DailyFX: Gold Could Face Pressure If Market Factors In More Fed Rate Hikes

January 6, 2016

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Gold could face more selling pressure if markets decide the Federal Open Market Committee will actually hike rates as much as policymakers have suggested, according to a first-quarter outlook from  Ilya Spivak and Michael Boutros, currency strategists at DailyFX. They cite a “tepid” response to the first hike announced last month, but note this was widely expected ahead of time. “For all the dovish rhetoric surrounding the start of the Fed’s tightening cycle, it is worth noting that policymakers maintained their outlook for next year’s policy path unchanged from September’s projection – calling for four rate hikes in the coming 12 months – even as they trimmed inflation bets,”DailyFX says.  “For their part, the markets envision only two 25-bps (basis-points) increases in the Fed funds rate in 2016.” This sets the stage for a possible surprise from the Fed, particularly since the committee has a more hawkish makeup this year, DailyFX says. The firm later adds, “If markets begin to consider the possibility that stimulus withdrawal might proceed closer in line with FOMC projections versus standing market expectations, gold prices are likely to face a swell in selling pressure.”

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

Gold Moving Higher As Fear Overpowers Positive Economic Data – iiTrader

Wednesday January 06, 2016 09:44

Strong fear sentiment in the marketplace is overwhelming positive U.S. economic data, says commodity strategists at iiTrader. They say since the news of North Korea’s test of a Hydrogen bomb, “the fear gauge has clearly ticked up.” They noted that, in a knee-jerk reaction, gold lost some ground following a much stronger than expected ADP employment report for December. However, since then prices have recovered and are back near session highs. Comex February gold futures last traded at $1,085 an ounce, up $6.60 on the day “Bulls must achieve a close above this 1086.3-1088.3 level in order to encourage short covering that should move the metal to test the 1101.6-1103.8 level. Support now comes in at 1079.5-1081.4 and the market must hold a close above here to avoid further consolidation,” they say.

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

RBC’s Gero: Geopolitical Tensions Boosting Comex Gold Futures

Wednesday January 06, 2016 09:05

Gold futures are continuing their early-year strength on geopolitical tensions, says George Gero, precious-metals strategist with RBC Capital Markets Global Futures. Just before 9 a.m. EST, Comex February gold was $7 higher at $1,085.40 an ounce. “Gold prices reflect world tensions,” Gero says, citing “saber rattling” from North Korea, which says it carried out an underground hydrogen bomb test, and ongoing Mideast worries. In particular, there are tensions between Saudi Arabia and Iran. Further, Gero adds, currency debasement continues in many countries. He adds that a gold close of $1,100 or higher “could attract asset allocators” and be “a financial game changer.”

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

Barclays: Safe-Haven Investments Stronger, Including Gold

Wednesday January 06, 2016 08:28

Equities weakened but safe-haven assets, including gold, are stronger after the People’s Bank of China lowered the fix for its currency and due to geopolitical concerns, says Barclays. “The USD-CNY fix was set at 6.5314, much higher than expected and triggered the biggest intraday move in CNH since the August devaluation,” Barclays says. “The CNH-CNY spread now stands at 0.1674, the widest level on record. The move triggered weakness across Asian currencies, with commodity currencies underperforming. Most Asian equities sold off although China equities rallied 1-2%.” On the geopolitical front, various media sources reported a “man-made” earthquake in a region where North Korea has conducted three previous nuclear tests, Barclays says. North Korea has subsequently said the country carried out its first underground test of a hydrogen bomb. “Safe havens such as gold, Treasuries and JPY rallied in response to the overall risk-off mood,” Barclays says. As of 8:14 a.m. EST, Comex February gold was $8.40 higher to $1,086.80 an ounce.

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

Metals Focus Sees Further Platinum Price Declines Before ‘Modest’ Recovery In Late 2016

Wednesday January 06, 2016 08:27

The consultancy Metals Focus sees further weakness in platinum early in the year before a modest recovery. “After last year’s sharp fall, we expect 2016 to remain a challenging year for platinum prices, although the picture is then likely to turn moderately positive,” Metals Focus says. The metal could initially be hurt by softness expected in gold and commodities generally, Metals Focus says. “However, as we progress through the year, investor sentiment and hence platinum prices may well slowly improve,” the consultancy says. For one thing, the Federal Reserve is expected to hike U.S. interest rates conservatively and European economies improving, eventually helping the euro and thus gold. Still, the lack of supply cuts may keep platinum from rising too strongly, Metals Focus says. As for demand, Metals Focus looks for platinum use in auto catalysts to grow from a low base last year, but cautions that the risk of a longer-term gradual shift to gasoline-powered vehicles – which use palladium instead — may restrain investor interest in platinum. Further, Chinese jewelry-related buying may be hurt by a slowing economy. “As a result, even though platinum is expected to record another fundamental deficit in 2016, the shortfall appears too small to stimulate fears about physical supply, especially taking into account ample above-ground stocks,” Metals Focus says. Against this backdrop, “we expect the scale of the price recovery to be rather modest later in the year.”

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

Commerzbank: Strong U.S. Auto Sales Bode Well For Platinum, Palladium

Wednesday January 06, 2016 08:27

Robust U.S. auto sales last month should be supportive for platinum and palladium, although for now they are falling with base metals and thus failing to profit from the data, Commerzbank says. Analysts cite data from Ward’s Automotive Group showing 1.63 million vehicles were sold in December, making this the strongest month of the year. In all of 2015, sales totaled 17.38 million, which exceeds the previous record high from 2000. Factors helping sales included low gasoline prices, an improving labor market and low interest rates. This comes at a time when the average age of a car in the U.S. is more than 11 years, meaning an aging fleet, Commerzbank continues. “This, coupled with a solid U.S. economy, could also make 2016 a year of robust vehicle sales,” the bank says. “This should boost platinum and palladium, which are used in auto catalysts; palladium in particular should profit because the U.S. market is gasoline-dominated.”

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