Gold treads water amid wait for central bank meetings

The spot gold price treaded water during Asian trading hours on Tuesday, November 1, as market participants waited for central bank meetings in the US and Japan.

Spot gold was recently trading at $1,276.85-1,277.15 per ounce, up $0.95 from Monday’s close. Trading ranged at $1,275.55-1,277.95 so far on Tuesday.

On Wednesday, industry watchers will focus on the conclusion of the Federal Reserve’s monetary policy two-day meeting.

Solid manufacturing figures from the US, Europe and Asia has boosted investor sentiments and expectations of a US rate hike this year, though most expect the US policy-makers to keep the Federal Fund rate unchanged in the upcoming meeting ahead of US presidential elections.

The market current sees only a 6% chance of a rate hike in November, but a 78% chance of an increase in December, according to the CME FedWatch tool.

“Although the Fed is likely to lift rates in December, we think that the expected path of Fed funds rate will continue to flatten, which should exert downward pressure on the dollar and US real rates, boosting investment demand. Physical buying [of gold] in Asia should also pick up in the final months of the year,” Boris Mikanikrezai, an analyst at Metal Bulletin, said.

The Bank of Japan will also announce its monetary policy later today, though market participants do not expect any rate changes.

In data, China’s official manufacturing PMI for October came in at 51.2, according to statistics announced by the National Bureau of Statistics (NBS) on Tuesday. The figure was better than market forecast of 50.4 and September’s reading of also 50.4. An above 50 reading signifies expansion, and below, contraction.

The Caixin manufacturing PMI for October came in at 51.2 – above expectations of 50.2 and September’s reading of 50.1 – marking the fastest growth seen in the sector in two years.

“The economy seems to be stabilising for the moment, owing primarily to policies implemented to sustain growth. Supportive policies must be continued, or industrial output may be dragged down by a slowdown in investment,” Zhong Zhengsheng, Director of Macroeconomic Analysis at CEBM Group said.

The official PMI is more focused on large state-owned firms, while the independently surveyed Caixin PMI is closely watched for conditions among the country’s private sector.

Meanwhile, the country’s official non-manufacturing PMI, which represents the services sector was at 54.0 in October, up from September’s figure of 53.7.

Key US economic data due later today includes final manufacturing PMI, ISM manufacturing PMI, construction spending, IBD/TIPP economic optimism, and ISM manufacturing prices.

In US data released Monday, the core PCE price index month-over-month in October was in line with forecasts at 0.1%. Personal spending and income over the same period also met consensus at 0.5% and 0.3% respectively.

The Chicago PMI in October, however, disappointed at 50.6, which was below expectations of 54.1.

In other commodities, the Brent crude oil spot price fell 0.01% to $48.80 per barrel, and the Texas light sweet crude oil spot price slipped 0.06% to $46.88 so far on Tuesday.

In currencies, the US dollar index slipped 0.01% to 98.41 recently.

In equities, the Shanghai Composite increased 0.28% to 3,109.19 so far on Tuesday.

In other precious metals, silver was last at $17.905/17.925, up $0.055. Platinum rose $5 to $978/984, and palladium increased $4.50 to $619/626 so far on Tuesday.

On the Shanghai Futures Exchange, gold for December delivery was last unchanged at 279.85 yuan per gram, and the December silver was flat at 4,081 yuan per kilogram.

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Gold Edges Lower On US Consumer Report

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Gold Looks Vulnerable

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Comex copper price starts new week in the green

The Comex copper price built on the previous week’s momentum to set a three-week high Monday October 31 with positive US data offsetting a strengthening dollar.

Copper for December settlement on the Comex division of the New York Mercantile Exchange ticked up 0.20 cents or 0.1% to $2.1955 per pound. Trade could be shallow this week with a large host of market participants attending LME Week.

Comex gold for December delivery fell $2.80 or 0.2% to $1,274.0 per oz. Trade has ranged from $1,272.20 to $1,280.50.

The red metal spent the early part of October eroding to a multi-month low, but short-term sentiment has turned more positive recently amid solid manufacturing figures from the US, Europe and Asia

This wave of optimism continued Friday when stronger-than-expected third quarter advance US GDP data showed the world’s largest economy grew at 2.9%.

“Metal prices were driven up ahead of LME Week, the LME base metal index (LMEX) achieving a 15-month high of 2,487 points on Friday,” Commerzbank said. “Prices have found support of late from positive US economic data – the US economy recorded its strongest growth for two years in the third quarter.”

Still the greenback is keeping the commodities complex from a major upturn. After falling to a one-week low of 98.24 last Friday, the dollar index has since recovered to 98.58 on Monday, up 0.3% from its previous close. This has “generally kept the precious in check”, MKS Group said in a Monday note.

But the predominant issue is the US presidential election, which concludes next Tuesday after nearly two years of campaigning.

“Investors will pay close attention to the FOMC meeting over November 1-2, which should shed some light over future US monetary policy. The market sees the likelihood of rate increase in November at just 8.3% but at 68% in November,” Metal Bulletin analyst Boris Mikanikrezai said. “While we also see a December move as the likeliest scenario, we think that what matters for the future direction of gold prices is the longer-term path of the Fed funds rate rather than the precise timing.”

In today’s data, the focus remains on the US with core PCE price index, personal spending personal income and Chicago PMI all scheduled for release.

Following that, the macroeconomic news-flow will centre on the Chinese manufacturing PMI on Tuesday. Consensus is for Chinese factory activity to have remained in expansion mode in October, with the official manufacturing PMI expected at 50.3 and the Caixin manufacturing PMI at 50.2.

Meanwhile in European markets, Germany’s DAX and France’s CAC-40 were down 0.3% and 0.7% respectively, while the dollar strengthened by 0.4% to 1.0950 against the euro.

In other commodities, light sweet crude (WTI) oil futures on the Nymex slipped 57 cents or 1.2% to $48.13 per barrel, while Comex silver for December was recently trading at $17.830, up 3.4 cents.

