Precious Metals Weekly
Group Economics Macro & Financial Markets Research
Gold as risky asset?
Georgette Boele, tel,+31 20 6297789
14 October 2015
Gold behaves as a risky asset, but it is mainly a US dollar move… Gold has been the best performing precious metal this week but this rally will unlikely continue… …while the palladium price rally has lost momentum
Gold as a risky asset?
…while palladium being the weakest
For some gold bulls, the unimaginable thing happened.
In the period that the emission scandal hit the news until last
Recently, gold prices have behaved as a risky asset. The
Friday, palladium prices rallied by more than 17% versus the
behaviour of gold prices already changed at the end of
US dollar. This was not only the result of expectations of future
September, but on 2 October it became clear. What was the
higher demand for palladium autocatalysts but also the impact
trigger for this change in behaviour? In short, the weaker-than-
of a weaker US dollar (see above). Since Friday, sentiment
expected US employment report. This has resulted in the
has turned somewhat. There are some reasons for this. First,
further pricing out of Fed rate hikes, which has improved
there has been some deterioration in investor sentiment and
overall investor sentiment and has pushed the US dollar lower.
palladium is the precious metal that is the most negatively
Often better investor sentiment is negative for gold prices.
affected by this. Second, Chinese and German economic data
However, this is not the case if it coincides with lower
have come in below expectations. Third, investors have taken
expectations on US interest rates and a lower US dollar. The
a step back and moderated their bullish stance on palladium.
latter two forces are more dominant for gold prices. The US dollar currently behaves as a cyclical currency where the state
Palladium prices versus speculative positions
of the US economy and interest rate expectations are the
Number of contracts
crucial drivers. Both these forces have been negative for the
40,000
palladium price
1000
US dollar lately. Therefore, the US dollar has moved lower across the board including versus precious metals. Gold prices
900
30,000
appear to have behaved as a risky asset, whereas while in fact its price has mainly been supported by US dollar weakness.
800 20,000 700
Gold best performing precious metal this week…
10,000
600
Gold prices have been the strongest performing precious metal so far this week with platinum not far behind as explained above. Gold’s fortunes are the most closely linked to the
0 Jan 14
Jan 15
Net positions (lhs)
sentiment on the US dollar. We expect the US dollar to remain under pressure in the near-term unless US economic data
500 Jul 14
Jul 15
Palladium prices (rhs)
Source: Bloomberg, ABN AMRO Group Economics
surprise to the upside. It is unlikely that the risk-on environment will continue to support gold prices. The futures markets has priced out a Fed rate hike this year while
ABN AMRO forecasts End period Gold Silver Platinum Palladium
14-Oct Close 14 1,166 1,185 15.9 15.7 988 1,216 688 798
Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 1,184 1,172 1,112 1,100 1,050 1,000 950 900 16.6 15.7 14.5 15.0 14.5 14.0 14.5 15.0 1,141 1,081 910 900 875 850 900 1,000 736 674 652 650 625 600 625 650
supportive and hence gold negative. We expect gold prices to
Average Gold Silver Platinum Palladium
Q1 15 1,218 16.7 1,194 786
Q3 15 1,126 15.0 993 618
move back to USD 1,100 per ounce this year once the US
Source: ABN AMRO Group Economics
according to the options market there still is small possibility. According to our scenario, at some point in time, a Fed rate hike this year is completely priced out and this is the moment that the US dollar could start to recover also versus gold prices. In such an environment, resilient US data in constructive investor sentiment will likely be US dollar
dollar recovers somewhat.
Q2 15 1,193 16.4 1,129 759
Q4 15 1,106 14.8 905 651
2015 Q1 16 Q2 16 Q3 16 Q4 16 1,170 1,075 1,025 975 925 16.0 14.8 14.3 14.3 14.8 1,075 888 863 875 950 700 638 613 613 638
2016 1,000 14.5 894 625
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Precious Mettals Weekly - Gold G as risky as sset?
