Market Nuggets
Metals Focus: 'palladium rally will continue this year'
Palladium’s volatility has picked up but the rally remains in tact, said the consultancy Metals Focus. After opening 2020 at $1,945 an ounce, the metal soared 32% to $2,577, but then corrected lower by some $200 in two days, analysts pointed out. “Palladium’s favorable supply/demand fundamentals remain the chief driver of the rally,” Metals Focus said. “After a decade of almost uninterrupted structural deficits, above-ground palladium stocks are estimated to have fallen to 12.7Moz [million ounces] by end-2019, down by 28% from 2010.” Further, inventories to satisfy demand had fallen to 14 months at the end of 2019, compared to 24 months in 2010, the consultancy said. Analysts reported that palladium auto-catalyst demand rose 2% last year even though car sales fell, with loadings of platinum group metals in vehicles rising due to more stringent emissions regulations, especially in China. That demand is likely to accelerate this year as the auto industry slowly bottoms out and even more stringent regulations mean even higher PGM loadings, Metals Focus said. Prices could correct lower, analysts said. Nevertheless, the consultancy “expects the structural deficit to double in 2020 to a four-year high, pointing to an increasingly tight physical market. Against this backdrop, we are confident that the palladium rally will continue this year.”
By Allen Sykora of Kitco News; asykora@kitco.com
CIBC: U.S. dollar to ‘weaken in both the near and longer terms’
Thursday January 23, 2020 09:06
With the U.S. Federal Reserve on hold, fiscal stimulus picking up elsewhere and improving global sentiment, the U.S. dollar will weaken this year as safe-haven bids in the currency are scaled back and other major currencies recover, said CIBC in a monthly forex outlook. Metals traders tend to monitor U.S. dollar moves since precious and base metals alike often move inversely to the U.S. currency. “While the greenback managed to hold onto its strength through 2019, we don’t expect that to remain the story for 2020,” CIBC said. “Global risk-on sentiment will likely continue to be bolstered by the gradual reduction of economic and political uncertainties. With the signing of the phase-one trade deal between China and the U.S., and the Brexit negotiation process well under way, trade flows, as supported by business investment and manufacturing production, should gradually pick up upon the subsequent improvement in global sentiment. That should see safe haven bids on the dollar continue to be pared back, thereby seeing the currency weaken in both the near and longer terms.” Meanwhile, the U.S. economy is shifting into a lower gear, CIBC said. “Sluggish business capital spending and more modest fiscal stimulus will leave growth in 2020 slightly weaker,” the bank said.
By Allen Sykora of Kitco News; asykora@kitco.com
TDS: gold market looking ahead to Jan. 28-29 FOMC meeting
Thursday January 23, 2020 09:06
Gold traders will be focusing on a meeting of the U.S. Federal Open Market Committee next week, said TD Securities. Typically, any dovish posture is bullish for gold, and vice-versa. Gold has been range-bound lately. “While we continue to look for the complex to break out, as central banks suppress real rates, we acknowledge that this trading session could mark the end of January's seasonal strength, which is typically driven by Chinese buying ahead of the Lunar New Year,” TDS said. “As this source of demand dries up in the coming week, the market will be looking to the FOMC meeting, which could quell any market concerns that financial stability risks could prompt the Fed to take back their insurance cuts in the coming year.”
By Allen Sykora of Kitco News; asykora@kitco.com
Commerzbank: Russian central bank buys less gold in 2019
Thursday January 23, 2020 09:06
Russia’s central bank continued buying gold in 2019 but purchases were down from the year ago, said Commerzbank. “A few days ago, the Russian central bank reported itself that it had acquired an additional 9.7 tons of gold in December,” Commerzbank said. “At 158 tons, however, gold purchases in 2019 as a whole were on the low side. Not only was this figure 42% down year-on-year, it was also the smallest quantity in six years. Nonetheless, the Russian central bank still bought more gold than any other central bank.” Gold reserves account for around 20% of Russia’s total currency reserves, Commerzbank said. “Some market observers believe that the Russian central bank will also hold back on its gold purchases in the coming years because external risks, such as U.S. sanctions, are now considered to be lower.”
