Gold Moves As Trump Rattles Markets

Strengths

• The best performing precious metal for the week was gold, followed by silver, with a 2.03 percent gain.  Nearly $1.6 billion went into the 10 precious metal-backed ETFs that have attracted the most money in January, reports Bloomberg. Frankfurt-listed Xetra-Gold drew in more than any other commodity ETF.
• The Royal Mint in London reports that coin sales are on the rise amid political turmoil, with sales to Germany more than doubling in volume last year and sales to the U.K. rising by over a quarter. Chris Howard, the director of bullion at the Royal Mint, says that coin and bar production is up 50 percent compared with a year ago. The group expects similar growth this year through expansion in the U.S. and German markets.
• Political concerns from the EU to the U.S. sent gold rebounding to a three-year high in 2016. According to the World Gold Council, purchases through exchange-traded funds helped global demand climb about 2 percent to 4,309 metric tons last year. This was driven by inflows into gold-backed ETFs of 532 tonnes, offsetting a decline in coin and jewelry demand.

Weaknesses

• The worst performing precious metal for the week was palladium, rising just 1.11 percent.  Russia’s Norilsk Nickel noted that they plan to increase production of palladium in 2017.
• Underwriters that announced a bought deal price of $7.95 per share to raise $250 million for Alamos Gold experienced a hung deal early in the week with few investors requesting allotments.  The shares were subsequently repriced to $7.25 a share to clear the order books later in the week, according to two people familiar with the offering who told Bloomberg.
• Gold Resource reports the suspension of operations for up to 48 hours this week, after an employee died in a heavy-equipment accident in the Arista mine in Mexico, reports Bloomberg. In an unrelated accident, another Arista mine worker died as a result of a ground fall event.

Opportunities

• Gold is sending a “canary in the coal mine” signal for the U.S. dollar, reports Bloomberg, and a lot of it has to do with President Trump rattling the markets. Some of the Trump administration moves this week include the following: A dust-up with Australian Prime Minister over a refugee-resettlement deal, a trade adviser to Trump saying Germany is benefitting from a “grossly undervalued” currency – sending the euro up, and Trump’s firing of the nation’s acting attorney general for criticizing his immigration travel, just to name a few. This sent investors searching for gold as a safe-haven. Joni Teves, the top LBMA forecaster with UBS, says she sees the metal rising in 2017 to an average of $1,350 an ounce.
• Argentina’s Federal government is said to be drafting a bill with state governors to attract mining investment in the country. Such a bill would reconcile federal and state legislation, reports Bloomberg. The government wants a final draft by next month to send to Congress for approval by March 1.  Some provinces have bans on certain mining processes which are more restrictive than at the federal level, and potentially some stalled projects may be able to move forward in the permitting process.
• Strategists at BMO Capital Markets think President Trump may be spending all of his political capital on his initial moves a little too fast, and burning bridges in the process. The group’s theory is that this may hinder the push through of Trump’s pro-business agenda; also lowering the probability of meaningful fiscal stimulus anytime soon, reports Bloomberg. As the Fed deals with Trump uncertainty, prices and trading volumes surged Thursday on call options, as seen in the chart below, giving holders the right to buy bullion at higher prices. Similarly, on Wednesday investors poured $413 million into the largest ETF backed by gold, recouping almost half of the money that exited last month, Bloomberg data shows.

Threats

• At least 10 bills to limit protests have been introduced in recent months by Republicans in statehouses across the U.S., reports Bloomberg, with the goal of regulating public dissent as demonstrators take to the streets to protest Trump. The bills range from a possible protection in North Dakota for motorists who unintentionally kill protestors blocking roads, to a bill in North Carolina which would call for imprisoning people who taunt ex-officials. “I’ve been monitoring free speech legislation for about a dozen years now, and I’ve never seen anti-protest legislation in the states anywhere near as large as we’re seeing now,” Lee Rowland, senior staff attorney for the American Civil Liberties Union said.
• A New York federal appeals court overturned the dismissal of a lawsuit alleging traders at JPMorgan Chase & Co manipulated the silver-futures market, writes Bloomberg. In an order on Wednesday, the appeals court said that U.S. District Jude Paul Engelmayer demanded too high a level of evidence for an independent silver and gold futures trader to overcome the bank’s request for the suit to be thrown out. Similarly, the judge “engaged in impermissible fact-finding” by questioning the plaintiff’s data analysis, Bloomberg continues. JPMorgan isn’t the only Wall Street bank in this situation – many others have been pegged with allegations of silver-market manipulation for nearly a decade.  Maybe the system isn’t rigged as opinion polls have suggested?  Nah!
• Following an environmental audit, 23 mines in the Philippines have been shut down, reports Bloomberg, and five mines are under suspension. One of the companies affected by the Philippines suspension case is OceanaGold, whose Nueva Vizcaya province is the subject of a proposed suspension order citing alleged declining agricultural production. Following the news, Oceana tumbled as much as 18 percent in overnight trading in Australia, the most since February 2009, but fared better when Canadian markets opened.  B2Gold also has a mine in the region that has been subject to review.

Courtesy of http://usfunds.com/