Market Nuggets
Standard Chartered: Geopolitical Risks Could Trigger Short Covering In Gold
Geopolitical risks, such as those surrounding Italy, could trigger a short-covering rally in gold, says Standard Chartered. Prices rose sharply Tuesday, helped by Italy’s fiscal and political issues, before falling back around $1,200 again on Wednesday. Still, Tuesday’s rally shows that gold “remains on investors’ radar” during times of uncertain geopolitical developments, Standard Chartered says. “As we have highlighted previously, positioning is overextended in gold, with gross shorts [bearish positions] close to record highs…,” Standard says. “If a geopolitical catalyst boosted prices above the 100-day moving average, a significant short-covering rally could push prices up towards $1,300/oz.” Short covering is when bearish traders buy to get out of existing positions. “Seasonal demand for gold, alongside central-bank buying, has offset some of the weakness on the investor side, and should start to limit the downside for prices; but greater support is likely to come from a stable USD [U.S. dollar],” Standard says.
By Allen Sykora of Kitco News; asykora@kitco.com
Commerzbank: Gold ETFs Report Outflows So Far In October
Thursday October 4, 2018 08:53
Commerzbank reports that investors are continuing to move out of gold-backed exchange-traded funds early in the fourth quarter. The ETFs trade like a stock but give investors exposure to the price of gold, with metal put into storage to back the shares. “The gold ETFs tracked by Bloomberg have seen outflows of 14.5 tonnes since the start of the month,” Commerzbank says. “Apparently investors still do not see gold as an attractive investment alternative.”
By Allen Sykora of Kitco News; asykora@kitco.com
BBH: Dollar Remains Strong As Yields Enter New Phase
Thursday October 4, 2018 08:53
A rally in the U.S. dollar remains intact as Treasury yields reach higher ground, says Brown Brothers Harriman. As of 8:24 a.m. EDT, the December U.S. dollar index was up 0.119 point to 95.525. “The rise in U.S. yields has entered a new phase,” BBH says. “After being unable to break much above 3.10% this past month, the 10-year yield shot up to 3.19% yesterday. Today has seen a continuation of this, with yields trading as high as 3.23% before stalling. This is the highest rate since May 2011.” The strength in yields was helped Wednesday by stronger-than-expected U.S. data, including the ADP report on private-sector payrolls and the employment component of a report from the Institute for Supply Management, BBH adds.
