UBS: Gold Prices Trading Above 50-Day Moving Average

January 7, 2016

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Gold is holding above the 50-day moving average ahead of commodity index rebalancing, due to start Friday, says UBS. Prices climbed above this average Wednesday for the first time since early November. “Bouts of selling seem to have been absorbed well by the market, making gold’s resilience around current levels even more impressive,” the bank says. “Lower U.S. yields help, with (10-year) yields down to the lowest since mid-December.” Meanwhile, while physical buying is not comparable to fourth-quarter demand, this is nevertheless “encouraging,” UBS says. “Early first quarter is typically a strong period for physical demand, as participants in China prepare for the New Year festivities that occur either in late January or early February,” the bank says. “While it’s still early days, a continuation of the interest we saw in the fourth quarter should be seen as a positive, indicating healthy underlying demand.” Some gold appetite has also occurred in India, UBS adds. As of 10:24 a.m. EST, Comes February gold was $13.30 higher to $1,105.20 an ounce. The 50-day moving average stood at $1,083.10.

INTL FCStone: Most Markets Under Pressure But Gold Rises Above $1,100

Thursday January 07, 2016 10:41

Another rout is occurring in a wide range of markets, with nearly everything lower except for gold, says Edward Meir, commodities consultant with INTL FCStone. Comex February gold has climbed over $1,100 an ounce. March silver also rose and is back over $14. Meanwhile, equities, crude oil and base metals are all on the defensive. “The latest selling in a number of markets actually set in late last night when the Chinese stock market opened, promptly falling 7% during the first 30 minutes,” Meir says. “This forced circuit breakers to kick in and the authorities then moved to shut trading for the day.” Meir says more weakness may be coming in Chinese stocks.  “We think the Chinese stock market still has much more room to fall considering that for all the weakness we saw in the Chinese economy last year, the general Shanghai stock market was still up 9% last year, largely reflecting the artificial propping up measures that were in play at the time and which likely are buckling right now,” Meir says. “Another relatively safe bet is further yuan depreciation; the currency is under attack again today and the on-shore/off-shore differential in the yuan continues to widen, a signal that the onshore (official) rate is too overvalued.”

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

UBS: Platinum, Palladium Suffer With Other Commodities Despite Gold Strength

Thursday January 07, 2016 10:41

Platinum group metals have not been able to benefit from the safe-haven strength in gold lately, instead on the defensive with the rest of the commodity complex, says UBS. Oil prices have dipped to the lowest levels since 2008. Economic growth concerns, particularly in China, have weighed on base metals. “Palladium is currently the worst performer, down by 7% so far this year, after falling by 30% in 2015,” UBS says. “There are several reasons for this. Firstly, the metal typically suffers during times of risk-off and this is amplified by its poorer liquidity conditions. Secondly, palladium has a stronger positive relationship with equities, which suggests that the recent weakness in equities has weighed more on palladium than platinum. Finally, while palladium prices do not tend to react much to monthly auto sales figures, the weaker-than-expected print out of the U.S. for December has likely somewhat affected sentiment.” Platinum is down for the week, although it has moved into modestly higher territory so far Thursday in the New York session. “Platinum’s stronger positive correlation with gold is acting as a bit of a buffer,” UBS says. However, as of 10:29 a.m. EST, Nymex March palladium was $7.30 lower to $4997.75.

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

Commerzbank: Gold Hits Nine-Week High, Lives Up To Reputation As Safe Haven

Thursday January 07, 2016 08:16

Gold has fared the best of any asset during the recent turmoil in financial markets and is thus continuing to live up to its reputation as a safe haven, says Commerzbank. Comex February gold hit a nine-week high of $1,104.20 an ounce in overnight screen trading. In euro terms, gold hit a seven-week high of €1,020 per ounce, Commerzbank points out. “As expected, the minutes of the latest meeting of the U.S. Federal Reserve contained no significant new information about the timetable for the rate hike cycle,” Commerzbank continues. “That said, FOMC members did make striking reference to the downside risks to the inflation outlook. The longer the turmoil on the financial markets continues, the more market participants are likely to have doubts about the Fed rate hike cycle being continued in the near future. We believe this would be positive for gold because the opportunity costs of holding gold would remain low in this scenario.”

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

Barclays: Risk Sentiment Deteriorates Further; Gold Among Beneficiaries

Thursday January 07, 2016 08:16

The combination of a weaker Chinese yuan and falling crude prices have fueled an escalation in risk aversion, with gold one of the beneficiaries, Barclays says. The falls are seen across the board, with European equities down close to 3% after material falls in Asia, led by limit down drops in China,” Barclays says. In the U.S., the March S&P 500 futures are down 43.90 points to 1,942 in overnight screen trading, while Nymex February crude oil is down $1.09 to $32.88 a barrel. “Credit spreads are wider in Europe and core bond yields, notably USTs (U.S. Treasuries), are lower on safe-haven demand,” Barclays says. Against this backdrop, Comex February gold is $11.40 higher to $1,103.30 an ounce.

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

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