COMMERZBANK: GOLD: Risk of setback following strong start to year
Transcription
COMMERZBANK: GOLD: Risk of setback following strong start to year
Commodity Research | Commodity Spotlight Commodity Spotlight Precious Metals 11 February 2015 Gold: Risk of setback following strong start to year The gold price rose in January despite a firm US dollar. The gains were triggered by the announcement of extensive bond purchases by the ECB, the surprising decoupling of the Swiss franc from the euro by the SNB and the renewed flaring up of the Greek debt crisis following the election victory of Syriza. The gold price is also likely to continue profiting from the ultra-loose monetary policy pursued by the ECB. However, we expect the gold price to suffer a renewed setback in the summer months because the market is underestimating the Fed’s interest rate hikes. Gold is likely to be trading at $1,250 per troy ounce and €1,200 per troy ounce by year’s end. The gold price got off to a similarly good start to the new year as it did last year, increasing by nearly 9% in USD in January. For the first time since August 2014, gold briefly exceeded the $1,300 per troy ounce mark – what is particularly remarkable is that this happened despite a significantly appreciating US dollar. After all, a firmer US dollar normally weighs on the alternative currency that is gold. In euro terms, gold was thus able to gain by a full 18% to achieve a 21-month high of €1,166 per troy ounce at the end of January (chart 1). That said, it has shed some of these gains again in the meantime. Commerzbank Forecasts 2015 Q1 Q2 Q3 Gold 1225 1150 1175 Silver 17.0 16.0 16.5 Platinum 1225 1200 1250 775 Palladium USD per troy ounce 750 800 Precious metals A number of factors played their part in the strong gold price in January: The ECB announced on 22 January that it would be buying government bonds and other securities worth a total of €60 billion each month starting from March. Given that the programme is supposed to run for a period of 19 months, this will increase the ECB’s balance sheet by €1.14 trillion. An increase in the ECB’s balance sheet in recent years usually went hand in hand with a rising gold price in euros (chart 2, page 2). In mid-January, the Swiss National Bank (SNB) decoupled the Swiss franc from the euro in a completely unexpected move. Because this happened one week before the broad-based ECB bond purchases were announced, some market participants regarded it as a sign of the SNB’s lack of confidence in the ECB’s monetary policy. Apparently this was seen as a signal to purchase gold. Gold ETFs saw strong inflows in the days following the SNB’s decision. The clear victory of the radical left-wing and reform-critical Syriza party in the Greek parliamentary elections at the end of January ultimately caused the Greek debt crisis to flare up again. As a result, the interest rates for Greek bonds rose significantly and increased withdrawals were made from Greek bank accounts out of fear that Greece would leave the Eurozone. All of this can explain the strength of the gold price in euros. The decline in yields on 10-year US Treasuries in January gave the gold price in US dollars a boost for a time, as this drove down real interest rates despite falling inflation. The geopolitical risks such as the escalation of the conflict in eastern Ukraine are also likely to have played their part in this. CHART 1: Gold price begins the new year with marked gains 1700 1600 1500 1300 Head of Commodity Research 1250 Eugen Weinberg 1200 +49 69 136 43417 eugen.weinberg@commerzbank.com 1150 Analyst 1100 Carsten Fritsch 1050 +49 69 136 21006 carsten.fritsch@commerzbank.com 1000 Analyst 950 Barbara Lambrecht 900 +49 69 136 22295 barbara.lambrecht@commerzbank.com 850 Analyst 1400 1300 1200 1100 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Gold price in USD per troy ounce, left Apr-14 Jul-14 Oct-14 Jan-15 Gold price