Lonmin shuts down second furnace after detection of electrode breaks

Otmane El Rhazi from The Bullion Desk.

Lonmin, the world’s third largest platinum producer, has shut down a second furnace facility following a technical problem, it said on Wednesday.

The company said it had detected electrode breaks in the furnace, which were creating an unstable and high temperature-operating environment.

The stoppage is expected to only last a maximum of 21 days, the British producer said, and should allow the integrity of furnace conditions to be addressed.

The company was forced to halt its Number One Furnace earlier this month in order to fix a leak, although the three smaller Pyromets continue to operate.

Lonmin says work on the number one furnace is progressing well and on schedule.

“We expect 2015 sales to be back end loaded into the second half of the 2015 financial year and there will be an increased build up of concentrate stocks, which we expect to unwind by year end,” the company added.

“We continue to explore commercial ways of mitigating the stock build up. We expect our net borrowings to further increase at the end of March 2015 as a direct result of the lower sales volumes in the first half, but they are expected to remain within our borrowing facilities. Our sales guidance for 2015 financial year remains unchanged,” it added.

The company added that it will update the market when it releases its first quarter production results on January 29.

Earlier this year, Lonmin noted a decline in both production and profit for the year ended September 30, as strikes in South Africa and reduced platinum prices hit the producer.

In January, South African majority union AMCU downed tools demanding a basic wage of 12,500 rand from the three largest PGM producers in South Africa, including Lonmin. An agreement was reached on June 24.

The company lost 391,000 platinum saleable ounces due to the five-month strike. Underlying profit before tax at $46 million was considerably lower than the $158 million in 2013 and revenue during this period was $965 million against $1,520 million in the corresponding period of 2013.

(Editing by Martin Hayes)

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Gold around highest in nearly two weeks, boosted by price spike on US open

Otmane El Rhazi from The Bullion Desk.

The gold price held around its highest in nearly two weeks on Tuesday afternoon, as support underpinned a $20 spike seen as New York opened for business earlier.

Spot gold was last seen at $1,207.60/1,208.40, up $26.50 on Friday‘s close after reaching its highest since December 18 earlier in the session at $1,210.80 per ounce.

The metal rose from about $1,183.00 to $1,202.80 in a couple of short moments after traders in the US sat down at their desks.

With no immediate fundamental catalysts in the market and the dollar stagnant just off two-and-half-year highs against the euro at 1.2160, traders believe that a fund placed a big order to stockpile some gold before the year-end.

“This added some spice to what otherwise could have been a boring day,” a US-based trader said. “My guess is that a fund wanted to add some gold [to their portfolio before year-end] so they placed a big order. Then the momentum traders and computers hopped on board, driving the price up above $1,200.”

In data, the US CB consumer confidence figure at 92.6 was well short of the forecasted 94.6, albeit up from a previous 91.0.

In data announced earlier out of Europe, the eurozone’s M3 Money supply was better than expected at 3.1 percent, while the Spanish flash CPI at -1.1 percent fell short.

In other metals, silver followed gold through resistance at $16 and was last seen up 62 cents at $16.36/16.41 per ounce, after hitting a two-week high earlier in the session at $16.49.

In others, platinum at $1,215/1,220 per ounce was up $18, while palladium at $805/811 was up $1.

(Additional reporting by Tom Jennemann, editing by Martin Hayes)

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Gold lending rates remain in backwardation as physical demand improves

Otmane El Rhazi from The Bullion Desk.

Lending rates for gold for forward delivery have remained largely in backwardation as physical demand in Asia expands at weaker prices, which are subdued in the wake of the festive season.

Spot gold, which is now hovering around $1,185 per ounce, has found support from a spike in physical demand in China before the end of the calendar year, with premiums on the Shanghai Gold Exchange climbing to $5-6 over spot prices from lows of $1-2 at the start of December.

While current premiums are dropping slightly, uptake on the cheaper price still remains, suggesting that China’s sensitivity to the gold price is still strong.

Further take-up may also be seen during the first few weeks of 2015 on buying ahead of the Chinese New Year in February, an auspicious period to purchase gold.

For the week ending December 19, gold delivered from SGE vaults reached its highest in nearly a year at 61.6 tonnes, bringing the overall year-to-date figure up to 2,016 tonnes.

Brent crude oil continues to decline and has hit a new five-year low at $57.88 per barrel – it started the year around $110.

The continual decline comes after a warning last week from the Saudi oil minister that OPEC will not cut production from 30 million barrels per day, even if the price falls to $20 a barrel.

In the forwards, one-month gold at -0.065 percent over spot is up following the -0.09 percent backwardation seen on December 24, its widest backwardation in three weeks. The curve narrowed to -0.0475 percent backwardation over two months, while three-month metal is up slightly at 0.0275 percent.

Six-month gold remained in contango, albeit fractionally, at 0.02 percent, as did the one-year rate at 0.135 percent.

The London Bullion Market Association (LBMA) has decided to scrap the GOFO rates after two more parties indicated that they might no longer wish to participate, it has confirmed. The final rates will be published on Friday, January 30.

Société Générale is the second rate-setting member this year to exit the process following Deutsche Bank in January. Under LBMA rules, the minimum number of members is six.

The market-making members of the LBMA – the Bank of Nova Scotia-ScotiaMocatta, Barclays Bank Plc, HSBC Bank USA London Branch, Goldman Sachs, JP Morgan Chase Bank and UBS AG – set the GOFO rate.

Every day at 10:30 UK time, these contributors register the rates at which they are prepared to lend or swap gold against US dollars. Quotes are made over one, two, three, six and 12 months.

The highest and lowest quotes for each period are discarded and the remaining rates are averaged.

(Editing by Martin Hayes)

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Gold price recovers as euro strengthens

Otmane El Rhazi from The Bullion Desk.

The gold price was higher during Tuesday morning sessions, recovering from its lows as the euro lost ground against the dollar.

The yellow metal was last at $1,189.60/1,190.30 per ounce, a $8.10 increase on the previous day’s close. Still, conditions remain quiet as many market participates are absent for the Christmas and New Year holidays.

“We don’t expect much to happen for the balance of the week, as many participants are away for the Christmas/ New Year break, but the less-than-stellar late-year action in a number of commodity markets is indicating a rather sloppy start come January,” said Edward Meir at INTL FCStone.

Yesterday saw gold come under pressure on news out of Europe and a softer euro.

Greece will to go to the polls for a general election on January 25th following the Greek Parliament’s rejection of Prime Minister Antonis Samara’s nominee for President.

“The election was automatically triggered following Samara’s third and final failed attempt to have Stavros Dimas confirmed, paving the way for the anti-bailout Syriza party to potentially take power,” said MKS Capital.

“Greece’s four-year bailout is due to finish in February, however a victory to the Syriza party, which has pledged to write off much of Greece’s debt and renegotiate the terms of the bailout is causing growing alarm within the EU.”

The European Central Bank has already warned that a move towards anti-austerity against the EU and IMF would lead to sanctions.

The euro was last at 1.2174 against the dollar.

The data agenda is light today, with only Spanish flash CPI, EU M3 money supply and private loans of note. The US also has S&P/CS composite and CB consumer index scheduled.

Silver at $15.93/15.98 was up against the previous close of $15.76. platinum at $1,204/1,209 was $4 higher and palladium at $808 was up $1.

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Gold slides after Greek anxiety prompts modest dollar bounce

Otmane El Rhazi from The Bullion Desk.

The gold price fell on Monday as fresh political turmoil in Greece pushed the dollar higher.

Gold for February delivery on the Comex division of the New York Mercantile Exchange closed down $13.40, or 1.1 percent, at $1,181.90 per ounce. Trade ranged from $1,178.60 to $1,197.50.

“With a strong dollar backdrop, gold is finding it hard to hold on to any gains and we find ourselves back down to just above the key $1,170 support zone,” Triland Metals said in a report.

“Light conditions may on Boxing Day and today may have amplified the move up and down and we will await to see what the new year brings for the real action around this long term support area,” the broker added.

The dollar strengthened by 0.22 percent to 1.2154 against the euro after a parliamentary vote in Greece failed to elect a new president, paving the way for a snap election that could empower anti-austerity independence parties.

The European Central Bank has already warned that a move towards anti-austerity against the EU and IMF would lead to sanctions.

Meanwhile, the equity market rally paused in the wake of the Greek news with the Dow Jones industrial average and S&P 500 both near unchanged.

As for other commodities, light sweet crude (WTI) oil futures for January delivery were down $1.06, or 1.94 percent, at $53.67 per barrel, while the most-actively traded Comex copper contract ended at $2.822 per pound, up 0.8 cents.

After a light day for economic inputs, Tuesday and Wednesday will see a run of keynote economic releases. Notable figures include China’s final HSBC flash PMI on Tuesday, with US Tuesday/Wednesday releases including consumer confidence, weekly jobless claims, the Chicago PMI and pending homes sales, among others.

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Gold price falls as new eurozone fears play on sentiment

Otmane El Rhazi from The Bullion Desk.

The gold price was down on Monday afternoon London trading, as fears over a potential crisis in the Europe maintained strength in the dollar.

Spot gold was last seen at $1,179.70/1,180.50 per ounce, down $15.50 on Friday’s close.

