FXTM: Investors Return To Gold; 'Further Appreciation Is In The Cards'
Gold is “back in fashion,” says Lukman Otunuga, research analyst at FXTM. Spot metalhit a three-month high of $1,has been as high as $1,232.70 an ounce Monday andremains near that level, hovering just under $1,230 in early-Tuesday trading. “A combination of factors ranging from depressed equitymarkets, trade disputes, global growth fears and geopolitical tensions havebrought gold back into fashion,” Otunuga says. “The yellow metal found comfortnear three-month highs on Tuesday as risk-averse investors sought safety in themetal amid market uncertainty. With a weakening U.S. dollar adding to thefactors boosting appetite for the yellow metal, further appreciation is in thecards for the near term.” The analyst says gold’s technical picture turnedbullish on the daily charts after a weekly close above $1,213. “Technicaltraders will keep a close eye on how prices behave around the $1,233.50 level.A solid breakout above this point opens the gates to $1,240.”
By Allen Sykoraof Kitco News; asykora@kitco.com
Commerzbank: Short Covering Boosts Gold;ETFs Posting Inflows
Tuesday October 16, 2018 09:21
Short covering has played a role in gold’s recent rally butinvestors are also turning to gold-backed exchange-traded funds again, sayCommerzbank analysts. They point out that the precious metal exceeded thetechnically important 100-day moving average for a while Monday. “We stillbelieve that short covering was primarily responsible given that speculativefinancial investors had built up considerable net-short positions before theprice rise began last week,” they report. “What is more, gold ETFs recordedinflows again for the fifth day in a row, more than offsetting the outflowsfrom the start of the month.” Gold has backed down from Monday’s high, but notby much. “That said, if it settles down above the 100-day moving average(currently at around $1,227) in any lasting fashion, we expect to see technicalfollow-up buying that should push the price further up,” Commerzbank says. As of 9:07 a.m. EDT, spot metal was up$2.45 for the day to $1,229.45 an ounce.
By Allen Sykoraof Kitco News; asykora@kitco.com
BBH: U.S. Deficit To Worsen WheneverEconomy Softens
Tuesday October 16, 2018 09:21
The annual U.S. deficit hit a six-yearhigh last month and more red ink may be in store, especially whenever theeconomy softens, says Brown Brothers Harriman. The Treasury reported that thedeficit for fiscal year 2018 was $779 billion, the worst since 2012 and worsethan a $666 billion deficit for 2017. “Spending rose 3.2% while revenue ropes a mere0.4%,” BBH says. “As a percentage of GDP [gross domestic product], the gap rose0.4 percentage points to -3.9%. The numbers certainly undermine the supply sideargument that tax cuts will pay for themselves. They aren’t, they won’t, and atsome point, they will require painful offsetting adjustments by the U.S.” BBH says the deficit is the “elephant inthe room” for the U.S. dollar. “While worrisome now, we don't think we'reanywhere near the tipping point where markets turn very negative on the U.S.,”the firm says. “That will likely be when the next U.S. downturn hits. Then, the budget deficit will blow out and could require fiscaltightening just as the Fed starts cutting rates. This combination of tightfiscal policy and loose monetary policy would be dollar-negative and is theopposite of what we are seeing now.”
By Allen SykoraFor Kitco News
Follow @AllenSykora
asykora@kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.