(Editing by Tom Jennemann)

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GOLD TODAY – Increased US political uncertainty may boost prices

Short Term: Medium Term: Long Term: Resistances: R1 1,300 50 DMA R2 1,315 100 DMA R3 1,375 2016 high (July) R4 1,400 Key resistance R5 1,400 Key level Support: 200 1,274 100 1,315 50 1,300 20 1,264 Support: S1 1,274 200 DMA S2 1,200 Key level S3 1,050 Medium-term support S4 1,046 2015 low Stochastics: Legend: UTL = uptrend line – strong resistance. UTL = downtrend line – strong support. DMA = Daily moving average. DMAs often correspond to support or resistance levels. Their slope is also important because it shows if the market can be supported on the upside (rising) or pressured on the downside (falling). The momentum index allows us to determine whether momentum is positive or negative. We use a parameter equal to 10, corresponding to momentum over the past 10 days. Above 0, momentum is positive; below 0, momentum is negative. ADX – average directional index. This allows us to gauge the strength of the current trend (above 20, the trend is strong; below 20, the trend is weak). The combination of momentum and ADX allows us to determine the current trend (up or down) and its strength (strong or weak). Technical Comment Momentum is in positive territory while ADX is firmly above 20, indicative of a potentially strong uptrend. Analysis Gold continues to strengthen, attracted by its steadily rising 200 DMA, leaving the year-to-date uptrend intact for now. Still, a bearish pattern has emerged, namely a bearish crossover pattern, whereby the (short-term) 20 DMA crosses below the (long-term) 200 DMA. This suggests that gold will remain very challenged unless it manages to break firmly above $1,300. On the upside, gold needs to move firmly back above its 200 DMA and, if so, above $1,300 to produce a potentially powerful rally. On the downside, we are watching the 200 DMA – a firm and sustained break below it would signal the end of the uptrend (from a purely technical viewpoint). Macro drivers Gold started the week lower after rallying 1.42% rally last week, supported by positive spillovers from metals due to stronger global growth momentum and firmer risk appetite. Investors will pay close attention to the FOMC meeting over November 1-2, which should shed some light over future US monetary policy. The market sees the likelihood of rate increase in November at just 8.3% but at 68% in November. While we also see a December move as the likeliest scenario, we think that what matters for the future direction of gold prices is the longer-term path of the Fed funds rate rather than the precise timing. In light of positive US macro data – third-quarter GDP rose at its fastest pace since the third quarter of 2014 – the Fed could surprise on the hawkish side by guiding the market toward a steeper expected path of Fed funds rate. Under this scenario, the dollar could strongly rise while US real rates could move higher, prompting some long liquidation in  gold. Another key imminent event is the US presidential elections on November 8. Political uncertainty has increased after the FBI reopened a probe into Clinton emails on Friday, October 28, although the market does not seem to be concerned yet – volatility across most risky asset classes is broadly unchanged. Investment and speculative flows: ETF holdings – at 2,163 tonnes as of October 28 edged 1.93 tonnes or 0.1% higher last week. They are up 30 tonnes or 1.4% since the start of October so they are rising at a stronger pace than in September (27 tonnes) and August (16 tonnes). This bodes well for the year-to-date price uptrend. Speculative positioning improved for the first time in four weeks over October 18-25, according to the latest CFTC statistics. Perhaps the profit-taking of August 30-October 11 has ended. Physicals: The physical market is improving further in India, swinging back to a premium structure, reflecting stronger demand for festival season. Demand in China could pick up in the coming weeks due to favourable seasonality, especially due to lower domestic prices. Conclusion Although gold is under selling pressure today, we remain constructive over the very short term, anticipating a more dovish Fed than the market is inclined to think. As well, increased US political uncertainty should prompt investors to rebuild some risk-unfriendly positions in, for example, gold. Still, a firm break below the 20 DMA would be enough to neutralise our stance or even adopt a negative stance. In the fourth quarter, we are slightly constructive – although the Fed is likely to lift rates in December, we think that the expected path of Fed funds rate will continue to flatten, which should exert downward pressure on the dollar and US real rates, boosting investment demand. Physical buying in Asia should also pick up in the final months of the year.   All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.

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Gold: Correction Finished, Intermediate Base Pattern Completing

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Gold price extends losses as dollar bounces

The spot gold price extended its losses during Asian trading hours into the London morning trading session on Monday October 31 while the dollar continues to strengthen. 

The spot gold price was recently quoted at $1,274.25/1,274.70 per oz, down $9.45 on the previous close. Trade has ranged from $1,272.45 to $1,279.60 so far.

After falling to a one-week low of 98.24 last Friday, the dollar index has since recovered to 98.51 on Monday, up 0.2% from its previous close. This has “generally kept the precious in check”, MKS Group said in a Monday note.

While the broker sees initial support at $1,265 per oz, it warned that there may be “a few more surprises” leading into the US presidential election vote on November 8, with volatility skewed to the upside.

In the other precious metals, the spot silver price was rose 8.5 cents to $17.82/17.84 per oz. Platinum at $978/984 per oz was up $3 and palladium climbed $0.50 to $615/622 per oz.

(Editing by Mark Shaw)

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Precious Metals Spike On Continues Political Uncertainty

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Arbitrage Between U.S. And Chinese Steel Prices Falls To Normal Levels

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Silver Completing Intermediate Base Pattern

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Metals continue to show strength

The base metals closed on a strong note on Friday, October 28, with gains averaging one percent basis three-month prices. Zinc prices led the rise with a 1.7 percent gain, aluminium and copper prices were up 1.4 and 1.2 percent respectively. Precious metals were also firmer on Friday, with spot prices up an average of 1.4 percent, led by a 1.5 percent rebound in palladium prices to $618 per oz. Gold prices closed up 1.2 percent at $1,283.95 per oz – further concerns about the US Election have added to political uncertainty, giving gold prices a boost in the process.

This morning, the base metals are up an average of 0.2 percent, basis three-month prices, most of the metals are firmer, the exception is copper that is down 0.4 percent at $4,825 per tonne. Nickel prices are up 0.7 percent at $10,450 per tonne, zinc and tin prices are up 0.4 percent, while aluminium and lead prices are little changed.

In Shanghai, the base metals are up across the board with December aluminium prices up 2.6 percent at Rmb 14,150 per tonne, December zinc prices are up 1.6 percent, January nickel prices up one percent and December copper prices are up 0.7 percent at Rmb 38,400 per tonne. Spot copper prices in Changjiang are also up 0.7 percent at Rmb 38,500-38,700 per tonne, the backwardation between spot and the December contract is at an equivalent of $44 per tonne and the LME/Shanghai copper arbitrage ratio has fallen to 1:7.96, which means the arb window is probably not open to most trading.

In other metals in China, January iron ore prices on the Dalian Commodity Exchange are up 3.3 percent, January steel rebar on SHFE is up 2.3 percent, while December gold and silver prices are up 0.6 and 0.7 percent respectively. In international markets, spot Brent crude oil prices are down 0.5 percent at $50.42 per barrel.

Equities were generally weaker on Friday, the Euro Stoxx 50 closed down 0.2 percent while the Dow closed off 0.1 percent and the S&P 500 closed off 0.3 percent. In Asia this morning, markets are mixed, the Nikkei is off 0.1 percent, the Hang Seng is up 0.2 percent, the CSI 300 is down 0.2 percent, the ASX 200 is up 0.6 percent, helped by stronger commodity prices, and the Kospi is down 0.6 percent.

In FX, the dollar has slipped on the back of the latest FBI Clinton probe with the dollar index falling to 98.50 from a peak last week of 99.12. The euro jumped to 1.0991 on Friday, but is recent quoted at 1.0958, while other currencies are little changed with sterling at 1.2176, the yen at 104.87 and the aussie at 0.7601. The yuan has firmed from Friday, it is recent quoted at 6.7698, Friday’s low was 6.7869. Other emerging market currencies are mixed, the rouble is weaker at 63.20 on the back of the weaker oil and the rand is firmer on the back of firmer commodity prices.

