News

Gold rally unlikely to be sustained – Macquarie

Date Aug 27 2015 09:04:14 Source:
Aug.27,2015(SHMET)--

Gold’s recent price respite is only temporary and investors should remain cautious until the Federal Reserve acts, Macquarie said on Wednesday.

 

“Gold as a currency has regained some mojo since its July low, on favourable economic developments and a potential delay to Fed tightening,” the bank said.

 

The recent turmoil in global FX and equity markets resulting from China’s economic slowdown and yuan devaluation sent gold earlier this week to its highest level since July 7 at $1,701.

 

“We don’t, however, believe the events of the last week or so have radically changed the outlook for US rates, the dollar and – given the way we view the market – gold,” the bank said.

 

“Our forecast remains that gold will remain weak until the Fed starts to raise interest rate, and then should rally gently afterwards.”

 

This is based on the bank’s expectations for the US dollar, and also an historical analysis which shows that Fed tightening cycles tend not to be that bearish for gold when underway especially if long-term rates remain lower than consensus.

 

A potential delay in the Fed tightening cycle of three months therefore only makes a small difference to this view, it added.

 

US interest rates have hovered around near zero levels since December 2008 and a rate increase hasn’t taken place in over a decade. In recent months, Federal Reserve Chairwoman Janet Yellen has grown insistent on raising interest rates in 2015.

 

The CME Group Fedwatch – a tool to gauge market expectations of a rate hike – was last at a 24 percent probability of a rate hike in September. Over the last month, the figure has ranged from 50 to zero.

 

Macquarie has made adjustments to its third quarter and fourth quarter forecast – from $1,075 to $1,110 and from $1,125 to $1,090 respectively – with the annual average unchanged at $1,152.

 

The spot gold price was last $1,121.7/1,122.0, down $21.70 on the previous close.

 

 

Gold hits one-week low although equity markets remain volatile

 

Gold defied expectations on Wednesday afternoon, slipping further despite volatile trading on global equity markets.

 

The spot gold price was last at $ 1,124/1,124.50 per ounce, down $19.40 on Tuesday’s close and its lowest in around one week. Trade has ranged from $1,117.9 to $1,146.7 so far.

 

“Gold’s price performance this week is puzzling,” Commerzbank said. “The continued uncertainty on the financial markets and the dwindling [US] rate hike expectation would generally suggest higher rather than lower gold prices.”

 

Global equity markets remained under pressure today. China’s latest efforts to prop up the economy failed to stabilise the country’s stock markets – the Shanghai composite index closed 1.3 percent down, its lowest since December, after a volatile trading session.

 

But stronger US data, which raise the prospects of an interest rate hike by the Federal Reserve, put pressure on the precious metal – durable goods orders month-over-month were up 0.6 percent, above the forecast of -0.4 percent. Additionally, the revised figure was adjusted to an increase of 3.4 percent.

 

Core durable goods jumped two percent month-on-month, smashing expectations of a 0.3 percent uptick.

 

Still, the president of the New York Fed said the case for a rate increase in September is “less compelling” given international developments and volatility in financial markets.

 

In the other precious metals, silver dropped below $14 earlier for the first time since August 2009 – it was last at $14.09/14.13 per ounce, down 59 cents.

 

Platinum at $977/982 per ounce was unchanged while palladium at $522/527 fell $14.

Edited by SHMET

Gold extends drought, US data beats expectations

Date Aug 27 2015 09:03:57 Source:
Aug.27,2015(SHMET)--

Gold prices dipped for consecutive days as safe haven demand ebbed amid a rebounding dollar.

 

Gold for December delivery on the Comex division on the New York Mercantile Exchange was last down $13.10 or 1.1 percent at $1,125.20 per ounce. Trade has ranged from $1,122.90 to $1,146.0.

 

The yellow-metal is still $50 higher than the five year lows seen at the end of July.

 

However, a normalisation of US interest rates at the September Federal Open Market Committee (FOMC) could send the dollar higher and consequently weigh on the precious metal’s complex.

 

US interest rates have hovered around near zero levels since December 2008 and a rate increase hasn’t taken place in over a decade. In recent months, Federal Reserve Chairwoman Janet Yellen has grown insistent on raising interest rates in 2015.

 

“Gold as a currency has regained some mojo since its July low, on favourable economic developments and a potential delay to Fed tightening,” Macquarie Research said. “We think this is only a temporary respite and investors should remain cautious until the Fed acts.”

