Metals Weekly Round-Up: Geopolitical Tensions Drive Gold Higher

- May 29th, 2020

Gold climbed 2 percent this week, driven by a weak US dollar and renewed anxiety over tensions between the US and China.

After slipping below US$1,700 mid-week gold has climbed almost 2 percent to US$1,727.

The yellow metal’s late week gains have been attributed to a weak US dollar and renewed anxiety over relations between the American nation and China.

President Trump is expected to make a statement sometime Friday (May 29) regarding China’s decision to approve a national security law in Hong Kong.

 

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“Even with many economies reopening, the economic status is still quite weak. So with this new geopolitical tension it means that recovery in many parts of the world can take longer, which could lift gold prices,” Xiao Fu an analyst at the Bank of China told Reuters.

The mid-week slump saw gold fall as low US$1,696, its first time below US$1,700 since early April.

An insatiable demand and Q1 production declines may work as another price catalyst for the currency metal.

In its monthly report for May, the World Gold Council noted that production was down 3 percent during the first quarter of the year.

The gold price has already climbed 11.4 percent since January and has potential to move higher.

In an interview with the Investing News Network, Adrian Day, of Adrian Day Asset Management forecasted a gold price of US$2,000 in 2021.

At 12:34 p.m. EDT, an ounce of gold was selling for US$1,734.85.

Silver also made gains this session adding as much as 3.9 percent from Monday (May 25).

Since the mid-March liquidation, the white metal has surged 49 percent. Its year-to-date low (11.94) saw the metal shed 33.7 percent from its January high of US$18.02.

An ounce of silver was valued at US$17.81 at 12:36 p.m. EDT.

News that South Africa would move to begin reopening its economy supported platinum prices early in the week.

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The metal gained 2.5 percent from Monday (May 25) to Tuesday (May 26), as the world’s largest platinum producing country announced plans to allow miners to resume operations.

Continued demand declines from end use sectors weighed on prices keeping the metal locked below US$830.

At 10:10 a.m. EDT, platinum was trading for US$825.

Sister metal palladium followed a similar trajectory on reports that South Africa’s mining sector had received the green light.

The metal hit its highest value for May -US$1,954- this week but was still 29 percent lower than its year-to-date high US$2,754 (February 26).

Palladium was moving for US$1,834.

The base metals faced volatility for the last week of May, dragging prices lower across the board.

Copper started the session at US$5,341 before falling 1.1 percent lower to US$5,278.50.

Prices are likely to continue facing headwinds, as the International Wrought Copper Council (IWCC) anticipates a significant oversupply.

“These are unprecedented times and the copper industry is not immune from the impact of the COVID-19 pandemic,” states a report from the group. “The economic disruption and its impact on the copper industry has resulted in greater uncertainty in the factors affecting the supply and demand for copper.”

The red metal was valued at US$5,278.50 at 10:32 a.m. EDT.

 

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Zinc also trended lower throughout the week dropping 2.8 percent from Monday (May 25).

Supply chain disruptions have impacted zinc’s ability to grow since the coronavirus was declared a pandemic. According to Fastmarkets analysts COVID-19 reduced mine production by 742,000 tonnes.

While on the other hand the metals analysis firm forecasts, “[t]he 154,000-tonne global zinc concentrate market deficit we calculate to have re-emerged in the first quarter of 2020 will probably disappear again in the second half of the year.”

A tonne of zinc was valued at US$1,918.50 at 12:21 p.m. EDT.

Despite nickel also reacting to market pressures for the final session in May, Fast Metals analysts are projecting positive price growth in the months ahead.

“Nickel prices are consolidating after another step higher in a promising uptrend off the March low,” the note reads. “We believe that the trend can continue given that the market has passed the worst of the Covid-19 demand destruction and a recovery lies ahead.”

Nickel was priced at US$1,2133 as of 12:25 p.m. EDT.

Lastly, lead fell lower throughout the week but was still able to end the month 21 percent higher than its mid-month low (US$1,576.50).

Analysts are less optimistic about lead’s recovery post-COVID-19 noting the metal will likely remain range bound below US$1,700.

Lead was trading for US$1,609 at 12:31 p.m. EDT.

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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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