday, with some traders linking a 14-day Relative Strength Index above 70 with unsustainable climbing,” SP Angel says. As of 7:52 a.m. EST, Comex February gold was down $4.60 to $1,313.90 an ounce after peaking Wednesday at $1,323, its strongest level since September.

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