The economic agenda is busy today, data out already showed Japan’s housing starts jumped ten percent, having been expected to climb 5.3 percent, German retail sales dropped 1.4 percent, data out later includes UK lending data, EU and Italian CPI, EU flash GDP and US data includes personal income, spending and PCE prices and Chicago PMI – see table below for more details.

The base metals are all looking strong and well placed to continue higher. Aluminium and tin prices are pushing the envelope on the upside, zinc prices look well placed to follow, copper and nickel prices are approaching resistance lines and lead is consolidating. With the metals’ industry gathering in London for London Metals Week, it will be interesting to see whether sentiment is getting more bullish or not. We remain quietly bullish, but sentiment generally seems considerably less bullish than the price performance.

Gold prices have pushed higher on the back of increased uncertainty over the US election but prices are still generally in consolidation mode in that they could be forming bear-flags. That said, ETF buying has picked up in recent weeks and if the dollar retreats further then more buying could emerge. Platinum prices are rebounding from oversold levels, while palladium prices are at best consolidating. Given the strength in other industrial metals we would not be surprised to see the industrial precious metals get some support. 

 

Overnight Performance
GMT	06:45	+/-	+/- %	Lots
Cu	4825	-20.5	-0.4%	3197
Al	1715.5	0	0.0%	1760
Ni	10450	70	0.7%	1027
Zn	2409	10.5	0.4%	2051
Pb	2069	1	0.0%	205
Sn	20650	90	0.4%	8
	Average		0.2%	8,248
Gold	1275.89	-8.06	-0.6%
Silver	17.852	0.107	0.6%
Platinum	979	1	0.1%
Palladium	620.8	2.8	0.5%
	Average PM		0.1%

 

 

SHFE Prices 06:50 GMT	RMB	Change	% Change
Cu	38400	270	0.7%
AL	14150	355	2.6%
Zn	19320	310	1.6%
Pb	16440	80	0.5%
Ni	83020	830	1.0%
Sn	134540	180	0.1%
Average change (base metals)	0		1.1%
Rebar	2604	59	2.3%
Au	280.05	1.6	0.6%
Ag	4088	27	0.7%

 

Economic Agenda
BST	Country	Data	Actual	Expected	Previous
5:00am	Japan	Housing Starts y/y	10.0%	5.3%	2.5%
7:00am	Germany	Retail Sales m/m	-1.4%	0.2%	-0.3%
9:30am	UK	Net Lending to Individuals m/m		4.6B	4.5B
9:30am	UK	M4 Money Supply m/m		0.6%	0.9%
9:30am	UK	Mortgage Approvals		62K	60K
10:00am	EU	CPI Flash Estimate y/y		0.5%	0.4%
10:00am	EU	Core CPI Flash Estimate y/y		0.8%	0.8%
10:00am	EU	Prelim Flash GDP q/q		0.3%	0.3%
10:00am	Italy	Prelim CPI m/m		0.2%	-0.2%
12:30pm	US	Core PCE Price Index m/m		0.1%	0.2%
12:30pm	US	Personal Spending m/m		0.4%	0.0%
12:30pm	US	Personal Income m/m		0.4%	0.2%
1:45pm	US	Chicago PMI		54	54.2

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DGCX to list Shanghai gold futures

The Dubai Gold and Commodities Exchange (DGCX) will list a contract known as the “DGCX Shanghai Gold Futures Contract” after obtaining a license from the Shanghai Gold Exchange (SGE) to do so, the DGCX said on Saturday, October 29.

This will be the first yuan-denominated gold future product to be offered outside of China and will use the Shanghai Gold Benchmark as its pricing mechanism, the DGCX said.

SGE’s chairman, Jiao Jinpu, had said last week at an industry conference earlier in October that both exchanges are expected to sign an agreement in this aspect.

“The aim of the listing is to create further economic development and cooperation between China and Dubai through the precious metals trade. The gold futures product will offer global participants access to China and with that a deeper pool of liquidity as well as an enhanced gold pricing mechanism,” the DGCX said.

“We are a gateway to the Middle East, Africa and Europe where a significant portion of gold traders, miners, jewellers and financiers reside. This contract will have far-reaching appeal to those wanting access to a product with deeper pools of liquidity and a pricing mechanism that is fair and transparent,” Gautam Sashittal, CEO of Dubai Multi Commodities Centre and the board director of DGCX, said.

The DGCX also announced on the same day that the Agricultural Bank of China (ABC) DIFC Branch will be the first market maker for the Shanghai Gold Futures contract.

ABC is China’s third largest lender by assets and is one of the first participants in the precious metal business in China and is known to hold leading positions all the time, the DGCX said.

As part of the agreement, the ABC DIFC Branch will provide bid and offer prices with a minimum spread and maximum size, and maintain margins and collaterals.

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Gold eases as risk appetite improves, US dollar strengthens

The spot gold price eased during Asian trading hours on Monday, October 31, as improved risk sentiment decreased the appetite for safe haven assets.

Spot gold was recently at $1,276.75-1,277.15 per ounce, down $7.00 from last Friday’s close. Trading ranged at $1,276.30-1,279.60 so far on Monday.

“So far gold has found strong support around $1,250, which we believe relates to a pick-up in physical demand from jewellery fabricators,” James Moore, an analyst at Metal Bulletin, said.

“But attempts to rally continue to struggle. The sell-off in the bond market also points to reduced demand for safe-haven assets while risk appetite improves and suggest gold prices will continue to struggle in the short term.”

Solid manufacturing figures from the US, Europe and Asia has boosted investor sentiments.

Last Friday, the US’ advance third-quarter GDP growth came in at 2.9%, beating forecast of 2.5% and the previous reading of 1.4%. As well, the advance GDP price index at 1.5% was better than the expected 1.3%.

Following the data, now roughly 74% of investors expect the Federal Reserve to normalise interest rates in December, according to the CME FedWatch tool. With the presidential election in less than two weeks, it is unlikely the policy-board adjusts the Federal Funds rate beforehand during the November 1-2 Fed meeting.

Focus will also be on the Chinese manufacturing PMI this Tuesday. Consensus is for Chinese factory activity to have remained in expansion mode in October, with the official manufacturing PMI expected at 50.3 and the Caixin manufacturing PMI at 50.2.

In other US data released last Friday, the US employment cost index quarter-on-quarter was in line with consensus at 0.6%, while the UoM consumer sentiment at 87.2 was below the predicted 88.2.

Other US data due later today includes the core PCE price index, personal spending, personal income and Chicago PMI.

In currencies, the US dollar index rose 0.18% to 98.49 recently.

In other commodities, the Brent crude oil spot price fell 0.52% to $50.40 per barrel, and the Texas light sweet crude oil spot price slipped 0.35% to $48.44 so far on Monday.

