Political uncertainty is pushing Gold to a 4 week high in the precious metals markets at the moment, explains RAKBANK
Hedge funds and other money managers increased their net long position in COMEX gold for the first time in four weeks, in the week ended May 23, U.S. Commodity Futures Trading Commission (CFTC) data showed on Friday. Money managers raised their bullish stance in silver for the first time in six weeks and also raised it in copper futures and options, according to the data. The speculators added 47,738 contracts to their net long position in gold, bringing it to 117,661 contracts, a three-week high, CFTC data showed. The bullish move came as gold prices rallied to a 2-1/2-week high as political tension in the United States reduced expectations of aggressive interest rate rises this year. In silver, the money managers increased their net long position by 11,388 contracts to 29,686 contracts, CFTC data showed. They added to their bullish stance in copper for the second straight week, bringing their net long position to a three-week high at 50,191 lots, up 12,202 lots from the prior week, the data showed.
According to Reuters, Gold rose to its highest in nearly four weeks on Friday as political uncertainty led investors to favour bullion over assets considered riskier such as stocks. “We have had the political noise coming from Trump and the U.S. administration and there is a certain element of uncertainty in the markets in general, which is supporting gold. Equities are also down,” analyst Carsten Menke at Julius Baer in Zurich said. Leaders of the world’s rich nations face difficult talks with Donald Trump at a G7 summit in Sicily on Friday after the U.S. president lambasted NATO allies and condemned German trade policies a day earlier. Gold is often a favoured investment during times of political and financial uncertainty. Spot gold gained 1.1 per cent at $1,268.69 an ounce by 2:19 p.m. EDT (1819 GMT), the highest since May 1. It was on track to close the week up around 1 per cent, the third straight week higher. U.S. gold futures GCcv1 settled up 0.9 per cent at $1,268.10. Many traders will be away from their desks for an extended Memorial Day holiday weekend in the United States and in Britain, with many financial markets closed on Monday, when U.S. gold futures will close early. “We do expect a (U.S.) rate hike in June and we see the dollar strengthening again,” said Menke. “On the upside, there’s a lot of uncertainty, which keeps people from selling gold and maybe causing a little bit of buying.” Data on Friday showed U.S. gross domestic product grew at a 1.2 per cent annual rate in the first quarter instead of the 0.7 per cent pace reported last month, supporting the dollar. “Oddly enough, the gold price is holding more ground than many traders may have expected on these positive economic releases out of the U.S.A,” said Miguel Perez-Santalla, vice president of Heraeus Metal Management in New York. “Though technically, the precious metals market appears to be strong, the positive economic view is likely to prevail at some point against it. “Among other precious metals, spot platinum climbed 1.1 per cent to $956.99, it’s highest in a month. Head of Technical Analysis Stéphanie Aymes at Societe Generale said a bullish formation on the charts means platinum is expected to head towards $991. Platinum is up 1.8 per cent for the week. Spot silver rose 1.3 per cent to $17.33 and was on track to gain 3.1 per cent this week, its biggest weekly rise since mid-April. Palladium rose 2.2 per cent to $788.10 and has added 3.8 per cent this week; it’s first weekly gain this month.
Gold was low key in the first half of the week with the price easing to $1247.50 on Wednesday, however it found willing physical bargain hunters into this dip and the market burst into life on Friday with the yellow metal spiking to $1269 before ending just off the highs at $1266.50 bid, a gain of $11.50 or 0.92%. The way gold has recovered its poise since the sell-off in the first half of the month is technically impressive and the charts are looking increasingly positive with the 50 day MA crossing up through the 200 day MA, a MACD short-term buy signal and the possibility of a rare long term golden cross (the 100 day MA moving up through the 200 day MA) looming. In a research note just released ICBC Standard Bank has raised the possibility of a test of $1300 by US Independence Day (4th July) despite entering a fallow period for physical demand in India, and with rising global geo-political tensions and the political farce currently being played out in Washington and we see no reason to disagree with that view.
Silver had another good week with the industrial precious metal rising steadily from a low of $16.82 on Monday to end just off the highs at $17.35 bid, a gain of 53 cents or 3.15%. As with gold, the technical picture for silver is looking increasingly positive, both from a long and short term perspective with the 100 day MA set to cross up through the 200 day MA following last week’s MACD buy signal and chart watchers will be eyeing a test of the long term downtrend that intersects at $18.50 over the summer
Platinum added another $17 or 1.81% the previous week’s 2.29% gain as the noble metal ended the week at $955 after ranging between $935 and $965. Platinum, having been ‘bottom of the class’ so far in 2017 and despite a fairly negative LPPM week, is also looking technically positive with a MACD short term buy signal posted this week and the 100 day MA at $965 set to cross up through the 200 day MA and flag a long term buy signal that would target the psychologically important $1,000 barrier and beyond that key resistance pegged at $1050.
Palladium recouped much of the previous week’s dramatic 5.71% decline as the junior precious metal rallied from a low of $752 on Monday to end near the highs at $790 bid, a gain of $30 or 3.95% and importantly the close was above the 100 day MA set at $778. A look at the charts shows a classic uptrend pattern over the last six months and with its strong demand over supply fundamentals the market seems poised to reclaim a foothold above $800 with this year’s high of $830 firmly on technical and fundamental traders’ radar screens.
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