The losses come as investors appear nervy on the outlook of the eurozone, after Greece failed to elect a new president, paving the way for a snap election that could see the far-leftist and anti-austerity Syriza party into power.

The euro was last seen just above two-year lows at 1.2178. The European Central Bank has already warned that a move towards anti-austerity against the EU and IMF would see sanctions introduced.

Investors fear that a coalition of Syriza and other communists may derail the international bailout programme and ultimately lead to a Greek exit from the bloc economy.

“New Democracy and its allies in coalition will fail to gain a majority and the far-left-of centre Syriza Party will likely become the largest minority party and will succeed in piecing together a new left-of- centre coalition including the Communists and other allies on the left,” Dennis Gartman, editor of the Gartman Letter, said.

“The latest several polls taken in the past few days have Syriza with the support of somewhere close to 28 percent of the nation’s voters, while New Democracy has the support of 25 percent. This is a bit narrower in Syriza’ s favour of two weeks ago but it is still an indication that the nation’s votes are tired of New Democracy’s programme that has included the strident austerity demands put upon Athens by the Troika,” he added.

Today is light on the data side, with no frontline figures due. But Tuesday and Wednesday keynote economic releases will be compressed ahead of the January 1 holiday.

Notable figures include China’s final HSBC flash PMI on Tuesday, with US Tuesday/Wednesday releases including consumer confidence, weekly jobless claims, the Chicago PMI and pending homes sales, among others.

In other metals, silver was last seen at $15.75/15.80, up six cents although a high of $16.26 was seen earlier in the session, as thin trading conditions exacerbate moves across the precious metals. Platinum meanwhile at $1,198/1,202 is up $13 and palladium at $810/815 is up $7.

(Editing by Jennemann)

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Gold price holds below $1,200/oz as new Greek worries emerge

Otmane El Rhazi from The Bullion Desk.

The gold price held mostly steady on Monday; however, all eyes have shifted to Greece where a looming snap election in January could be bad news for the euro.

Gold for February delivery on the Comex division of the New York Mercantile Exchange was last down $3.20 at $1,192.10 per ounce. Trade has ranged from $1,190.50 to $1,197.50.

“Gold had a very firm post-Christmas session on Friday rallying back up towards the $1,200 level before settling around $1,194. The move was initiated in Asia on the back of a strong SGE premium, and the buying interest continued during London time despite London out for the Boxing Day holiday,” MKS Finance said in a note.

“With low volumes and poor liquidity at present, gold could really move either direction but we suspect that $1,200-$1,205 should be heavy on the topside and $1,170-$1,175 should still attract decent Asian physical demand short term,” it added.

Today is light on the data side, with no frontline figures due. But Tuesday and Wednesday keynote economic releases will be compressed ahead of the January 1 holiday. Notable figures include China’s final HSBC flash PMI on Tuesday, with US Tuesday/Wednesday releases including consumer confidence, weekly jobless claims, the Chicago PMI and pending homes sales, among others.

Meanwhile, in the wider-markets, the dollar was 0.16 percent softer at 1.2202 against the euro, while Germany’s DAX and France’s CAC-40 were down 0.84 percent and 0.66 percent respectively.

Nevertheless, the euro is nervy after parliamentary vote in Greece failed to elect a new president, paving the way for a snap election that could empower anti-austerity independence parties.

“New Democracy and its allies in coalition will fail to gain a majority and the far-left-of centre Syriza Party will likely become the largest minority party and will succeed in piecing together a new left-of- centre coalition including the Communists and other allies on the left,” Dennis Gartman, editor of the Gartman Letter, said.

“The latest several polls taken in the past few days have Syriza with the support of somewhere close to 28 percent of the nation’s voters, while New Democracy has the support of 25 percent. This is a bit narrower in Syriza’ s favour of two weeks ago but it is still an indication that the nation’s votes are tired of New Democracy’s programme that has included the strident austerity demands put upon Athens by the Troika,” he added.

As for the other precious metals, Comex silver for March delivery were down 6.2 cents at $16.085 per ounce. Trade has ranged from $16.00 to $16.255.

Platinum futures for April delivery on the Nymex were down $5.20 at $1,214.70 per ounce, while the most-actively traded palladium contract was at $817.65 per ounce, down 95 cents.

(Additional reporting by Tom Jennemann)

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Gold price flat as volumes decline ahead of holiday

Otmane El Rhazi from The Bullion Desk.

Gold futures inched ever-so-slightly lower on Wednesday as a lack of catalysts and trading volumes have the market drifting aimlessly in these final hours before Christmas.

Gold for February delivery on the Comex division of the New York Mercantile Exchange was last down $1.50 at $1,176.50 per ounce. Trade has ranged from $1,175.70 to $1,181.20.

“There is nothing that has happened in the past twenty four hours nor is there anything likely to happen in the next forty eight that shall dissuade us from holding our long positions in gold predicated primarily in yen terms and secondarily in euro denominated terms,” Dennis Gartman, editor of the Gartman Letter, said.

“Further, until such time as gold/euro trades upward through the truly important psychological resistance at 1000 euros per ounce, a level that has rebuffed gold six times thus far this year, we see no reason to take any further action,” he added.

In the only data release of note today, US weekly unemployment claims fell by 9,000 last week to a seasonally adjusted 280,000, which marks a seven-week low.

But yesterday, the Dow Jones industrial average surged above 18,000 for the first time ever after it was reported that US GDP grew by five percent in the third quarter, which was well above the 4.3 percent forecast.

In the wider-markets this morning, the euro was 0.27 percent stronger at 1.2206 against the dollar, while Germany’s DAX was up 0.57 percent and France’s fell by 0.44 percent.

As for the other precious metals, Comex silver for delivery we up 1.8 cents at $15.785 per ounce. Trade ranged from $15.690 to $15.865.

Platinum for January delivery on the Nymex were down $2.10 at $1,189.60 per ounce, while the most-actively traded palladium contract was at $813.75 per ounce, down 30 cents.

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Gold price dips as investors favour stocks

Otmane El Rhazi from The Bullion Desk.

The gold price slipped further on Tuesday after equity markets hit fresh records and the dollar rallied.

Gold for February delivery on the Comex division of the New York Mercantile Exchange was last down $3.50 at $1,176.30 per ounce. Trade has ranged from $1,173.00 to $1,184.90.

“The general theme now seems to be one of a rising dollar and buoyant equity markets, leaving commodities vulnerable as an asset class. Short-term, we would keep an eye on North-Korean developments, as they could stir the markets if the retaliation intensifies,” INTL FCStone’s Ed Meir said.

In the wider-markets, the dollar rose 0.31 percent to 1.2192 against the euro, while Germany’s DAX and France’s CAC-40 were up 0.46 percent and 1.13 percent respectively.

Meanwhile, US stocks climbed for a fourth straight session yesterday on Monday – the S&P 500 index closed at record high of 2078.54.

In data today, the Chinese CB leading index at 0.9 percent was slightly better than last month’s 0.8 percent. In the eurozone, French consumer spending was better than predicted at 0.4 percent, while Italian retail sales at 0.0 percent fell short of forecast.

Here in the US, durable goods orders unexpectedly fell by 0.7 percent in November, which was much worse than the call for a 3 percent gain after a 0.3 percent increase in October.

But US third quarter GDP came in at 5 percent in the third quarter, which is the quickest pace in 11 years and easily surpassed the 4.3 expected.

In the other precious metals, Comex silver for March delivery wee down 7.3 cents at $15.615 per ounce. Trade has ranged from $15.560 to $15.780.

Platinum futures for February delivery on the Nymex were up $9.10 at $1,191.30 per ounce, while the most-actively traded palladium contract was at $814.00 per ounce, down $1.25.

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Gold price upside limited despite small recovery, oil stagnant

Otmane El Rhazi from The Bullion Desk.

The gold price recovered slightly on Tuesday morning following the slump of the previous session, although sentiment remains bleak while investors are pushed towards more yield-bearing assets and weak oil prices continue to weigh.

Spot gold was last at $1,181.60/1,182.40 per ounce, up $8.30 on Monday’s close after hitting a low of $1,170 in the previous session.

A pick-up in physical buying in China at the lower price levels appeared to offer some support, with premiums moving towards $5 over spot.

“While emerging market buying on dips is likely to moderate further potential price declines, ongoing oil market weakness is a significant weight on bullion and may very well cap rallies,” HSBC’s James Steel said.

Brent crude oil is stagnant at around $60 per barrel after a warning from the Saudi oil minister that OPEC will not cut production from 30 million barrels per day production even if oil falls to $20 a barrel and that the “world may never see $100 a barrel again”.

OPEC may fear that a cut in Gulf production would invite competitors such as Russia to compete for its market share.

“The ability and apparent willingness of OPEC, and more specifically Saudi Arabia and the Gulf States, to hold production in the face of plunging prices may also mean the upside for gold prices is limited,” Steel added. “The threat of even lower oil prices is a clear negative for gold.”

Still, the general theme has been one of investors seeking riskier assets while the dollar remains strong at 1.2230 against the euro, US bond yields are picking up and equity markets flourish.

