Citi Research looks for share prices of South African gold producers to hold up this time around due to a weak currency in the country, which drives up the price of gold in the country’s currency. The South African gold sector has performed well from December to March the past three years, helped by strong operational performance during this time of the year, as well as a rising gold price in rand. On previous occasions, the market gave back the rally in these stocks. “This time may be different,” Citi says. “Even though we again expect operational performances to fade during the year, we caution that a high rand-gold price may last this time around….This time, weakness has been driven by broad concerns about emerging-market growth, exacerbated by fears of a SA credit downgrade to sub-investment grade in 2016. This has seen the ZAR gold price increase 20% over a short period of time to ZAR600,000/kilogram, a level we believe can be sustained in 2016.” Citi says it actually has a long-term bearish view on South African gold stocks, but “we think macro tailwinds may prove this thesis wrong in the near term (i.e. 6-12 months); especially in light of the +60% fall in the sector’s valuation over the past three years.”

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

Commerzbank, MKS: PGMs Under Pressure; Palladium Hits Lowest Price Since 2010

Tuesday January 12, 2016 08:34

Platinum group metals remain on the defensive, report Commerzbank and MKS (Switzerland) SA. Nymex April platinum has been as low as $850.10 an ounce, while March palladium hit $451.50. “The weak rand is weighing particularly on platinum, which is currently trading at a record-high discount of $260 per troy ounce as compared with gold and is now priced only marginally above the seven-year low it hit in December,” Commerzbank says. “Palladium is likewise tending towards considerable weakness. This precious metal, which is used chiefly in the automotive industry, has dropped to (nearly) $450 per troy ounce for a time this morning and has thus recorded its lowest level since August 2010. It is also receiving no support from robust Chinese car sales figures, which achieved record levels both on a monthly basis in December and on a yearly basis for the whole of 2015.” MKS reports there was initially some buying of the PGMs in early Tokyo hours, before they fell. “Both PGMs did track lower as the morning progressed with some Japanese general public traders cutting their losses and liquidating long positions,” MKS says.

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

Citi: Investor Concerns Over U.S. Interest Rates Adding Pressure To Palladium

Tuesday January 12, 2016 08:34

Ideas that rising U.S. interest rates could hurt auto sales is one of the factors likely hurting palladium, which is already down by 15.5% for the year to date and taking prices below $500 an ounce for the first time in over five years, says Citi Research. Platinum group metals are used in auto catalysts. Concerns over China’s economy have dominated movement in industrial and platinum group metals since the start of the year, Citi says. “An added bearish factor for palladium has been investor concerns over the impact of rising interest rates on auto sales in the US, a key gasoline market,” Citi says. “Experian ‘Industry Report’ data suggest 87% of new cars in the U.S. were bought via financing in 3Q15, pointing to a potentially sizeable interest-rate exposure. The fall in December U.S. seasonally adjusted annualized auto sales…to 17.2 million units from November’s 18.1 million units acted as an additional trigger for price weakness. However, the focus on a slowing U.S. auto market appears to exclude the impact of a rapidly improving Chinese auto market on palladium demand.”

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

BNP Paribas: Stabilizing Market Sentiment Should Help U.S. Dollar

Tuesday January 12, 2016 08:34

Market sentiment appears to be stabilizing, with European equities, the S&P futures and U.S. two-year Treasury yields all higher, which should help the U.S. dollar, says BNP Paribas. Until U.S. retail sales and industrial-production data on Friday, the main focus should remain on Fed speakers, including Vice Chair Stanley Fischer and Richmond Fed President Jeffrey Lacker Tuesday, BNP Paribas says. “While the market is currently not taking Fed tightening signals at face value, should the speakers highlight that their tightening views have not changed, we think the market could be vulnerable to a fairly quick repricing on Fed expectations once global sentiment improves,” BNP Paribas says. “Furthermore, comments from Atlanta Fed’s (Dennis) Lockhart and Dallas Fed’s (Rob) Kaplan on Monday were noteworthy with Lockhart saying that he did not see immediate implications for the U.S. economy and the Fed from the recent market volatility although he did add he is ready to revise his view ‘if the volatility continues for several weeks.’ Kaplan said that four rate hikes this year is a projection not a promise, but noted that the central bank will have enough information to make a decision in March.”

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

UBS: Gold Physical Demand Picks Up During November

Tuesday January 12, 2016 08:34

Physical gold demand picked up in November, according to UBS. “Switzerland was a net exporter of gold in November for the first time in a year,” says UBS, reporting Swiss net gold exports of 18.4 tonnes during the month. “The last time Switzerland was a net exporter of gold was in October 2014; back then gold was similarly under pressure, which also prompted a response from key physical markets such as China and India.” The bulk of the exports headed to China, Hong Kong and India, the bank continues. Meanwhile, data show that China’s gold imports from Switzerland and Hong Kong were down month-on-month and year-on-year, but volumes were still about 7% higher than the five-year average, UBS says. Combined gold imports from both sources totaled 83.3 tonnes. India’s imports from Switzerland of 81.6 tonnes were the most since April 2013, with total imports of 101.5 tonnes the most since August.

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

Barclays: Pace Of U.S. Monetary Tightening To Be Key For Gold

Tuesday January 12, 2016 08:34

The pace of U.S. rate hikes will be the major driver for gold prices, says Barclays, adding that the bank’s economists expect three hikes of 25 basis points in 2016. “The first week in 2016 had a string of weaker-than-expected U.S. data, including manufacturing, construction and business sentiment,” the bank says. The Institute for Supply Management manufacturing index, Chicago purchasing managers index, December auto sales and construction spending missed expectations, by a wide margin for the last two. “However, the U.S. December employment report revealed higher-than-expected gains in nonfarm payrolls and an upward revision of November’s, indicating a still strong labor market,” Barclays says. “Our economists believe this suggests that the soft Q4 data mentioned above are temporary.”

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