In equities, the Shanghai Composite fell 0.58% to 3,086.28 recently on Monday.

In other precious metals, silver was last at $17.84/17.89, up $0.12. Platinum rose $0.50 to $976/981, while palladium decreased $0.50 to $614/621 so far on Monday.

On the Shanghai Futures Exchange, gold for December delivery was last unchanged at 279.60 yuan per gram, and the December silver was flat at 4,080 yuan per kilogram.

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Comex copper price benefits from positive US data

Comex copper prices rose for the fifth consecutive session Friday Oct 28 on better-than-expected US data, while investors prepare to head to London for a week-long conference.

Copper for December settlement on the Comex division of the New York Mercantile Exchange climbed 1.45 cents or 0.7% to $2.1780 per pound. The contract has finished in positive territory every session this week and is trading at a two-week high.

Comex gold for December delivery fell $6.20 or 0.5% to $1,263.30 per oz. Trade has ranged from $1,262.0 to $1,272.70.

This morning, fresh US data showed the American economy grew at 2.9% during the third-quarter, above the forecast of 2.5% and previous reading of 1.4%. Advance GDP price index over the same period also exceeded expectations at 1.5% expansion, 1.3% was called for.

Lastly, employment cost index quarter-on-quarter was in-line with economic consensus at 0.6%. Later, University of Michigan consumer sentiment and inflation expectations are due.

The positive figures follow weeks of solid manufacturing figures in the US, Europe and Asia, which also provided a lift for the base metals complex.

“A lot of the economic news globally in recent weeks has been improving and that should help demand for metals – for a long time sluggish demand growth has been the weak link in the supply/demand equation – so any pick-up in demand may well start to prompt a bit more restocking,” Metal Bulletin analyst William Adams said.

The positive US data weighed on the precious metals complex because now 75% of investors see the Federal Reserve hiking interest rates in December. With the presidential election in less than two weeks, it is unlikely the policy-board adjusts the Federal Funds rate beforehand.

But chairwoman Janet Yellen has been steadfast in her desire to raise rates at least once in 2016 after the Fed initially targeted four hikes at the beginning of the year.

“If a Federal Reserve rate hike in December appears more probable after the US elections, prices are likely to further decrease slightly,” Commerzbank said in a note. “We do not expect any more pronounced price slide because the selling pressure from speculators is likely to abate and physical buying interest will doubtless pick up at lower prices.”

LME Week will start in earnest this weekend, with metal participants gathering in London to discuss recent trends. The recent price rises may boost sentiment after a tough year, market participants said.

Turning to European markets, Germany’s DAX fell 0.3%, while France’s CAC-40 was last up 0.3%. The dollar softened by 0.3% to 1.0926 against the euro.

In other commodities, light sweet crude (WTI) oil futures on the Nymex fell 42 cents or 0.8% to $49.30 per barrel, while Comex silver for December settlement was recently trading at $1,26.50 per oz., up $2.90.

(Editing by Tom Jennemann)

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LME must tackle rivals, scepticism in race for London’s gold market

The London Metal Exchange (LME) must overcome a general sense of scepticism and an increasingly crowded marketplace when it rolls out its new precious metals contracts next year.

Working with the World Gold Council (WGC) and with support from five banks and one proprietary trading house, the LME will launch London spot, futures and options contracts for gold and silver in the first half of 2017. Platinum and palladium contracts will follow later.

But the market is largely sceptical about the new LME/WGC precious metals venture for now.

“I just don’t have a lot of confidence that the LME can influence the precious metals market,” one market participant said.

The LME has not traded precious metals since the 1990s. Its only foray into gold futures trading dates back to 1982 when it joined gold industry participants to launch the London Gold Futures Market (LGFM). But the lack of speculative investors caused the market to close within three years.

The exchange lost out in the race to administer the London gold fix in November 2014 – it is now in the hands of ICE – although it won the administration of the platinum and palladium price fixes in October 2014.

The LME’s credibility is a concern for some – recent clashes with users over fee increase and falling volumes are among show it has many issues to contend with.

Another worry for the gold market is the fact that the new suite of precious metals contracts – called LMEprecious – does not have the backing of the London Bullion Market Association (LBMA), which is the leading authority on the London bullion market and the governor of the good delivery list.

“I’m not so optimistic about LME’s gold contracts. The gold market has always been used to using the OTC market to trade,” another industry source said.

The London gold market is primarily over-the-counter (OTC), with trades taking place privately between counterparties rather than on an exchange. But liquidity has dropped over the past year – many banks have pulled out of commodities and exited precious metals due to the advent of tighter regulation following the 2008 financial and banking crisis.

The new set of contracts is a response to that change in regulatory environment, the LME and the WGC have jointly said.

“It is always better to anticipate and be prepared than wait and catch up,” Aram Shishmanian, CEO of the WGC, said.

All trading of the new LME contracts will be centrally cleared on LME Clear, the LME’s clearing house.

“The market has been adamant about not clearing unless its mandated to do so, a regulatory change that’s been years in the making and keeps getting pushed back. Without a regulatory requirement the market just won’t budge,” another market participant said.

And market participants would like to see liquidity in these new contracts before trading them, many said.

“Liquidity is the most important thing for us,” one bank official said. “Our traders are only allowed to trade a futures contract if the contract is liquid. They must be able to sell it easily – if not, it would be a risk to us.”

The LME, meanwhile, said it is hoping to attract more players before the new contracts go live. “With most new efforts you need the ‘coalition of the willing’ to get things moving. You can’t get everyone there on day one,” LME CEO Garry Jones said.

Goldman Sachs, ICBC Standard Bank, Morgan Stanley, Natixis, OSTC and Societe Generale will act as the initial liquidity providers but large-volume entities such as HSBC, UBS, JPMorgan and Scotia are not involved, some sources noted.

Also fighting for the control of the London gold market is Intercontinental Exchange, which also won in November 2014 the race to administer the London gold fix. The exchange is set to launch a rival gold futures contract next year.

But with the LBMA separately attempting to set up its own trading platform to improve transparency in the $5 trillion London gold market, there are concerns about the risks of overkill.

“A little like sharks in a feeding frenzy, various exchanges and unheard of companies seem to be attempting to kill a market that is alive and well,” David Govett, head of precious metals at Marex Spectron said.

“The LME, ICE and the LBMA themselves are all launching futures contracts, trading platforms and who knows what else in an attempt to break up the centuries-old OTC London gold market,” he added.

In the first quarter of 2017, the LBMA – together with Boat Services and Autilla – will roll out its own trade reporting service. It also has plans to launch further services in the future, such as a trading venue and OTC Clearing/CCP as and when the market requires.

The two start-ups were chosen over larger industry bodies, including the LME, CME and ICE.

“Do we really need multiple industry bodies working towards the same goal but not working with each other?” one banking source asked.

But there are specification differences between the contracts – the LME contract will be focused on London while the CME contracts are New York-oriented, CME head of precious metals Miguel Vias noted.

