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MKS: ETF Buying, Soft Dollar May Propel Gold Still Higher

Kitco News

MKS (Switzerland) S.A. sees potential for gold to extend its recent rally if the dollar softens and exchange-traded-fund demand remains strong. ETFs trade like a stock but track the price of the commodity, with metal put into storage to back the shares. The area around $1,250 to $1,253 has proven “stubborn” resistance, as this is near a series of recent peaks plus the 200-day moving average, says MKS. Thick scaled-up offers were seen on the approach of that level early in the week. “On the downside, we feel the initial support/pivot should sit around $1,238-42 short term, with the $1,230-33 zone providing decent support for now,” MKS says. “We feel that there is still upside potential from here, particularly if stocks and the USD [U.S. dollar] remain under pressure. Finally, good demand has been seen by ETFs this month with just under 1 million ounces added and, if that trend continues, the case for an extension higher remains firm.” A little after 9 a.m. EST, spot gold was $1.60 stronger at $1,246.80 an ounce.

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

 

TDS: ‘Dovish Hike’ Would Support Precious Metals

Tuesday December 18, 2018 09:10

A so-called “dovish hike” in interest rates by the Federal Open Market Committee on Wednesday would bode well for precious metals in 2019, says TD Securities. A “dovish hike” occurs when a central bank raises rates but hints that future such moves will be limited. The central bank is expected to announce another 25-basis-point hike at the end of a two-day meeting, despite heavy criticism from the White House. “Chatter that the Fed could blink as soon as tomorrow is helping gold prices remain firm into the meeting, but we don't buy that rhetoric,” TDS says. “More likely, the action surrounding tomorrow's meeting will revolve around statement language. Nonetheless, any signs of a dovish hike would do well to start convincing the complex that the Fed will not move towards restrictive policy next year, when we expect prices will move substantially higher.” Commodity Trading Advisers could cover their short positions and establish a modest long position should prices break $1,255 an ounce to the upside, TDS adds.

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

 

BBH: FOMC ‘Has No Choice But To Hike’ Rates

Tuesday December 18, 2018 09:10

The Federal Open Market Committee “has no choice but to hike” interest rates despite White House criticism, says Brown Brothers Harriman. “Criticism of the Fed is unseemly, unnecessary and harmful,” BBH says. “This is especially true coming days ahead of the FOMC meeting, which strikes us as taking on an air of desperation as equity markets tank….Given this jawboning, we think the Fed has no choice but to hike tomorrow [Wednesday].  Of course, there are other reasons the Fed should hike.” If the Fed were to stand pat, policymakers would be sending the “wrong signal” to the markets, BBH says. “Indeed, one could argue that no hike tomorrow would sow more chaos in the markets than the expected 25-[basis-point] move would.”      

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