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FXTM: Investors Return To Gold; 'Further Appreciation Is In The Cards'

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Gold is “back in fashion,” says Lukman Otunuga, research analyst at FXTM. Spot metal hit a three-month high of $1,has been as high as $1,232.70 an ounce Monday and remains near that level, hovering just under $1,230 in early-Tuesday trading. “A combination of factors ranging from depressed equity markets, trade disputes, global growth fears and geopolitical tensions have brought gold back into fashion,” Otunuga says. “The yellow metal found comfort near three-month highs on Tuesday as risk-averse investors sought safety in the metal amid market uncertainty. With a weakening U.S. dollar adding to the factors boosting appetite for the yellow metal, further appreciation is in the cards for the near term.” The analyst says gold’s technical picture turned bullish on the daily charts after a weekly close above $1,213. “Technical traders will keep a close eye on how prices behave around the $1,233.50 level. A solid breakout above this point opens the gates to $1,240.”

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

 

Commerzbank: Short Covering Boosts Gold; ETFs Posting Inflows

Tuesday October 16, 2018 09:21

Short covering has played a role in gold’s recent rally but investors are also turning to gold-backed exchange-traded funds again, say Commerzbank analysts. They point out that the precious metal exceeded the technically important 100-day moving average for a while Monday. “We still believe that short covering was primarily responsible given that speculative financial investors had built up considerable net-short positions before the price rise began last week,” they report. “What is more, gold ETFs recorded inflows again for the fifth day in a row, more than offsetting the outflows from the start of the month.” Gold has backed down from Monday’s high, but not by much. “That said, if it settles down above the 100-day moving average (currently at around $1,227) in any lasting fashion, we expect to see technical follow-up buying that should push the price further up,” Commerzbank says. As of 9:07 a.m. EDT, spot metal was up $2.45 for the day to $1,229.45 an ounce.

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

 

BBH: U.S. Deficit To Worsen Whenever Economy Softens

Tuesday October 16, 2018 09:21

The annual U.S. deficit hit a six-year high last month and more red ink may be in store, especially whenever the economy softens, says Brown Brothers Harriman. The Treasury reported that the deficit for fiscal year 2018 was $779 billion, the worst since 2012 and worse than a $666 billion deficit for 2017. “Spending rose 3.2% while revenue ropes a mere 0.4%,” BBH says. “As a percentage of GDP [gross domestic product], the gap rose 0.4 percentage points to -3.9%. The numbers certainly undermine the supply side argument that tax cuts will pay for themselves. They aren’t, they won’t, and at some point, they will require painful offsetting adjustments by the U.S.” BBH says the deficit is the “elephant in the room” for the U.S. dollar. “While worrisome now, we don't think we're anywhere near the tipping point where markets turn very negative on the U.S.,” the firm says. “That will likely be when the next U.S. downturn hits.  Then, the budget deficit will blow out and could require fiscal tightening just as the Fed starts cutting rates.  This combination of tight fiscal policy and loose monetary policy would be dollar-negative and is the opposite of what we are seeing now.”  

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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