“It is difficult to do a global gold contract. The Comex contract comes as close as you can get… There will continue to be regional differences [for gold contracts] and we will certainly continue to do what we can to make sure Comex remains the global standard,” he added.

Competition is healthy for the market, ensuring London remains a viable and stable marketplace,

“London is going through some big changes and you are watching multiple players trying to help the market move forward,” Vias told Metal Bulletin. “I like the fact there are so many eyes on London making sure it remains a healthy viable liquidity pool.”

(Additional reporting by Vivian Teo, editing by Mark Shaw)

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Gold Holds Below Important Resistance At 1272/73

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Gold price confined to narrow range, focus on GDP data/Fed

Gold was little changed in London on the morning of Friday, October 28 while market participants focus on the release of US third-quarter GDP growth data today.

The spot gold price was recently quoted at $1,266.90/1,267.3 per oz, down $1.20 on the previous close. Trade has ranged narrowly from $1,265.55 to $1,271.95 so far.

Key US data due later today includes third-quarter advance GDP growth – forecast at 2.5% – as well as the advance GDP price index, the employment cost index and revised UoM consumer sentiment and revised UoM inflation expectations.

Investors hope for further insight on the likelihood of interest-rate movements from the Federal Reserve from today’s GDP data.

If the figures prove positive, the gold price could come under pressure because the dollar would presumably appreciate further on heightened expectations of a rate rise from the Federal Reserve, Commerzbank said in a research note.

“We expect to see a slow steady grind higher into the year-end but remain wary of shocks to US dollar and data influencing FOMC rate announcements, and the US election,” MKS noted, highlighting heavy resistance at $1,275-80 per oz.

In the other precious metals, the spot silver price was unchanged at $17.585/17.605 per oz. Platinum at $963/973 per oz was up $9 and palladium climbed $6 to $611/619 per oz.

 

(Editing by Mark Shaw)

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Why So Many Gold And Silver Price Forecasts Are Wrong

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Metals prices stronger, rallies look robust

The base metals pressed ahead with their stronger tone on Thursday, October 27, with three-month prices closing up an average of 0.4 percent, led by a 1.1 percent rise in nickel prices to $10,340 per tonne, copper prices closed up 0.7 percent at $4,788 per tonne, while lead was the only metal to see prices slip, they closed down 0.8 percent at $2,050 per tonne. The precious metals were mixed yesterday, spot gold, silver and platinum prices were little changed, while palladium prices dropped 1.5 percent to $609 per oz.

This morning, base metals three-month prices are up an average of 0.5 percent with gains across the board, with zinc, lead and nickel prices up 0.6-0.7 percent, aluminium prices are up 0.4 percent, tin prices 0.3 percent and copper prices once again lag with a 0.1 percent again to $4,795 per tonne. Volume has been higher than average with 7,449 lots traded as of 06:39 BST.

Spot precious metals prices are also upbeat with a 0.5 percent average gain, PGM prices are up 0.6 percent, silver prices are up 0.4 percent and gold prices are up 0.2 percent at $1,270.70 per oz.

In Shanghai, the December base metals prices are up an average of 1.4 percent, led by a 2.7 percent gain in aluminium prices, lead prices are unchanged, while the rest are up between 1.2 percent for copper (Rmb 38,280 per tonne) and tin prices and 1.6 percent for nickel prices. Spot copper prices in Changjiang are up 0.9 percent at Rmb 38,250-38,450 per tonne, the backwardation between spot and the December copper contracts has narrowed to an equivalent of $25 per tonne, while the LME/Shanghai copper arbitrage ratio is steady at 1:7.99, which should be open for some trading.

In other metals in China, iron ore January futures are up four percent on the Dalian Commodity Exchange, January steel rebar prices on SHFE are up 0.8 percent, while gold and silver prices are up around 0.3 percent. The surge in iron ore and steel is now looking more speculative again, but until recently it had looked to be driven by restocking. In international markets, spot Brent crude oil prices are up 0.4 percent at $50.48 per barrel.

Equities were mixed yesterday, the Euro Stoxx 50 closed up 0.1 percent, the Dow closed down 0.2 percent and bonds were lower as it looked as if more central banks might move away from further monetary policy easing. In Asia this morning, equities are mixed, the Nikkei is up 0.6 percent, the Hang Seng is down 0.7 percent, the CSI 300 is up 0.1 percent, the ASX 200 is off 0.2 percent and the Kospi is down 0.3 percent.

In FX, the dollar index remains strong at 98.91, but prices are consolidating below Tuesday’s high at 99.12, the euro is getting some lift at 1.0905, sterling is weak at 1.2160 as are the yen at 105.40 and the aussie at 0.7577. The yuan continues to weaken, it was recently at 6.7793 and most of the other emerging market currencies we follow are consolidating, but perhaps with a slightly weaker bias.

The economic agenda is busy, there was a host of Japanese data out, most of it showed some improvement even if it was not strong, see table below. French preliminary GDP climbed to 0.2 percent, later there is data on German, French and Spanish CPI, French consumer spending and Spanish GDP. US data includes advanced GDP, GDP prices and revised University of Michigan consumer sentiment and inflation expectations – see table below for more details.

Base metals prices are rallying again, aluminium prices have cleared a resistance area, tin prices have set a fresh high this morning and the complex is looking more bullish as it approaches London Metals Week. We wait to see what sentiment is like when the metals’ world meets next week. For now we remain quietly bullish.

The precious metals are for the most part consolidating, gold and silver prices are doing well to hold up in the face of the stronger dollar, platinum prices are rebounding having become quite oversold in recent months, while palladium prices are struggling and are looking weaker. With considerable uncertainty ahead with the US election, the FOMC meetings in November and December and with an OPEC meeting in November too, we would not be surprised if demand for safe-havens remained solid. On top of that, the lower gold prices of late are likely to attract a pick-up in physical interest.   

 

Overnight Performance
BST	06:39	+/-	+/- %	Lots
Cu	4795	7	0.1%	2333
Al	1699.5	7	0.4%	2018
Ni	10400	60	0.6%	948
Zn	2373	13.5	0.6%	1937
Pb	2065	15	0.7%	172
Sn	20570	70	0.3%	41
	Average		0.5%	7,449
Gold	1270.69	2.09	0.2%
Silver	17.68	0.07	0.4%
Platinum	966.2	7.2	0.8%
Palladium	614	5	0.8%
	Average PM		0.5%

 

SHFE Prices 06:40 BST	RMB	Change	% Change
Cu	38280	460	1.2%
AL	13910	370	2.7%
Zn	19130	300	1.6%
Pb	16380	0	0.0%
Ni	82370	1130	1.4%
Sn	135200	1640	1.2%
Average change (base metals)	0		1.4%
Rebar	2547	19	0.8%
Au	278.9	0.8	0.3%
Ag	4067	8	0.2%

 

