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Gold & Precious Metals

Wilders’ Defeat and Gold

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Posted by Arkadiusz Sieron

on Friday, 17 March 2017 06:32

The parliamentary election in the Netherlands is behind us. What does the outcome imply for the gold market?

Wednesday was a turbulent day. The U.S. central bank hiked its interest rates for the third time during the current tightening cycle, while a general election was held today in the Netherlands. Although usually nobody cares about the Dutch politics, this time was different. This is because the anti-EU Geert Wilders’ Freedom Party has gained in popularity recently, raising concerns over the rise of populism in the West. The elections were believed to be a litmus test of the sentiment in Europe after the Brexit (by the way, yesterday the Queen gave Royal Assent to the Brexit bill, clearing the way for Theresa May to trigger the exit) and before elections in France and Germany this year.

How did the test go? According to preliminary results, Wilders’ party is set only for 20 seats, while the ruling center-right People’s Party for Freedom and Democracy will take 33 of the 150 available parliamentary seats. Christian Democrats and the centrist Democrats 66 will secure 19 each of them, while the Socialist Party is expected to take 14 seats, the same amount as the Green Party and five more than the Labor Party. Hence, Wilders came in the second place and due to the fractured system of proportional representation, he is unlikely to form a ruling coalition.

What do these results mean for the gold market? Well, Wilders’ defeat may be a signal of a reversal in the worldwide populist trend. It does not bode well for Marine Le Pen in the upcoming French elections and it rules out the possibility of a Dutch withdrawal from the European Union. Therefore, the outcome of the Wednesday’s election reduced political uncertainty, which is negative for gold, the ultimate safe haven. However, investors should not forget that the results should strengthen the euro. The rise in the common currency against the U.S. dollar is usually positive for the yellow metal. Indeed, the currency channel prevailed yesterday and the euro was boosted, as well as gold.

....related from Arkadiusz Sieron:

European Elections and Gold

 



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Gold & Precious Metals

Rates Up - Gold Up - Why ???

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Posted by Ross Norman - Sharps Pixley, London

on Thursday, 16 March 2017 09:56

To observers of financial markets it must seem odd that they often behave exactly the opposite to what is expected. Explaining it is also a strange thing too.

Essentially when the US Federal Reserve jawbones a potential move such as a rate hike (for the best part of a year), investor positioning is congruent with the expected outcome - that is to say dollar / equities up an by extension, gold down.

But what happens when they are too successful in leading the markets expectations and the market positioning is too extreme for the expected move. Well you have a heap of investors who are short gold and long the dollar / equities who don't get the win they expected... that is to say the move is over-priced into the news. As such, those investors - be they speculators in the futures markets or physical buyers who have forestalled their purchases for a hoped for price correction ... are vulnerable.

In this environment a little counter-intuitive buying of gold and selling dollar / equities is usually sufficient to frighten them into covering their position. In short, markets end up moving exactly the opposite way to how classic economics would tell us. And the move feeds on itself because of the extreme positioning. 

Evidence to support this view is gold's move over the last few rates increases - the 25 bps increase in December 2015 saw a subsequent 18% rise in gold over the following 3 months. Meanwhile the December 2016 rate rise saw an 8% increase over the next 3 months. Yesterdays rate rise has seen a 2.4% rise in gold so far ... and appears to be petering out. What this indicates is that the wonderful ruse by institutions who exploit predictable investor behaviour seems to be running its course.

So where do we go from here - well having been burned by behaving logically, presumably those investors who keep finding themselves "long and wrong" in dollar/equities and "caught short" in gold will be more perspicacious - a posh way of saying more wise and cynical. Ultimately we could just end up not listening at all.

Ross Norman

CEO

Sharps Pixley, London

https://www.sharpspixley.com/

...related, published prior to rate hike:

SWOT Analysis: How Will Gold React to the Next Rate Hike?



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Gold & Precious Metals

Gold's Next Leg Down Targets $1156

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Posted by Rick Ackerman - Rick's Picks

on Wednesday, 15 March 2017 06:41

Bouncy-looking-pivot-in-Gold-has-failed

Our downside target for the near-term is 1156.60, a ‘midpoint’ Hidden Pivot that comes from the weekly chart.

