Precious Metals Weekly Round-up: Gold Price Loses Steam

Gold was flat on Friday (August 23) as investors awaited comments from US Federal Reserve Chair Jerome Powell. It’s hoped he will give more clarity on further interest rate cuts.

As market participants turn their attention to Powell’s speech, which is slated for later on Friday, they have retreated from gold, causing the yellow metal to head for its first weekly loss in the last four weeks.

“Markets are looking for further guidance in the near term on rate cuts. That’s the reason gold has been consolidating over the past few days, given no clear direction provided by any data or news,” said Julius Baer analyst Carsten Menke.

Powell’s speech will take place on Friday at 2:00 p.m. EDT, and will be held at Jackson Hole in front of a group of central bankers. Market watchers anticipate that his comments will shed more light on monetary policy after the Fed’s meeting in July tempered hopes of sharp rate cuts.

Also weighing on the precious metal is the US dollar, which is up again this week and is headed for its second week of gains. Even so, analysts believe that the current economic landscape, paired with ongoing geopolitical issues, will work in favor of gold and stop any substantial losses.

“We’ve been seeing some profit taking over the past few days,” Julius Baer’s Menke said.

“Given that we still have quite elevated uncertainties in financial markets related to growth outlook, trade tension, this is an entry opportunity for investors. That’s why the downside for prices will be limited.”

Even though it has headed into the red this week, the yellow metal is still up close to 6 percent for the month thanks to its safe haven nature. The metal has gained support from investors as concerns surrounding US-China trade and global growth continue to linger.

“From a technical point of view, we are seeing some temporary weakness on gold but the main trend remains solid, with a first resistance placed at US$1,535,” said ActivTrades analyst Carlo Alberto De Casa.

As of 9:43 a.m. EDT on Friday, gold was trading at US$1,505.90 per ounce.

Silver was up slightly on Friday, still holding strong above the US$17 per ounce level. The white metal continues to be supported by interest from investors thanks to concerns surrounding the state of the US economy and ongoing geopolitical issues, particularly between the US and China.

Also backing silver is a recent decline in its supply and output. “In recent weeks, top miners such as Fresnillo (LSE:FRES, OTC Pink:FNLPF) announced silver output fell in the first half of this year versus the same period last year, which has supported prices,” FocusEconomics states in a recent report.

“The silver market is expected to tighten and swing into deficit this year on waning investment in mining and declining silver scrap supply,” the report also says.

Silver’s recent rally could lend credence to the theory that it will outperform gold in the not-so-distant future. As David Morgan, publisher of the Morgan Report, told the Investing News Network, everything surrounds gold, and once it takes off, silver will follow.

As of 10:00 a.m. EDT on Friday, silver was changing hands at US$17.11.

As for the other precious metals, platinum was relatively flat, still unable to break through the US$900 per ounce level.

While analysts at FocusEconomics see the price of the metal rising slightly from its current level, they believe it will continues to be muted and trail behind its sister metal palladium.

“Prices will still be muted by recent historical standards, and will remain notably below those for sister metal palladium, constrained by excess supply and weaker automotive demand,” they said.

“Potential strikes and power outages in South Africa, the extent of substitution for palladium in vehicles, the US-China trade spat and the evolution of the global economy will all be important factors to watch going forward.”

As of 10:12 a.m. EDT on Friday, the metal was trading at US$858.

For its part, palladium was down close to 2 percent on Friday, still trading below the yellow metal.

However, there are still many market participants in palladium’s corner, with Metals Focus predicting that the metal will continue to rise. The firm forecasts that autocatalyst demand will more than likely go up by 3.6 percent in 2019, setting records at 8.59 million ounces due to tighter emission standards.

FocusEconomics shares Metal Focus’ sentiment, stating that factors such as the ongoing supply deficit and a shift to cleaner vehicles will continue to support the metal and prices throughout the year.

As of 10:18 a.m. EDT, palladium was trading at US$1,444 per ounce.

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