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Mitsubishi: Threat Of Rising U.S. Tariffs Supportive For Gold

Kitco News

The threat of rising U.S. tariffs on imported goods has a number of positive implications for gold, says Mitsubishi. Gold benefited late last week on news that the Trump administration is planning trade sanctions against China, with potential for a trade war. “Firstly, higher tariffs will raise the cost of goods and therefore add to inflation, which would be positive for gold and precious metals as inflation hedges,” Mitsubishi says. “Secondly, any resulting slowdown in global trade would negatively impact the share prices of affected companies, in particular those in aerospace and construction – a degree of this was seen already last week. Thirdly, a more risk-averse investor environment would tend to be positive for traditional risk hedges including gold, U.S. Treasuries and the yen – with rising prices of U.S. Treasuries and the yen ultimately benefitting gold by keeping the real rate and the dollar environment favorable to bullion.”

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

 

MKS: Gold Backs Down From Early Highs On Profit-Taking

Monday March 26, 2018 07:55

In early-Monday overseas trading, gold briefly probed above last week’s one-month high before pulling back on profit-taking, says Sam Laughlin, senior precious-metals trader with MKS (Switzerland) S.A. Spot gold peaked at $1,350.90 an ounce, just ahead of Friday’s high of $1,350.20. “A mild early-session bid tone to bullion during Asian trade on Monday was soon extinguished by resting offers around $1,350, as participants looked to take profits ahead of key resistance levels,” Laughlin says. “Mixed dollar flows kept price action within a modest range throughout the session, while Shanghai opened at a mildly softer premium toward $8 relative to London bullion.” He describes “decent two-way flow” in electronic Comex trading through Globex. As of 7:46 a.m. EDT, spot gold was up $1.80 to $1,348.70 an ounce. “Strong support for the metal expected underneath $1,345 with extension toward $1,343-$1,340 (Friday's breakout level), while initial top-side targets extend through $1,350 to the 2018 high prints around $1,361 (mid-February) and $1,366 (late-January),” Laughlin says. In a shortened week due to the Easter holiday, the main focus of gold traders is likely to be headlines on any potential trade war and associated equity and dollar movements, Laughlin adds.

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

 

Mitsubishi: Palladium Hurt By Trade-War Fears But Fundamentals Tight

Monday March 26, 2018 07:55

Palladium has fallen 14% since the January highs, but supply/demand fundamentals remain favorable, says Mitsubishi. The metal, used for automotive catalytic converters, fell last week on worries about a trade war. “As a pro-cyclical industrial commodity, palladium has been riding high on synchronized global growth and on positive fundamentals thanks to demand from the auto-catalyst sector; the strength of this demand has been called into question however by fears about a slowdown in world growth due to rising tariffs and also by concerns that the auto sector would be hit hardest by such measures,” Mitsubishi says. In the Nymex futures market, the speculative net-long position has fallen to 1.3 million ounces, the lowest since November 2016, even before the sell-off from late last week, Mitsubishi points out. Meanwhile, after heavy long liquidation of over 200,000 ounces, or 15%, in the year to date, exchange-traded-fund holdings have now flat-lined. More speculative short-term sellers have probably been washed out, leaving a core of longer-term investors, Mitsubishi says. “Despite the drop in palladium’s price, down almost 14% since the highs of January, the supply-demand situation remains tight, resulting in an ongoing backwardation in the forward market as well as a modest sponge premium,” Mitsubishi says. “The palladium market is likely to remain in a substantial supply-demand deficit, which should keep market conditions tight.” As of 7:46 a.m. EDT, spot palladium was up $4.65 at $979 an ounce. The January high was $1,028.60.

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