BMO: U.S. Jobs Growth Misses Expectations; Potential For More Short Covering In Gold

February 8, 2016

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BMO Capital Markets sees potential for more short covering in gold after U.S. nonfarm payrolls missed expectations. February jobs growth was 151,000, below expectations for around 190,000, further reducing already-diminished expectations of more Federal Reserve rate hikes. “We expect more short covering in the weeks ahead, which could support gold prices up to $1,175/oz, the top end of our estimated range for this year ($925-1,196/oz),” BMO says. “Even now, short positions remain the highest since July 2015, when gold prices were $1,090/oz.” Still, BMO says, gold is likely to remain a “trading game” rather than a long-term uptrend back to say $1,800 an ounce. “Even if the next Fed rate hike comes off the table, we expect gold prices will be increasingly impacted by weekly economic data rather than a specific ‘rate hike’ catalyst,” BMO says. “This, we believe, should see gold prices continue to trade within a historically narrow range, but better supported than base metals such as copper.”

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

HSBC: Corporate Bond Outflows May Provide More Support For Gold

Friday February 05, 2016 08:28

Gold, rising lately amid signs the Federal Reserve may be turning more dovish, may draw further support from concern about U.S. corporate bonds, says HSBC. Analysts cite a Financial Times article detailing an investor exodus from the lowest-quality U.S. corporate bonds. “This has sent the yields on these bonds to their highest levels since 2009, the depth of the financial crisis,” HSBC says. “In that same year gold climbed from $800/oz at the beginning of January to $1,225/oz by early December, a rally of more than $400/oz. The current surge in yields and the rally in gold prices are unlikely to be a coincidence. The FT reports that yields on debt issued by U.S. companies that carry a rating of triple-C or lower hit 20% for the first time in more than six years this week …. In short, a shift by investors away from asset classes, that have until recently been popular due to the search for yield, is likely to continue to support gold.”

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

TD Securities Sees Platinum Rising To $1,025/Oz As 2016 Unfolds

Friday February 05, 2016 08:28

TD Securities looks for platinum to rally toward $1,025 an ounce late in 2016. Until recently, platinum had been weak with other precious metals amid expectations for more U.S. rate hikes, as well as worries the Volkswagen emissions scandal would hurt demand for platinum, which is needed for catalytic converters in diesel-powered autos. “With gold turning the corner recently and the market largely pricing out additional Fed interest-rate increases for the year, there will be less incentive for holders of above-ground platinum to fill the primary deficit gap, as they did in 2015,” TDS says. This, along with strong European auto sales last year and a projected increase of 4% in 2016, may help trigger a restocking rally from manufacturers. Meanwhile, future mine supply might “disappoint,” with mining companies cutting capital expenditures due to low prices, TDS continues. “The weaker U.S. dollar along with moderating Treasury yields have reduced the cost of carry for all precious metals, which make it much more difficult to balance the projected primary deficit gap when manufacturers start buying metal to replenish dwindling stocks for the catalysts to be installed in the newly sold vehicles in Europe and other parts of the world,” TDS says. “As such a platinum price of $1,025/oz is in the cards as the year unfolds.”

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

Category: Gold