Gold tumbles on upbeat US data; dollar, equities recover

Date Aug 26 2015 09:23:19 Source:

Gold dropped in late-afternoon trading on Tuesday after the release of better-than-expected US data and a recovery in equity markets and the dollar.


The spot gold price was last at $1,135.70/1,136 per ounce, down $15.90 on Monday’s close. Trade has ranged from $1,134.90 to $1,156.90. On Monday the metal peaked at its highest in seven weeks at $1,170.


In data, the US CB consumer confidence index at 101.5 beat the expected 92.8 and was up from the previous reading of 90.9. This might strengthen market expectations for an interest-rate rise from the Federal Reserve later this year.


“There are still several key US data points due to be released between now and the September FOMC meeting: GDP and PCE data this week and nonfarm payrolls next week would be the ones to watch. Given the latest shifts in sentiment and policy expectations, gold’s sensitivity to these data releases is likely to become even more pronounced,” UBS said.


The CME Group FedWatch – a tool used to gauge market expectations of a Fed Funds rate adjustment – currently predicts a 21-percent probability of a rate rise in September.


In other US data today, new home sales at 507,000 were lower than the forecast 512,000 but up from the previous reading of 482,000. But the Richmond manufacturing index at 0 missed the expected reading of 9.


The S&P/CS Composite-20 HPI was up 5.0 percent, close to the forecast of 5.1 percent, while the HPI at 0.2 percent was below the estimate of 0.4 percent. The flash services PMI at 55.2 was better than forecast but down from the previous reading of 55.7.


The dollar is stronger today – the dollar index was last at 94.62.


Meanwhile, European and US equity markets rebounded after China’s central bank had made further monetary easing measures to stabilise falling markets – the Shanghai composite index tumbled more than seven percent today.


The country’s central bank cut its benchmark lending rate by 25 basis points to 4.6 percent – the fifth reduction since November – with effect from Wednesday. As well, it lowered the one-year deposit rate by 25 basis points to 1.75 percent.


“Gold will retreat towards the $1,135/40 area initially,” ICBC Standard Bank analyst Tom Kendall said. “That has been reinforced by the 50bp cut in Chinese bank reserve requirements announced this morning.”


“That cut will do little to move the structural dynamics of the economy but will help commercial banks to manage the squeeze on short-term liquidity, and may underpin investor confidence somewhat,” he added.


In the other precious metals, silver was last at $14.64/14.69 per ounce, down 15 cents. Platinum at $973/978 was $9 lower and palladium at $533/538 was down $33 and around its lowest since September 2010.



Edited by SHMET

Palladium slide exaggerated, short-covering and bargain hunting likely

Date Aug 26 2015 09:23:08 Source:

Palladium’s recent price fall is exaggerated and there is now room for short-covering and bargain hunting, market participants said.


The metal fell to a low of $530 this morning – its cheapest since September 2010 – and was last at $550/555 per ounce, down $16 on Monday’s close.


Palladium prices have fallen 15 percent since Friday’s opening level – it is the hardest hit of the precious metals in the global crash that was triggered by renewed fears about the slowing Chinese economy.


“[But] the extent of the price slide is exaggerated – after all, demand will grow this year despite a slowdown in the automotive industry,” Commerzbank said in a note, attributing the fall in the metal’s price mainly to speculative selling.


The price fall has also attracted some buying, FastMarkets head of research William Adams said.


“We feel prices are extremely oversold so would not be surprised by a meaningful rebound on short-covering and bargain hunting,” he noted. “The market is nervous and the trend is still bearish. At some stage we expect a strong rebound but will now wait for the market to show its hand. It may be starting to do so today.”


As well, Nymex open interest in palladium has begun to fall off more rapidly, suggesting a degree of profit-taking by shorts is emerging, ICBC Standard Bank analyst Tom Kendall said.


Friday’s CFTC report showed short-covering started to show up while last week saw fresh buying by the longs for the first time in seven weeks.


“An aggressive short-covering rally is likely at some stage,” Adams noted.


In the last three weeks, physically backed palladium ETFs have recorded outflows of 50,000 ounces to stand at 3,013,212 ounces, according to today’s data. Since the start of the quarter, however, they have seen net inflows of 15,000 ounces and have recovered from their March lows.


Still, some market participants remain cautious about the metal’s prospects.


“Although the tentative rebuilding of long positions is encouraging, persistent price weakness continues to warrant caution especially amid concerns about China, which palladium in particular is more exposed to,” UBS said.


In July, car sales in China declined for the fourth consecutive month. Such a long period of weakness was seen last of 2009, Heraeus noted.



Edited by SHMET

New Indian anti-laundering legislation could damage gold demand

Date Aug 25 2015 10:04:11 Source:


The introduction of mandatory checks for Permanent Account Numbers (PAN) in India could hurt gold demand in the worlds largest consumer of the metal.


In the last budget, Indian finance minister Arun Jaitley announced plans to introduce checks on purchases exceeding 100,000 rupees to improve tax compliance within the country consumers would be required to present a PAN card upon the purchase of any asset above that value.


But this could hit domestic gold demand by at least 10 percent because many in the country, particularly in rural areas, do not possess a PAN card, Metals Focus Chirag Sheth told FastMarkets.


There will be an immediate impact on Indian demand a 10-percent immediate effect but possibly more depending on how the jewellers can deal with it, he said.


Only 20 percent of the population owns a legitimate PAN card, according to some estimates.


The legislation aims to tackle Indias growing money laundering problem the country has made many attempts to cut off the circulation of illegal money in the form of gold.


[But it] could damage an industry which is about more than just gold its intrinsically linked to the culture, another source agreed.


