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BMO: Trade Frictions Prompting Asset Allocation Toward Gold

Kitco News

There was a large inflow of gold into exchange-traded-fund vaults at the start of the week as investors continued to fret over a potential trade war, says BMO Capital Markets. News organizations reported an inflow of some 14.3 tonnes, the most since autumn, on Monday. “As trade frictions continue to escalate, macro asset allocation back towards gold is accelerating at the present time,” BMO says. “While daily moves can fluctuate, since the start of this year, gold holdings have risen 1.9%, with Monday showing the largest single-day gain in six months. This is helping gold pricing to hold above $1,300/oz despite increasing [U.S.] rate-hike expectations.”

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

 

Metals Focus: Trade Tensions Could Underpin Gold Prices

Wednesday March 21, 2018 08:38

Global trade tensions are emerging as a factor that could potentially push gold higher, says Metals Focus. Analysts with the consultancy point out that the U.S. administration “has moved beyond its rhetoric” and is considering action against a number of nations, including China, the European Union and India, as the U.S. trade deficit has widened to the highest level since 2008. “Looking ahead, a full-blown trade war, though unlikely at this point in time, could have wider implications for global markets and for the gold price,” Metals Focus says. “To start with, retaliatory action by the United States’ trading partners could weaken the dollar and benefit gold. This is because it would lower U.S. exports and increase the trade deficit, which will have to be funded by additional debt. Second, rising tensions could damage global trade and, in turn, act as a headwind for global growth. The strength in global equity markets has also been partly driven by this economic performance and so a slowdown could derail equities, push up volatility and in turn, benefit gold prices. Third, muted economic growth would most likely result in a slower pace of Fed rate hikes. At present, the markets generally priced in three rate increases in 2018. As such, a shallower rate hike trajectory would be constructive for gold.”

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

 

Commerzbank: Russia Adds Gold Reserves In February; China Doesn’t

Wednesday March 21, 2018 08:38

Russia’s central bank remained a notable gold buyer last month while China remained conspicuous by its absence, points out Commerzbank. “By its own account, the Russian central bank bought almost 25 tonnes of gold in February,” the bank says. “Russian gold holdings are now at over 1,880 tonnes. According to data from the International Monetary Fund, it was once again Turkey and Kazakhstan that were buying gold -- 8.7 and a good 4 tonnes, respectively. By contrast, the Chinese central bank purchased no gold again for the 16th month in a row. February saw China’s foreign currency reserves decline again overall for the first time in over a year.”

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

 

Commerzbank: Gold To Take Cue From Dollar, FOMC

Wednesday March 21, 2018 08:38

The dollar’s reaction to the outcome of a Federal Open Market Committee meeting Wednesday afternoon will dictate gold’s next direction, says Commerzbank. Analysts point out that the Fed fund futures are fully factoring in another 25-basis-point rate hike. “It will be more interesting to see whether the Fed indicates that it might even raise interest rates four times this year,” Commerzbank says. “So far, the FOMC members have spoken out in favor of three rate hikes. This, and the response of the U.S. dollar, will presumably determine whether the gold price recovers, and if so to what extent.”

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