Gold at $1,200: “Compelling Reasons” Have Haven Seekers Returning to Metal – RBC’s George Gero

February 8, 2016

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Fear of the unknown by investors globally, has helped gold reach $1,200 an ounce on Monday, explains George Gero, Vice President of RBC Capital Markets. “[A]s crude weakness  and political uncertainty persists and banks in the Eurozone experience weakness… gold reached the $1,200 area,” Gero says in a note Monday afternoon. “There are enough compelling reasons for haven seekers to return to gold, especially in view of gold being liquid, portable ,convertible to any currency and without political allegiance,” he writes.

A research note from RBC Capital Markets says that global gold ETFs have seen a reacceleration of inflows to start the year while the net speculative position has seen an increase in long positioning. “Since the start of 2016, gold ETF holdings have seen a 6% pick up, ending the week at 49.8 MMoz, versus 47.0 MMoz at the start of the year. As well, the net speculative position has seen an increase in long positioning, up to 7.7 MMoz versus 1.5 MMoz at the start of 2016.” It adds,  “However, we believe that there may be more room to run given the positive momentum in the gold price, which ended the week at $1,173/oz, while current ETF holdings and speculative position remain below 2015 averages of 50.6 MMoz and 8.6 MMoz, respectively, when the gold price averaged $1,160/oz.” RBC explains that helping gold’s cause is an increased probability around a more measured pace in U.S. Fed rate hikes, “with the probability of a March hike now sitting at 10% versus 51% at the beginning of January based on Fed funds futures,” they say.  

By Daniela Cambone of Kitco News; dcambone@kitco.com

Bid In Gold Continues With Force; Can It Hold Safe Haven Appeal? – Triland Metals

Monday February 08, 2016 13:17

The bid in precious metals continued with force on Monday says Triland Metals, a subsidiary of Mitsubishi corporation.  In its Monday research note the firm says, “some large option activity on Friday pushed the metal to $1,173 and renewed pressure in equities today was enough to push the metal through various technical levels up to the key $1190-$1200 area.” The firm adds that the medium term technical downtrend is being brought into question. “ [I]t remains in a dangerous area to be overly optimistic  given its previous performance after rallies like this.” Triland explains that in  2014, the metal breached the 200 day moving average by 6% and then slid 14%. “[A}nd more recently, the January bounce in 2015 had many parallels too.  The only difference this time is the pressure in equities – whether gold can hold on to the safe haven bid however, is very debatable. “

By Daniela Cambone of Kitco News; dcambone@kitco.com

INTL FCStone: ‘Constructive Backdrop Will Likely Remain In Place For Gold During February’

Monday February 08, 2016 11:13

INTL FCStone sees gold remaining strong during February. The metal posted a strong showing in January, with the firm’s analysts citing an improving technical-chart picture, weaker global macroeconomic readings that suggest “the elixir of central-bank easy money will be with us for some time and the Fed will likely have to sit on its hands for a while longer,” plus continued volatility in global stock markets. Further, the firm cites good demand for gold exchange-traded funds and signs of improving physical demand in China. “All in all, we think this constructive backdrop will likely remain in place for gold during February and see prices trading between $1,140–$1,215 over this month,” INTL FCStone concludes in its monthly outlook. The firm lists a silver range of $14.50 and $15.60 for the rest of February.

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

Citi: Gold ‘Safe-Haven Flows May Remain Sticky For Some Time’

Monday February 08, 2016 10:53

Gold may well draw support from safe-haven buying for some time amid uneasiness in equities and diminished expectations for Federal Reserve rate hikes, says Citi Research. The bank points out that exchange-traded-fund inflows of gold have continued, with 31 tonnes absorbed by physically back funds in the last week alone. “The question remains whether the recent upward price trajectory will continue in the more medium term,” Citi says. “But with global markets still feeling uneasy after a choppy January, safe-haven flows may remain sticky for some time, in our view. Meanwhile, markets seem very reluctant to price in an aggressive Fed hiking schedule, even with the uptick in wage and labor force participation last Friday, which could keep upside to USD (U.S. dollar) range-bound. In our view, gold prices could stay supported around these levels for some time.”

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

Mitsubishi : ETF Inflows ‘Impressive’ But Potential For Profit-Taking In Gold

Monday February 08, 2016 09:14

Mitsubishi points out that gold purchases by exchange-traded funds have been “impressive” so far in 2016 but also cites potential for the yellow metal to run into profit-taking. Gold last week climbed above the 200-day moving average. “We also note that gold has rarely sustained a rally above the 200 DMA for more than a handful of days in the last two years, and we therefore believe that gold’s rally could start to fade, with plenty of opportunity for profit-taking at current levels,” the firm says. Meanwhile, inflows into gold exchange-traded funds have been “impressive in the year to date, but not exceptional,” Mitsubishi says. During January, approximately 1.4 million ounces of gold were bought by ETF investors on a price increase of $57 over the month, making the pace of January ETF buying similar to the same month in 2015, when 2.1 million ounces were bought on price appreciation of $89, the firm says. “If gold’s rally starts to fade, we could well see net liquidation in gold ETFs, as happened in February and March 2015.”

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

RBC’s Gero: Gold Hits Three-Month High On ‘Investor Insecurity’ In Other Markets

Monday February 08, 2016 09:14

Gold futures have hit their highest level in more than three months. “Investors insecurity (is) again driving gold higher as we are within hailing distance of $1,200,” says George Gero, precious-metals strategist with RBC Capital Markets Global Futures. “Weaker stocks, weaker crude, political instability and currency moves in many countries are also worrying traders enough to look for additional haven of gold.” As of 9:10 a.m. EST, the March S&P 500 stock futures were down 24.20 points. Comex April gold was $25.90 higher to $1,183.60 an ounce and peaked at $1,184.40, its strongest level since October.

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

Category: Gold