“Positioning still seems to be light in gold so we expected the market to remain contained during the holiday period, but big swings in other markets such as USD and crude will exacerbate moves due to the light liquidity,” MKS’ Alex Thorndike said in a note.

In data, the Chinese CB leading index at 0.9 percent was slightly better than last month’s 0.8 percent. In the eurozone, French consumer spending was better than predicted at 0.4 percent, while Italian retail sales at 0.0 percent fell short of forecast.

Core durable goods orders, final GDP, new home sales, core PCE price index, personal spending, personal income, University of Michigan’s consumer sentiment report and the house price index are due from the US this afternoon.

In the other metals, silver at $15.70/15.75 per ounce was up 16 cents, platinum at $1,182.00/1,192.00 was $9 higher and palladium climbed $2 to $808/813.

(Editing by Mark Shaw)

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Comex quiet amid light data flow, thin holiday trade

Otmane El Rhazi from The Bullion Desk.

The gold price tread water on Monday as investors would rather focus on equities in these final few sessions of 2014.

Gold for February delivery on the Comex division of the New York Mercantile Exchange was last down 80 cents at $1,195.20 per ounce. Trade has ranged from $1,193.80 to $1,203.60.

“We do not expect much to happen in the gold market at least until the end of the year,” INTL FCStone’s Ed Meir said. “However, after that, the general trend seems to one of a rising dollar and revived equity markets, while commodities are likely to remain under pressure.”

The economic data flow will be light as well today. German import prices fell 0.8 percent in November, while US existing home sales figures are due this afternoon.

In the run-up to the Christmas holidays, retail sales data for France and Italy will be out on Tuesday, while US releases include final quarterly GDP numbers, new home sales and weekly unemployment claims.

In the wider-markets, the dollar was 0.28 percent softer at 1.2264 against the euro, while Germany’s DAX and France’s CAC-40 were up 0.96 percent and 0.48 percent. In Asia, the Nikkei and Hang Seng ended up 0.08 percent and 1.26 percent.

“Those owning gold in terms of the US dollar find themselves bored, and if they are not they should be. With gold trading $1,195, it’s down 0.5 percent for the year-to-date and that, in our opinion, defines boredom,” Dennis Gartman, editor of the Gartman Letter, said. “However, those long of gold in euro denominated terms know that with gold trading 977 per ounce, they are up 11.6 percent for the year.”

As for gold market positioning, Comex gold net longs were down by 330,000 ounces to 13.30 million ounces in the week ending December 16, which represents the first decline in a four weeks, according to CFTC data.

“The move was mostly on the back of long liquidation, although some of it was offset as shorts continued to seek cover,” UBS’ Edel Tully noted.

The Comex silver position was reduced by 10.99 million ounce to 164.81 million ounce as shorts rebuilt positions for the first time since early November. This was further supplemented by long liquidation, Tully added.

In other precious metal prices, Comex silver for March delivery was essentially unchanged at $16.025 per ounce. Trade has ranged from $15.965 to $16.175.

Platinum futures for January delivery on the Nymex were up 70 cents at $1,197.70 per ounce, while the most-actively traded palladium contract was at $807.55 per ounce, up $2.45.

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Gold, silver prices to rebound next year as dollar wanes – ANZ

Otmane El Rhazi from The Bullion Desk.

The precious metals should find better support in 2015 when the strength of the US dollar will wane and the physical gold consumers in emerging markets will return, ANZ Research said.

It sees gold averaging $1,238 per ounce during 2015 while silver should rebound with more force to average $19, the bank said in a research note on Monday. This will bring the gold/silver ratio back towards the long-term average of 60 from its current level of 75,

“Heavy selling over 2013 and early 2014 appears to be abating, with key COMEX investors showing signs of re-entering at lower price levels. Market drivers could also swing from a heavy focus on the US monetary setting to the re-emergence of strong Chinese and Indian demand,” the bank said.

Spot gold was last $2.50 higher than Friday’s close to $1,196.50/1,197.10 per ounce – it has traded in a sub $9 intraday range either side of the $1,200 pivot level, peaking earlier at $1,203.50. Silver at $16.05/16.10 was unchanged.

Strong demand in the second half of 2013 and into 2014 resulted in a significant build-up of stocks in mainland China, ANZ said. This resulted in subdued levels of imports in the second half of 2014 that helped run down these onshore stocks.

The pullback in demand over the past three quarters should put bolster demand next year, it added. With supply and demand in China looking largely balanced in the fourth quarter, the necessary adjustment in the market seems to be taking place.

Elsewhere in Asia, the decision by India’s government to ease import restrictions on gold – it repealed the 80:20 rule that made it mandatory for 20 percent of all imported gold to be re-exported with added value – was a surprise.

“This has significantly changed the landscape for the market in India, opening up all import channels once more,” the bank said. “But it should be noted that the government is unlikely to maintain the status quo.”

“There are likely to be other restrictions placed on the market, perhaps import quotas or the like. Also, smuggling is likely to remain an issue as long as the 10-percent import duty remains,” the report said.

A reduction in gold ETF sales will also be needed to stabilise the market – the outlook for the dollar, one of the main long-term drivers of the gold price, is crucial.

The greenback has given back a small portion of its gains against the euro – it was last indicated around 1.2264, having hit 1.2227 on Friday, its highest since July 2012.

“We expect that over the course of 2015, this negative influence [of a stronger dollar] will wane,” ANZ said. “Furthermore, we also expect that as the financial impetus for ETF selling (a strengthening dollar) fades through second half 2015, this should alleviate the pressure to liquidate physical gold holdings by investors.”

For silver, industrial demand should remain robust in 2015 – prices are expected to remain relatively soft on a long-term basis, the bank said.

Jewellery demand could hit a record in 2015, reflecting the substitution of silver for gold in India, although ANZ advised keeping a close eye on the country’s demand dynamics.

Still, silver prices should rise relative to gold. With the ratio between the two stretched so far, it has significant room to gain on gold prices, the bank suggested.

And although platinum and palladium prices are unlikely to reach this year’s highs of $1,500 and $900 in the absence of additional supply shocks, “the potential for the market to find a base and rise through 2015 on the back of better demand conditions remains high,” it said.

Platinum at $1,196/1,201 was up $1 while palladium fell $2 to $802/807.

Platinum’s sharp sell-off in recent months suggests there is more room to rebound on improving demand for vehicles, particularly in the US and Europe. And both metals should benefit while both markets are vulnerable to industrial action.

Palladium will be in deficit by an estimated 500,000 ounces while the deficit in platinum will be around half that figure, ANZ said.

(Editing by Mark Shaw)

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Gold price to see more volatility in thin holiday trading

Otmane El Rhazi from The Bullion Desk.

Gold price traded slightly higher in Asian trade on Monday in the holiday-shortened week, although prices continued to stay right beneath the key $1,200 level.

The recent sharp declines in oil prices have proved very influential in pressuring other commodity prices, but a bounce towards the end of last week did help to pull gold prices up.

“The bounce in crude prices also helped boost gold and would continue to if oil manages to trade higher. The bullion market faces tough upside resistance, however, and further gains may be an uphill battle,” said analyst James Steel from HSBC Securities.

However, a rising dollar due to the eventual increase in interest rates in the US will continue to cap gains on gold.

“A strong USD and the likelihood of highere US rates even if inflation remains subdued, is a recipe for lower gold prices…The run up to the holiday period is traditionally volatile for prices as volumes drop off and even relatively modest investor purchases or sales can have a magnified impact on the market,” Steel added.

Gold price traded last at $1,197 per ounce, $2.50 higher than where it ended on Friday. Silver broke above the $16 mark on Friday to end at $16.09 per ounce. Current prices are slightly lower at $16.03.

The week ahead will also see a quiet data docket as holiday season kicks it. Expect little to none from the European markets with just retail sales data for France and Italy out on Tuesday, and US data to dominate for the rest of the week. These include final quarterly GDP numbers, new home sales and unemployment claims.

Platinum and palladium are both slightly lower today although the latter did see strong gains of close to two percent on Friday. Platinum is $2.50 lower at $1,195 while palladium is $3.50 lower at $803 per ounce.

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GOLD WEBCAST – Gold price looks to retest $1,200 amid stronger dollar

Otmane El Rhazi from The Bullion Desk.

Gold retesting the key psychological $1,200 per ounce mark, shrugging off near-two year highs in the dollar. Spot gold was last seen at $1,198.80/1,199.50 per ounce, up $2.80 on Thursday’s close, with the metal trading within a $7 intraday range. Near-two year highs in the dollar at 1.2250 against the euro is weighing on sentiment, although largely gold appears to be ignoring the gains. Trading expected to remain subdued however, in light of few macroeconomic announcements and as the year-end holiday season approaches.

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Comex muted in pre-holiday trade

Otmane El Rhazi from The Bullion Desk.

Gold futures are holding just under $1,200 on Friday as a slightly stronger dollar and general holiday malaise are keeping the market quiet.

Gold for February delivery on the Comex division of the New York Mercantile Exchange was last up $2.00 at $1,196.80 per ounce. Trade has ranged from $1,193.20 to $1,201.50.

“Gold prices are currently capped by a stronger dollar and ongoing weak oil prices. Equity market gains further reduce the appeal of alternative assets like gold,” HSBC’s James Steel said. “Despite this, gold keeps challenging $1,200. The outlook is not wholly negative for bullion.”

