Gold Lacks Safe-Haven Bid But Faring Better Than Other Commodities - UBS-Shanghai Metals Market

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Gold Lacks Safe-Haven Bid But Faring Better Than Other Commodities - UBS

Industry News 05:17:00PM Jul 09, 2015 Source:SMM

By  Paul Ploumis 09 Jul 2015  Last updated at  05:30:43 GMT

(Kitco News) - Gold may not be drawing a big safe-haven bid from the Greek debt crisis and meltdown in Chinese stocks, but the metal is outperforming other commodities, notes one bank.

"Gold's price action of late seems to be counterintuitive from a safe-haven standpoint," said UBS analysts in a research note Wednesday. "In reality, weakness is currently being felt across commodities and in relative terms, gold is actually doing better than other assets in this space."

According to the report, gold has fallen around 3% since late June, compared to losses of 14% in Brent crude oil, 10% in copper, 14% in nickel, 7% in both platinum and silver and 10% in palladium.

Gold has also held up well compared to other global equity market like the Shanghai Composite Index, which has fallen 30% from its peak. Although some would expect a correction in Chinese equities to be positive for gold, the analyst argued that it most likely won't.

"The sense is that the surge in participation in the Chinese equity market did not really come from investors rotating out of existing gold positions in the first place," they said, adding that the focus on stocks actually prevented potential gold buying and weighed down on bullion demand.

"Therefore, a correction in equities should not necessarily lead to a reallocation into gold," they explained.

This lack of physical demand continues to pressure the yellow metal, which has been in a downtrend since May, the analysts said.

However, it is really gold's lack of 'traditional' safe-haven response to current market conditions, the analysts said, that may weigh further on market sentiment towards the metal.

"For now, the $1,150 psychological level seems to be holding well and the bounce from the lows today may provide some comfort at this point."

Courtesy: Kitco News

Gold Lacks Safe-Haven Bid But Faring Better Than Other Commodities - UBS

Industry News 05:17:00PM Jul 09, 2015 Source:SMM

By  Paul Ploumis 09 Jul 2015  Last updated at  05:30:43 GMT

(Kitco News) - Gold may not be drawing a big safe-haven bid from the Greek debt crisis and meltdown in Chinese stocks, but the metal is outperforming other commodities, notes one bank.

"Gold's price action of late seems to be counterintuitive from a safe-haven standpoint," said UBS analysts in a research note Wednesday. "In reality, weakness is currently being felt across commodities and in relative terms, gold is actually doing better than other assets in this space."

According to the report, gold has fallen around 3% since late June, compared to losses of 14% in Brent crude oil, 10% in copper, 14% in nickel, 7% in both platinum and silver and 10% in palladium.

Gold has also held up well compared to other global equity market like the Shanghai Composite Index, which has fallen 30% from its peak. Although some would expect a correction in Chinese equities to be positive for gold, the analyst argued that it most likely won't.

"The sense is that the surge in participation in the Chinese equity market did not really come from investors rotating out of existing gold positions in the first place," they said, adding that the focus on stocks actually prevented potential gold buying and weighed down on bullion demand.

"Therefore, a correction in equities should not necessarily lead to a reallocation into gold," they explained.

This lack of physical demand continues to pressure the yellow metal, which has been in a downtrend since May, the analysts said.

However, it is really gold's lack of 'traditional' safe-haven response to current market conditions, the analysts said, that may weigh further on market sentiment towards the metal.

"For now, the $1,150 psychological level seems to be holding well and the bounce from the lows today may provide some comfort at this point."

Courtesy: Kitco News