 

The CME Group Fedwatch – a tool to gauge market expectations of a rate hike – was last at a 24 percent probability of a rate hike in September. Over the last month, the figure has ranged from 50 to zero.

 

Meanwhile, inflows into gold ETFs continued – holdings in the funds tracked by FastMarkets have increased to 1,536.95 tonnes.

 

Turning to China, Shanghai composite index closed 1.3 percent down, its lowest since December, after a volatile trading session.

 

China is in the process of injecting $21.80 billion through a short-term liquidity adjustment to quell fears in the financial markets, according to various reports. The volume of money flowing out of the country over the past few days has raised worries that Chinese lenders might run short of cash.

 

In US data, durable goods orders month-over-month was up 0.6 percent, above the forecast of -0.4 percent. Additionally, the revised figure was adjusted to an increase of 3.4 percent.

 

Core durable goods jumped two percent month-on-month smashing expectations of a 0.3 percent uptick.

 

The dollar was last 1.2 percent stronger at $1.1375 against the euro, while Germany’s DAX and France’s CAC-40 were each down 0.1 percent.

 

As for the other precious metals, Comex silver for September delivery was last down 42.5 cents at $14.185 per ounce. Trade has ranged from $14.065 to $14.705.

 

Platinum for October delivery on the Nymex declined $1.60 to $975.10 per ounce, while the most-actively traded palladium contract was at $526.35 per ounce, down $13.75.

 

Edited by SHMET

LME MORNING – Base metals steady but sentiment far from optimistic

Date Aug 26 2015 09:23:57 Source:
Aug.26,2015(SHMET)--

 

Base metals steadied in Tuesday morning LME trading, making a tentative recovery after yesterday’s panic-selling following a sell-off in global equities that wiped billions of dollars off financial markets.

 

The slump, dubbed China’s “black Monday”, surprised investors in its speed and severity. Participants were quick to dump risky assets such as commodities; base metals quickly sold off and hit fresh multi-year lows.

 

But they recouped some of the losses during yesterday’s kerb session and were last trading sideways to higher although several participants believe today’s respite would be temporary and prices will start to work lower.

 

“Underlying sentiment is still poor – this is likely a quick correction but prices will then return to the lower levels until there is a pick-up in demand,” one trader told FastMarkets.

 

In data, China’s leading indicators at 0.9 percent were better that expected but the previous reading was revised lower to 0.6 percent. In Europe, the German Ifo business climate at 108.3 was better than the forecast 108.3.

 

US figures due later includes the HPI, the flash services PMI, consumer confidence, new home sales and the Richmond manufacturing index.

 

In currencies, the euro reached an eight-month high against the dollar on Monday and remains strong this morning at 1.1552.

 

In the metals, copper at $4,990 per tonne was up $39 on Monday’s close – it bottomed out at $4,855 in the previous session. Still, a backwardation in spreads is keeping investors on their toes – the benchmark cash/threes backwardation has increased to $24 this morning.

 

“While the market remains weak, the risk in our view is still for an aggressive short covering rally as a dominant holder of warrants, tightening spreads and falling available LME inventory all combine,” ICBC Standard Bank analyst Leon Westgate said.

 

LME stocks fell a net 650 tonnes to 355,550 tonnes. Cancelled warrants increased 900 tonnes to 53,700 tonnes, building on steady increases of late, mostly in Asian locations.

 

Aluminium at $1,543 was up $22. Stocks fell 8,200 tonnes to 3,303,950 tonnes and cancelled warrants dropped 5,275 tonnes to 1,291,425 tonnes.

 

Meanwhile, despite talk that China is set to curtail production, participants are cautious, downplaying downplayed a statement from the China Nonferrous Metals Industry Association (CNIA) claiming that Chinese producers have cuts of 2.4 million tonnes per year of capacity on the slate.

 

Nickel at $9,460 was down $55 although headline inventories declined – total stocks fell 1,200 tonnes to 453,852 tonnes and cancelled warrants jumped 7,056 tonnes to 163,710 tonnes, centred on in Johor, Gwangyang and Singapore.

 

Zinc at $1,715 was up $8 – it had fallen below $1,700 yesterday. Stocks rose 2,800 tonnes to 525,550 tonnes. Lead at $1,649 was down $9.50 although stocks fell 1,875 tonnes to 190,775 tonnes. Lead spreads have tightened, with Sept/3-mth, Oct/Nov, Oct/3-mth and Nov/3-mth in backwardations of $0.15, $0.90, $0.21 and $1.15 respectively.

