Hedge funds and other money managers cut their net long position in COMEX gold for the third week in a row in the week ended May 16, explain RAKBANK.  This takes it to a two-month low as bullion prices rose, U.S. Commodity Futures Trading Commission (CFTC) data showed on Friday

Money managers also cut their bullish stance in silver, taking it to the lowest in 16 months, but increased it in copper futures and options, according to the data. The speculators reduced their net long position in gold by 29,997 contracts to 69,923 contracts, the lowest since mid-March as prices climbed above an eight-week low as the U.S. dollar slipped and U.S. political turmoil fuelled demand for safe-haven assets. In silver, they cut their net long position by 15,244 lots to 18,298 lots, a fourth straight reduction to the lowest level since January 2016, the data showed. The money managers added 8,202 contracts to their net long position in copper, bringing it to 37,989 contracts, CFTC data showed.

According to Reuters, Gold rose on Friday and was on track for its best week in five as the dollar softened on political turbulence in the United States, boosting bullion’s safe-haven appeal. Spot gold was up 0.6% at $1,253.87 an ounce by 2:47 p.m. EDT (1847 GMT), putting it up 2% for the week. U.S. gold futures GCcv1 settled up 0.06% at $1,253.60 “We have political turmoil in the U.S. which has driven the dollar lower… this week’s sentiment has supported gold,” Danske Bank analyst Jens Pedersen said, adding that it was unclear whether bullion would hold on to the gains into next week.

Gold is often seen as an alternative investment during times of geopolitical and financial uncertainty, gaining alongside bond yields and the yen while stocks usually take a hit. U.S. President Donald Trump last week fired Federal Bureau of Investigation Director James Comey. This triggered a political firestorm that culminated on Wednesday in the Justice Department’s appointment of a special counsel to probe possible ties between Russia and Trump’s 2016 presidential campaign.

 

The dollar index .DXY, which measures the greenback against a basket of six major currencies, was poised for its worst week in more than a year while world stocks edged up. “Political risk is back on again after market participants became overly complacent following the outcome of the French elections,” Commerzbank analyst Carsten Fritsch said. “Risk sentiment took a major hit,” he said. New applications for U.S. jobless benefits unexpectedly fell last week and the number of Americans on unemployment rolls tumbled to a 28-1/2-year low, pointing to rapidly shrinking labour market slack.

St. Louis Federal Reserve President James Bullard said the Fed’s expected plans for rate increases may be too fast for an economy that has shown recent signs of weakness. “After he spoke, it was enough to push the dollar through some key levels that brought gold up pretty easily,” said Bob Haberkorn, senior market strategist for RJO Futures in Chicago. Federal funds futures implied traders saw about a 74% chance the Fed would raise interest rates in June, CME Group’s FedWatch program showed. Among other precious metals, palladium fell 0.5% to $757.97 per ounce. The metal slipped 6% this week and was poised for its biggest weekly fall since late January. Platinum rose 0.6% to $937.24 an ounce while silver climbed 1.6% to $16.80 an ounce. Both metals were headed for their strongest week since mid-April.

 

RAKGOLD Analysis – Gold

In last week’s review RAKBANK suggested that gold was likely to benefit from rising political tensions following President Trump’s sacking of FBI Director Comey, while also noting the improving technical picture. This prediction proved to be accurate as the yellow metal staged a strong 3% rally from Monday’s low of $1227 to a high of $1265 by Thursday amid sharp falls across the board in the USD. However more good news on the US employment front prompted a bout of profit taking at the end of the week with gold closing at $1255 bid, representing a pared gain of $27 or 2.20%. The rally back up through and close above the long term moving averages, and a MACD crossover buy signal with the yearlong downtrend that intersects at $1285 the target for chart watchers.

Silver

As with gold they were friendly to silver in last week’s report, predicting a test of $17, and this also proved to be a good call as the industrial precious metal rose by almost 4% from a low of $16.42 on Monday to $17.03 by Wednesday, before easing back to end the week with a pared 37 cents or 2.25% gain at $16.82 bid. The rally was fuelled by investor bargain hunting with ETF inflows of over 10 million ounces worth $168 Mio last week and the move has triggered a MACD buy signal that should attract technical momentum buyers with the 100 day MA set at $17.40 and the 200 day MA at $17.63 the likely targets on the charts.

 

Platinum

Platinum ranged between $922 on Monday and $948 on Wednesday before ending up $21 or 2.29% at $938 bid. Trading volumes in the PGM’s were predictably light last week with the world’s major players convening in London for the annual LPPM gathering when the latest reports from the leading analysts are released. Here are some of the key headlines were as follows: The platinum market is set to record its first surplus (300,000 ounces) in six years in 2017 stated Johnson Mathey, as a drop in demand from the vehicle industry, jewellers and investors outstrips a smaller fall in supply. The physical surplus in platinum is set to grow to 315,000 ounces this year, as lower auto-catalyst demand drags on investment in the metal, consultancy Metals Focus said. Supply was expected to remain flat at just over 8 million ounces but demand would slip to three-year lows as buying wanes from carmakers, which use the metal as a component in catalytic converters, it said. Investment was also expected to dry up. Platinum prices would be pegged at $1,000 an ounce this year on average, up 1 per cent from 2016 levels, the consultancy said.

Palladium

Palladium started the week on the highs at $820 and ended at the lows of $760, a stunning loss of $41 or 5.71% as the junior precious metal was the big loser in PGM week in London. The sell off does not make sense given the latest fundamentals as set below: The deficit in palladium is expected to widen to 792,000 ounces in 2017 from 163,000 ounces this year, Johnson Mathey said.

JM added that the rising deficit in palladium helped cut its discount to platinum to less than $100 an ounce this month, it’s lowest in 15 years. The average for the past 20 years has been $555. Palladium prices were projected by Metals Focus to increase 25%
to an average of $770 an ounce, reflecting a jump in the deficit to 1.381 million ounces from 1.175 million in 2016, largely on the back of rising auto-catalyst demand due to its heavy use in gasoline catalytic converters while platinum is more heavily loaded in converters installed in diesel cars, which have fallen out of favour since the Volkswagen emissions scandal of 2015. Palladium prices could peak at $870 an ounce, around a three-year high, the consultancy said.

For more information on the rest of the markets are doing, read RAKBANKs roundup here.

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