In the physical markets, Switzerland exported 232.2 tonnes of gold in November, according to official Swiss Customs Administration statistics, an increase of 16 percent on the October total and the highest volume this year.

Elsewhere, India’s imports of gold surged in November to 145-150 tonnes, according to the latest statistics from the Indian Ministry of Commerce and Industry. The ministry valued gold imports last month at $5.6 billion, which at the average spot price of $1,177 per ounce equates to around 148 tonnes.

Imports hit 150 tonnes in October after 120-130 tonnes in September, 71 tonnes in August and 48 tonnes in July, when importers stepped up their efforts to meet the typical increase in demand from the Hindu festival season.

“Swiss customs data show strong gold exports to India in November,” Steel said. “Although confusion over import regulations and softer seasonal demand may reduce India’s demand this month, it is safe to say that declines from these levels are likely to elicit greater emerging market purchases.”

“This should help establish a floor on gold prices but not necessarily promote a rally. Stronger investment-led participation in the market is needed for that, we believe,” he added.

Trading today is expected to remain subdued however, in light of few macroeconomic announcements and as the year-end holiday season approaches.

“There comes a time in December when it becomes clear that the time for Christmas holidays is upon us,” Marex Spectron’s David Govett said earlier this week.

“Do not buy strength or sell weakness in this market at the moment. When it looks good, sell it, when it looks awful, buy it, otherwise leave it alone,” he added.

In data today, Japanese all industries activity disappointed at -0.1 percent. GfK German consumer sentiment was close to expectations at 9, while the country’s PPI beat expectations at 0.0 percent and the eurozone’s current account fell short at $20.5 billion.

In the wider-markets, the dollar is holding near a two-year high at 1.2279 against the euro, while Germany’s DAX and France’s CAC-40 were down 0.31 percent and 0.13 percent respectively.

Light sweet crude (WTI) oil futures were up $1.07 at $55.43 per barrel, nevertheless, crude is still just about $2 above a five-and-a-half year low.

As for other precious metals, Comex silver for March delivery were down 1.4 cents at $15.920 per ounce. Trade has ranged from $15.830 to $16.00.

Platinum for January delivery on the Nymex was up $1.20 at $1,198.30 per ounce, while the most-actively traded palladium contract was at $793.25 an ounce, up $1.10.

(Additional reporting by Ian Walker)

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Gold price to retest $1200/oz, shrugging off near 2-yr dollar high

Otmane El Rhazi from The Bullion Desk.

The gold price is set to retest the key psychological $1,200 per ounce mark during Friday morning London trading, shrugging off near-two year highs in the dollar.

Spot gold was last seen at $1,198.80/1,199.50 per ounce, up $2.80 on Thursday’s close, with the metal trading within a $5 intraday range thus far.

“The precious metals experienced a stronger pullback earlier in the week, but generally they are not holding up badly and the fact we are seeing some strength at the same time as the dollar is strengthening again bodes well,” FastMarkets analyst William Adams said.

Near-two year highs in the dollar at 1.2270 against the euro is weighing on sentiment, although largely gold appears to be ignoring the gains.

A close above $1,200 per ounce heading into the weekend could be notable considering the changing stance of the US Fed on the prospective interest rate hike next year.

Trading today is expected to remain subdued however, in light of few macroeconomic announcements and as the year-end holiday season approaches.

“There comes a time in December when it becomes clear that the time for Christmas holidays is upon us,” Marex Spectron’s David Govett said earlier this week.

“Do not buy strength or sell weakness in this market at the moment. When it looks good, sell it, when it looks awful, buy it, otherwise leave it alone,” he added.

In wider markets, equities appeared to like the fact the Fed was not in a hurry to raise rates – the Euro Stoxx 50 surged 3.3 percent yesterday and the Dow closed up 2.4 percent. The stronger tone has flowed through Asia where the Nikkei has closed up 2.39 percent and the Hang Seng up 1.25 percent,

Given so much bullish energy in equities in the past 48 hours, the precious metals have managed to hold up well as stronger equity markets tend to increase the cost of holding precious metals.

The data agenda is fairly light today. Earlier, Japanese all industries activity disappointed at -0.1 percent. GfK German consumer sentiment was close to expectations at 9, while the country’s PPI was positive at 0.0 percent and the eurozone’s current account fell short at $20.5 billion.

Traders will also be looking to the physical markets for any signs of activity, as premiums in the world’s top two consumers continue to fall to around $2 per ounce over spot respectively.

Physically delivered metal on the Shanghai Gold Exchange (SGE) improved last week, despite falling to 38 tonnes in the first week of the month. According to the SGE figures, 50 tonnes of gold were physically delivered from the week beginning December 8, ten tonnes over the year-to-date average and 12 tonnes up from the week before.

In the other metals, silver at $15.93/15.98, up 12 cents, is back below the psychological $16 mark with the metal trading within a 14 cent intraday range so far.

Platinum meanwhile at $1,196/1,201 is up $3, while palladium is up $2 at $790/795 per ounce.

(Editing by Kathleen Retourne)

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Gold to average $1,145/oz in 2015, platinum the favoured trade – Natixis

Otmane El Rhazi from The Bullion Desk.

The gold price still has room to drop further given continued strength in the dollar and the possibility that the Federal Reserve will raise interest rates some time in 2015, Natixis said.

Platinum is the more favourable trade next year, it said in a research note on Thursday.

“The strengthening dollar will continue pushing gold prices down. As the dollar strengthens so the need for gold as a safe haven ‘in times of crisis’ dissipates,” Natixis said. “Moreover, the yen and euro are expected to weaken on the back of expanding central bank balance sheets.”

Despite dovish comments from the Fed on Wednesday out of the final FOMC meeting of 2014 on when it will raise interest rates, the prospect of a higher rate in the next year – Natixis foresees a first increase in June – remains high. A move towards higher interest rates will make gold a less appealing investment because it offers no yield.

Gold will average $1,145 in 2015, Natixis predicted. Spot metal is currently trading around $1,205 per ounce, down from a 2014 peak of $1,388 in March.

“Higher yields will increase the opportunity cost of holding gold. Investors will be incentivised to enter yield-earning investments rather than holding gold, which typically incurs a cost,” it said.

As well, producer hedging is expected to accelerate, it said, which should bring more metal into the market amid existing concerns over demand, and holdings in physically backed exchange-traded products are expected to remain a source of supply.

“We would not be surprised to see a slight acceleration in outflows compared to this year as interest rates rise. Around 95 percent of gold holdings in physically backed ETPs are held in five western countries; the US alone accounts for around 55 percent of global holdings,” the broker added.

Natixis remains bullish on platinum although prices are set to rise slowly and will average $1,354 in 2015.

Platinum is currently at $1,207 per ounce, down from a 2014 peak of $1,520 in July but up from a low of $1,178 in November.

“At current platinum prices we are well below the cash cost of production of a number of major South African producers,” Natixis said. “For the past three years now, South African producers have been cutting overheads, CAPEX and even output. The only card left for them to play is to cut output further.”

Cuts in the platinum industry – particularly centred on the closure of unprofitable mines – will keep the cash cost of production at 15,000 rand per ounce, it suggested

“If the combination of dollar-based platinum price and the USD-ZAR exchange rate pushes ZAR-denominated platinum prices significantly lower than the industry’s costs of production, this will force further mine closures, which may in itself precipitate additional tension between mining companies, workers and government,” Natixis said.

“This is a scenario that cannot persist for a protracted period, as was painfully demonstrated by the industrial tensions and mine closures of the past two years,” the broker added.

In others, Natixis predicted that silver, currently trading around $16, will average $15.30 per ounce in 2015, while palladium, currently at $790, will average $770.

(Editing by Mark Shaw)

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Swiss gold exports to China fall to 34 tns in November

Otmane El Rhazi from The Bullion Desk.

Switzerland exported 232.2 tonnes of gold in November, according to official Swiss Customs Administration statistics, an increase of 20 percent on the October total and the highest volume this year.

Of those exports, 34.7 tonnes of gold, including gold plated with platinum, in unwrought forms or for non-monetary purposes, was exported to China, down from 42.5 tonnes in the previous month.

Swiss statistics are a good indicator of the volume of metal being shipped into China, which does not publish official figures gold imports.

“As expected, shipments from Switzerland to China were not exceptional. To be sure, the 34.7-tonne flow is decent and in fact is equivalent to about twice the average monthly Swiss shipment to China, but it still reflects an 18-percent decline from October inflows,” UBS Edel Tully said.

Easing demand for physical metal in China has been widely reported in recent weeks, with Shanghai Gold Exchange (SGE) premiums at $1-2 over spot for 1kg bars, down from $6 in October.

Switzerland sourced most gold from the UK in October, accounting for around 46 percent of total imports of 239.7 tonnes.

“This flow reflects the movement of metal from London vaults into refineries in Switzerland, which had been working at full capacities, to meet demand mostly coming from Asia. India, China and Hong Kong accounted for 63 percent of Switzerland’s exports in November,” Tully added.

Of total exports, 76.9 tonnes of metal were shipped into India, up from 75 tonnes in October.