Precious metals P s G prices perr troy ounces Gold G price in US Gold SD G price in EU Gold UR G price in JP Gold PY G price in CH Gold HF G price in GB Gold BP G price in INR Gold G price in CN Gold NY G price in BR Gold RL G price in RU Gold UB G price in TR Gold RY S Silver prices pe er troy ounces S Silver price in USD U S Silver price in EUR E P Platinum prices per troy ounce es P Platinum price in n USD P Platinum price in n EUR P Platinum price in n JPY P Platinum price in n CNY P Palladium prices s per troy ounc ces P Palladium price in USD P Palladium price in EUR P Palladium price in JPY P Palladium price in CNY P Palladium price in BRL P Palladium price in INR P Palladium price in RUB G forw ard ra Gold ates L LBMA 1 Month Gold Forw ard Offer rate B BBA LIBOR USD 1 Month G 1 Month Le Gold ease rate L LBMA 3 Month Gold Forw ard Offer rate B BBA LIBOR USD 3 Month G 3 Month Le Gold ease rate V Volatility 1 month gold op ption volatility o volatility 1 month silver option 1 month platinum option volatillity um option volattility 1 month palladiu C COMEX & NYMEX positions N LONGS - GOLD NET G (COMEX)) N LONG ON SILVER NET S (COME EX) N LONG ON PLATINUM (NY NET YMEX) N LONG ON PALLADIUM (N NET NYMEX) T Total ETF positio ons T Total Know n ET TF Holdings of Gold T Total Know n ET TF Holdings of Silver T Total Know n ET TF Holdings of Platinum T Total Know n ET TF Holdings of Palladium R Relative G Gold/Silver ratio o G Gold/Platinum ra atio P Platinum/Palladi um ratio Sou urce: Bloomberg g
Close
Change 1 Day D in %
C Change 5 days in %
Change e YTD in %
1,166 1,022 139,456 1,114 758 75,763 7,401 4,514 73,583 3,422 Last 16 14 Last 988 866 118,188 6,272 Last 688 603 82,259 4,365 2,663 44,691 43,392 Last 0.07 0.19 0.13 0.10 0.32 0.23 Last 15.79 27.63 25.37 31.20 Last 88,469 49,502 22,647 11,857 Last 49,196,551 608,656,318 2,702,158 2,900,146 Last 73.45 1.18 1.44
-0.26 -0.13 -0.09 -0.22 -0.82 -0.11 0.11 0.64 1.02 -0.52 Change 1 Day D in % -0.38 -0.52 Change 1 Day D in % -0.21 -0.39 -0.35 -0.15 Change 1 Day D in % 0.50 0.27 0.35 -0.09 1.05 0.35 1.41 Change 1 Day D in % -27.78 -1.83
1.77 0.24 1.48 - 0.12 1.34 1.89 1.61 3.08 2.62 1.78 C Change 5 days in % - 0.93 - 2.37 C Change 5 days in % 4.58 3.06 4.29 4.43 C Change 5 days in % - 1.45 - 3.11 - 1.89 - 1.75 - 0.24 - 1.38 - 0.86 C Change 5 days in % -13.33 - 0.26
-1.61 4.07 -2.05 -5.66 -0.61 0.91 0.30 43.52 10.94 23.21 Change e YTD in % 1.08 7.19 Change e YTD in % -18.77 -13.72 -18.82 -16.86 Change e YTD in % -13.84 -8.77 -14.22 -12.56 25.56 -11.59 -6.83 Change e YTD in % 252.94 12.85
-13.64 0.05
5.56 - 0.76
0.00 25.49
Change 1 Day D in % 1.41 0.41 -0.95 0.35 Change net 5 days 15,326 19,396 1,136 2,777 Change net 5 days -17,809 -2,374,003 -2,159 -15,296 Change 1 Day D in % 0.40 0.27 -0.75
C Change 5 days in % 7.65 - 3.90 - 3.34 - 5.54 C Change net 1 Month M 32,490 23,942 -4,410 6,964 C Change net 1 Month M 415,401 -8,335,628 -129,828 -5,577 C Change 5 days in % 2.66 - 2.70 6.19
Change e YTD in % -8.52 -6.92 55.23 44.26 Chang ge net YTD -16,756 15,770 -7,303 -10,161 Chang ge net YTD -2,242,129 14,454,530 -1 -21,736 -166,744 Change e YTD in % -2.91 20.69 -5.48
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Precious Mettals Weekly - Gold G as risky as sset?
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