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TDS: Gold To Ease If Stocks Recover, But Metal To Rise Later In Year

Kitco News

TD Securities says gold could slide whenever equities right themselves up again, but gold should rise later in the year since the Federal Reserve will be cautious about hiking U.S. interest rates. Gold fell as last week wound down after a strong U.S. jobs report, with equity and bond prices also falling on ideas that the Fed will hike more in the coming year than was previously expected and traders starting to contemplate the possibility of four hikes in 3017. “However, considering that rates still remain near historical lows, equity investors could very well re-anchor their investment theses, as the recently higher rates are also accompanied with improving macroeconomic conditions,” TDS says. “And, should equity fears subside, gold and its precious-metal friends should begin to give in to higher rates and increased Fed expectations — which we expect will help to drive the yellow metal toward $1,316/oz. That being said, we anticipate that the Fed will increase rates only cautiously, and given that the hurdle rate for U.S. data to continue beating expectations should grow as analysts move their expectations higher. Still low real rates, a flattish yield curve, a weak USD [U.S. dollar] and fewer data surprises all tend to support a stronger precious environment, which should see prices head back higher later in the year.”

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

 

MKS: Gold Traders Monitoring Equities For Next Move

Tuesday February 06, 2018 08:18

Gold’s next move may hinge on equities, with more buying of the metal if the stock-market sell-off continues but some potential long-liquidation selling if equities recover, says Sam Laughlin, senior precious-metals trader with MKS (Switzerland) S.A. The metal rose in Asia-Pacific trade as Monday’s sharp sell-off in U.S. stocks spread around the globe. “In lieu of dollar moves, the global equity market weakness underpinned interest in the precious, sending gold to a $1,346.10 session high…,” Laughlin says. Flows have softened since but there is still an “underlying bid tone” keeping the metal buoyant around $1,340, he continues. “Gold positioning, although recently lightened, still lends itself to further position squaring, notably with regards to the recent build in longs should we see a reversal to the recent stock-market weakness (longs at around 65% of all-time high),” MKS says. “That being said, we may see further moves out of equities should the recent weakness persist, lending itself to a reallocation of funds into safe-haven assets and further precious gains.” Laughlin says the $1,340-per-ounce area offers initial chart support for gold, but stronger support from $1,330 to $1,335 will act as a pivot point over the near term. “Bulls will be focusing on a sustained break above $1,350 for a test toward the late-January high around $1,365,” he adds. Around 7:44 a.m. EST, spot gold was 95 cents higher to $1,340.20.

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

 

BBH: Stock Tumble Not Enough To Seriously Hurt Consumer Sentiment

Tuesday February 06, 2018 08:18

The sharp drop in U.S. equities on Monday really only cost the market a month of gains and may not be enough to seriously damage consumer sentiment, says Brown Brothers Harriman. The Dow Jones Industrial Average lost 1,175.21 points Monday for its biggest one-day point drop ever. “Yet it is important to put the price action in perspective,” BBH says, pointing out that the major bourses gave up last month's gain and a little more, with the Dow now off just 1.5% for the year.  The S&P 500 was off less than 1% coming into Tuesday. “If one was concerned that equity valuations were elevated, the recent drop may have simply skimmed off some froth.” The initial reaction seems to be two-fold, BBH says. “One is the broad de-risking, and the second is the economic implications,” BBH says. “The idea is that the sharp decline in equities will impact consumer sentiment and undermine the wealth impact. Given the strength of the U.S., EMU, and Japanese economic momentum, it may take more than giving back a few weeks’ worth of gains to pose a serious challenge.”

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