With total imports of gold into India in October at 151 tonnes, around 50 percent of imports during the country’s busiest period of buying came from Switzerland.

This coincides with the surge in the gold price during October – spot gold hit a low of $1,161 per ounce last month, down from a 2014 peak of $1,388.70.

Turkish imports of gold from Switzerland climbed to 22.8 tonnes in November from five tonnes in the previous month, making the country the fourth-largest importer of gold from Switzerland.

Hong Kong exports from Switzerland also improved to 34.24 tonnes last month from 25 tonnes in the previous month, while exports to Singapore climbed to 16.4 tonnes from nine tonnes.

(Editing by Mark Shaw)

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Gold price recovers, outlook improves on dovish Fed

Otmane El Rhazi from The Bullion Desk.

The gold price continued to recover on Thursday morning following dovish statements from the Federal Reserve on when it may choose to raise interest rates.

Spot gold was last at $1,210.90/1,211.70 per ounce, up $21.60 on Wednesday’s close after falling as low as $1,183.30 in the previous session following the meeting.

The Federal Reserve is not in a rush to raise interest rates, it said in what was seen as a moderately dovish policy statement.

The apparent delay to the timing of the US central bank’s first rate increase has created a more favourable environment in the near-term for gold prices.

“With the Fed still dovish and with all the uncertainty in the markets, we would not be surprised if precious metals got some lift,” FastMarkets analyst William Adams said.

The Federal Open Market Committee (FOMC) can be “patient in beginning to normalize the stance of monetary policy”, it said, adding that this new language is consistent with its previous position that the federal fund rate will remain unchanged for a “considerable time” following the end of QE3 in October.

“There are a couple of key points for gold from yesterday’s FOMC meeting: 1) the Fed indicated that despite slightly different language, the intent of its current policy guidance is unchanged from the last meeting and, 2) forecasts for interest rates for 2015-2017 have been nudged lower,” UBS Edel Tully said.

“Both are positive for gold, at the margin, and has likely contributed to its current resilience in the face of a stronger dollar,” she added in a reseach note.

While dollar movements remain in focus, Russia’s currency crisis continues albeit the rouble is slightly better than earlier in the week where it hit 79 against the dollar.

In a conference this morning, Russian President Vladimir Putin insisted that Russia’s economy will stabilise although he warned that it could last a further two years.

While blaming the crisis on external factors, Putin urged the country’s central bank not to “burn” its $419 billion of reserves to help stabilise the country amid rumours that the country may buy or even sell gold to prop up the rouble, which was last at 61.66.

In data today, the German IFO business climate number at 105.5 was as predicted and up from 104.7 last month. US unemployment claims, the flash services PMI, the CB leading index and the Philly fed manufacturing index are due later.

In the other metals, silver also broke back above resistance at $16 and was last at $16.12/16.17 per ounce, up 42 cents. Platinum was last at $1,208/1,213, up $18 and palladium was $13 higher at $788/793.

(Editing by Mark Shaw)

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Federal Reserve to be ‘patient’ with rate hike

Otmane El Rhazi from The Bullion Desk.

The Federal Reserve said that it is not in a rush to raise interest rates, in what was seen as a moderately doveish policy statement.

The members of the Fed’s policy are locked in what’s become an increasingly public debate on when will be the right time to raise interest rates, which have been near zero since December 2008. The current market consensus is that the first hike will happen sometime in the middle of 2015.

The Federal Open Market Committee (FOMC) said on Wednesday that it can be “patient in beginning to normalize the stance of monetary policy”, adding that this new language is consistent with its previous position that the federal fund rate will remain unchanged for a “considerable time” following the end of its asset purchase programme (QE3) in October.

“This was carefully crafted statement. [The Fed] wants to get away from ‘considerable time’ but they didn’t want to damage the markets, especially considering how volatile they have tuned recently,” a US-based fund manager.

“Adding the ‘patient’ phrase is a clever way to both include ‘considerable time’ but also to step away from it. But ultimately, this word play shouldn’t change the [rate hike] timetable [of mid-2015],” he added.

In the markets, gold for February delivery on the Comex division of the New York Mercantile Exchange was last at $1,188.80 per ounce, about $6 lower than when the FOMC statement was released. The yellow-metal swung within a wide range of $1,185.80 to $1,203.10 in the Fed’s wake.

But it was the equity markets that were the big movers. The Dow Jones industrial average, for example, was last up by 242 points, or 1.58 percent, at 17,339.

SOME DISSENT

Meanwhile, there’s not unanimity on the Fed board as it relates to the timing of a rate hike.

Three Fed officials dissented: two hawks, Dallas Fed President Richard Fisher and Philadelphia Fed President Charles Plosser, and one dove, Minneapolis Fed President Narayana Kocherlakota.

Fisher said that the improvement in the US economic performance since October has moved forward, further than the majority of the FOMC envisions, so it could be appropriate to increase the federal funds rate sooner rather than later.

Kocherlakota said that the FOMC statement, in the context of ongoing low inflation and falling market-based measures of longer-term inflation expectations, created undue downside risk to the credibility the Fed’s two percent inflation target.

In a post-FOMC press conference, Fed chairwoman Janet Yellen said the the Fed “is unlikely to begin the normalization process for at least the next couple of meetings” but stressed that the FOMC would still consider a rate hike at any meeting should the economy improve more quickly than expected.

She also said that the recent decline in oil prices is “likely to be on net a positive” for the US economy.

“It’s something that’s certainly good for families, for households, it’s putting more money in their pockets having to spend less on gas, on energy. In that sense it’s like a tax cut,” Yellen said.

Light sweet crude (WTI) oil futures for January delivery on the Nymex is just just about a five-and-a-half year low at $55.89 per barrel.

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Slower EU diesel demand no reason to be bearish on platinum – Macquarie

Otmane El Rhazi from The Bullion Desk.

The death of diesel engines in European cars has been exaggerated, Macquarie said, as fears grow over the outlook for platinum.

Almost 954,000 new cars were registered in the EU in November and 11.6 million so far this year, figures from the European Automobile Manufacturers Association (ACEA) show.

While ACEA does not break this figure down into diesel- and petrol-driven cars, Macquarie said that 53.1 percent of total EU sales were made up of diesel engines in 2013, a figure it expects to fall in 2014 at 52.8 percent.

“For platinum demand this is bearish, but should be kept in context – a 2-percent point decline in diesel share only reduces platinum demand by about 50,000 ounces, and will be offset if overall car sales in Europe rise by more than four percent, which we expect. More profound changes could happen in future,” it added in a report.

Platinum is the primary element in autocatalysts for diesel engines – of the seven million ounces of platinum consumed every year, around 40 percent ends up here. Of that proportion, 20 percent goes into European cars, the biggest consumer of diesel engines in the world.

Although France is looking to “phase them out”- Prime Minister Manuel Valls has suggested that the country will “progressively undo” the dominance of diesel-powered vehicles in the market – total diesel car sales will rise 4.9 percent this year, the bank said.

Still, diesel’s popularity in Europe remains based on the financial incentives for owning a diesel engine.

“Neither of two of the reasons we gave earlier this year for diesel losing market share is played out – that the cost of diesel fuel was becoming more expensive compared with gasoline, and that the cost of diesel cars were becoming more expensive compared to gasoline cars,” Macquarie said.

Moves to taxing diesel more highly, both absolute and relative to gasoline, have stalled, it added, with diesel trading at a hefty discount to gasoline at the pump either side of 10 cents per litre.

Furthermore, diesel-powered cars have not become more expensive relative to gasoline cars despite the fact that traditionally they have always been sold at a higher premium than regular petrol engines.

“Diesel’s market share in European passenger cars has remained remarkably resilient in 2014. However the sharply lower oil price has reduced diesel cars’ financial advantage, and we think its market share decline will accelerate in 2015, though by no more than 2.0 percent points,” Macquarie said.

Spot platinum was last trading around $1,200 per ounce, down from a 2014 peak of $1,520 in July but up from a low of $1,178 in November.

(Editing by Mark Shaw)

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Gold struggles to make gains, market awaits FOMC rate hints

Otmane El Rhazi from The Bullion Desk.

Gold held below $1,200 on Wednesday morning, consolidating ahead of the FOMC press conference later today where traders expect significant downside pressure to arise should it provide any hints to the timing of interest-rate rises.

The spot gold price was last at $1,196.10/1,196.90 per ounce, down $1 and confined to a tight $6 intraday range.

The FOMC statement could shed light on the Fed’s interest rate policy timetable, a lack of clarity in which is generally hampering growth in commodities – particularly gold, which holds no yield.

“Most believe that the Fed will be cutting rates in 2015 and as that approaches gold will remain under pressure,” MKS said in a note.

“Some banks are predicting the phrase that the Fed will keep the funds rate low for a “considerable time” may be omitted from today’s statement,” it added. “If this is the case gold could easily test $1185-90 support and possibly break lower.”

But the downturn in oil prices, which are around five-and-a-half-year lows, and slowing world growth may see the Fed retain that part in the statement for a while longer amid the country’s continuing struggle to stoke inflation.

There is also speculation that Russia may be forced to buy or sell gold reserves in a bid to stop the plummeting rouble. On Monday night, the country’s central bank stepped in when the Russian currency hit 67 against the dollar, increasing interest rates to 17 percent from 10.5 percent in a knee-jerk move.

