Prices of precious metal are expected to trade in a slightly higher range in December, particularly if the US dollar weakens in the lead up to the US Federal Open Market Committee’s meeting later in December, said INTL FCStone in a report on Monday.
A pullback in the dollar over the course of December is likely as investors will conclude that a second rate hike may not be in the cards for some time after the first in December, said Edward Meir in the report.
Also making the case for further dollar is the enormous fund length – now close to an eight-month high as per the latest CFTC report – that has been built up going into the Fed decision, while further dollar buying may also be dissuaded after the European Central Bank’s stimulus measures announcement last week.
On gold, uneven chart patterns and uninspiring fundamentals suggest gold’s upside potential is limited.
“However, what is giving us pause, at least in the short-term, is the fact the fund positions have hit record short readings as of last week, meaning that the current move could run for a little while longer before it fizzles,” the report said.
The broker sees the yellow metal trading at $1,050-1,125 per ounce in December. The spot gold price was last at $1,085.70-1,086 on Monday.
On silver, though INTL FCStone does no view the metal’s outlook favourable going into December, there could be an element of support as some dollar longs exit the market by year-end.
Silver trading is expected to trade between $14.00-15.25 in December, according to the report. The spot silver price was recently at $14.58-14.63 on Monday.
On platinum, although there has not been much change in the demand-side of the equation with automotive sales mostly decent in the metal’s largest market Europe, it is the supply side that is unnerving investors, said the report.
The South African rand continues to lose ground, prompting producers to keep exporting metal, while platinum exchange-traded-fund sales have also exacerbated the selloff, with holdings now at their lowest level in nearly two years.
Platinum prices are expected trade at $830-920 in December, according to the report. The spot platinum price was so far at $882-887 on Monday.
Palladium is similar to platinum, whereby the problem is not so much on the demand side, but has to do with the fact that supply has been recovering just as investment flows are exiting the market and exacerbating the recent sell-off, said the report.
“During December, we see prices trading between $530-600,” said INTL FCStone. The palladium spot price was last at $558-563 on Monday.