April Gold had a chance to rally out of the hole this week from a bouncy-looking pivot at 1195.40. Instead, the futures popped for a few measly points before falling back to the support. This is pretty feeble price action, especially considering the rally had round-number support at 1200.00 going for it as well. Under the circumstances, we should expect the futures to continue lower, eventually turning 1200.00 into resistance.

I’d return reluctantly to the bullish case, at least for the near term, if this vehicle were to leap above 1214.50 in the next day or two. That would generate a bullish impulse leg on the hourly chart — one that presumably would be tradable. Click here for two weeks' free access to Rick's Picks

...also: Silver Market Poised For Big Reversal When Institutional Investors Move In

 



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Gold & Precious Metals

Gold: Set To Surge On Major News

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Posted by Stewart Thomson - Graceland Updates

on Tuesday, 14 March 2017 07:02

Mar 14, 2017

  1. After Janet Yellen first hiked rates in late 2015, the precious metals market rallied in a big way in the first half of 2016. Please  click here now. Double-click to enlarge this GDX daily chart.
  2. In late 2016 the Fed hiked again, but the metals market rally in 2017 has been more subdued. Why?
  3. For the main answer to that question, please  click here now. Double-click to enlarge this dollar versus yen chart.
  4. The bottom line is that the gold price has tremendous correlation to the price action of the dollar versus the yen. In 2016, the dollar collapsed against the yen. In 2017, the dollar has declined against the yen again, but only moderately.
  5. Hence, the rally in gold and gold stocks has been less exciting than it was in 2016.


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Gold & Precious Metals

SWOT Analysis: How Will Gold React to the Next Rate Hike?

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Posted by Frank Holmes - US Global Investors

on Monday, 13 March 2017 07:56

Strengths

 

  • The best performing precious metal for the week was gold, down 2.43 percent, but still leading its precious metals peers. Gold imports by India are said to have risen nearly three-fold in February from a year earlier, reports Bloomberg, jumping 175 percent. Jewelers are restocking for the upcoming festival and wedding period that starts next month.
  • The U.S. saw its largest trade deficit since March of 2012, reports Bloomberg, as a jump in merchandise imports in January exceeded a smaller gain in shipments overseas. “The wider deficit indicates trade, which subtracted 1.7 percent from fourth-quarter growth, will weigh on the economy in early 2017,” the article continues.  A stronger dollar has made exports less competitive and could be hindrance to boosting manufacturing jobs in the U.S. as President Trump promised.
  • Joni Teves, strategist at UBS, writes that the research group expects underlying positive sentiment toward gold to remain broadly intact as uncertainty lingers. In its Global Precious Metals Comment, Teves outlines that despite the recent increase in positioning, gold market length remains relatively subdued with net positions in Comex accounting for about 50 percent of the record. Similarly, UBS writes “there really isn’t much expectation of an aggressive selloff in gold – this has been a common theme among our conversations with market participants in different regions.”

 

Weaknesses

 

  • The worst performing precious metal for the week was platinum, down 5.72 percent.  Silver was not far behind with a loss of 5.22 percent.
  • According to a weekly Bloomberg survey, nearly half of gold traders and analysts are bearish on gold as the dollar strengthens amid expectations of a Fed rate hike next week. Overseas, the People’s Bank of China reports gold holdings unchanged for a fourth-straight month, coming in at 59.24 million ounces by the end of February. Similarly, Bullionvault’s Gold Investor Index, which measures the balance of client buyers against sellers, fell to the lowest level since July.
  • Gold fell below $1,200 an ounce this week, the longest losing streak since October, on better-than-expected U.S. private jobs data – adding to positive economic talk that boosted the dollar. “Three weeks ago the possibility of a rate hike in March was very small, but now it’s 100 percent,” said Bob Takai, CEO and president of Sumitomo Corp. So where exactly does the Fed see rates headed? The chart below gives a quick comparison between the Fed Funds Target versus where the Taylor Rule Estimate, estimating close to 4 percent.  The sudden shift to raise rates in March may reflect that the Fed is behind the curve again.
3-13fh

Opportunities



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