Gold Apr '17 (GCJ17)

by cmdtyNewswires - Fri Feb 15, 2:49PM CST
Apr Comex gold (GCJ19) on Friday closed up +8.2 (+0.62%) and March silver (SIH19) closed up +0.215 (+1.38%). Precious metals moved higher Friday with Apr gold at a 2-week high on signs of weak price pressures in China that may prompt China's central bank (PBOC) to expand stimulus measures. China Jan CPI rose +1.7% y/y, weaker than expectations of +1.9% y/y and the slowest pace of increase in a year, and China Jan PPI rose +0.1% y/y, weaker than expectations of +0.3% y/y and the slowest pace of increase in 2-1/4 years. Also, gold was supported by weaker than expected U.S. economic data that was dovish for Fed policy after Jan manufacturing production fell -0.9% m/m, weaker than expectations of unchanged and the biggest decline in 8 months. Metals prices fell back from their best levels after the S&P 500 climbed to a 2-1/4 month high, which curbs safe-haven demand for precious metals. Apr gold fell to a 2-week low on Thursday and Mar silver slipped to a 2-1/2 week low as political risks in the U.S. eased after lawmakers passed a compromise spending bill that averted a government shutdown on Friday night. Fund buying of gold is a bullish factor as global geopolitical concerns and stock market volatility have fueled demand for gold as a store of wealth after long gold positions in ETFs rose to a 5-3/4 year high on Jan 31.Big Picture Gold-Silver Market Factors: Bullish factors include (1) expansive Bank of Japan and European Central Bank monetary policies, although the ECB ended its quantitative easing program in Dec 2018, (2) an easier monetary policy by China's central bank, which cut the bank required reserve requirement ratio by 100 bp on Jan 4, and (3) fund buying of gold as global geopolitical concerns and stock market volatility have fueled demand for gold as a store of wealth as long gold positions in ETFs rose to a 5-3/4 year high. Bearish factors include (1) strength in the dollar as the dollar index recently rallied to a 1-1/2 year high, (2) tighter dollar liquidity as the Fed draws down its balance sheet, (3) slack inflation pressures after the Jan ISM prices-paid sub-index fell to a 3-year low of 49.6 and after the 10-year T-note breakeven inflation expectations rate recently fell to a 1-1/2 year low, which reduces demand for gold as an inflation hedge, and (4) the slower Chinese economy and US/Chinese trade tensions that dampen Chinese demand for industrial metals.