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UBS: Silver Takes Cue From Gold But Falls Behind

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Silver is the weakest of the precious metals this year, losing 7% so far in 2019, with little on the horizon to pull it up aside from any bounce in gold, said UBS. “Gold remains a key driver for silver prices, and therefore lackluster price action has mostly been acting as a drag,” UBS said. “Investor indifference towards gold is amplified even more in silver.”  The gold-silver ratio has climbed above 89, the highest since 1993 and representing an underperformance by silver. “This could ultimately attract interest – at the very least from a relative value perspective – but the bar remains high for silver upside catalysts that could trigger a sharp reversal in the ratio for now,” UBS said. “A convincing break higher in gold is likely to revive investors' enthusiasm towards silver, with the view that there's plenty of catching up to do. However, although certain macro factors are looking more supportive for gold here (further decline in rates, weakness in equities), the dollar remains strong and broader conditions still appear insufficient to call for a strong bull run for now.” Unlike gold, more than 50% of silver’s demand is for industrial uses, meaning exposure to economic activity. “On this front, silver has met challenges given risks to global growth amid higher tariffs and continued trade tensions between the U.S. and China,” UBS said. “Base metals have similarly come under pressure. Global sales of semiconductors are down sharply, and our colleagues in equities note high inventories amid slower rate of demand in end markets.” Meanwhile, holdings of silver by exchange-traded funds are down by 2%, or 10.95 million ounces, so far in 2019, UBS added.

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

 

INTL FCStone: Gold Benefits From Softer Equities

Wednesday May 29, 2019 08:59

Gold prices are being helped by weakness in equities, says INTL FCStone. Around 9 a.m. EDT, the futures for the Dow Jones Industrial Average were nearly 200 points lower. “The across-the-board equity selloff is finally giving gold a bit of a lift, with the precious metal up $6.60 at $1284/ounce, basically recouping yesterday's equivalent decline,” INTL FCStone says.

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

 

UBS: 'Lean Positioning' Contains Downside In Gold

Wednesday May 29, 2019 08:43

“Lean positioning” in Comex gold is keeping the downside contained, but also reflects “indifference” to the metal, says UBS. Weekly data from the Commodity Futures Trading Commission through May 21 shows that bullish gold positioning gave back the previous week's gains, declining by 3.98 million ounces to 10.12 million mainly due to long liquidation, UBS says. “Gold net-long positions are currently sitting around 27% of the all-time high, although levels are about 28% higher than the 12-month average of 7.90moz,” UBS says. “Relatively lean positioning is a supportive factor for gold at the moment, keeping the downside contained. It is also a reflection of the lack of interest at the moment, as disappointment over gold's recent performance creeps in.” Analysts say they consider the movement in gold “disappointing,” considering real rates have fallen to the lowest in nearly one and one-half years. “It would be encouraging to see whether gold manages to climb further above the 50-day and 100-day moving averages at $1,288 and $1,296 [as of Tuesday], respectively.”

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

 

Commerzbank: Palladium ETF Withdrawals To Be Offset By auto Demand

Wednesday May 29, 2019 08:43

Palladium prices are holding up despite outflows of the metal from exchange-traded funds, with palladium likely to drawing offsetting support from automotive demand, says Commerzbank. Gold, silver and platinum weakened Tuesday, but palladium did not follow suit. “Only palladium is holding firm,” Commerzbank says. “This surprises us given that palladium ETFs have registered considerable outflows, especially in recent weeks. ETF investors have sold 85,000 ounces of palladium since the start of the quarter, and as much as 100,000 ounces since the start of the year. According to Johnson Matthey, over 300,000 ounces are set to be withdrawn from ETFs this year. The weak investment demand should be more than offset by robust demand from the auto industry, however.” 

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