FxWirePro: Hedging sentiments back in action for precious metal price risks

The precious metals have also significantly appreciated since December’s FOMC meeting and rate hike with gold extending its rally to a four and a half-month high, once again breaching above$1,350/oz.

Very recently, the platinum price rose to hit a four-month high of $1,028.61 in last week’s trading session.

It has been short hedges on gold since December on a view that the market was under-pricing Fed tightening, given solid economic growth and a possible bottoming out in inflation.

A continuation of the global reflation trade into 2018 has sent the trade-weighted US Dollar lower, boosting gold higher following the December FOMC meeting and rate hike.

XAUUSD futures for near-month delivery eased 0.31% at $1,347.90 on the Comex division of the NYME.

This week’s major focus is on: The US Federal Reserve meeting, the last under the headship of Janet Yellen as she would hand the chair over to Jerome Powell, as well as Friday’s U.S. jobs report for January and Wednesday’s euro zone inflation data would also be in focus.

However, looking ahead, the general perception is that the Fed under incoming Chair Powell will hike in March followed by three more hikes in 2018.  As such, we reckon that the gold would prolong to reprice lower over the next couple of months and stay short.

Originally went short Dec’17 CME gold at a price of $1,318/oz. Now rolled onto Feb’18 deliveries embedding the roll gains into our entry level which increases to $1,355.20/oz. Trade target is $1,300/oz with a stop at $1,384/oz.

Elsewhere, capitalizing on weaker dollar sentiments, in a sign of the changing mood, hedge funds seem to have raised their bets on platinum futures to a four-month high.