Be Careful What You Wish For…

After weeks of low volatility range trading, precious metals finally broke trend, with sharp losses seen last Friday, with Gold settling below the key support of $1180.  Fridays have been particularly bearish sessions as investors concerned with holding long positions over the weekend opt to close positions out.  Rumours that Greece was closer to a bailout deal after Thursdays summit of Eurozone ministers fuelled those concerns.  However, the Greek debt situation still appears far from over, especially after Greek Prime Minister demoted lead negotiator and Finance Minister following months of ineffectiveness in resolving the countries debt obligations. This saw the yellow metal regain lost ground to close nearly $30 higher on Monday.  In fact we’ve witnessed a complete turn-around in the fortunes of precious metals. On the one week performance, Silver led the surge higher jumping 6.1% higher, while both Platinum and Gold climbed 3% from this time last week.

Meanwhile, the US dollar index has been dragged lower, after disappointing U.S data (weaker Consumer confidence) and dampened expectations that the Fed will hint at this week’s FOMC of an imminent rate hike. This is the latest in a series of lacklustre data from the states, with yesterdays the US flash services PMI also missing consensus.  A weaker USD is positive for commodities like gold which are priced in USD as it makes them cheaper for non-dollar users. Unfortunately the weakness in USD has also pushed commodity currencies such as the NZD higher. So in NZD terms, Gold is still hovering around the $1600 NZD per oz. level.  Undervalued on medium term charts.

Looking ahead, the next 24 hours should be very eventful.  Tonight we get an update on US 1st quarter GDP with estimates as low as just 0.1% annualised.  Followed by tomorrow morning’s Federal Open Market Committee meeting.  Then closer to home, we get the latest thinking from our own Reserve Bank. Expectations are that they will try and talk the NZ currency down given how low inflation is currently running. Personally I’m looking for higher levels in the NZD/ Gold levels in the coming week.

By Adam Van Sambeek, Treasury Manager.

Will Gold and Silver Follow Crude Oil’s Suit?

Gold consolidates just below the $1,200 per ounce with no fresh news or direction for traders to latch on to. Renewed dollar strength follows unclear FOMC minutes, which could’ve been interpreted anyway to suit your own view on the FED’s ultimate intentions. This is capping any sustained Gold rally.  Gold failed to hold key 1205 support, after briefly climbing to 1224 just before Easter, returning to its high volume comfort zone of around 1200.  Traditionally, precious metals now enter the seasonally-low period where physical demand historically declines. However, the yellow metal is showing resilience, with higher lows and higher highs, with the next few trading sessions crucial for bulls that we maintain above the 1190 level.  Last night did see this level break, only to claw back losses, closing at $1193, after weaker than expected US retail sales and slump in small business confidence.

Interestingly, the Commodity Futures Trading Commission (CFTC) reported that the Comex speculative traders increased their net-long positions in gold to 100,757 contracts, which marks a five week high, up from 80,019 a week earlier.  A sustained build in price and an adjustment in current bearish sentiment, could rise the likelihood for further long accumulation and short-covering in the coming weeks. However this still poses risks, as this data proves the market remains highly speculative, and therefore vulnerable to price swings. Good news is we’ve already seen Crude oil prices recover 15% over the past month, leading a small commodity revival, as investors seek value in beaten up sectors. Will Gold and Silver follow suit?

By Adam Van Sambeek, Treasury Manager.

The Seldom Mentioned Joys of Spooling

Current headache… why does the Strand Annealer not spool how I would like it to? ‪#‎problems‬ ‪#‎respool‬ ‪#‎luggage‬

2015-04-09 15.11.36

Update: Luckily I have the guru AKA Murray available to help me find a solution. We spent the morning problem solving and now things are running much more smoothly (to the delight of Buddy who was re-spooling all the rejects!)

Gold Corrects Downwards, Driven by USD

It shouldn’t have come as any surprise that following last week’s meteoric rise in Gold, involving the longest winning streak in over a year, we would witness some sort of correction. The pullback in gold picked up steam after Federal Reserve chairwoman Janet Yellen said late on Friday that an increase in the benchmark federal funds rate “may well be warranted later this year” given a sustained improvement in US economic conditions. This was enough to see Gold prices retreat back to $1180 support, having stumbled around the $1200 psychological resistance. Many may argue that last week’s rally is in fact the correction to a market in a strong downward trend. That may be the case, but more weight should be placed on Gold’s recent resilience and how convincing $1150 support has become.

As stated many times before, USD is the main driving force for commodities, and in particular the increasingly public debate on when the Fed will raise interest rates.  This has become highly speculative, with traders forecasting the Fed’s next move anytime data is released. Last night’s data was no exception, a weaker-than-expected ADP employment report followed by disappointing ISM Manufacturing data saw traders selling USD, with subsequent gains for commodities.  This heightens volatility in an already uncertain market, making trading decisions increasingly difficult. Don’t expect any respite as we head into Easter, Employment and Non-Farm Payrolls are due tomorrow night, and in a holiday thinned market, expect volatility. (Non-Farm Payrolls are expected to show an increase of 245k with the Unemployment Rate holding at 5.5%. )

I particularly like Bullion priced in NZD. Last night’s disappointing Global Dairy Trade auction saw the index fall 10%, while New Zealand Whole Milk Powder falls 13.3%. All this should put NZD under pressure, which is long overdue for exporters into Australia who’ve been suffering a near parity exchange rate of late. Happy Easter everyone.

By Adam Van Sambeek