Gold Jewelry In Demand After Two-Year Slump In China

Strengths

• The best performing precious metal for the week was palladium, up 0.28 percent.  Trade data shows Chinese imports of palladium are up 60 percent year-over-year. The world’s leading jeweler, Chow Tai Fook Jewellery Group, saw profits increase for a second consecutive six-month period as demand for gold in China lifts sales. This mirrors China’s recovery in demand for luxury goods after a two-year slump amid a corruption crackdown in the country, reports Bloomberg.  In Bloomberg’s weekly survey, gold traders see the rally in gold resuming with the dollar trading at its lowest in more than a month.

• The world’s leaders in gold imports, India and China, saw a welcome increase in gold demand for the month of October after a September slump in demand, writes Lawrie Williams.

• The Russian central bank added another 700,000 ounces of gold to its reserves last month as a part of its plan to reduce the nation’s reserve dependence on the U.S. dollar. Reported by TASS, the BRIC countries are considering forming a single, unified gold trading system.

Weaknesses

• The worst performing precious metal for the week was silver, down 1.52 percent on little news unique to the metal. According to the TD Securities outlook for 2018, precious metal gains are likely to be capped by U.S. monetary policy and the passage of tax reform.

• Western Australia’s Liberal party joins the gold industry in opposition of a proposed increase in gold royalty, saying it would cost jobs and much of its revenues would leak to the eastern states of the country.

• United Steelworkers urged the Canadian government to respond after two workers died in an incident that the union said is linked to protests at a mine project owned by Torex Gold based in Toronto, writes Bloomberg.  It was later reported the men who died were not employees of Torex Gold.

Opportunities

• Mike McGlone, BI commodity strategist, writes that strong gold ETF inflows seem poised to gain momentum as investors seek diversification. He adds that gold ETF inflows are outpacing price appreciation for the longest period and at the highest velocity since the global financial crisis.

• UK-based Glint Pay announced the launch of a beta-app and credit card allowing consumers to buy portions of gold and then use the account to make purchases, reports Kitco. This is a major step forward in the re-monetization of the yellow metal.

• A UBS price forecast says gold could rebound above $1,300 per ounce toward the end of this year and into 2018. The Bank of Montreal also projects a gold price average of $1,300 per ounce in 2018. JPMorgan, however, projects precious metals will be stable through 2018, with gold averaging $1,350 per ounce by the fourth quarter.

Threats

• JPMorgan Chase & Co. is bearish on gold in the near term expecting the Federal Reserve to hike five times through December 2018, fueling a climb in real rates, reports Bloomberg. BlackRock Inc. says a tax cut and interest rate hikes would undermine gold.

• Emmerson Mnangagwa was sworn in as interim president of Zimbabwe after Robert Mugabe was removed from power. Many believe this successor and former right-hand man of Mugabe will continue to implement the violent infrastructure the nation has seen for many years while in a time of crisis with 95 percent of the population unemployed.

• China moves to make it more difficult for new-energy vehicle manufacturers to access subsidies and plans to phase out financial support entirely by 2020. This comes at a time when electric vehicle sales are booming in the nation with sales rising 45 percent year-over-year to 490,000 units in the first 10 months of 2017.

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