in EUR per troy ounce, right Source: Bloomberg, Commerzbank Corporates & Markets Michaela Kuhl +49 69 136 29363 michaela.kuhl@commerzbank.com Analyst Daniel Briesemann For important disclosure information please see page 6. research.commerzbank.com / Bloomberg: CBKR / Research APP available +49 69 136 29158 daniel.briesemann@commerzbank.com Commodity Research | Commodity Spotlight Precious Metals Uncertainty over Greece suggests further ETF inflows All this has certainly contributed to the remarkable shift in sentiment that we have seen among ETF investors in recent weeks. Holdings in gold ETFs tracked by Bloomberg climbed by 65.5 tons in January (chart 3). These were the most pronounced net inflows in any month since September 2012, the inflows happening in the second half of the month and continuing in early February. In the short term, the uncertainty over forthcoming developments in Greece suggests that we will see further ETF inflows. Unless an aid programme is agreed, Greece risks running out of money by the end of February and being unable to service its debts. Furthermore, the ECB will no longer be accepting Greek bonds as collateral for its monetary policy operations with effect from mid-February. This makes refinancing considerably more expensive for Greek banks and could lead to more withdrawals from Greek bank accounts. Plus ECB bond purchases and risk of global devaluation race From March the ECB will be beginning its programme of extensive bond purchases. Besides the direct effects on the gold price mentioned at the beginning of this article, there is also the danger of a global devaluation race. The indirect aim of the ECB’s bond purchases is to weaken the euro in order to generate inflation. The Japanese central bank has already been pursuing this objective with its ultra-expansionary monetary policy. The central banks of Canada and Australia unexpectedly lowered their interest rates recently, no doubt in a bit to weaken their currencies too. Because it is largely beyond the control of central banks and cannot be multiplied at will, gold should profit from this in the medium term. Probability of Fed interest rate hikes underestimated in contrast We nonetheless expect the gold price to suffer a renewed setback during the summer months, as the market is underestimating the probability of the US Federal Reserve implementing interest rate hikes this year. Our economists envisage a first rate hike in September, followed by further interest rate increases at subsequent meetings. The moment the Fed hints at this at one of its next meetings and the market begins pricing in this factor accordingly, US bond yields are likely to rise to markedly and the gold price to come under pressure. Expectations of interest rate hikes have returned to the market after the robust US labour market data on 6 February. Hence, the market’s response gave a foretaste of this already. Real interest rates will increase even more sharply when the rate of inflation dips temporarily below zero, meaning that gold will face considerable headwind from this side. Against this backdrop, one risk factor is also the market positioning of speculative financial investors. These have expanded their net long positions in gold by more than 70% since the beginning of the year to the highest level since October 2012 in early February (chart 4, page 4). Lower price in summer, recovery by year’s end We therefore expect the gold price to fall to $1,150 per troy ounce this summer, though it should recover to $1,250 per troy ounce by year’s end. Real interest rates look set to decline again towards the end of the year as inflation should begin rising in the fourth quarter. What is more, the more volatile performance of the US equity markets is likely to drive capital back into gold, which points to ongoing inflows into the gold ETFs. The ultra-loose monetary policy of the ECB and other central banks