Growing concerns over China’s faltering economy is a double-edged sword for gold says Rob Kurzatkowski, senior commodity analyst at OptionsXpress. “On one hand, the knee jerk reaction drives traders to flight to quality plays like Gold. On the other hand, the continued slowdown of the Chinese economy and higher US interest rates all but eliminate the threat of inflation,” he says, in a research note published Tuesday. Kuratkowski also sees continued U.S. dollar strength as another hurdle for the gold market. On a technical basis, he says that gold has been caught between resistance at $1,085 an ounce and support at $1,050 an ounce. “If the market is able to break the 1085 level on the upside, prices may trade into the 1100’s, possibly testing the 1150 mark. On the downside, this support level can be viewed as especially critical, as failure to hold this support level could send prices toward the 1000 mark with momentum,” he said.

By Neils Christensen of Kitco News; nchristensen@kitco.com

Gold Could Fall With Equity Markets On Chinese Weakness

Tuesday January 05, 2016 13:59

Continued weakness in equity markets might not be positive for gold, despite seeing some risk aversion benefit at the start of the year, according to analysts at Triland Metals. “Whilst gold seemed to find a temporary bid it’s likely to be sold with everything else should that worry spread,” they say in a report Tuesday. The analysts note that China remains the biggest worry in financial markets, which could be the theme for 2016. Specifically in gold the analysts say that the market continues to suffer from lack of investor interest, specifically highlighting weak demand in exchange-traded funds (ETF). “The ETF investor community is still offloading on both rallies and sell-offs – gold won’t begin to trend higher until those dips are bought into so we keep one eye on the investor flows,” they say. “Investors in 2016 may see value in the depressed commodity markets but they should expect more supply pain before we start to gain traction again and even when prices do recover they are likely to do so at a much slower pace than most will be happy with.”

By Neils Christensen of Kitco News; nchristensen@kitco.com

UBS: Gold Reviving Safe-Haven Status; More Work Needs To Be Done

Tuesday January 05, 2016 12:50

There are early signs that gold is regaining its role as a safe haven, although more work needs to be done, says UBS. Prices surged Monday after Saudi Arabia-Iran tensions, a weak Chinese manufacturing survey and a sharp decline in global equities. The metal was modestly higher as New York trading got under way early Tuesday. “Gold was up as much as 2% yesterday, but hesitation was evident around $1,080,” UBS says. “For now, the market seems reluctant to take out the 50-day moving average at $1,081.22.” There may be concerns about future selling tied to commodity index rebalancing and the U.S. dollar index remaining near the highs of the past month, the bank says. “That gold gained this week on the back of risk-off sentiment and equities selling off is a positive for gold,” UBS says. “Gold needs to reassert its role as a safe haven and as a viable hedge against investors’ exposure to equities. Much work still needs to be done to fully regain investors’ confidence in gold as a safe asset, and caution is needed in interpreting price action early in the year when liquidity is still quite light. Nevertheless, early signs appear encouraging.”

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

UBS: Commodity Index Rebalancing To Mean Some Selling Of Gold, Silver

Tuesday January 05, 2016 12:45

The looming rebalancing of commodity indexes will mean some selling of gold and silver, says UBS. Each year, some commodities are sold and others bought during the rebalancing. This time around, some gold will be sold starting Friday and running through Jan. 14, UBS explains. The bank’s rough estimates as of early December suggest about 890,000 ounces of gold will be sold, along with about 12 million ounces of silver. The final amounts of contracts to be sold would be determined based on settlement prices on Thursday, UBS adds.

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

CME Group: Year-On-Year Metals Volume Falls In December; 2015 Up from 2014

Tuesday January 05, 2016 08:37

CME Group reports that metals volume fell year-on-year in December and the fourth quarter but was up for all of 2015. December volume averaged 264,000 contracts per day last month, down 10% from 293,000 in the same month a year ago. During the fourth quarter, metals volume averaged 326,000 contracts a day, which was down 11% from 361,000 in the fourth quarter of 2014. However, for full year 2015, metals volume was up 2% to 344,000 contracts daily, compared to 337,000 in 2014.

