Gold hits lowest in over 7 months as rising yields dent appeal
· Gold recouped some losses on Friday after dropping to its lowest in more than seven months, but stayed on course for its worst week since end-November, as rising U.S. Treasury yields eroded the appeal of non-yielding bullion.
· Spot gold fell 0.2% to $1,771.16 per ounce by 0706 GMT, having touched its lowest since July 2 at $1,759.29 earlier in the session. Prices have declined 2.9% so far this week.
· U.S. gold futures slipped 0.3% to $1,769.20.
· Prices have rebounded after hitting the technical support at the $1,760 level and that’s why we are seeing some recovery, said Hareesh V, head of commodity research at Geojit Financial Services.
· However, gold will continue to remain under pressure due to optimism over the global economic recovery, robust economic data, higher yields and stabilizing dollar, he added.
· An unexpected rise in U.S. jobless claims despite declining new coronavirus infections last week also didn’t support gold.
· Benchmark U.S. Treasury yields hovered close to a near one-year high hit earlier in the week. Higher yields increase the opportunity cost of holding bullion, which pays no interest.
· “U.S. bond yields have been rallying quite strongly in the last week, and there’s growing momentum that they can lift further as U.S. and global growth recovers more quickly as vaccines roll out,” said Lachlan Shaw, National Australia Bank’s head of commodity research.
· The recent record surge in Bitcoin is acting as a headwind for gold, as it is challenging gold’s status as a store of wealth and portfolio diversifier, Shaw said. .
· Gold Price Analysis: XAU/USD to suffer a massive sell-off on a close below $1765
Gold (XAU/USD) is attempting a bounce from seven-month lows of $1761 but downside bias is still intact. XAU/USD bears eye daily closing below November 30 lows at $1765, FXStreet’s Dhwani Mehta reports.
***Key quotes***
“The gold price is at the brink of announcing a massive sell-off should sellers find acceptance below the November 30 low of $1765 on a daily closing basis. Stops could be triggered on a sustained move below the latter, exposing the June 2020 lows around $1720.”
“The 14-day Relative Strength Index (RSI) lies just above the oversold territory, suggesting that there is room for further downside.”
“If the bulls manage to defend the crucial support, allowing the price to settle above that level, a corrective pullback towards the January low of $1803 cannot be ruled out.”
· Warren Buffett exits GOLD entirely
After making lots of noise last summer with the purchase of Barrick Gold (NYSE:GOLD), Warren Buffett's Berkshire Hathaway dumped the stock in its entirety, according to the latest 13F filing.
The move to sell Barrick Gold was made in Q4 after purchasing just under 21 million shares in the second quarter of 2020. Berkshire Hathaway sold some of its Barrick position in the third quarter.
Berkshire's original purchase of Barrick was a surprise to many as Buffett is known for his negative opinion on gold.
· Commodity prices have been trending higher — but how long the rally lasts depends on China
Commodity prices are going up but whether that continues for an extended period of time — known as a supercycle — depends on China, an economist said Thursday.
The last supercycle happened in the mid-2000s before the global financial crisis and peaked in 2008 as China grew to become a commodity powerhouse.
Prices for commodities like oil and base metals have rebounded strongly from last October on the back of positive news about Covid-19 vaccine trials, Vivek Dhar, a mining and energy economist at the Commonwealth Bank of Australia, said on CNBC’s “Squawk Box Asia.”
“Now, the question that we’re talking about, in terms of supercycle or not, in our view, it still lies in the hands of China,” he said.
“China accounts for about 50% to 60% of commodity demand in the mining space. So, if we’re going to be talking supercycles, I’d say what is China going to do in 2021 is going to be the key question,” Dhar said.
He explained that the rise in commodity prices started on the back of Beijing committing stimulus toward infrastructure in 2020. Whether that momentum carries on into 2021 remains unknown.
“This idea of a supercycle — there’s definitely a case that can be made for it — but in our view, really, China holds the cards. Until we see policy support — and the next five-year plan really prioritizes the commodity-intensive sectors as opposed to service sectors or consumption sectors — we’re just not believers right now of that supercycle story,” Dhar said.
That stands in contrast to investment banks JPMorgan and Goldman Sachs which are bullish about an impending commodity supercycle.
As of Thursday, base metals traded higher on the London Metal Exchange, with copper up 2.57% at $8,606 a tonne, aluminum up 1.23% at $2,141 and zinc higher by 2.17% at $2,877.
· Silver eased 0.5% to $26.87 an ounce, and was down over 1.8% so far this week, its worst since mid-January.
· Platinum slipped 1.3% to $1,258.52, but was set to post its third straight weekly gain, while palladium shed 0.3% to $2,345.07.
· Platinum scores a 5% gain over the last two trading days
Of all of the precious metals traded on the futures markets (gold, silver, platinum and palladium), it seems that platinum is in a group by itself as it has consistently risen for the last three consecutive weeks. In fact, three weeks ago, platinum futures open just below $1100 per ounce at $1096. Today platinum gained a total of $26.20, this basis the most active April 2021 Comex contract and is currently fixed at $1283.90.
In regards to the underlying reasons why we have seen platinum move so strongly to the upside it is simply a lack of supply and rising demand. The vast majority of platinum is mined in South Africa which produces roughly 80% of the world’s supply. Another factor that is key to the recent move in platinum is it is the only precious metal that has the properties which converts unburned hydrocarbons into carbon dioxide and water vapor. In fact, the demand from the auto industry accounts for the use of the vast majority of platinum production.
There is a new major application that will only increase the demand for platinum and that is in the automotive industry in which platinum demand will increase substantially. That is the bridge between modern gas-powered engines into electric vehicles, platinum is being researched to help make batteries more capable of meeting demands of transportation. Also, as a medium hybrid diesel engine which produce much less greenhouse gasses. Another type of engines has seen an increased growth especially in China.
Reference: Reuters, Kitco, FXStrteet
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