likewise suggests a higher gold price. That said, the appreciation of the US dollar will doubtless limit the rise in the gold price. Gold in euros should fare considerably better and increase by year’s end to €1,200 per troy ounce, which would constitute a rise of a good 20% year-on-year. CHART 2: ECB bond purchases tend to drive up gold price ECB balance sheet in EUR billion, gold in EUR per troy ounce 3500 1600 3000 1400 2500 1200 1000 2000 CHART 3: Gold ETFs seeing inflows again of late Monthly change in gold ETF holdings in tons 100 50 0 800 1500 600 1000 400 500 200 0 2000 2002 2004 2006 2008 2010 2012 2014 ECB balance sheet, left Gold price, right Source: ECB, Bloomberg, Commerzbank Corporates & Markets 2 0 -50 -100 -150 -200 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Source: Bloomberg, Commerzbank Corporates & Markets 11 February 2015 Commodity Research | Commodity Spotlight Precious Metals At a glance TABLE 1: Our forecasts Current USD per troy ounce Gold Silver Platinum Palladium 1234 16.9 1209 771 Quarterly average Q1 15 1225 17.0 1225 775 Q2 15 1150 16.0 1200 750 Q3 15 1175 16.5 1250 800 Q4 15 1250 18.0 1300 850 Yearly average Q1 16 1250 18.5 1350 875 Q2 16 1250 18.5 1375 900 Q3 16 1300 19.0 1400 925 Q4 16 1350 20.0 1450 950 2014 1260 19.1 1384 800 2015 1200 17.0 1250 790 2016 1300 19.0 1400 910 Quarterly averages, based on spot prices; Source: Bloomberg, Commerzbank Corporates & Markets TABLE 2: ETF holdings (weekly data) Gold ETFs (in '000 ounces) Silver ETFs (in '000 ounces) Platinum ETFs (in '000 ounces) Palladium ETFs (in '000 ounces) Date Holdings 06.02.15 53945.0 06.02.15 621280.1 06.02.15 2544.4 06.02.15 2976.4 Total net change % change 1 week 1 month 1 year 1 year 450.9 2508.2 -1900.7 -3.4 254.8 -1831.2 837.9 0.1 -62.1 -51.0 83.1 3.4 -62.8 -64.5 849.1 39.9 52 weeks High Low 56791.2 51436.8 647387.5 620442.2 2856.4 2461.3 3083.6 2090.7 Source: Bloomberg, Commerzbank Corporates & Markets TABLE 3: Net long positions of money managers (weekly data) Date 03.02.15 03.02.15 03.02.15 03.02.15 Gold (in '000 contracts) Silver (in '000 contracts) Platinum (in '000 contracts) Palladium (in '000 contracts) Level 148.326 38.885 21.991 17.965 Total net change 1 week 1 month 1 year -4.911 54.130 104.674 -2.837 17.078 36.507 -1.949 5.593 -1.069 -1.235 -1.508 2.186 52 weeks High Low 153.237 29.863 45.943 -7.638 42.109 12.06 25.804 14.617 Source: CFTC, Bloomberg, Commerzbank Corporates & Markets TABLE 4: History Current USD per troy ounce Gold Silver Platinum Palladium 1234 16.9 1209 771 % change 1 week 1 month y-t-d y-o-y -2.7 -2.5 -2.7 -2.6 -4.4 -16.4 -13.0 7.3 1.0 2.6 -1.9 -3.9 4.2 7.8 0.0 -3.3 History Q113 1632 30.1 1632 741 Q213 1417 23.2 1467 714 Q313 1330 21.5 1453 724 Q413 1272 20.8 1397 724 Q114 1292 20.5 1429 745 Q214 1257 19.7 1448 816 Q314 1282 19.7 1434 862 Q414 1201 16.5 1229 787 Source: Bloomberg, Commerzbank Corporates & Markets TABLE 5: World Official Gold Holdings (monthly data) Country USA Germany IMF Italy France Russia tonnes 8,133.5 3,384.2 2,814.0 2,451.8 2,435.4 1,208.2 (+58.4) Country China Switzerland Japan Netherlands India Turkey tonnes 1,054.1 1,040.1 765.2 612.5 557.7 529.1 (+5.3) Source: World Gold Council, Commerzbank Corporates & Markets TABLE 6: Upcoming Events 26 Feb / 24 March ca. 27 February 3 March / 1 April 5 March / 15 April 6 March / 3 April 17 March / 16 April 18 March / 29 April USA CHN USA EUR USA EUR USA Consumer Price Inflation, January / February Gold imports via Hong Kong, January Vehicle sales, February / March ECB meeting and press conference Nonfarm payrolls, February / March EU new car registrations, February / March FOMC meeting followed by press conference in March Source: Fed, ECB, Bloomberg, Commerzbank Corporates & Markets 11 February 2015 3 Commodity Research | Commodity Spotlight Precious Metals CHART 4: Net long positions of money managers (Gold) 250 2000 '000 contracts 1800 200 1600 150 1400 