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Mitsubishi: Real Rates, Dollar To Be Favorable For Gold

Kitco News

Mitsubishi looks for gold to find support from two main factors in 2018 -- a favorable environment for real interest rates and a subdued U.S. dollar.  “The U.S. Federal Reserve is likely to raise interest rates only slowly and conservatively and be disinclined to get ‘ahead of the curve’ despite the U.S. economy growing at full steam and signs of rising inflation beginning to emerge, partly as a result of a weak dollar,” the firm says. “Though U.S. government bond yields may begin to break out of a 30-year downtrend, yields are likely to remain subdued overall and real rates will be kept low if inflation picks up.” Mitsubishi looks for the dollar to underperform other major currencies as quantitative easing is dialed back and possibly ended in Europe. “Coupled with concerns about the deterioration of the U.S. fiscal position in the light of tax cuts and infrastructure spending, plus worries about downwards corrections in toppy equity markets, gold will benefit from some risk hedging,” Mitsubishi says. “Add to this the myriad risks and uncertainties in the world economy, holding gold as a defensive play in 2018 may make sense for more investors.”

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

 

Mitsubishi: Palladium Prices May Extend Record Highs But Then Recede

Wednesday January 31, 2018 10:58

Mitsubishi looks for palladium prices to recede but not as dramatically as back in 2001, when they also topped $1,000 an ounce. The metal could still hit fresh all-time highs in the first quarter on speculative buying, the firm says. The metal was one of the top-performing commodities in 2017. “Prices will pull back from these overstretched levels as investors take profit and reallocate portfolios, and as scrap supplies and above-ground stocks become mobilized,” Mitsubishi says. “This will not be like the crash in prices post-2001, however, as the market will remain in a supply-demand deficit and a backwardated forward market is still likely to prevail. Primary supplies will remain tight as an increase in output from Russia is offset by declining underlying production in South Africa.” Demand could change, the firm continues, noting that China is removing the subsidies on new cars and the U.S. auto market is showing signs of peaking. The main industrial use for palladium is catalytic converters in automobiles.

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

 

BMO: Gold Lifted By Soft U.S. Dollar Ahead Of FOMC

Wednesday January 31, 2018 08:00

Gold has gotten a boost from a weaker U.S. dollar, says BMO Capital Markets. As of 7:52 a.m. EST, Comex April gold was up $6.30 to $1,346.40 an ounce. This occurred as the U.S. dollar index slipped below 89.0, BMO says. “Gold prices continue to march higher, buoyed by a subdued dollar ahead of Janet Yellen’s final FOMC [Federal Open Market Committee] meeting as Fed chair,” BMO says. “Consensus expectations are for U.S. interest rates to remain unchanged with further indication of gradual tightening later on in the year as robust economic data and key indicators in the labor market point towards further growth.”

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

 

BBH: Trump ‘Offered No Lifeline For The Dollar’

Wednesday January 31, 2018 08:00

President Donald Trump’s State of the Union speech Tuesday night “offered no lifeline for the dollar,” says Brown Brothers Harriman. As of 7:52 a.m. EST, the euro was up to $1.24521 from $1.24021 late Tuesday. Trump focused on the strength of the U.S. economy, BBH says. “However, details of his proposed plan to boost infrastructure spending were lacking,” BBH says. “And while he talked of the need for greater bipartisanship ahead, Trump offered the Democrats very little in terms of possible compromises on the most contentious issues.” On another subject, BBH says a “hawkish hold” is the most likely outcome from a Federal Open Market Committee meeting that wraps up on Wednesday. “Growth impulses are stronger,” even though growth in headline fourth-quarter gross domestic product disappointed, the firm says. “The part of the economy that is the most responsive to monetary policy, final domestic purchases, rose by a robust 4.8%.” 

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

 

Commerzbank: Palladium Hit By Profit-Taking; Premium Over Platinum Narrows

Wednesday January 31, 2018 08:00

Platinum has narrowed its price discount to palladium as the latter undergoes profit-taking, says Commerzbank. Palladium was the strongest precious metal in 2017 and continued to rise during the first two weeks of 2018, before pulling back. The metal fell some 3% Tuesday. “It was presumably dragged down by base metals,” Commerzbank says. “What is more, profit-taking probably ensued after market participant sentiment towards palladium had long been close to euphoric. Since mid-last year, speculative financial investors have been continuously betting heavily on rising palladium prices. Hence there has been and indeed still is considerable correction potential from this perspective.” Palladium has now shed all of its gains since the start of the year, the bank points out. “Platinum fared better than palladium yesterday, narrowing the price gap between the two precious metals to less than $60 per troy ounce,” Commerzbank adds. As of 7:50 a.m. EST, spot palladium was up $2.45 to $1,056.95, while platinum was up $8.90 to $1,005.05.

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