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Societe Generale 'Moderately Bullish' On Gold Prices

Kitco News

Societe Generale says it has a “moderately bullish outlook” on gold due to potential for short covering  of bearish bets by money managers and building up of currently low bullish positions. “The main trigger for sustained higher gold prices comes in the form of a gradual asset rotation from equities and other risky assets into bonds and safe-haven assets such as gold, as mainstream investors seek protection from market turbulences, potential recessions and growing bearish sentiment,” the bank says. “Moreover, the downside is somewhat limited, with current gold prices representing a floor, as bearish drivers are lacking, fundamentals are neutral and costs for the most expensive producers are close to current prices.” Analysts note that Federal Reserve policymakers recently lowered their forecasts for 2019 from three rate increases to two. This should support gold, Societe Generale says. “Dollar bears got buried in 2018 but our FX strategists forecast the dollar to depreciate in 2019….A weakening dollar is clearly supportive of gold prices.” Societe Generale sees gold at $1,300 an ounce in six months and $1,375 in 12 months. Just after 10 a.m. EST, spot gold was 20 cents higher for the day at $1,282.50 an ounce.

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

 

Mitsubishi Doubts Palladium’s Uptrend Will Continue

Thursday January 24, 2019 10:16

Mitsubishi questions the sustainability of a two-year uptrend in palladium. The metal hit a record high of $1,439 an ounce last week before pausing on profit taking, analysts report. Just after 10 a.m. EST, spot palladium was $28 lower to $1,302 an ounce. Mitsubishi reports signs of rising sponge inventories and waning industrial demand. “The new high appeared to have been almost entirely a speculative driven move from the previous series of all-time highs of late last year,” Mitsubishi says. “Palladium appears to be a two-tier market at present – investment demand in the OTC [over-the-counter] market has been very strong, whereas industrial demand has been weakening – there is evidence of this in the elevated premium of ingot (the investment form of the metal) over sponge (the industrial form). There is no shortage of the sponge form of the metal at present, and with Chinese, U.S. and European car sales all slowing down, we question whether palladium demand in auto catalysts may have peaked.” Mitsubishi looks for the palladium market to remain in a supply/demand deficit this year but says this is “unlikely to continue to justify record-high prices and the extreme tightness seen in the forward market.  Speculative profit taking by investors and the release of inventory by industrial users are likely to bring metal back to market, helping ease prices and forward rates. The outlook for auto-catalyst demand remains generally positive but is clouded by a slowing of the two biggest markets, China and the USA.” Mitsubishi says it looks for palladium to average $1,150 this year and trade in a range of $1,050 to $1,350.

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

 

Commerzbank: Platinum Prices Not Gaining Traction Despite ETF Inflows

Thursday January 24, 2019 10:16

Platinum has struggled to move back above $800 per troy ounce despite continuing inflows into exchange-traded products, says Commerzbank. “Holdings have been topped up continuously since early last week – by a total of just shy of 146,000 ounces,” the bank says. “Clearly some investors have not given up on platinum and regard prices of below $800 as attractive buying opportunities.” Still, analysts lists new risks “just around the corner.” A U.S. investigation on whether car imports pose a threat to national security will be concluded in February. “If this is the conclusion drawn by the U.S. administration, there is a risk that tariffs will be imposed on car and car part imports, especially from the EU [European Union],” Commerzbank says. “The European Commission’s director-general for trade reiterated yesterday that the EU is willing to respond to U.S. tariffs by itself introducing tariffs on U.S. goods worth €20 billion.” A truce has been in place since July as the two sides work on a trade deal. “If the situation were to escalate, however, this would presumably hit the auto industry hard – in which case demand for platinum and palladium would no doubt also suffer,” Commerzbank says. Platinum and palladium are used for catalytic converters. Just after 10 a.m. EST, spot platinum was right at $800 an ounce, up $7 for the day.

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