Precious metals were down on Friday (February 1), but made gains for the week due to geopolitical uncertainty and the Fed’s pause on interest rate hikes.
Gold prices slipped marginally on Friday (February 1), as investors retreated from seeking the safe haven of the precious metal in favor of riskier assets amid optimism the United States and China are on the verge of reaching a trade deal.
Fortunately, the recent pause in US interest rate hikes kept the yellow metal on track for a second week of gains.
“The market liked what they heard from the Fed, as both the broader market and gold spiked on what were interpreted as dovish statements,” Brian Leni, founder of Junior Stock Review, told the Investing News Network.
While there was no trade deal made at the end of the two-day US-China meeting, the Asian country promised to purchase more soybeans from the United States and President Donald Trump took that gesture as a sign that negotiations were moving in the right direction.
Trump also noted on Thursday (January 31) that he will meet with Chinese President Xi Jinping soon to try to seal a comprehensive trade deal.
“If there is real progress on the trade talks, that could hurt gold because that better outlook would mean the [US Federal Reserve’s] accommodative stance will not come into play,” said Michael McCarthy, chief markets strategist at CMC Markets (LSE:CMCX), referring to the US central bank’s intention to halt raising interest rates.
Investors often sell the yellow metal in order to purchase other asset classes when interest rates rise since bullion does not pay interest.
As of 9:31 a.m. EST, gold was trading at US$1,321.50 per ounce.
Meanwhile, silver was also down on Friday, after it rose to its highest since July 2018 in the previous session. The white metal found support from the pause in interest rate hikes.
“I like what gold’s set up and what it’s telling me about silver,” noted Andrew Hecht, author of the weekly Hecht Commodity Report. Adding,“[g]old broke out to the upside and I think it’s only a matter of time before silver follows. The more bid-up gold gets the better silver will do.”
As of 9:35 a.m. EST, silver was trading at US$16.03 per ounce — still above the US$16 threshold.
As for the other precious metals, platinum was up 0.98 percent and as of 9:37 a.m. EST, the metal was trading at US$828.00 per ounce.
For its part, palladium was relatively steady and as of 9:57 a.m. EST, palladium was trading at US$1,352.00 per ounce, still holding steady above gold.
Precious metals top news stories
Our top precious metals stories this week feature an interview with Frank Holmes, CEO and chief investment officer of US Global Investors (NASDAQ:GROW) at the Vancouver Resource Investment Conference, why a stall in palladium’s rally does not signal growth for platinum and a report from GFMS that notes its analysts are expecting gold to average US$1,292 per ounce this year.
Many market watchers are expectant to see what 2019 will bring for the junior mining sector and in particular for precious metals in a time of geopolitical uncertainty.
To get more insight on what’s ahead for gold, the Investing News Network, caught up with Frank Holmes, CEO and chief investment officer of US Global Investors, at this year’s Vancouver Resource Investment Conference.
Holmes shared his thoughts on the main trends in 2018 and what factors investors should pay attention to this year that could impact the yellow metal.
While palladium has eclipsed gold for the first time in 16 years, analysts believe that the climb is expected to slow down, eventually leaving the precious metal to slide behind gold but still topple the lackluster platinum.
On Tuesday (January 29), Reuters released a poll of 29 analysts and traders which concluded that palladium’s uptick, which has been heavily supported by a supply shortage, will end at around a price of US$1,200 per ounce this year before dipping behind yellow metal prices in 2020.
“The [palladium] supply deficit is here to stay, and the high level of prices as well,” said Frank Schallenberger, analyst at Landesbank Baden-Wuerttemberg.
The price of gold is expected to average US$1,292 per ounce this year, says Refinitiv GFMS in its Gold Survey Q4 2018 Review and Outlook, released on Wednesday (January 30).
The GFMS metals research team, a unit of Refinitiv, stated the yellow metal’s fourth quarter performance was supported by an increase in safe haven demand and renewed interest from investors. The report also noted that this trend is expected to continue in 2019.
“We expect gold prices to continue to benefit from continued economic uncertainty and a slowdown in the US economy,” said GFMS analysts at Refinitiv.
Also in the news
DRDGOLD (JSE:DRD) reported that its second quarter production was down by 5 percent quarter-on-quarter, mostly due to an 8 percent decline in tonnage throughput.
Most of the problems were experienced at the miner’s Ergo asset, thanks to major power interruptions experienced over 11 days during the second quarter, caused by a fire at a sub-station belonging to state electricity utility Eskom. The company added that it is expecting a loss per share of between 5.8 cents and 8.6 cents per share compared to earnings of 14.4 cents for the same period last year.
“The expected decrease in earnings per share and headline earnings per share … are primarily due to the costs associated with the commissioning and start of far west gold recoveries, as well as a three percent decrease in gold produced,” the miner noted.
Additionally, Russian gold and silver producer Polymetal (LSE:POLY) revealed on Thursday that 2019 will be a year where it focuses on asset sales rather than getting involved in industry consolidation.
“The pressure from at least some of our shareholders has been to grow smaller or to grow more focused to reduce the number of assets in our portfolio,” said Vitaly Nesis, chief executive, when asked if Polymetal might take part in merger and acquisitions.
“We do not rule out making new acquisitions in the future but … not in 2019,” he added.
The company also reported an 11 percent rise in fourth quarter revenue to US$652 million thanks to record high production following a full Kyzyl ramp-up last year.
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.