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Standard Chartered: Gold may be sold to meet margin calls in other markets

Kitco News

Whereas gold initially benefited from the steep fall in global equities, the metal may now run into selling as investors cash out of gold positions in order to meet margin calls and offset losses elsewhere, said Standard Chartered. The metal hit a seven-year high Monday as the Dow Jones Industrial Average fell more than 1,000 points and 10-year Treasury yields fell. However, gold has not been able to extend those gains even though the slide in equities has continued. Standard Chartered commented that bullish gold positioning had become “overstretched” or “overbought” at the start of the week. Meanwhile, holdings of gold by exchange-traded products hit a record high above 3,000 metric tons. “Investor demand has more than offset physical-market weakness,” Standard Chartered said. “While gold has rallied amid both risk-on and risk-off episodes, gold could suffer from further profit-taking as gold is utilized to meet margin calls, as a liquid asset, amid sharp declines across equity markets. Barring near-term profit-taking, price risks remains to the upside.”

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

 

Commerzbank: gold ETFs post first outflow in 26 days

Thursday February 27, 2020 09:00

Holdings of gold by global exchange-traded funds have fallen for the first time in nearly a month, said Commerzbank. Gold ETFs trade like a stock but track the price of the commodity, with gold put into storage to back the shares. Gold prices ran up to a seven-year high this week, and ETF gold holdings hit a record high. “Market participants have been selling gold from time to time over the past few days – partly to take profits, and apparently partly to offset losses incurred elsewhere,” said Commerzbank analyst Daniel Briesemann. “Gold ETFs ended their record series of inflows yesterday and saw their first outflow in 26 days of trading (of 2.6 tons). ETF holdings have been increased by just shy of 90 tons since the start of the year.”

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

 

Analysts: Risk-off sentiment continues; gold benefits

Thursday February 27, 2020 09:00

Risk-off sentiment continues as more new coronavirus cases have been reported in rest of the world other than China, allowing gold prices to remain strong, analysts said. Brown Brothers Harriman cited news reports saying there are now 2,790 cases of the coronavirus across 37 countries excluding China, including 44 deaths, as of Wednesday morning. China has nearly 80,000 confirmed cases and 2,750 deaths. "However, it wasn't until the U.S. officials warned of it that the equities reversed their earlier gains [on Wednesday], and the S&P 500 settled at new lows (since early December),” said Bannockburn Global Forex. “President Trump's public address late yesterday failed to reassure investors, and risk-aversion continues.” Global equities, including U.S. stock-index futures, are mostly lower so far Thursday. Futures for the Dow Jones Industrial Average are down by around 375 points. “Gold is firm but remains within Tuesday's range (~$1,625-$1,664),” Bannockburn said. As of 8:51 a.m. EST, spot gold was $9.30 higher to $1,650.10 an ounce.

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

 

Commerzbank: Palladium hits fresh record high

Thursday February 27, 2020 09:00

Palladium continues to defy worries about the global coronavirus outbreak, which has hit so-called risk assets, with the metal climbing to a record high near $2,850 per ounce early Thursday, said Commerzbank analyst Daniel Briesemann. “It is now more than three times more expensive than platinum,” he said. The most recent impetus is a report from the world’s largest palladium producer, Russia’s Norilsk Nickel, characterizing a tight global palladium market. Briesemann cited Nornickel’s statistics saying the supply/demand deficit was around 550,000 ounces last year and will grow to around 900,000 ounces in 2020. “This is due first and foremost to higher palladium loadings in auto catalysts as tougher emissions guidelines come into effect,” Briesemann said. “The loadings in gasoline engines [are] set to rise by 5-7%. Because palladium is superior in technical terms to platinum in auto catalysts, the producer sees only limited scope for using platinum as a substitute for palladium. Furthermore, palladium could be in more demand this year on account of a physical shortage of rhodium. That said, it is questionable whether the aforementioned forecasts already take sufficient account of the negative impact of the Covid-19 virus on demand.” As of 8:51 a.m. EST, spot palladium had backed down from the peak and was trading $15 lower at $2,656 an ounce.

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

 

FXTM: The worst is yet to come

Thursday February 27, 2020 09:00

Weakness in financial markets may well get worse as the coronavirus spreads around the globe, saidHussein Sayed, chief market strategist at FXTM. In equities, buying the dips has been a successful strategy for several years, he said. This might seem like a good strategy again after the Dow Jones Industrial Average fell 8.8% from its recent record high. “Indeed, stocks are cheap, but cheap is a relative term,” Sayed commented. “They may be cheaper than two weeks ago, but when compared to historical averages or relative to foreign stocks, they are still way too expensive.” As recession fears develop, investors will not look at valuations but instead will want to preserve capital, Sayed said. “Buying the dips may pay off if coronavirus gets under control, especially because we’ll end up with more liquidity in the market,” Sayed commented. The problem is “no one knows when will it take a U-turn.” Sayed commented that it’s appearing more likely there will be a global pandemic. “U.S. equity futures are indicating a high possibility of entering correction territory when markets open up later today, that is a 10% or more decline from the latest peak, but given where we stand currently, a bear market or a 20% decline from this month’s record high is becoming a highly likely scenario,” Sayed concluded.

 

 

 

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