Economic Agenda
BST	Country	Data	Actual	Expected	Previous
12:01am	UK	GfK Consumer Confidence	-3	-3	-1
12:30am	Japan	Household Spending y/y	-2.1%	-3.0%	-4.6%
12:30am	Japan	Tokyo Core CPI y/y	-0.4%	-0.5%	-0.5%
12:30am	Japan	National Core CPI y/y	-0.5%	-0.5%	-0.5%
12:30am	Japan	Unemployment Rate	3.0%	3.1%	3.1%
6:00am	Japan	BOJ Core CPI y/y	0.2%	0.3%	0.4%
6:30am	France	Prelim GDP q/q	0.2%	0.3%	-0.1%
All Day	Germany	Prelim CPI m/m		0.1%	0.1%
7:45am	France	Consumer Spending m/m		0.3%	0.7%
7:45am	France	Prelim CPI m/m		0.2%	-0.2%
8:00am	Spain	Flash CPI y/y		0.3%	0.2%
8:00am	Spain	Flash GDP q/q		0.7%	0.8%
Tentative	Italy	10-y Bond Auction			1.21|1.4
1:30pm	US	Advance GDP q/q		2.5%	1.4%
1:30pm	US	Advance GDP Price Index q/q		1.4%	2.3%
1:30pm	US	Employment Cost Index q/q		0.6%	0.6%
3:00pm	US	Revised UoM Consumer Sentiment		88.1	87.9
3:00pm	US	Revised UoM Inflation Expectations			2.4%

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Gold stays supported amid wait for US GDP data

The spot gold price stayed supported during Asian trading hours on Friday, October 28, amid the wait for the third quarter advance US GDP number due later today.

Spot gold was recently at $1,270.85-1,271.15 per ounce, up $2.65 from Thursday’s close. Trading ranged at $1,268.10-1,271.15 so far on Friday.

“Prices appear to have found some support but it is too early to say there will not be another down leg. Still, it is encouraging that prices have managed to get some lift given the strength of the dollar. We remain bullish overall but would not necessarily be in a hurry to buy,” William Adams, head of research at FastMarkets, said.

The US dollar index slipped 0.13% to 98.82 recently on Friday – it had reached a nine-month high of 99.12 on Tuesday.

Market focus is now on the advance third-quarter US GDP growth due later today which could affect US monetary policy, the direction of the US dollar and global risk sentiment.

There is wide consensus of 1.3% to 3.6% for this data and thus has the potential to surprise markets, National Australia Bank said on Friday.

Other key US data due later today includes the advance GDP price index, employment cost index and revised UoM consumer sentiment and revised UoM inflation expectations.

In US data released on Thursday, core durable goods orders came as expected at 0.2% while durable goods orders disappointed at -0.1%. Unemployment claims were better-than-expected at 258,000 as were pending home sales at 1.5%.

In other commodities, the Brent crude oil spot price increased 0.58% to $50.55 per barrel, and the Texas light sweet crude oil spot price gained 0.32% to $49.78 so far on Friday.

In equities, the Shanghai Composite slipped 0.3% to 3,121.79 recently on Friday.

In other precious metals, silver was last at $17.66/17.68, up $0.06. Platinum rose $11 to $967/973, and palladium decreased $7 to $612/620 so far on Friday.

On the Shanghai Futures Exchange, gold for December delivery was last unchanged at 278.65 yuan per gram, and the December silver was flat at 4,062 yuan per kilogram.

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Gold: Longer-Term Target Below $1046

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Gold: 1st Retest Of 200 DMA

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Copper: JJC In Matrix

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History of the LME: teething problems mar move to new HQ

The London Metal Exchange (LME), the world’s largest non-ferrous metals market, marked its 139th year of existence by moving to a new HQ in February, although the relocation did not take place without a major hiccup in the summer.

Three years after its purchase by Hong Kong Exchanges and Clearing Ltd (HKEx), the LME upgraded to a purpose-built new HQ on the fringes of London’s financial district – only its fourth location in its entire lifespan.

But the building and its new open-outcry floor at Finsbury Square was closed for nearly two months due to safety issues, resulting in floor traders having to relocate to the LME’s disaster recovery site in the Essex countryside outside London.

During 135 years of independence and since being taken private, the LME has been the premier exchange for the global metal industry; the vast majority of commercial transactions have a price reference discovered on Europe’s last open-outcry trading floor, which is still open for business, even though ring-dealer numbers have fallen to nine firms – there were some 30 in the 1970s heyday.

The LME started life in the 19th century above a City of London hat shop. While the business hub remains in London, its direction has increasingly been guided by China and Asia since its purchase by HKEX. 

The following is a chronology of the major events in the LME’s history from its inception to recent developments:

September 2016 – LME says it will implement charge-capping as final component of warehouse reforms package.

August 2016 – LME, World Gold Council and key banks and brokers announce plans to introduce exchange-traded and centrally cleared precious metals products

June 2016 – LME launches electronic ‘Third Wednesday’ programme for member clients

April 2016 – LMEshield, an electronic warehouse receipt system for the global commodities market, is introduced.

February 2016 – LME completes move of offices and new floor to 10 Finsbury Square building

January 2016 – HKEX issues strategic plan for 2016-2018, outlining the development roadmap for it and Hong Kong’s financial markets

November 2015 – LME launches aluminium premium hedging, steel rebar and steel scrap contracts

November 2015 – LME Clear launches two new services: trade compression and the ability to post metals warrants as collateral

October 2015 – HKEx unveils plans to roll out nickel, tin and lead yuan-denominated mini futures contracts in Hong Kong

August 2015 – LME details proposals to enhance liquidity on new contracts and existing products such as market-maker incentives

July 2015 – LME issues consultation on further warehouse reforms

May 2015 – LME calls for consultation on broader access to its electronic trading platform – category three and four members can access system.

March 2015 – LME amends physical delivery procedures and policies and changes warehouse agreement

February 2015 – LME amends order-to-trade ratio for outright trading of monthly forward contracts

January 2015 – LME announces it will move to new premises early in 2016

January 2015 – LME unveils liquidity/participation plan for LMEselect

December 2014 – LME introduces LBMA platinum and palladium 

December 2014 – HKEx launches copper, aluminium and zinc mini-sized contacts and thermal coal futures in Hong Kong

September 2014 – LME/HKEx detail fees to apply from January 2015. Average transaction fee rises 34%

September 2014 – LME Clear debuts – clearing, matching and registration all in-house now

September 2014 – LME says will delay introduction of premium hedging contracts until second quarter of 2015

September 2014 – LME Clear receives EMIR authorisation

August 2014 – US judges dismisses aluminium anti-trust lawsuits

August 2014 – Exchange issues first ever commitments of traders report (COTR)

July 2014 – LME appeal against March judgment heard, verdict to come later

June 2014 – LME commits to open-outcry ring remaining open beyond start of 2015

March 2014 – LME delays warehouse changes after UK High Court finds in Rusal’s favour, says proposals are ‘unfair’ and ‘unlawful’

April 2014 – HKEx says will introduce mini-metals contracts and thermal coal futures in Hong Kong

April 2014 – Exchange says will introduce three regional premium hedging contracts.

