Metals Weekly Round-Up: Stimulus Hopes Push Commodities Higher

Base Metals Investing
Base Metals Investing

After slipping below US$1,900 earlier in the week, the gold price rose as investors regained hope that a US stimulus package could be close at hand.

After the second and final US presidential debate on Thursday (October 22), gold moved above the key US$1,900 per ounce threshold. After slipping below that level earlier in the week, investors regained hope that a US stimulus package could be close at hand.

Gold’s steady growth trend was disrupted this week as the US dollar strengthened, adding volatility to the yellow metal’s value. The other precious metals were also on course to end the week in the green.

Entering the five day period at US$1,910 before slipping to US$1,895 on Wednesday (October 21), a subsequent rally pushed gold as high as US$1,927 by the headwinds mentioned.

“Gold is just waiting for US stimulus to get through and before the US presidential election there is uncertainty about who is going to win, though it won’t change the trajectory for the market,” Soni Kumar, commodity strategist at ANZ, told Reuters.

Because gold is considered a hedge against inflation and currency debasement, the next round of stimulus is expected to add to its value.

During a recent interview with the Investing News Network, Nick Barisheff, president and CEO of BMG Group, touched on the connection between US debt and gold’s future growth, speculating that the metal’s price could hit US$10,000 in the long term.

“Basically if you look over a reasonable timeframe, the price of gold and the total amount of US debt is correlated, so they would go up together,” he said. The two fell out of sync in 2011, with gold correcting while US debt kept growing, but Barisheff said the relationship remains.

Watch Barisheff’s full interview above.

At 10:50 a.m. EDT on Friday (October 23), an ounce of gold was trading for US$1,893.66.

Silver had been locked at the US$24 per ounce range since the end of September, but moved above US$25 briefly this session. While the trend to US$25 was unsustainable, silver remained above US$24.50 for the remainder of the week.

The nature of the dual metal as a leveraged play on gold has worked in its favor, prompting analysts to note that during bull markets silver traditionally outperforms gold.

That was evident during Q3, when silver outpaced its yellow sister significantly. During the period, silver added 34 percent to its value, gaining more than 60 percent year-to-date at its quarterly peak.

On the other hand, gold added only 6.9 percent to its value in total for Q3, and 16 percent when it touched an all-time high of US$2,063.

Silver was priced at US$24.51 at 11:07 a.m. EDT on Friday.

Though gold and silver have spent the last four weeks edging higher, platinum has been steadily slipping lower. However, that trend was reversed this period, with the automotive metal surging past US$900 per ounce late in the week.

Adding 5 percent to value for the week, the metal is positioning to benefit from the rally in precious metals. At 11:44 a.m. EDT on Friday, platinum was valued at US$907.

The palladium price was also propelled higher this week when it breached US$2,300 per ounce. The price action took palladium back to pre-COVID-19 levels seen in March.

But after hitting the six month high, prices were pressured and fell back to US$2,246. Palladium was selling for US$2,260 at 11:50 a.m. EDT on Friday.

The broad base metals space was also in the green on Friday, with all metals registering gains.

Copper was the leader, surging to a year-to-date high of US$6,953 per tonne on Wednesday.

Demand out of Asia has contributed to the red metal’s ascent to a two year high. Renewed industrial demand and the US stimulus package are forecast to continue working in copper’s favor.

“The US government is likely to unleash a new stimulus package soon, which will fuel a further surge of global liquidity into financial markets and copper,” said Dan Smith of Commodity Analytics.

“The EU is also looking at stimulus via increased infrastructure spending to boost renewable energy and power grids for electric vehicles.” Copper was selling for US$6,886 on Friday morning.

Zinc was also on the move this week, adding 2.7 percent to its value. Despite being shy of its year-to-date high, the metal is still in positive territory. Zinc was trading for US$2,540 per tonne to end the week.

Nickel marked a year-to-date high this session when it surpassed US$16,064 per tonne, a 14 percent increase from its January values. The metal has been gaining since late September, as demand from the electric vehicle space is projected to increase.

By Friday, nickel had shed some of the gains to trade for US$15,707.

Lead also enjoyed a price uptick for the third full week of October. Though it remains well off its year-to-date high, the metal is slowly edging higher and is holding above US$1,700 per tonne. Lead ended the week at US$1,792.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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