Gold: USD 1,300/oz remains in play in the coming weeks – Standard Chartered

After surrendering their safe-haven bid, gold prices have regained traction following the release of the FOMC minutes and prices are likely tto breach USD 1,300/oz as the market prices in a less hawkish Fed, according to Suki Cooper, Precious Metals Analyst at Standard Chartered.

Key Quotes

“We continue to expect the Fed to announce its gradual balance sheet reduction in September and to hike for the third time this year in December. While political and macro risks continue to linger, such as Jackson Hole, the US debt ceiling and low inflation, gold continues to closely track the USD and real yields. Prices are testing their 50-day moving average, and while geopolitical risks exacerbate gold’s upside risk, we think gold is likely to breach USD 1,300/oz as the market prices in a less hawkish Fed, particularly in a risk-off environment.” 

“Regulatory filings reveal a number of newcomers in gold  Gold held in trust across the physically backed exchange traded products (ETPs) was up 170 tonnes (t) in H1-2017, but holdings have fallen by 60t in H2-2017 to date. Indeed, ETP holdings rose every single month in H1. February marked the strongest month, and the latest regulatory quarterly filings show that the largest holders kept their exposure mostly unchanged q/q in Q2. The largest sellers had been reducing their exposure over the year and continued to do so at a similar pace. The largest buyers in Q2-2017 reduced their exposure at the end of last year and have rebuilt positions to a similar level y/y and are close to their “peak” exposure. But the relatively high number of newcomers in the gold space is striking. While it bodes well that the universe of gold investors is expanding, their resilience will be tested with the recent price volatility; Q3 filings will reveal whether they were part of the exodus in July, which showed the largest monthly outflows since December. July activity underscored the recent change in ETP investor behaviour: they have become net sellers when prices have fallen towards lows of USD 1,200/oz.”