Bullion quiet after Friday’s gold price rally – MORNING REPORT

Nov 17, 2014 - 7:42 AM GMT
  • Japan GDP -0.4 percent, Expected 0.5 percent, Previous -1.8 percent

The gold price, along with silver price, rallied sharply on Friday afternoon to close up 2.5 and 4.3 percent respectively at $1,189 and $16.27, that is after lows earlier of $1,146.90 and $15.28. There was no apparent trigger for the move, apart from perhaps a rebound in the oil price and a pull-back in the dollar, but the move no doubt was fueled by much awaited short-covering.  Given the rally happened fairly late on Friday we wait to see how much more short-covering emerges. The PGMs were mixed with platinum rising 1.4 percent to $1,210, while palladium very surprisingly dropped 0.5 percent at $761.

This morning the precious metals are mixed, palladium has attempted to catch up with a 0.8 percent risen to $767, platinum is off 0.5 percent, while silver is up 0.3 percent at $16.32 and gold is up 0.1 percent at $1,190.10 – so little follow through so far.

Precious metals have followed higher to the same extent as international prices did of Friday with silver up 4.2 percent at Rmb 3,490 and gold up 2.6 percent at Rmb 236.20.

Equities – the Euro Stoxx 50 closed up 0.1 percent on Friday and the Dow closed down 0.1 percent – Asia, this morning is weaker with the Nikkei off three percent, as the data showed the economy  back in recession, the Hang Seng is down 0.9 percent, the CSI 300 is off 0.3 percent and the Kospi is down 0.1 percent.

Currencies – the dollar index peaked at 88.27 on Friday, it is last at 87.42, the euro is firmer at 1.2533, sterling is weak at 1.5701, the aussie is firmer at 0.8770, as is the yen at 115.71, while the yuan is weaker at 6.1290.

The data out of Japan was mixed with GDP falling 0.4 percent, but that was not as bad the second quarter, while GDP prices climbed 2.1 percent so at least inflation has replaced deflation. UK house price index fell 1.7 percent and later we get Italian and EU trade balances, the German Bundesbank monthly report, US Empire State manufacturing index, industrial production and capacity utilisation. In addition, UK Monetary Policy Committee member Andrew Haldane and ECB President Mario Draghi are speaking – see table below for more details.

After the aggressive rallies in gold and silver on Friday afternoon we wait to see if the rallies are sold into, which would show underlying sentiment remains bearish, or whether there is further short-covering. Given the speed of the moves we would not be surprised to see more short-covering as many of the shorts, who must be sitting on significant profits, may be worried about seeing those disappear. We are surprised that the PGMs did not follow bullion prices more, we still feel they are oversold, so there may well be room for them to play catch-up.


Metals Overnight Performance
GMT 06:36 +/- +/- % Lots
Cu 6705 -1.75 0.0% 2097
Al 2026.25 -0.75 0.0% 372
Ni 15636 51 0.3% 279
Zn 2262.5 -2.25 -0.1% 270
Pb 2036 -4 -0.2% 68
Sn 19801 -39 -0.2% 2
Steel 450 0 0.0% Total
Average (BM ex-Steel) 0.0% 3,088
Gold 1190.1 1.1 0.1%
Silver 16.32 0.05 0.3%
Platinum 1203.8 -6.2 -0.5%
Palladium 767 6 0.8%
Average PM   0.2%



    Economic Agenda      
GMT Country Data ACTUAL Expected Previous
Sunday Japan Prelim GDP q/q -0.4% 0.5% -1.8%
Sunday Japan Prelim GDP Price Index y/y 2.1% 1.9% 2.0%
Sunday UK Rightmove HPI m/m -1.7% 2.6%
 9:00am Italy Italian Trade Balance 2.68B 2.06B
9:30am UK MPC Member Haldane Speaks
10:00am EU Trade Balance 16.2B 15.8B
11:00am EU German Buba Monthly Report
1:30pm US Empire State Manufacturing Index 12.1 6.2
2:00pm EU ECB President Draghi Speaks
2:15pm US Capacity Utilization Rate 79.3% 79.3%
2:15pm US Industrial Production m/m 0.2% 1.0%