Precious Metals Weekly
Group Economics Macro & Financial Markets Research
30 March 2016
Investor positioning too heavy? Georgette Boele Co-ordinator FX & Precious Metals Strategy Tel: +31 20 629 7789 georgette.boele@nl.abnamro.com
Yellen’s cautious comments weigh on USD and support gold prices The strong price rally is the result of investor demand for gold Speculative net-positioning has risen sharply… …but is not excessive in our view Total gold ETF positioning also has room to rise Investors are waiting for a reason to push gold prices above 1,280
Yellen’s cautious comments weigh on dollar and support gold prices Last week and the start of this week, the US dollar profited from relatively hawkish comments from Fed officials. This weighed on precious metal prices. However, the dollar upside was capped across the board including versus precious metals. For example, gold prices appear to be well protected in the USD 1,210-1,220 per ounce area, also this time. On Tuesday, before the Fed’s Yellen’s speech, gold prices already recovered. This move gained momentum after Yellen’s cautious remarks on monetary policy and the economy. As a result, gold prices are back to around USD 1,240 per ounce. Investor positioning too heavy? Year-to-date, precious metal prices have rallied by more than 10% with the exception of palladium which has had a delayed recovery. For example, gold prices have rallied close to 17%. The rally, so far this year, has been fuelled by investors moving back in precious metals as an investment. Investors move into an asset if it is relatively cheap and if there is enough upside in prices. The substantial price declines over the recent years have made precious metals cheap on an absolute level. The prospect of cautious Fed tightening as well as negative rates/yields in the eurozone, Japan, Danmark, Sweden and Switzerland have sharply increased the relative attractiveness of precious metals as an asset. In addition, the uncertainty surrounding China’s exchange rate regime and financial market turmoil have also made gold more attractive. It is a relatively cheap “safe-haven” asset because of low US Treasury and German Bunds yields and the strong dollar rally over the recent years.
Insights.abnamro.nl/en
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Precious Metals Week kly - Investo or positionin ng too heavy y? - 30 Marc ch 2016
Gold speculative net-positioning Numbe er of contracts
300,0 000 250,0 000 200,0 000 150,0 000 100,0 000 50,0 000 0 00
02
04
06
0 08
10
12
14
16
Net positions Source: Bloomberg, ABN N AMRO Group Ec conomics
As the gold price rallyy has been at a high pace, investors and annalysts start to doubt if the rally ha as come to an end, especially y because of th he speculative positioning (se ee above). We do on’t share these e concerns. Th he speculative positioning p in ggold is close to the 2015 peak, because of a ssharp increase in long positions. This positiooning could lim mit the upside ear-term. However, the net-po ositioning has sstill considerable room to momentum in the ne increas se and to reac h the peaks in 2010 and 2011. There has aalso been a notticeable rise in the total-known t ET TF positions in gold (see grap ph below). We tthink that there e is further room to t go. In our vie ew, financial markets m are waiting for a goodd reason to pus sh gold prices above the pea ak of USD 1,28 80 per ounce. Any A weaker-thaan-expected ec conomic data in n the major eco onomies could be such reason. The focus foor this week (Friday) is on US em mployment repo ort and US ISM M. If they disapp point, the US ddollar should move m lower while gold g prices cou uld rally above USD 1,280 per ounce. If theyy come in around market expecttations, gold prrices will likely continue the USD U 1,200-1,2880 range for the e time being.
Total known ETF holdings gold, gold price ETF po ositions in mln troyy ounces
Gold price
100
2,200
80
1,800
60
1,400
40
1,000
20
600
0
200 95
00
05
10
Total ETF positions gold (lh hs) Source: Bloomberg, ABN N AMRO Group Ec conomics
15 Gold price (rhs)
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Precious M Metals Week kly - Investo or positionin ng too heavy y? - 30 Marc ch 2016
ABN AMRO precio ous metals fo orecasts Change es in red/bold End pe riod Gold Silver Platinum m Palladiuum Average Gold Silver Platinum m Palladiuum
30-Mar De c-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-177 Jun-17 Sep-17 Dec-117 1,250 1,300 1,350 1,370 1,3700 1,400 1,425 1,4550 1,237 1,,061 13.9 16.00 16.50 17.00 17.50 17.500 18.00 18.50 19.000 15.4 894 980 1,000 1,050 1,100 1,1255 1,150 1,200 1,2550 972 562 600 620 576 640 660 6800 700 720 7440 Q1 16 1,156 14.9 937 581
Q2 16 1,275 16.3 990 610
Q3 16 1,325 16.8 1,025 630
Q4 16 1,360 17.3 1,075 650
2016 Q1 17 Q2 177 Q3 17 Q4 17 20117 1,279 1,370 1,3855 1,413 1,438 1,4001 16.3 17.5 17.88 18.3 18.8 188.1 1,007 1,113 1,1388 1,175 1,225 1,1663 618 670 6900 710 730 7000
Source: ABN AMRO Grouup Economics
Fin nd out more abo out Group Eco onomics at: http ps://insights.a abnamro.nl/en n/
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