The rouble hit a high of 79 at one stage in the previous session.

“The unsettling trade in the USDRUB also caught the market’s attention with one trader quoting that trading spot RUB was like “shooting a moving target”. Despite the rate rise by the Russian CB the pair jumped higher during the early European session showing the lack of confidence the market has in the CB right now,” MKS added.

In data today, the eurozone final CPI at 0.3 percent was as expected, as was the core figure at 0.7 percent. Still to come in a busy day for US data are wholesale sales data, CPI figures, current account and the FOMC’s report on the state of the country’s economy.

In the other metals, silver remains below the key psychological level of $16 although it has been tested again this morning. The metal was last at $15.84/15.89 per ounce, up 14 cents.

Platinum at $1,200/1,205 per ounce was up $3 while palladium at $785/790 was $5 higher.

(Editing by Mark Shaw)

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Gold price to average $1,169/oz in 2015 – Deutsche Bank

Otmane El Rhazi from The Bullion Desk.

Deutsche Bank expects the tightening of US monetary policy to be the main driver of gold prices next year, it said.

Although the world’s leading central banks are set to act in opposing ways in 2015, the Federal Reserve, which is expected to raise interest rates after bringing its third quantitative easing programme to an end, will ultimately pressure prices lower, the bank said in a report on Tuesday.

“While some may consider the expansion in central bank balance sheets most notably in Europe and China as beneficial to the gold price, we expect US financial markets will be the ultimate driver of where gold prices are heading next year,” the bank said.

In a statement due after a two-day meeting that starts later today, the Fed is expected to shed light on future monetary policy – the phrase “considerable time” could be removed from its statement, suggesting the Fed is confident the US economic recovery is strong enough to warrant a raising of rates from their current level near zero.

“We are maintaining our bearish outlook for gold prices heading into next year. This reflects ongoing adjustments in US interest rates, equity and currency markets all of which we expect to be negative for gold,” it said.

The yellow metal will average $1,169 per ounce in 2015, it said, up 0.5 percent on its previous forecast but below its average forecast in 2014 of $1,265.

Spot gold was last at a little changed $1,197.20/1,198 per ounce, reversing strongly lower after previously recovering back towards $1,120 early this afternoon.

On the upside, with Chinese, Japanese and European economies struggling, further signs of weakness and stimulus measures may increase safe-haven buying, the bank suggested.

“More convincing could be the prospect that additional programmes of quantitative easing by other global central banks such as the ECB, BoJ and the PBoC might throw a life-line to the gold price. However, we find only a loose correlation of central bank balance sheet growth and gold price trends,” it said.

Deutsche Bank also highlighted growing concerns over world growth stemming from soft oil prices – Brent crude hit a five-and-a-half-year low of $58 per barrel this morning after OPEC’s decision not to cut oil production from 30 million barrels per day.

“We expect the falling oil price will expose the increase divergence among global central banks,” it said. “Commodity markets will therefore need to fear a further strengthening in the US dollar with precious metals and energy markets exhibiting the strongest negative correlation to the US dollar.”

Central bank buying will remain prominent in 2015, it added. This year has seen sizable purchases from central bank such as Russia, with the country alone buying up 74 tonnes from July through to September, the World Gold Council said.

“We expect the trend of global central bank gold buying will continue albeit at a slower clip than recent years,” Deutsche Bank said.

(Editing by Mark Shaw)

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Gold slumps below $1,200, Fed fears hit precious metals hard

Otmane El Rhazi from The Bullion Desk.

Gold was below $1,200 in Tuesday morning London trading, falling for a second consecutive day on fears of an impending interest-rate increase in the US.

The spot gold price was last at $1,196.00/1,196.80 per ounce, down $2 on Monday’s close and below the key psychological $1,200 level following a gradual sell-off that began towards the end of the London session on Monday.

“The precious metals had generally been holding up well until yesterday’s more aggressive pullbacks; we now need to see what dip-buying interest there is around. On balance, with other markets looking more vulnerable and with the shine coming off equities, it may be that there is some call for safe havens, especially cheap ones,” FastMarkets’ William Adams said.

Ahead of the FOMC meeting scheduled for Wednesday, investors are increasingly positioning for higher interest rates from next year.

The meeting is expected to shed light on future monetary policy – the phrase “considerable time” could be removed from its statement, suggesting the Fed is confident the US economic recovery is strong enough to warrant a raising of rates from their current level near zero.

Still, the country continues to struggle with low inflation created by slowing world growth and weak oil prices – Brent crude oil hit another five-and-a-half-year low this morning at $58 per barrel.

Further measures from Russia to counteract the wildly depreciating rouble, which is down 50 percent against the dollar this year alone, have not yet had a discernible effect on gold. The country’s central bank stepped in when the rouble hit 67 against the dollar, increasing interest rates to 17 percent from 10.5 percent in a knee-jerk move.

“Gold failed to profit yesterday from the significantly higher risk aversion among market participants, as evidenced among other things in sharply falling equity markets and noticeably declining cyclical commodities,” Commerzbank said in a note. “Ahead of the Fed meeting which begins today, some short-term-oriented market participants clearly chose to take profits.”

Data today out of China this morning could sway sentiment should Beijing step in to bolster its slowing economy following the HSBC manufacturing PMI at 49.5 missing the forecast 49.8.

Out of the eurozone today, the German manufacturing PMI was robust at 51.2 although the services number was short at 51.4. In France, the manufacturing PMI undershot at 47.9 was but the services PMI at 49.8 was better than predicted.

The Eurozone manufacturing and services PMIs, German ZEW economic sentiment and the eurozone trade balance are due before the flash manufacturing PMI and US housing starts and permits.

In other metals, silver also bore the brunt of the sell-off in gold – it was last at $16.14/16.19 per ounce, down seven cents and looking to test $16. Platinum at $1,208/1,213 was unchanged while palladium at $796/801 was up $1.

(Editing by Mark Shaw)

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Gold price falls below $1,200/oz on dollar gain, oil fall

Otmane El Rhazi from The Bullion Desk.

The gold price slumped in late afternoon trade on Monday as oil plummeted and the dollar strengthened ahead of the Federal Reserve meeting that kicks off tomorrow.

Gold for February delivery on the Comex division of the New York Mercantile Exchange was last at $1,194.60 per ounce in after-hours electronic trade, which is $13.10 below Monday’s close and $30 below the session high.

Comex silver was hit ever harder – the grey metal was down five percent at $16.20 per ounce, which was a three-week low.

Gold’s renewed price volatility after the recent FOMC meeting in October suggests that bullion’s near-term direction may be dependent on the upcoming FOMC meeting and subsequent impact on monetary policy expectations, HSBC’s James Steel said in a report.

“A more dovish FOMC statement would in turn be price supportive while a hawkish statement would be negative, in our view,” Steel said. “The current macro environment has added headwinds to bullion given the weak euro, the dollar near a five and a half year high and crude oil near a five and a half year low. Gold is likely to remain weak in the near term, in our view.”

Meanwhile, in other commodities, light sweet crude (WTI) oil futures hit a new five year low at $55.02 per barrel, while the most-actively traded Comex copper contract settled at $2.8785 per pound, down 5.55 cents.

As for currencies, the dollar rose 0.21 percent against the euro while the dollar index was up 0.40 percent at 82.04.

Equity market also faced downward pressure with the Dow Jones industrial average and S&P 500 closed down 0.54 percent and 0.55 percent respectively, while Germany’s DAX and France’s CAC-40 ended down 2.72 percent and 2.25 percent.

In data, the Empire State manufacturing index was negative at -3.6 against the 12.1 forecast, while the NAHB housing market index was slightly under-par at 57, compared with a predicted 59.

In better news, November industrial production rose 1.3 percent – it had been expected up 0.8 percent. Capacity utilisation for the same month was 80.1 percent, better than the forecast 79.4 percent.

Later this week will see a slew of PMI numbers starting on Tuesday with China’s Flash HSBC reading, while attention will also be focused on this week’s US FOMC meeting for any indication on the timing of interest-rate rises after the end of quantitative easing.

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Gold price down as Fed caution kicks in, oil woes continue

Otmane El Rhazi from The Bullion Desk.

Gold fell in Monday morning trading ahead of the Federal Reserve’s last meeting of the year.

Spot gold was last at $1,213.80/1,214.60 per ounce, down $8 on the pre-weekend close and trading within a $14 intraday range, with the dollar at 1.2422 against the euro.

The metal has fallen for the second consecutive session while investors take up positions ahead of FOMC meeting on Wednesday, which could shed light on future monetary policy in the US – the phrase “considerable time”, which suggests when the Fed may choose to raise interest rates from their current rate near zero – could be removed from its statement.

But while there are signs that the US economy is strengthening after the end of quantitative easing at the end of October – including the vastly improved labour market – the country continues to struggle with low inflation created by slowing world growth and weak oil prices.

A mover towards a near-term interest-rate rise would push investors to yield-bearing assets such as bonds and equities, sending gold swiftly lower.

“If the Fed does remove the term ‘considerable time’ in this month’s edition, the indication would be increasingly apparent that a rate hike is on the cards,” investment analyst Howie Lee from Phillip Futures said.

