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UBS: ‘We Expect Gold To Ultimately Be Supported’

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Gold has started the week softer after a weekend Group of 20 meeting rekindled hopes of the U.S. and China averting an all-out trade war, but the metal is likely to attract buying at lower levels, said UBS. “Positive risk sentiment, some repricing of Fed cut expectations, and dollar strength are all weighing on gold, and consolidation, which already started last week, is likely to continue around these levels in the near term,” UBS said. As of 8:38 a.m. EDT, spot gold was trading $16.20 lower to $1,392.70 an ounce. “We expect gold to ultimately be supported,” UBS said. “Strategic buying is likely to emerge at lower levels, potentially augmented by physical buying, especially given seasonal demand in late Q3 through to Q4….Our models suggest gold is better poised to withstand bouts of dollar strength, with real rates currently the stronger driver of prices. Diversification is likely to remain attractive for investors amid a dovish policy backdrop, low rates and lingering uncertainties. Market pricing for Fed cuts are likely to be shifted partially to September or March, and with data remaining soft, the impact on back-end real rates is likely to be more subdued.” And, the back added, while a U.S.-China truce was reached, an ultimate resolution of the trade war remains “elusive for now.”

By Allen Sykora of Kitco News;


Commerzbank: Gold Falls On Profit-Taking; Big Slide Not Expected

Monday July 1, 2019 8:53

Gold has fallen sharply on profit-taking in response to an apparent truce in the trade war between the U.S. and China during the weekend Group of 20 summit, said Commerzbank. As of 8:38 a.m. EDT, spot gold fell $16.20 for the day to $1,392.70 an ounce. “The risk posed by the trade conflict is being priced out on the gold market – possibly prematurely,” Commerzbank said. “After buying gold on 13 consecutive days of trading, including Friday, ETF [exchange-traded-fund] investors are now likely to have taken profits.”   A strong U.S. dollar is weighing on gold following the G20 summit, Commerzbank said. “This is because the ‘truce’ in the trade dispute is a positive sign for the U.S. economy,” the bank said. “As a result, some of the rate-cut expectations in the U.S. are also being reduced.” Nevertheless, Commerzbank analysts said they do not expect gold to fall significantly further. “In our view, it is above all the upcoming ECB [European Central Bank] and Fed rate cuts, and the (geo)political risks, that argue against any pronounced and lasting price slide.”

By Allen Sykora of Kitco News;


BBH: G20 Was 'Can-Kicking Exercise' But To Boost Risk Sentiment

Monday July 1, 2019 8:53

The Group of 20 summit may be a “can-kicking exercise” but nevertheless should provide support for risk assets for now, said Brown Brothers Harriman. U.S. President Donald Trump delayed additional tariffs on Chinese goods while talks resume, but made some concessions on Huawei by allowing the blacklisted company to buy some U.S. products.  In return, China will reportedly buy U.S. agricultural goods. Trump also sought to defuse tensions on the Korean peninsula by making a surprise visit to the demilitarized zone that separates the two Koreas. “All in all, the G20 headlines haven’t really resolved any of the difficult matters at hand,” BBH said. “It’s more of a can-kicking exercise. However, the compromises have allowed time for difficult talks to progress. This may be enough to boost risk sentiment near-term, but the longer-term outlook remains cloudy.  Within this uncertainty, we are retaining our bullish dollar outlook.” 

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