The policy, which was supposed to be introduced on June 1, has run into strong opposition particularly from the All India Gems and Jewellery Trade Federation, which warned that the governments planned gold monetisation scheme would be affected by making PAN numbers compulsory.


Jewellers were also up in arms earlier this year and threatened to go on strike. They claim that around 80 percent of the $122 billion industry comes from those in the agricultural sector and fear the impact on their business.


The domestic agricultural sector accounts for a large proportion of annual gold demand in India farmers use gold as their primary store of wealth because they have limited access to the formal banking system.


For more than five years, Indian citizens have been required to present PAN numbers on any purchase of above 500,000 rupees. But many jewellers have reportedly avoided the rules by writing up several different receipts of below 500,000 rupees to make up the amount of a consumers purchase.


But under the new rules, should a buyer want to a purchase 1.5 million rupees of gold, the jeweller would have to write up 15 different receipts to avoid the customer presenting a PAN card a move that would be both unlikely and highly illegal.


The suggested policy will encourage jewellers to perform all transactions on a cash basis, thereby encouraging more illegal activity, said a source who did not want to be named.


People will simply no longer declare things it incentivises cash transactions, he said.


Though some industry bodies have suggested introducing incentives for credit card purchases, others said consumers may turn to smaller jewellery outlets that might turn a blind eye to the ruling.


But there may be some resistance to do so Indian jewellery has suffered from under-caratages for some time, particularly from untrusted smaller outlets, despite attempts from authorities to remedy the situation through the establishment of the Bureau of Indian Standards (BIS).


Simultaneously, the country also announced a new gold deposit scheme, which aims to monetise domestic inventories of around 20,000 tonnes of the metal, thereby lowering annual imports of around 1,000 tonnes and easing the countrys current account deficit.


Still, previous incentive schemes have failed to garner the interest of Indian consumers.


India will also introduce a sovereign gold bond as an alternative to physical gold. The bonds carry a fixed interest rate and will be redeemable in cash pegged to the face value of gold at the time of maturity. Other than giving investors long exposure to gold, it also provides a fixed interest rate.


Edited by SHMET


Date Aug 25 2015 10:03:52 Source:

Gold continued to trade around seven-week highs on Monday afternoon while a sell-off in global financial markets continued. As well, palladium fell to its lowest in three years.


The spot gold price was last at $1,160.2/1,160.5 per ounce, little changed from Fridays close.


The global sell-off in equity markets was triggered by falls in Chinese markets stock markets in Asia plummeted on Monday, with the Shanghai composite index dropping 8.49 percent on concerns about the Chinese economy following a run of disappointing data.


Gold is holding up relatively well so far in the face of the equities-led slide in other commodities and emerging market FX, ICBC Standard Bank analyst Tom Kendall said.


Gold climbed to $1,170.1 its highest since July 7 after the US markets opened. The Dow Jones industrial average was down more than 1,000 points shortly after the start of the US trading session but the initial sell-off eased later.


In Europe, the FTSE 100 closed down a heavy 4.5 percent but had earlier been more than 6.2 percent lower.


The VIX index, also known as the fear index, hit its highest since January 2009 earlier at 53 a sign of widespread investor alarm.


As for the other precious metals, silver was last at $15.03/15.08 per ounce, down 26 cents. Platinum at $995/999 fell $23 and palladium hit its lowest in three years at $566 it was last at $573/578, down $28.

Edited by SHMET


Date Aug 25 2015 10:03:34 Source:

Gold was on an even keel Monday despite the fact that global equity market whipsawed during an extremely volatile session.


Gold for December delivery on the Comex division on the New York Mercantile Exchange was last down $5.00 or 0.4 percent to $1154.60 per ounce. Trade has ranged from $1,151.80 to $1,169.80.


Fears of Chinese economy grinding for a protracted period reached critical mass today as the Shanghai Composite Index fell 8.5 percent to 3,209.91, while dragging the other global equity markets down with it.


The Dow Jones industrial average fell over a 1,000 points on the echo of the opening bell, with major market participants Glencore and Noble each tumbling 12 percent and 7.9 percent respectively at one point.


China is the main end-user of commodities, but after years of investment projects in new infrastructure, the country is in the midst of a transition to a service oriented economy.


The fresh rout of selling spread panic amongst European and US equities, further fueling speculation that a US rate rise will not take place before 2016, Triland Metals said.


The aforementioned rate rise has turned into a hot-button issue with supporters and detractors.


Dennis Lockhart, President of the Federal Reserve Bank of Atlanta, is set to speak tonight after saying on August 10 that the Fed was close to hiking rates.


The CME Group FedWatch a tool used to gauge the markets expectation of a Fed Funds rate adjustment currently predicts a 24 percent probability of a rate hike in September.


This morning the number stood at 28 percent and was near 50 percent earlier in the month.


Meanwhile, the net long fund position (NLFP) on Comex climbed 9,217 contracts last week when 11,283 lots of short-covering outweighed 2,066 contracts of long liquidation.


The gross short position is at 144,053 contracts, down from a record high of 159,441 contracts on July 21. Previous peaks were around the 110,000-120,000 level, so the gross short position remains large.


Turning to US equities, the Dow Jones industrial average and S&P both rebounded, but were still in negative territory by 2.3 percent and 2.7 percent respectively. The dollar was 1.6 percent softer at $1.1566 against the euro.


As for the other precious metals, Comex silver for September delivery was last down 49.6 cents at $14.805 per ounce. Trade has ranged from $14.555 to $15.390.


Platinum for October delivery on the Nymex declined $34.90 to $992.20 per ounce, while the most-actively traded palladium contract was at $576.20 per ounce, down $28.25.

Edited by SHMET