Elsewhere, oil prices, which hit fresh multi-year lows this morning, are also weighing on prices.

“As an inflation hedge, gold and to a degree the other precious metals, is likely to come under pressure during periods of sustained oil price drops, as, in addition to reflecting weak demand and deflationary impulses, falling oil prices also act to reduce inflation outright and therefore the inflation demand for gold,” HSBC Securities analyst James Steel said.

Brent crude hit $60.49 in early morning trading, a fresh five-and-a-half-year low, though it has since recovered to $62.84 per barrel.

In data, the Empire State manufacturing index, capacity utilisation rate, industrial production, NAHB housing market index and TIC long-term purchases are due from the US.

Elsewhere, there are growing expectations the People’s Bank of China will impose further stimulus measures to counteract the slowing economy, considering the recent spate of disappointing data.

In other metals, silver at $16.84/16.89 per ounce was down 14 cents, slipping below the key psychological level of $17, while platinum at $1,214/1,224 was $3 lower and palladium was up $1 at $809/814.

“We expect dips to remain well supported and for sentiment to gradually become less bearish and more bullish, especially for the PGMs,” FastMarkets analyst William Adams said.

(Editing by Mark Shaw)

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GOLD WEBCAST – Gold holds new range as all eyes turn to US Fed week

Otmane El Rhazi from The Bullion Desk.

Gold remains on a knife edge while further slumps in oil prices and the prospect of higher US interest rates weigh against an otherwise improving backdrop. On the upside, poor industrial production numbers out of China this morning at 7.2 percent -below the forecast 7.6 percent and down on the previous reading of 7.7 percent – will only add to the prospect of further Chinese stimulus measures from Beijing to Confidence in gold as a source of safe-haven investment has improved on weak oil prices, which are exacerbating concerns over world economic growth. next week sees the final FOMC meeting of the year, which poses a high degree of risk to the gold market. Expectations are that the phrasing in its statement may change because slack in the labour market appears to be easing, although inflation remains wea

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Gold finely poised ahead of next week’s FOMC meeting

Otmane El Rhazi from The Bullion Desk.

Gold remains on a knife edge while further slumps in oil prices and the prospect of higher US interest rates weigh against an otherwise improving backdrop.

The spot gold price was last at an unchanged $1,226.00/1,226.90 per ounce after trading within a $10 intraday range.

On the upside, poor industrial production numbers out of China this morning at 7.2 percent -below the forecast 7.6 percent and down on the previous reading of 7.7 percent – will only add to the prospect of further Chinese stimulus measures from Beijing to buoy the slowing economy.

Still, fixed asset investment at 15.8 percent was in line with expectations and retail sales data at 11.7 percent was up from the previous and forecast 11.5 percent.

Confidence in gold as a source of safe-haven investment has improved on weak oil prices, which are exacerbating concerns over world economic growth.

But further slumps in oil prices also threaten to offset general commodities sentiment, with Brent crude hitting another fresh five-year low at $62.97 per barrel this morning, while WTI broke through the $60 mark and was last at $58.75, also a five-year low.

And next week sees the final FOMC meeting of the year, which poses a high degree of risk to the gold market. Expectations are that the phrasing in its statement may change because slack in the labour market appears to be easing, although inflation remains weak.

A move towards lifting interest rates would reverse the positivity building in the gold market – investors would favour more yield-bearing assets.

“There has been talk that the FOMC meeting next week will see the committee removing the all-important phrase “considerable time” from their minutes; if that happens, it ought to send gold plummeting heavily as the rate hike draws nearer,” Howie Lee, investment analyst at broker Phillip Futures, said.

“Gold’s recent climb means the space for downside now presents more opportunities than upside potential,” he added.

In data out of the eurozone, the German WPI at -0.7 percent undershot the expected 0.3 percent, while industrial production at 0.1 percent for the entire bloc was short of the forecast 0.2 percent. The employment change reading of 0.2 percent was as predicted

The US PPI, the core PPI and preliminary UoM consumer sentiment data are due later.

In the other metals, silver at $17.15/17.20 per ounce was up 10 cents, while platinum at $1,238/1,243 was up $2, as was palladium at $815/821.

(Editing by Mark Shaw)

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Gold takes a breather, FOMC meeting next week may provide impetus

Otmane El Rhazi from The Bullion Desk.

Gold price fell slightly lower on stronger US data out last night but maintained comfortably above the $1,200 level.

The dollar index edged higher but gold was little impacted, indicating some strong underlying support for the precious metals. Dollar gains were aided by US unemployment claims coming in at 294,000, which beat the forecast 299,000, as did retail sales at 0.7 percent and core retail sales at 0.5 percent.

In other data, US import prices at -1.5 percent also beat forecasts while business inventories were in line with expectations at 0.2 percent.

“That said, consumer spending tends to be volatile and the solid report from November may very well be a one-off in light of the holiday season. We will require further consistency in retail sales numbers before concluding that retail sales have rebounded in the US,” commented Howie Lee, investment analyst at broker Phillip Futures.

Gold price was last at $1,224.7, about $2 lower than where it ended on Thursday.

Going forward, the last FOMC meeting for the year could be a key risk factor for gold.

“There has been talk that the FOMC meeting next week will see the committee removing the all-important phrase “considerable time” from their minutes; if that happens, it ought to send gold plummeting heavily as the rate hike draws nearer. Gold’s recent climb means the space for downside now presents more opportunities than upside potential,” Lee added.

Silver price looked more firm, holding steady overnight at $17.1 but declined slightly this morning to $17.08 per ounce. There were significant outflow in silver ETFs, which saw investors taking profit after the recent rise in prices. On the retail side however, the US Mint reported that 43.05 million ounces of Amercian Eagle silver coins have been sold so far this year, outperforming the entire year of sales in 2013.

In the other precious metals, platinum is three dollara lower at $1,237 while palladium is a dollar lower at $818 per ounce.

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Gold premiums in Mumbai improve, December imports set to plunge

Otmane El Rhazi from The Bullion Desk.

Gold premiums in Mumbai have edged higher while imports of gold into India drop amid continued confusion over new legislation and after the peak demand season.

The Mumbai premium for gold has climbed to $5-8 per ounce on one-kg bars over the London spot price from $4-6 a week ago, sources told FastMarkets.

While demand for imported metal has slumped, domestic jewellery and investment demand remains robust – a source at one of the country’s biggest jewellers indicated that sales could be up five percent in the year to date following the surge at the end of the monsoon season in August

But confusion remains following the abolition of the 80:20 rule, which made it mandatory for companies to export 20 percent of any imported gold.

“I don’t think people here have got any wiser as to exactly what the rules on imports are at the moment,” Metals Focus Chirag Sheth said. “A large number of people are simply waiting for some clarifications from the government following the removal of the 80:20 rule.”

As little as 10 tonnes of metal might have been shipped into the country in December, other sources have indicated – one claimed to have seen “little in the way of shipments”.

Imports in November hit a still-to-be confirmed 110-120 tonnes on news that the Reserve Bank of India (RBI) was reviewing import restrictions.

A member of the RBI has since indicated that the recent crash in oil prices to multi-year lows has made the country “better placed” on its current account deficit (CAD) although it widened to $10.1 billion in the second fiscal quarter of this year, the Reserve Bank of India said on Monday, with the surge in gold imports cited as a contributing factor.

On Wednesday, the World Gold Council suggested that India should consider establishing its own gold exchange and in turn create a domestic pricing structure for gold derived from the London fix.

Sources in India have backed the idea, suggesting that a bourse along the lines of the Shanghai Gold Exchange would “do wonders for cleaning up the black-market” but that to succeed fully the government would need to “incentivise people to participate”.

Smuggling remains rife – stringent import duties and restrictions that have been in place since 2013 have encouraged the illegal flow of metal to the country, which vies with China as the world’s largest consuming nation.

In China, spot premiums on the Shanghai Gold Exchange remain at $2 over spot, with demand flat despite fluctuations in the gold price.

Physically delivered metal last week on the SGE totalled just 38 tonnes, the lowest figure since August, bringing total year-to-date wholesale demand to 1,905 tonnes.

Prices on international markets have recovered to current levels of $1,220 per ounce from four-year lows of $1,131.60 in October, albeit down from a 2014 peak of $1,388.

The Hong Kong premium is unchanged at $1.10, a five-week low, as was the Singapore rate at $1.20, while Dubai nudged up to $1, other sources said.

(Editing by Mark Shaw)

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Investor risk-off mood help recovery in precious metals

Otmane El Rhazi from The Bullion Desk.

A risk-off tone prevailed in financial markets overnight, helped along by further falls in oil prices, a sharp correction in Chinese equities yesterday and an announcement of a snap election in Greece. The precious metals complex recovered strongly as a USD sell off fuelled a strong rally in gold and other precious metals markets.

Investors were seen buying up gold in reaction to a sell-off in the Chinese equity markets following a week of gains, as well as news on the tightening of credit conditions in China. News out yesterday said the People’s Bank of China took measures to tighten liquidity by imposing stricter collateral rules on short-term loans; there was also talk of an imminent decrease in reserve requirements.

