World Bank Says Precious Metals To Reverse Gains This Year

Gold remained strong on Monday but was unable to sustain the $1300 price too long as technical selling was triggered the minute it crossed the threshold. Traders could not resist booking profits as gold soared over the last week. Gold closed at the 1295 price which is still well above the 1230 number in mid-April. Silver dipped 179 points after breaching $18 and closed the day at 17.6. Platinum continued to outperform in precious metals gaining $6.15 to trade at 1084.55.

The U.S dollar continues to move sharply lower against the foreign currencies continuing to push prices higher across the board as silver is also hitting a contract hit in today’s trade as the trends are higher. Gold prices are trading far above their 20 and 100 day moving average telling you that the short-term trend is to the upside as it certainly looks like prices will test $1,300 an ounce again in the next couple of days.

Japanese financial markets are closed for various holidays for most of this week, which may limit near-term follow-through on last week’s momentum. This may push tertiary catalysts out of the forefront and refocus investors on baseline fundamentals, putting the US Employment report in the spotlight. The outcome ought to be pivotal for rate hike timeline expectations.

Analysts expect a 200k increase in nonfarm payrolls in April – a mild slowdown from the 215k added in March – while the jobless rate holds steady at 5 percent. Equally of note, average hourly earnings are expected to rise at a year-on-year rate of 2.4 percent, making for the first wage inflation increase in four months.

Traders marked down tightening bets after the FOMC signaled an emphasis on domestic matters, with the probability of a June hike falling from 21 to 12 percent. This makes sense: US news-flow has increasingly underperformed relative to consensus forecasts over recent weeks. This may make markets more sensitive to upbeat results that clash with the established narrative versus the alternative. (DailyFx)

The World Bank does not expect the recent rise in platinum prices to be sustained for the full year, with its latest ‘Commodity Markets Outlook’ report forecasting a 10% year-on-year price decline in 2016. The report, released on April 26, notes that precious metals prices increased by 6% in the first quarter on stronger investment demand and safe-haven buying. The price of gold rose by 7%, while silver and platinum prices each increased 1%. Platinum’s 13% surge in February and March is attributed to rising gold prices and a stronger rand, with South Africa producing about 60% of global production. “However, mine supply is facing headwinds due to sharply lower investment, upcoming labor negotiations, and adverse effects from drought. Demand from the automotive sector remains robust, boosted by low fuel prices and easing credit.”

Overall, the bank forecasts that precious metals prices will decline 2% in 2016, mainly as a result of lower investment demand. Platinum is expected to lead the decline, falling 10% on surplus supply. The bank is forecasting a 2016 platinum price of $950 in nominal US dollar terms, rising to $999 in 2017. By 2025, it expects the price of the precious metal to be $1 500 in nominal US dollar terms. The platinum price, which has traded as low as $816 in the last year, breached the $1 000/level in early April and was above that benchmark level at the time of the release of the World Bank report. Gold prices, by comparison, are projected to fall by only 1%, reflecting strong investment demand in the first quarter. However, the bank expects the price to decline in future on expectations of a rising dollar and tightening in US monetary policy.