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Commerzbank: Brexit 'Should Generate Good Demand For Gold As Safe Haven'

Kitco News

Gold, which is near the upper end of its trading range from the last two weeks, may draw some support from uncertainty surrounding European politics, particularly Brexit, says Commerzbank. European Union heads of state on Sunday approved a deal for the United Kingdom’s withdrawal from the EU. This now goes to the U.K. parliament, with Commerzbank noting there has been some resistance to the deal lately. “Voting in the House of Commons could take place in roughly two weeks, until which time the uncertainty is likely to continue,” Commerzbank says. “We believe this should generate good demand for gold as a safe haven. The smoldering dispute between Italy and the EU over the Italian budget for 2019 is also adding to the uncertainty.” Reuters reports that Italy may be willing to make some concessions. “However, we are not attributing much weight to the reports until this is confirmed,” Commerzbank says. “We do not see why Italy would back down now, especially as the yield spread between 10-year Italian and German government bonds has dwindled to below 300 basis points again.” 

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

 

MKS: Chinese Buying Helps Gold In Asia-Pacific Trading

Monday November 26, 2018 08:13

Gold drew some support from Chinese buying in overnight trade, says MKS (Switzerland) S.A. Shortly before 8 a.m. EST, spot metal was $2.45 higher to $1,225.60 an ounce. “This morning gold opened at $1223.50 and slowly edged its way a dollar or so higher leading into the China open,” MKS says. “There was a brief dip ahead of the SGE [Shanghai Gold Exchange] open and the spot gold hit the day's low of $1222.50, although it did not fall any further from there, cushioned by some modest China-based bids. The premium on the SGE sat fairly motionless at around $6 over the loco London price for onshore traders over the a.m. session, although there was a definite skew to the buy side.”

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

 

BBH: Dollar Caught Between Safe-Haven Flows, Fed Expectations

Monday November 26, 2018 08:13

The U.S. dollar is caught between safe-haven flows and a shift in market expectations for future Federal Reserve rate hikes, says Brown Brothers Harriman. As of 7:56 a.m. EST, the December dollar index was 0.13 point softer at 96.695. “Risk-off sentiment continues to come in waves, hurting equities and EM [emerging-market] assets and helping the dollar and yen,” BBH says. “On the other hand, the implied yield on the January 2020 Fed funds futures contract remains pinned near 2.73%.  That suggests only one more hike is expected in 2019 after this December hike.” The markets may get further clues on Fed policy this week, with Fed Vice Chair Richard Clarida scheduled to speak on Tuesday and Fed Chair Jerome Powell on Wednesday. “These two will be the most closely watched in light of their dovish comments earlier this month that significantly reset market Fed expectations,” BBH says. Meanwhile, minutes of the last meeting of the Federal Open Market Committee are scheduled for release on Thursday. “We do not think the Fed has done anything to dissuade markets about a December hike,” BBH says. “Yet the adjustment in market expectations has taken place further out.”

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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