In other news, Eurozone finance ministers decided to extend Greece’s bailout program by two months to February 2015. This decision was followed by the Greek government’s announcement that it intended to expedite the presidential election, originally expected to take place by February 2015. The surprise election decision hit the Greece stocks market hard, falling 11.2 percent, its hardest fall since 1987 as investors mull the possiblity of an opposition victory as well as the uncertainty over Greece’s economic stability.

Gold price jumped more than two percent on Tuesday, gaining $27 to end at $1,229.30. During the Asian trading session today, prices remain near its closing price at $1,229 per ounce. Silver also broke through the $17 mark to end the day at $17.07 per ounce. Current prices are slightly lower at $17.05.

“The best chance for gold to go higher would be for the financial market to become unverved over equity declines in China, fresh sovereign ris worries in the euro zone and currency markeet volatility. It is possible, if the markets are experiencing heighentened risk concers, for the USD and gold to rally simultaneously, as happened furing the financial crisis,” said HSBC Securities analyst James Steel.

PGM prices were pulled higher by gold as well, with platinum up more than a percent on Tuesday to end at $1,249 per ounce. Current price are however lower at $1,244. Palladium is a dollar lower today at $808 after gaining one percent as well.

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Gold price rises on weaker dollar, improved technicals

Otmane El Rhazi from The Bullion Desk.

Gold staged an impressive rally on Tuesday as fresh global anxiety prompted a sell-off in equities and another round of stimulus speculation.

Bullion for February delivery on the Comex division of the New York Mercantile Exchange closed up $37.10, or 3.1 percent, at $1,232.00 per ounce. Trade ranged from $1,199.50 to $1,239.00.

“Precious metals recovered strongly as a dollar sell off fuelled a strong rally in gold and other precious metals markets,” ANZ Research said. “Gold rebounded on speculation that European and Asian central banks will increase stimulus measures. Investors are increasingly wary that the recovery in the US will offset the slowdown in other major economies.”

In the wider-markets, the dollar was 0.45 percent softer at 1.2372 against the dollar, while US equity markets pared their losses. The Dow Jones industrial average and S&P 500 were last down just 0.41 percent and 0.17 percent.

US stocks, however, performed much better than those in Europe and Asia, where Germany’s DAX and the Shanghai Composite Index closed down 2.21 percent and 5.4 percent respectively.

Meanwhile, the precious metals are starting to diverge from crude oil futures, which remain near five-year lows, Triland Metals noted.

“[Gold is] performing sturdily in the face of currency pressure and deflationary forces,” said Triland Metals, adding that respective breaks of $1,210 and $16.50 in gold and silver led to sharp follow through moves.

As for today’s data, US Jolts job openings for October at 4.83 million beat the forecast 4.81 million and IBD/TIPP economic optimism at 48.4 was higher than the predicted 47.2 but wholesale inventories at 0.4 percent were worse than the expected 0.1 percent.

The NFIB small business optimism index climbed 2.0 points to 98.1 last month, which is just a tick lower than its historical average before the Great Recession and above the 96.6 forecast.

Earlier, the French trade deficit for October was 4.6 billion euros, slightly higher than forecast, while Germany was in surplus by 20.6 billion euros, more than anticipated. Industrial production from the UK was under par, falling 0.1 percent in October – it had been seen rising 0.3 percent.

As for the other precious metals, Comex silver for March delivery ended up 85.8 cents, or 5.3 percent, at $17.134 per ounce. Trade ranged from $16.290 to $17.230.

Platinum futures for January delivery on the Nymex was up $17.40 at $1,246.80 an ounce, while the most-actively traded palladium contract was $811.60 per ounce, up $13.80.

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Gold price to average $1,225/oz in 2015, silver $18.88 – BoA ML

Otmane El Rhazi from The Bullion Desk.

Gold will average $1,225 per ounce in 2015, Bank of America Merrill Lynch predicted, although it could trade as low as $1,100 at some stage.

Gold faces many challenges at present, with dynamics in rates, equities and the dollar all bearish factors, the bank said in a note on Tuesday.

“The macro headwinds are exacerbated by developments on the physical market, with China for instance purchasing fewer ounces than last year, when substantial pent-up demand was released during the sharp price correction,” it said.

From a supply and demand perspective, prices will continue to be well supported around $1,200, particularly given current levels of jewellery demand. But this implies that a meaningful pick-up of investor sales is necessary to push prices down to $1,000, it added.

Spot gold was last up $32 on Monday’s close at $1,234.30/1,235.10 per ounce but down from a 2014 peak of $1,388 in March.

Diverging central bank activity has perhaps been most visible in the steady appreciation of the dollar, which ultimately dampens gold prices. Given that the US is a relatively closed economy, currency movements may not necessarily have a major impact on growth but they have contributed heavily to another leg lower in inflation expectations, which contributed to a push higher in real rates, BoA ML added.

“Most of the headwinds for gold investors have originated in the US,” it said. “The US economy emerging from crisis mode has prompted the Fed to normalize monetary policy. This in turn increased headwinds to gold because the ECB and the Bank of Japan continue easing.”

Recent macro dynamics have left the global economy and gold in an uncomfortable position, the bank added.

“One of the key issues at present is that central banks in Japan and the eurozone look to aggressively reflate their economies, which, given exchange rate movements, makes a reflation of the US somewhat more challenging,” it said.

“With signals few and far between that the Fed is changing its policy approach, gold may not have seen the lowest print yet and there is a risk prices could fall to $1,100 per ounce by the second quarter of 2015,” it added.

Silver will average $18.88 per ounce for 2015, the bank predicted, up from current levels of around $17.

Although the market has been structurally oversupplied for years, prices have yet to be affected because investors have absorbed the extra volume for a long time.

But non-commercial demand is absent because Chinese purchasers have not returned to the market in size following the collapse in price from $50, the bank added,

“There is little scope for this dynamic to change, so silver prices are unlikely to break to the upside in 2015,” it said. “[But] silver coin offtake has picked up of late, partially in reaction to the sharp price declines. This may be an early warning sign that silver is not a one-way trade for all market participants.”

Prices of platinum and palladium, meanwhile, following the five-month strikes in South Africa earlier this year, will both rise because the structural deficit in both metals will continue into next year, Boa ML predicted.

The strikes cost an estimated 1 million ounces or 25 percent of annual platinum production, the bank said.

“Yet, these disruptions have had only a limited impact on prices, which we believe was heavily influenced by continued PGM deliveries from inventories the miners had built in the run-up to the strike,” it added.

It sees platinum average $1,438 per ounce and palladium $925 next year.

“Palladium has been in deficit for years, which is a key reason it was the best performing metal in already 2013. Fundamentals remain solid and we believe the announcement by Norilsk Nickel to finance the Russian central bank’s stockpiles as a sign the industry leader is looking to keep the physical market tight,” BoA ML said.

(Editing by Mark Shaw)

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India should establish its own gold exchange – World Gold Council

Otmane El Rhazi from The Bullion Desk.

India should consider establishing its own gold exchange and in turn create a domestic pricing structure for gold derived from the London fix, the World Gold Council suggested

” A dedicated institution focused on gold trading… would reduce the potential for arbitrage and aid standardisation,” the WGC said in a report on Tuesday.

The buying and selling of gold in India currently takes place through a many channels, both formal and informal.

Prices can often vary throughout the different channels – where one participant may quote a premium over London spot for 1kg bars of $15-16, others can quote upwards of $25.

“Fixing the price of gold through an Indian Gold Exchange would address pricing issues,” the WGC added. “An exchange would also improve price transparency and assess gold supply and demand.”

Creating an exchange would involve the construction of a series of vault facilities, much like the 49 facilities that service the Shanghai Gold Exchange, established in 2002.

Policymakers have long tried to wean the Indian public off its addition to gold to counteract the country’s ballooning current account deficit (CAD).

India’s CAD widened to $10.1 billion in the second fiscal quarter of this year, the Reserve Bank of India said on Monday, with the surge in gold imports cited as a contributing factor.

The country recently removed the rule that made it mandatory to export 20 percent of all gold imported into the country, although a 10-percent import duty remains in place.

“While some such measures can deliver short-term results, their long-term impact is open to question,” the WGC said. “A fully functioning mobilised gold market requires a robust infrastructure, backed by a synthesised approach from government.”

The development a more effective economic policy to gold might include incentivising banks to use gold collected as deposits or collateral, it added.

Turkey, one of the world’s top five consumers of gold, initially allowed banks to hold 10 percent of its liquidity reserves as gold, a figure that now stands at 30 percent.

Turkish banks in less than two years have around 300 tonnes of gold monetised as well as several gold-related products in the market, using this metal to meet reserve requirements.

“If India allowed its banks to use gold as part of their liquidity reserves, similar outcomes can be expected,” the WGC said.

“At present, financial products linked to gold have been poorly marketed. Many consumers are unaware of them and they are poorly understood. If banks were able to include gold in their reserve calculations, they would be financially incentivised to innovate, market and explain gold-based products,” it added.

Since consumers can only sell gold at jewellery stores, banks would need to become part of a recognised channel for the repurchase of gold, the WGC said.

“Allowing banks to repurchase gold is clearly an essential step in the monetisation process,” it said.

(Editing by Mark Shaw)

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