December 2013 – Russia’s Rusal calls for judicial review over warehouse changes. LME says it will contest

November 2013 – LME introduces package of warehouse reforms

September 2013 – Garry Jones, formerly CEO of NYSE LIFFE, starts as LME CEO and HKEx co-head of global markets

August 2013 – Liz Milan, MD LME Asia, Diarmuid O’Hegarty, LME deputy CEO, and Chris Evans, LME head of business development, resign

August 2013 – US class actions start on impact of warehouse queues on aluminium premiums and prices. HKEx says it will defend vigorously

July 2013 – HKEx/LME launch consultation process on new warehousing rules

June 2013 – HKEx/LME and Bank of China sign deal on renminbi clearing

June 2013 – LME approves Kaohsiung in Taiwan as good delivery point, gets closer to China

June 2013 – Martin Abbott resigns as LME CEO and HKEx co-head of global markets

June 2013 – LME agrees with LCH.Clearnet that clearing will migrate to LME Clear in September 2014

January 2013 – Martin Abbott and Romnesh Lamba appointed as HKEx co-heads of global markets

November 2012 – HKEx acquisition receives formal approval by UK regulator

July 25, 2012 – Shareholders vote to accept the 1.388-billion-pound HKEx bid at an EGM. The deal is set for completion in the fourth quarter of 2012

June 13, 2012 – At historic board meeting, LME receives updated standalone valuation and decides, with one dissenting vote, that a sale should be recommended. The board then unanimously accepts cash offer for entire shareholding from HKEx on the day the latter celebrates its 12th anniversary. Under the offer, LME shares are now worth 107.60 pounds each.

May 2012 – At LME’s regular monthly board meeting, HKEx and ICE are asked to resubmit bids by June 7. They carry out further due diligence and present to LME shareholders.

May 2012 – HKEx, NYSE Euronext, CME Group and ICE place bids by the deadline. All except one increase their bids. Later, the LME board holds an unscheduled meeting to review bids and requests that sale adviser Moelis & Co invite two of the four to a final round

March 2012 – LME sets May 7 deadline for formal binding bids. For any bid to be successful, a 75-percent vote from its 74 shareholders is needed to approve a sale.

February 15, 2012 – Deadline for initial bids, with six parties submitting offers ranging from 900 million pounds to one billion pounds. NYSE Euronext confirms interest. Offers said to be below 800 million pounds are eliminated

November 2011 – JP Morgan buys 600,000 LME ordinary shares at auction at just less than 42 pounds each, which notionally values the exchange at 640 million pounds.

September 2011 – LME reveals that it had received 10 or more expressions of interest with regard to potential bids. Share dealings are suspended. The LME’s share capital comprises 14.85 million ordinary or 10-pence shares and 2.49 million one-penny ‘B’ shares.

September 2011 – Exchange to launch non-ferrous swaps contracts for phone and screen trading in January 2012.

September 2011 – Trevor Spanner appointed managing director of post-trade services. He will take charge of the clearing project

July 2011 – LME review on warehousing concludes – load-out rates will increase from April 2012

May 2011 – LME says it is considering self-clearing, starts consultation process

May 2011 – Plastics futures contracts delisted, warehouse inventories fall to zero.

February 2011 – LME-SGX metal futures start trading in copper, aluminium and zinc. Lead and steel expected by end-2011, tin and nickel will follow.

January 2011 – LME launches Asian reference prices.

November 2010 – LME and LCH.Clearnet will roll out over-the-counter (OTC) gold post-trade clearing service. The launch date is November 29. Contracts to be cleared will be captured via LME’s trade capture system, LMEsmart, with matched bilateral trades submitted to LCH.Clearnet for clearing

August 2010 – Chicago and Detroit selected as further delivery points for the global steel billet contract

July 2010 – The two regional steel contracts – Mediterranean and Far East billet – are merged into a single, global contract

July 2010 – LME and Singapore Exchange (SGX) to develop cash-settled mini monthly metals futures contracts jointly; these will be traded and cleared through SGX

July 2010 – LME officially opens its Asia office in Singapore

June 2010 – New Orleans announced as first US location for delivery of steel billet

April 2010 – Sir Brian Bender appointed new LME chairman

February 2010 – Cobalt and molybdenum start trading

February 2010 – LME submits a formal proposal to bring trading of Forward Freight Agreements (FFAs) on-exchange in a joint venture with The Baltic Exchange

February 2010 – LME chairman Donald Brydon announces intention to stand down

November 2009 – MMTA members vote to reject OPDS system

September 2009 – Proposals to revamp corporate governance rejected at EGM

September 2009 – LME and MMTA announce they are studying setting up an online price discovery system (OPDS) for some minor metals

August 2009 – Cobalt and molybdenum contracts launch date confirmed as February 22, 2010

July 2009 – LME proposes the formation of a new joint venture with shipbroker sector for freight forward contracts, tentatively called the London Baltic Freight Exchange.

July 2009 – LME says holding talks with participants in the OTC freight market with a view to introducing on-exchange forward freight contracts.

July 2009 – Smart (System for Matching and Registering Trades) introduced. This decouples matching from LCH.Clearnet, which has handled this function in tandem with clearing for 22 years

July 2009 – Consultation on plastics trading completed. Contracts will cease trading on the floor in February 2010, with settlement prices reached electronically

April 2009 – LME pays first ever dividend to ordinary shareholders and drops rebate paid to members based on volumes

January 2009 – LME sets up liaison group with Minor Metals Trade Association (MMTA)

September 2008 – Forward contract extensions go live

September 2008 – Exchange says it will introduce contracts for cobalt and molybdenum in the second half of 2009, with trading on all three platforms out to 15 months. The date is subsequently put back because infrastructure systems are delayed

July 2008 – Spot trading starts in steel billet, concluding contract launch process

May 2008 – Further enhancements made to plastics contracts, including the removal of warrant shelf-life

April 2008 – Steel billet futures ‘hard launch’ – open-outcry ring trading starts

March 2008 – Cleared average price swaps trading starts

February 2008 – Steel billet trading starts with ‘soft launch’

January 2008 – LME says it will extend prompt dates for primary aluminium, copper, zinc, nickel and lead futures contracts.

