In Commodity News 04/07/2016
S&P Global Platts Gold Sentiment Survey respondents are forecasting the dollar price of gold bullion to remain rangebound or head higher over the course of next week, with the focus to remain the fallout from the UK’s referendum on EU membership.
The poll of 20 industry participants showed most were expecting prices to follow macro developments, especially any potential policy responses by central banks, responding to a change in the global economic outlook after “Brexit.”
One source said it was largely “Brexit/macro” issues that would drive prices next week, giving a price range of $1,305-$1,355/oz.
A shorter week in the US due to the July 4 holidays, however, may see trading volumes lower than usual, according to the survey.
Last week, survey participants incorrectly called the market rangebound to lower, with most investors having priced in a British decision to remain in the EU.
Spot gold prices jumped as much as 8% in the immediate aftermath of the UK’s vote to leave the EU, reaching a 2.5-year high Friday of $1,359/oz.
As the fallout subsided, prices eased to around $1,310-$1,335/oz range this week. The London Bullion Market Association Gold Price settled at $1,335/oz Friday morning, up $11 from Thursday afternoon.
While safe-haven demand has helped gold maintain its bull run into the second half of 2016 — having gained 25% in H1 — most analysts are expecting gold to find support in the medium to long term from loose monetary policy.
The Bank of England is widely expected to lower interest rates following the decision to leave the EU, while the likeliness of a rate hike by the US Federal Reserve in 2016 is now largely priced out.
According to CME Fed Fund Futures Friday, the probability of a rate hike by December is less than 13%, from more than 50% before the UK referendum.
Meanwhile, survey participants were agreed that physical gold demand would remain unchanged next week.
Physical demand in the world’s largest gold consuming countries — India and China — hit record lows this week.
Platts 995 India gold (PGPI) was assessed at $55/oz Friday, the sharpest discount on record, while the discount paid for unofficial, or cash gold, moved as high as $75/oz this week.
Discounts have been reported this week in China for the first time this year, at $1-$1.50/oz below spot prices.
Yet physical demand for gold has seen an uptick in Europe, the UK’s Royal Mint reporting report a week-on-week increase of 184% in gold bars to the week ending June 30.
Royal Mint said 100 gram gold bars saw a 13-fold increase, while kilo bars were up 75%.
Source: Platts
