Gold looks to Jackson Hole – HSBC

The course of the Jackson Hole Economic Symposium, which begins Thursday, will likely play a large part in influencing gold prices, at least in the near term, suggests James Steel, Chief Precious Metals Analyst at HSBC.

Key Quotes

“The world’s two top central bankers, ECB President Draghi and Fed Chair Yellen are scheduled to speak on Friday. Ms. Yellen's speech topic is financial stability. The markets – including gold – will also be alert for comments on the Fed's balance sheet plans or on how the Fed Chair views the recent downside surprises to inflation. The more she hints at balance sheet paring, the more gold may be pressured. The HSBC macroeconomics team believe that Mr. Draghi is unlikely to break major new ground on the near-term monetary policy outlook. Any comments could be aimed preventing a further rise in the euro, rather than providing anything for hawkish investors to latch on to, says HSBC Chief European Economist Simon Wells. Should Mr. Draghi’s comments weigh on the EUR, however, this could also sap any move higher in gold.”    

“The Bundesbank announced the successful repatriation of all 674t of German official sector gold, stored in New York and Paris. Germany had shipped out gold during the cold war for safe keeping at other central banks. The Bundesbank took four years to ship nearly 54,000 gold bars back to Germany from the vaults of the Fed and the Banque de France. The Bundesbank said it had thoroughly tested all the bars and found no irregularities. The Bundesbank will continue to hold substantial amounts of bullion in New York and London in relation to the forex markets. The successful operation puts to bed any concerns that the gold had already been sold and was not available for repatriation.”

“Palladium pushed higher after early weakness and platinum cut losses to finish the day nearly unchanged. The World Platinum Investment Council issued its Perspective report. China is by far the world’s largest platinum jewelry consumer and it is widely viewed that weak demand in this sector is one reason for sluggish platinum prices. The WPIC states that the outlook for China platinum jewelry demand is challenging for the next 2-3 years. That said, its impact on overall platinum demand may be overestimated, according to the WPIC. Also any further China decline will likely be offset by increases in the rest of the world, notably India, but also the US, said the WPIC. This may help stabilize platinum prices, especially if auto demand stays stable. High palladium prices have encouraged fresh platinum investor demand. But we are concerned that high net long positions in palladium may invite profit taking.”