Silver bullishness hits record highs while gold optimism up to 2012 levels

Gold stayed relatively rangebound Monday, getting an early bounce from failed oil-freeze talks in Doha but later yielding those gains as stocks rose, led by the Dow Jones average breaking 18,000 for the first time since July 2015.

The metal also found some safe-haven buying from uncertainty over big earthquakes in Japan and Ecuador. Gold was trading near $1,233 in late afternoon, while silver was near $16.21.

Gold prices are likely to stay supported around $1,260 in the second quarter ahead of the Feds rate increase, which may happen in July, Natixis analyst Bernard Dahdah told Reuters, thought the timing of that hike remains very uncertain.

Citigroup sees risks in U.S.: Stocks managed to rise despite a new warning from Citigroup on the U.S. economy. The megabank Monday downgraded its growth outlook for 2016-17.

Our outlook has little potential to be surprised on the upside, but the risks are very evident on the downside, wrote William Lee, head of Citigroups North America economics. Recently revised and incoming data imply GDP will grow by 0.9% in (the first quarter) and 1.7% for the year. Its expecting only one late-year interest-rate hike from the Fed.

And if investors needed another reminder about what exactly is propping up U.S. stocks, former Fed Chairman Alan Greenspan gave them one in a CNBC interview April 14, saying: You bring long-term rates down, and the price/earnings ratios in the equity markets go up,which is exactly what they planned to do and its happened that way.

Fed exec urges slow rate hikes: Meanwhile, New York Fed President William reiterated his cautious prognosis for the economy and the banks rate-hike pace, saying, Monetary policy adjustments are likely to be gradual and cautious, as we continue to face significant uncertainties and the headwinds to growth from the financial crisis have not fully abated.

And despite a surge in stocks Monday, more new signs emerged of slowing U.S. economy. Sales and profits are falling at more of Americas biggest companies, CNBC reported, citing a new report from the National Association for Business Economics. The share of those reporting stronger sales dropped to the lowest level in seven years, it added, and, for only the second time since the end of the Great Recession, more respondents said profits were falling than those who said profits were rising at their companies.

Trader bullishness soars: No wonder bullishness over precious metals is near record levels. Money managers increased their wagers on a price rally to the highest since 2012, taking their optimism to a level last seen before a three-year bear market started, Bloomberg reported, citing positioning in the latest CFTC futures trading data that saw net-long positions jump 13% as of April 12.

Silver bullishness is even higher among fund managers. Silver futures have rallied 17% this year, it noted. Money managers last week increased their net-long position in the metal by 30% to 54,885 contracts. Thats the highest since the comparable CFTC data begins in 2006.

UBS sees gold averaging $1,250: Although it thinks gold could slip below $1,200 again if risk appetites increase, UBS issued a note commenting on2016s newfound bullishness in gold. From a bearish stance in Q4 last year, attitudes have turned remarkably positive by the end of Q1 2016, Joni Teves wrote. Global markets entered a phase of heightened risk aversion following the global financial crisis (GFC). In Global Macro Strategy,we expect current high levels of risk aversion to decline, but accommodative policy is needed to reassure markets. This creates a good opportunity for gold to assert its value as a diversifier within a portfolio.

Acknowledging that the spring and summer months historically are marked by price lulls in the metals, UBS nonetheless is cautiously optimistic. Our 3-month target of $1,250 captures this view and the expectation that gold would remain in consolidation phase,especially during these seasonally slower months, to digest the length that has been built up this year. The market may experience some downside pressure around the June FOMC meeting, but continuing interest to buy dips should keep prices supported overall.

Gold refuses to budge: Dundee Economics summed up golds recent performance even better, noting that so far, the yellow metal refuses to decline.

Gold refuses to decline, which may be telling us something, it wrote. Our bias was neutral/negative these last two weeks, because we were concerned there might be a sudden, sharp reduction in the net-long spec position on COMEX (see the chart on p 4), triggered by some event a random, good U.S. economic data release, for example. But gold continues to find strength in Fed developments and the weakish U.S. dollar. Equity market rallies, too, have hardly dampened the gold price. All signs of a new bull market?

Although the potential for another dip below $1,200 exists, the factors that could keep it supported are just as present in todays market, and any number of catalysts could send it soaring again toward $1,300. And right now, the mood remains majority bullish on gold and silver.