100 1200 1000 50 800 0 2008 600 2009 2010 2011 2012 Spec. net long (lS) 2013 2014 2015 CHART 5: Gold: ETF holdings 90 1900 in mm oz 80 1700 70 1500 60 1300 50 1100 40 900 30 700 20 500 10 0 300 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Gold (USD per troy ounce, rS) ETF holdings, left Gold price (US$/oz), right Source: CFTC, Bloomberg, Commerzbank Corporates & Markets Source: Bloomberg, Commerzbank Corporates & Markets CHART 6: Gold versus US dollar CHART 7: US real interest rates versus gold 92 1900 3 2000 96 1700 2 1800 1500 100 1 1600 1300 104 1100 108 112 116 2009 2010 2011 2012 2013 US-Dollar Index (inverted), ls 2014 0 1400 900 -1 700 -2 500 -3 2010 2015 1200 1000 2011 Gold (US$/oz.), rs 2012 2013 2014 Real interest rates, lS 2015 Gold (US$/oz), rS Source: Bloomberg, Commerzbank Corporates & Markets Source: Bloomberg, Commerzbank Corporates & Markets CHART 8: Chinese net gold imports via Hong Kong in tons CHART 9: Global gold demand per quarter in tons 1400 1200 1000 800 600 400 200 0 -200 -400 160 140 120 100 80 60 40 20 Q1'08 0 Jan-10 Jan-11 Jan-12 Jan-13 Jewelry Jan-14 Q1'09 Q1'10 Q1'11 Bars and Coins ETFs Q1'12 Technology Source: Statistics Department of HK, Reuters, Commerzb. Corp. & Markets Source: WGC, Commerzbank Corporates & Markets CHART 10: Chinese silver imports CHART 11: Gold/Silver ratio 3000 2500 90 ytd in tons Q1'13 Q1'14 Official Sector Ounces of silver per ounce of gold 80 2000 70 1500 60 1000 50 500 40 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2012 2013 2014 Source: Chinese Customs Authority, Commerzbank Corporates & Markets 4 30 1996 1999 2002 2005 2008 2011 2014 Source: Bloomberg, Commerzbank Corporates & Markets 11 February 2015 Commodity Research | Commodity Spotlight Precious Metals CHART 12: Net long positions of money managers (Silver) 50 50 45 40 35 30 25 20 15 10 5 '000 contracts 40 30 20 10 0 -10 2008 2009 2010 2011 2012 spec. net long positions, lS 2013 2014 CHART 13: Silver: ETF holdings 700 50 45 40 35 30 25 20 15 10 5 0 in mm oz 600 500 400 300 200 100 0 2008 2015 Silver (US$/oz.), rS 2009 2010 2011 2012 ETF holdings, lS 2013 Source: Bloomberg, Commerzbank Corporates & Markets CHART 14: Net long posit. of non-commercials (Platinum) CHART 15: Platinum: ETF holdings 2200 '000 contracts 2000 40 3000 2015 Silver price (US$/oz), rS Source: CFTC, Bloomberg, Commerzbank Corporates & Markets 50 2014 2400 in '000 oz 2500 2100 2000 1800 1500 1500 1000 1200 500 900 1800 1600 30 1400 20 1200 1000 10 800 0 2008 2009 2010 2011 2012 spec. net long positions, ls 2013 2014 600 2015 0 2008 Platinum (US$/oz), rs 600 2009 2010 2011 ETF holdings, lS 2012 2013 Source: Bloomberg, Commerzbank Corporates & Markets CHART 16: Net long posit. of non-commercials (Palladium) CHART 17: Palladium: ETF holdings 1000 900 800 700 600 500 400 300 200 100 '000 contracts 28 24 20 16 12 8 4 0 2008 2009 2010 2011 2012 spec. net long positions, ls 2013 2014 3500 3000 1000 900 800 700 600 500 400 300 200 100 in '000 oz 2500 2000 1500 1000 500 0 2008 2015 Palladium (US$/oz), rs 2009 2010 ETF holdings, lS 2011 2012 2013 Source: Bloomberg, Commerzbank Corporates & Markets CHART 18: Price difference platinum vs gold (US$/oz) CHART 19: Price ratio platinum/palladium 1200 1000 800 600 400 200 0 2014 2015 Palladium price (US$/oz), rS Source: CFTC, Bloomberg, Commerzbank Corporates & Markets 1400 2015 Platinum price (US$/oz), rS Source: CFTC, Bloomberg, Commerzbank Corporates & Markets 32 2014 6 5 4 3 2 1 -200 -400 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: Bloomberg, Commerzbank Corporates & Markets 11 February 2015 0 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: Bloomberg, Commerzbank Corporates & Markets 5 This document has been created and published by the Corporates & Markets division of Commerzbank AG, Frankfurt/Main or Commerzbank’s branch offices mentioned in the document. 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