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

Adrian Day: Gold-Mining Stocks Offer ‘Once-In-A-Decade Buying Opportunity’

Tuesday January 05, 2016 08:37

Fund manager Adrian Day says gold stocks are undervalued and may present a rare buying opportunity. “Relative to bullion, the gold miners are selling at 70-year lows, while on most valuations metrics— price to ounces in the ground, price to cash flow, and so on—they are selling at five-, 10- and even 20-year lows,” says president and chief executive officer of Adrian Day Asset Management. “And in terms of price, global gold miners have made a complete round trip, selling at levels last seen prior to the onset of the bull market in 2001. Given that the price today remains a multiple of what it was then, this is nothing short of astonishing, and offers a once-in-a-decade buying opportunity.” There have been five times over the last 30 years when the XAU index of major gold and silver stocks has fallen more than 50%, Day says, adding that and on each occasion, it was followed by a rally of at least 100% and sometimes 200% to 300%.

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

Fund Manager Adrian Day Lists Arguments In Favor Of Gold Prices

Tuesday January 05, 2016 08:13

There are several arguments favoring gold, says Adrian Day, president and chief executive officer of Adrian Day Asset Management. “To be true, they are much the same arguments we made six and even 12 months ago, though they are now for the most part even more true,” he says. “In macro terms, we see a sluggish U.S. and global economy; ongoing stimulus around the world, with a hesitant Federal Reserve; and high global debt levels,” he says. He describes demand as “favorable” despite the ongoing sales from Western exchange-traded funds, with both Chinese and Indian demand continuing to trend upward. Supply may have peaked this year, Day continues. He lists two major negatives — sentiment and the U.S. dollar, but adds that “extreme” negative sentiment could end up helping gold from a contrarian standpoint. “Extreme negative sentiment…can turn sharply on a small market move,” he says. “From a contrarian viewpoint, the extreme negativism is a positive, meaning any recovery could be very strong, at least initially.” However, he adds, “until the dollar turns, gold in U.S. dollar terms is unlikely to sustain any rally.”

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

MKS: Gold Should Maintain Upward Momentum As Long As Equities Sag

Tuesday January 05, 2016 08:13

Look for gold to remain strong as long as equities are on the defensive, says MKS (Switzerland) SA. The metal rose sharply Monday on Saudi Arabia-Iran tensions and after weak Chinese manufacturing data, which sent global stock markets sharply lower. In early screen trading Tuesday, the March S&P 500 futures are down 12.90 points, while Comex February gold is up $3.50 to $1,078.70 an ounce. “If equities continue to slide in the short term, gold should maintain its modest upward momentum,” says Alex Thorndike, senior precious metals trader with MKS. “The first important resistance zone lies between $1,083-1,087, with the next major level at $1,100. With the market still net short, although less so than seen in December, a move and close above $1,100 could have some shorts a little nervous.” He put chart support around $1,058 to $1,060, then $1,046 to $1,048.

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

Correct: U.S. Mint: Gold, Silver Coin Sales Rise Sharply During 2015

Tuesday January 05, 2016 08:13

Editor’s note: The U.S. Mint corrected the sales figure that officials previously released for “America the Beautiful” silver coins.

U.S. Mint sales of gold and silver bullion coins were sharply higher in 2015, the government reports. American Eagle gold bullion coin sales were 52.81% higher than 2014 with 801,500 ounces sold. American Buffalo gold coins closed the year 24.22% higher with 220,500 ounces sold. The Mint reported weeks ago that American Eagle silver bullion coins set a new all-time record for sales. The year-end tally shows that record stands at 47 million ounces, 6.8% higher than the previous record set in 2014. “America the Beautiful” five-ounce silver bullion coin sales were 1,063,000 ounces, 59.25% higher than 2014. The U.S. Mint says it will begin taking orders for the 2016 American Eagle gold and silver bullion coins and American Buffalo coins on Monday.

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