September 2007 – LME says ‘soft launch’ of steel contracts on Select and inter-office phone market will be on February 25, 2008

June 2007 – Plastics futures revamped, with regional contracts and prompt dates launched

June 2007 – LME says it will start trading in two physical steel billet contracts on April 28, 2008

December 2006 – LME introduces mini five-tonne contracts in copper, aluminium and zinc

September 2005 – First plastics futures contracts become deliverable

May 2005 – Exchange launches futures contracts for two plastics – linear low-density polyethylene and (LL) and polypropylene (PP)

April 2005 – LME starts publishing prices and volumes for matched trades in ring, kerb and inter-office trade

July 2004 – Exchange sets May 27, 2005 as launch date for two plastics futures contracts – the first non-metallic instruments in its history

March 2002 – Silver contract suspended. North American Aluminium alloy contract introduced

February 2001 – Electronic trading platform LME Select introduced

September 2000 – LME demutualised

April 2000 – LMEX index contract launched

May 1999 – Revamped silver contract launched

June 1996 – Sumitomo Corp head trader Yasuo Hamanaka plunges market into crisis after losing $2.6 billion on copper over a 10-year period

1994 – LME moves to Leadenhall Street

1993 – Copper and lead trade redenominated in dollars from sterling

October 1992 – Aluminium alloy contract introduced

1991 – Maximum length of copper, nickel, aluminium and zinc contracts extended to 27 months from 15 months. US warehouses registered

1989 – LME launches Vendor Feed System (VFS), its first electronic pricing system. Tin contract is brought back, denominated in dollars. Japan warehouses registered

1988 – Traded options for metals introduced. Previously, non-transferable options had been transacted. In September, nickel and zinc trading switches to dollars from sterling

1987 – Singapore warehouses registered

1985 – Tin crisis – prices tumble after the International Tin Council’s buffer stocks collapse. Contract suspended

September 1980 – LME moves to Plantation House, Fenchurch Street

April 1979 – Nickel contract introduced

December 1978 – Standard aluminium contract introduced

1960 – LME has registered warehouses in 10 UK cities

October 1952 – The exchange reopens following the Second World War

1941 – Tin trade halts when Japan enters the war

1939 – Copper, lead and zinc trading on LME halts at outbreak of the Second World War when the UK government takes over the purchase and stocking of metals

1920s – Pig iron contract suspended

1915 – Zinc contract officially launched

July 1914 – LME closes because of fear of supply shortages at the outbreak of the First World War. It reopens in autumn of the same year

1903 – Lead contract introduced

1882 – The exchange moves to purpose-built premises in Whittington Avenue

1877 – The London Metal Market and Exchange Company established above a hat shop in Lombard Court. It trades in tin, copper and pig iron

(Editing by Mark Shaw)

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Gold price edges higher, seasonal Indian demand supports

Gold edged higher on Thursday, October 27 in London in morning trading, with improving physical demand from India ahead of the country’s festival season providing some support.

The spot gold price was recently quoted at $1,268.15/1,268.45 per oz, up $2.55 on Wednesday’s close. Trade has ranged from $1,265.15 to $1,269.65 so far.

Two important religious Hindi festivals – Dhanteras and Diwali – will be celebrated in India from tomorrow. These are considered auspicious times to give gold as a gift.

“Precious metals prices are still consolidating after the early-October sell-off. They have started to edge higher in recent days – given the stronger dollar, that is quite an achievement,” Metal Bulletin analyst William Adams said.

“There does not seem to be as much buying interest in the precious metals as there has been in the base metals. A stronger economic outlook may well mean less demand for safe-haven assets but we would expect the more industrial precious metals to do relatively better than gold in this climate,” he added.

Some selling in gold exchange-traded funds (ETFs) has emerged in recent days – holdings in the funds followed by Metal Bulletin were down 12 tonnes on Wednesday, October 26, and now stand at 2,154 tonnes, down from a high this year of 2,174 tonnes.

In the other precious metals, spot silver was recently quoted at $17.645/17.675 per oz, unchanged from the previous close. Platinum climbed $6.50 to $961/966 per oz and palladium edged $2 higher to $618/625 per oz.

(Editing by Mark Shaw)

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GOLD TODAY – Prices consolidate but remain vulnerable

Short Term: Medium Term: Long Term: Resistances: R1 1267 20 DMA R2 1301 Break down level R3 1303.80 May high R4 1344 Top of triangle R5 1359 Brexit-day peak R6 1375.25 High so far R7 1388 HRL R8 1434 Aug 2013 high Support: S1 1359 Previous peak S2 1310.65 July low S3 1302.55 Sep 1 support S4 1301. SL S5 1267 20 DMA S6 1249 38.2% Fibo S7 1240.15 Oct 7 low S8 1230 Triangle target S9 1199.85 May low S10 1046.40 Dec low Stochastics:Bullish, but choppy Legend: R/SL= Resistance/support line HRL = horizontal resistance line UTL = Uptrend line BB = Bollinger band Fibo = Fibonacci retracement line H&S = Head-and-shouder pattern Technical Comment Analysis Spot gold prices fell to a low of $1,240.15 per oz on October 7 from a high of $1,375.25 on July 6, a drop of $135.10 or 9.8%. Prices then spent seven days consolidating before starting to work higher last week. Upside progress has become quite laboured. The 20 DMA has been moving lower – it was recently at $1,267 per oz. Prices have just got back over it. Although prices are attempting to rebound, it is still too early to say the danger of further weakness has passed. Perhaps prices are still forming a half-way pennant. The height of the summer triangle was $70. A similar swing lower from the breakout level would suggest a move to $1,230 per oz; so far prices have been as low $1,240.15. Prices would need to get back above $1,300 per oz to negate the current vulnerability. But if prices can work higher from here, it will mean the overall upward trend remains intact. Macro picture We see this recent weakness as a correction to what has been a surprising strong year for gold prices, considering how downbeat the market had become between 2012 and 2015. Of that downward move to $1,050 per oz from around $1,800, prices had recouped about 43% of the losses when they were trading at $1,375 per oz. Perhaps this latest pullback in prices is a test of the quality of underlying demand – it could be forming the right-hand shoulder of a large inverse H&S. Fund profit-taking has been evident into the latest decline – the gross long position has dropped 29.6% from the early-July high. The short position has picked up to 94,727 contracts from a low of 62,515 on early September. So that equals 115,245 contracts of long liquidation and 32,212 contracts of shorting – meaning some 147,457 contracts have been sold (equivalent to 458 tonnes). Given this volume of selling, prices seem to have held up well. We expect the sell-off and these lower prices to prompt pent-up physical buying from the likes of jewellery manufacturers but they may want to see that prices have found support first so the buying could take time to emerge. Indeed, physical gold in India has returned to a premium of between $1 to $3 per oz, having been at discounts of more than $50 per oz at times over the summer. This is a sure sign of a pick-up in demand. Seasonally, this is also a stronger time for demand ahead of the festival and wedding seasons. ETF investors have generally remained committed although some selling has emerged in recent days. Holdings were down 12 tonnes on Wednesday, October 26, and now stand at 2,154 tonnes, down from a high this year of 2,174 tonnes. We need to watch out in case more redemptions follow. Conclusion The October sell-off has knocked prices out of their sideways range but the price weakness should now revive buying interest. Prices appear to have found some support but it is too early to say there will not be another down leg. Still, it is encouraging that prices have managed to get some lift given the strength of the dollar. We remain bullish overall but would not necessarily be in a hurry to buy. All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.

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