Mitsubishi Identifies Two Possible Gold-Supportive Factors
Investors may be overlooking some factors that potentially couldunderpin gold prices, says Mitsubishi. The metal has been held back by a strongdollar and expectations for more U.S. rate hikes, as well as a strong stockmarket that has reduced buying of gold as a hedge. However, two factors thatcould end up underpinning gold are political risks and rising inflation. “It isno secret that Donald Trump’s presidency hinges on the mid-term elections. Ifthe Democrats gain control of the House of Representatives in November,impeachment proceedings could begin in fairly short order,” Mitsubishi says.“The political uncertainty engendered by an impeachment could see the dollarlose ground and give some support to gold (as it did in Bill Clinton’simpeachment in 1998-1999). The second supportive aspect is if inflation startsto outstrip the Fed’s guidance of raising interest rates to just over 3% by theend of 2019 - with the U.S. economy at full employment and inflation alreadyhitting the Fed’s 2% target, it would not take much for inflation to outstripnominal rates, increasing the attractiveness of gold as an inflation hedge.”
By Allen Sykoraof Kitco News; asykora@kitco.com
Mitsubishi: Palladium Market Tight But Prices Sideways
Monday September 17, 2018 11:30
Palladium supplies remain tight, as reflected by backwardation, although U.S. dollar strength has capped gains in the metal, says Mitsubishi. Backwardationis when nearby contracts are more expensive than deferred and is generally seenas a sight of a tight market since users are paying a premium to get metalimmediately. “Outright prices are moving in a sideways direction, however, asthe strong dollar caps the upside,” Mitsubishi says. “However, the industrialoutlook remains positive as long as the U.S. and Chinese economies continues toperform well and neither fall victim to escalating trade tensions between thetwo countries.” There is limited speculative interest in the palladium market,with bullish and bearish positioning light, Mitsubishi adds.
By Allen Sykoraof Kitco News; asykora@kitco.com
Commerzbank: IndianGold Demand Rises In August But ‘Faltering Again’
Monday September 17, 2018 08:35
Gold demand inIndia, the world’s second-biggest gold-consuming nation, picked up in Augustbut may be faltering again this month, reports Commerzbank. Analysts note thatthe country’s Finance Ministry reported that the country imported significantlymore gold in August. “Advantage was clearly taken of the fall in local pricesto an eight-month low in August to replenish stocks,” Commerzbank says. “Demandin India already appears to be faltering again due to the higher prices,however. Local Gold traders are reporting negative premiums for the first timein over a month.”
By Allen Sykoraof Kitco News; asykora@kitco.com
BBH: Path of U.S.,European Monetary Policy ‘Fairly Clear’
Monday September 17, 2018 08:35
The trajectory ofmonetary policy in the U.S. and Europe has been “fairly clear,” says BrownBrothers Harriman. “There is practically no doubt that the Fed will hike rates onSept. 26. Despite softer-than-expected PPI and CPI figures, the market hasbecome more confident of another move in December. The Federal Reserve'sbalance sheet unwind reaches its maximum velocity of $50 billion a month in Q4. Itis also understood that [the] ECB [European Central Bank] will reduce its assetpurchases to 15 billion euros a month in Q4 and finish at the end of the year. Interestrates will not be raised for another year. The reinvestment of maturingproceeds appears to be the next operational issue that needs to be sorted.” The Bank of England has been clear also, withrates likely to gradually increase, BBH says. “By gradually, theFederal Reserve has meant in practice anything between two and four hikes a year. By gradually, the Bank of England means once a year.” Meanwhile, BBHsays, the Bank of Japan has been “moredifficult to read for investors,” buying fewer Japanese government bondsbut denying tapering. “The BOJ meeting this Wednesday is not expected toannounce any new innovations and reiterate its commitment to boost prices,” BBHsays.
By Allen SykoraFor Kitco News
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asykora@kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.