 

Tin at $14,160 was up $105; stocks fell 100 tonnes to 7,490 tonnes. The nearby spreads remain in a backwardation, while the benchmark cash/threes was last at $125 – while this is substantial, it is lower than last week’s peak above $500.

 

Steel, cobalt and molybdenum were neglected.

 

Edited by SHMET

METALS MORNING VIEW – Early rebound gains now fading

Date Aug 26 2015 09:23:44 Source:
Aug.26,2015(SHMET)--

Precious and base metals dropped an average of 3.4 percent yesterday with losses ranged from 6.5 percent for nickel and 0.8 percent for gold, with copper closing down 2.2 percent at $4,950, having earlier been off 4.1 percent to $4,855. The weakness was part of broad based sell-off that had started with Chinese equity markets falling around 8 percent on Monday that saw the Euro Stoxx 50 drop 5.4 percent and the Dow close down 3.6 percent. In the early hours this morning, some stability has returned – we wait to see that lasts.

 

This morning the base metals are up an average of 0.9 percent, tin leads the way with a 2.5 percent gain to $14,400, the rest are up between 0.3 percent for zinc and 0.8 percent for copper, which is at $4,990. Volume has been higher with 6,189 lots traded as of 6:06 BST.

 

Precious metals are mixed, palladium is off 1.3 percent at $558.70, the rest are up between 0.2 percent for gold ($1,153.80) and 0.7 percent for silver ($14.90), while platinum is up 0.3 percent at $985. The gold/silver ratio is at 77.34 after a peak yesterday of 79.26, while platinum is now at a $169 discount to gold.

 

In Shanghai, the base metals are mixed with nickel, tin and zinc down, 3.5, 2.0 and 0.4 percent respectively, while copper is up 1.7 percent at Rmb 38,970, lead is up 0.6 percent and aluminium is unchanged. We note that it is the metals tied in with steel that are suffering – this could be due to the production limits put on steel makers as Beijing tries to reduce pollution while the World Athletics Championships are on – they run until August 30.

 

Spot copper in Changjiang is up 1.7 percent at Rmb 39,050-39,200, the backwardation with the October contract is at an equivalent of $35 per tonne, while the LME/Shanghai copper arb ratio is at 7.92 that means the arb window is open.

 

In other metals in Shanghai, gold is unchanged, silver is off 1.2 percent, steel rebar is down one percent and iron ore was last down $2.8 at around $53.20.

 

Equities this morning are mixed, the CSI 300 is still falling, last down around 4 percent, the Nikkei is off 1.2 percent, the Hang Seng is up 0.9 percent, the Australian ASX 200 is up 2.7 percent and the Kospi is up 1.1 percent. With China still falling, we wait to see if other markets can diverge away from China.

 

Currencies – the dollar index has fallen hard in recent days, dropping to a low of 92.56 as the market turmoil has made traders feel the Fed is less likely to initiate its rate rises in September. It is attempting to rebound today, last at 93.59. Conversely the euro has shot higher, last at 1.1567 after a peak yesterday of 1.1705, sterling has been slower to rise, but is last at 1.5766, the yen rallied strongly yesterday, but is now consolidating around 119.24, the aussie dropped to a low of 0.7048 yesterday, but is today rebounding, last at 0.7181 and the rouble is weak at 69.90. The yuan is last at 6.4820, the rupiah, rupee, real and rand are all trending lower.

 

Data out today showed China’s leading indicators came in better that expected, but the previous reading was revised lower. Later we get German final GDP, the Ifo business climate index and US data includes HPI, flash services PMI, consumer confidence, new home sales and Richmond manufacturing index. Given the jittery market we would expect the market to be looking for good data to help restore confidence.

 

The base metal spiked lower again yesterday and some buying has been tempted to take advantage of that, but the overall trends remain bearish and until some confidence returns to the broader market we do not envisage robust enough buying to turn the trends. That said, the base metals are vulnerable to short-covering that could unfold at any time. The strong rebound in Shanghai copper prices, looks encouraging – we wonder whether the SRB are at work. Given many metal prices are now deep into marginal producers cost curves, the main exception being copper, we feel these low metal prices will be seen as offering value, once the fear factor subsides. While writing this report the early signs of strength have faded, base metals are now now up just 0.1 percent on average, having an hour ago been up 0.9 percent.

