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INTL FCStone: Gold 'Relative Winner' As Trade Tensions Escalate

Kitco News

Gold has recouped Tuesday’s losses as a trade war between the U.S. and China escalates, says INTL FCStone. After a brief respite in tensions, the U.S. listed items on which it will impose duties, and China responded by doing the same 11 hours later on 106 products, including some agricultural commodities. Copper, oil and the dollar index are all lower, although the decline in the greenback is “relatively modest, all things considered,” INTL FCStone says. Analysts add that “one relative winner today is gold.” As of 9:37 a.m. EDT, Comex June gold was $9.80 higher to $1,347.10 an ounce.

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

 

Standard: Gold-Silver Ratio, Fundamentals Favor Silver Prices

Wednesday April 04, 2018 08:13

The gold-silver ratio and supply/demand fundamentals favor silver, says Standard Chartered. The gold-silver ratio has hit a two-year high. This measures how many ounces of silver it takes to buy an ounce of gold and currently is around 81.6. “Usually, when the ratio has risen above 75, a mean reversion is driven by silver prices rising rather than gold prices falling,” Standard says. “However, more than just technical factors look favorable for silver, in our view. We expect silver’s fundamental deficit to widen this year, predominantly driven by robust industrial demand growth.” Analysts point out that China’s silver imports are up 36% year-on-year so far in 2018, while India’s silver imports are up 63%. Analysts also look for increased demand for use in solar cells. “The laggard dynamic, which happens to be crucial for price recovery, is subdued investor appetite,” Standard says. Speculators hold a net bearish position in Comex silver futures. Exchange-traded product flows were positive in February and March, but are still down for the year to date. “Silver prices tend to outperform when both industrial and investment demand are growing; we expect investor demand to turn more favorable amid a weaker USD [U.S. dollar] and rising inflation expectations,” Standard says. “The strength of industrial demand should limit downside risk, and provide a boost over the gold price rally.”

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

 

BBH: Trade Developments Rattle Markets

Wednesday April 04, 2018 08:13

The continued move toward a trade war between the U.S. and China has rattled global markets, says Brown Brothers Harriman. The U.S. dollar is mixed, but weaker against the euro. Stock-index futures are pointing to a sharply lower opening. Commodities are mostly lower, including oil and copper, although safe-haven gold is one of the commodities to benefit. Late Tuesday, the U.S. announced that specific tariffs and goods that would be targeted for intellectual property violations.  China responded by slapping tariffs on a wide range of U.S. products, including soybeans. “This sent reverberations through the capital markets, driving down equities as well as corn and soybean prices (subject to Chinese tariffs),” BBH says. “The U.S. dollar was sold, especially against the yen, euro, and sterling.  The dollar-bloc currencies lagged.” As of 8:08 a.m. EDT, the euro was up slightly to $1.22780 from $1.22689 late Tuesday, while the dollar was down to 106.226 Japanese yen from 106.580. The June S&P 500 futures were 36.40 points lower, while Nymex May crude oil was down 93 cents. Comex June gold was up $11.80 to $1,349.10. “The billion-dollar question is whether the U.S. initiates counter-retaliatory measures,” BBH says. “If the U.S. does, it would seem to be a clear escalation.  Currently, the U.S. provocations have escalated the chronic low-level tension.  China took small steps in response to the U.S. actions on washing machines, solar panels, steel and aluminum.  Now, in response to the tariffs for intellectual property violations, it has ratcheted up its response.”

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