Kaloti Precious Metals-Morning Market Report-Friday, October 14, 2016

Market Daily & Weekly

Note: Indications only, open and closing prices are bids; Data source: Bloomberg; Times as per Dubai

Fundamentals and News

ICE Will Start Gold Futures for Clearing London’s Daily Auction

• Intercontinental Exchange Inc., which runs the daily London gold auction, will start a futures contract for the metal in the U.S. in February, jumping the gun on the London Metal Exchange which is also working on a London-focused product.

The contract, subject to regulatory approval, will be for bullion held in London and traded on ICE Futures U.S. in New York. Each contract will be for 100 troy ounces of metal and will be used to clear the London gold auction, starting in March. The London Metal Exchange is scheduled to begin its own futures contracts in the first half of next year.

The move was announced as the London Bullion Market Association, which represents the city’s gold traders, meets in Singapore to discuss ways to modernize a market that clears more than $5 trillion of the precious metal a year. Gold futures also change hands in New York on the CME

Group Inc.’s Comex exchange. The London gold auction is held twice a day and has 13 authorized participants, up from four last year.

“What we are doing now is really focusing on the market that we already operate,” Finbarr Hutcheson, president of the ICE Benchmark Administration, which runs the London gold auction, said by phone from London. “This solution serves the need of our customers and the demand to develop and grow that market.”

ICE said in a statement the existing liquidity and participation in the daily London gold auction will help kickstart the contract. It said clearing would make it easier for more participants to join the auction as they wouldn’t need a credit line with every other member.

Last year, ICE started administering the electronic auction that replaced the century-old London gold fixing, a ritual that was taking place by phone. The auction is used by mining companies, refiners and central banks to trade large quantities of gold. It’s also a point of reference for derivative contracts.

“Central clearing during the auction will allow the number of diverse direct participants to continue to grow,” Ruth Crowell, chief executive officer of the LBMA, said in the statement.

“Central clearing is something that we have hoped to see.”

• We’ve not seen the last of the rally in gold, according to Toronto-Dominion Bank.

Prices are likely to go as high as $1,350 an ounce sometime next year, after dipping below $1,200 as the Federal Reserve raises interest rates, likely in December, according to Bart Melek, the bank’s head of commodity research. Futures closed Friday at $1,255.50 an ounce on the Comex in New York.

Higher interest rates should initially lead to a stronger dollar, curbing demand for gold, he said in an interview in Singapore before the start of the London Bullion Market Association and London Platinum & Palladium Market annual conference. Demand will be reignited as real interest rates, or yields minus inflation, remain low, keeping gold competitive with other assets, he said.

“By the end of next year, we will be testing the highs we saw early this year,” Melek said.

Data Forthcoming Releases

Courtesy: http://kalotipm.com.sg/kaloti-market-report-17th-october-2016