 

Gold is out on its own in the metals complex, it is finding safe-haven buying and that in turn is likely to be prompting short-covering. Whether it can continue on its own remains to be seen, especially considering how out of favour it has been in recent quarters. Silver tried to keep up with gold, but its industrial attributes are acting as a dragging anchor, platinum is in the same boat as silver, while palladium continues to sink. The PGMs seem to be getting extremely oversold, but perhaps the falling rand and rouble are delaying supply responses. 

 

 

 

Overnight Performance                

BST       06:06     +/-   +/- %     Lots

Cu  4990      40   0.8%      3220

Al    1537      9     0.6%      1112

Ni    9590      70   0.7%      624

Zn   1723.5   4.5  0.3%      1023

Pb   1666.5   6.5  0.4%      173

Sn   14400    345 2.5%      37

Steel     300 0     0.0%      Total

      Average (BM ex-Steel)      0.9%      6189

Gold       1153.8   2.2  0.2%     

Silver     14.9       0.11       0.7%     

Platinum       985 3     0.3%     

Palladium     558.7     -7.3 -1.3%    

      Average PM       0.0%     

 

 

SHFE Prices 6:06 BST          Change % Change

Cu  38970    640 1.7%

AL 11885    0     0.0%

Zn   14440    -55  -0.4%

Pb   13215    85   0.6%

Ni    75760    -2730     -3.5%

Sn   101580  -2110     -2.0%

Average change (base metals)      236.5          -0.6%

Rebar    1949      -20  -1.0%

Au   240.6     -0.05      0.0%

Ag   3417      -42  -1.2%

 

 

Economic Agenda

BST       Country Data      ACTUAL       Expected      Previous

3:00am  china     CB Leading Index m/m     0.9%           0.6%

 7:00am       Germany      German Final GDP q/q          0.4%      0.4%

9:00am  Germany      German Ifo Business Climate      107.6     108

2:00pm  US        HPI m/m            0.4%      0.4%

2:00pm  US        S&P/CS Composite-20 HPI y/y           5.1%      4.9%

2:45pm  US        Flash Services PMI         54.1       55.7

3:00pm  US        CB Consumer Confidence           92.8       90.9

3:00pm  US        New Home Sales            512K      482K

3:00pm  US        Richmond Manufacturing Index           9     13

 

 

Edited by SHMET

Gold dips, Chinese rate cut boosts equities

Date Aug 26 2015 09:23:31 Source:
Aug.26,2015(SHMET)--

Gold prices declined as the People’s Bank of China (PBoC) cut lending rates, which lent some stability to equity markets.

 

Gold for December delivery on the Comex division on the New York Mercantile Exchange was last down $14.70 or 1.3 percent to $1,138.90 per ounce. Trade has ranged from $1,134.0 to $1,156.30.

 

Overnight, the PBoC lowered lending rates by 25 basis points to 4.6 percent, the fifth such cut since November.

 

After repeated attempts to slowdown or outright halt selling on its various equity markets, the bank has seemingly capitulated to the bears by switching to a more traditional strategy of settling markets.

 

The rate cut, however, did little to clam the Shanghai Composite Index, which fell by falling by 7.6 percent.

 

China is in the midst of transitioning from an investment-minded economy to one that is driven by services and consumerism.

 

US equities responded favorably with the Dow Jones industrial average and S&P jumping 1.6 percent and 1.5 percent respectively, while the dollar was 1.6 percent stronger at $1.1434 against the euro.

 

“Gold has typically found some strange short term ‘safe haven’ bids that have already been flushed out, with more pressure possible today should equities find a bid,” Triland Metals said. “It is common for gold to find a knee-jerk bid in periods of fear – but then it is also common that this bid does not hold too long as it remains a risk trade like all else.”

 

Meanwhile, inflows into gold ETFs continued – holdings in the funds tracked by FastMarkets have increased to 1,536.95 tonnes.

 

In US data, S&P/CS Composite-20 HPI year-over-year was up 5 percent, near the forecast of 5.1 percent, while HPI month-over-month was at 0.2 percent, below the estimate of 0.4 percent.

 

New home sales stood at 507,000, near the 512,000 consensus.

 

Additionally, consumer confidence was 101.5, above the prediction of 92.8, while flash services PMI was 55.2, besting the predictions of 54.1, but below the previous reading of 55.7

 

As for the other precious metals, Comex silver for September delivery was last down 14.2 cents at $14.620 per ounce. Trade has ranged from $14.520 to $14.930.

 

Platinum for October delivery on the Nymex declined $13.90 to $977.60 per ounce, while the most-actively traded palladium contract was at $538.45 per ounce, down $36.60.

 

Edited by SHMET
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