Precious Metals Weekly Round-Up: Gold Reacts to Pandemic Fears

The precious metals sector performed flatly this week despite gold experiencing a slight uptick in relation to concerns that the coronavirus may be a global pandemic.

On Thursday (January 23), gold hit its highest price for the week at US$1,566.80 per ounce as cities outside of China began reporting cases of the flu-like virus. The novel respiratory illness has forced the Chinese government to quarantine 12 cities containing a combined 35 million residents.

Following a World Health Organization press conference Thursday during which officials eased fears that a pandemic was afoot, gold edged back.

By Friday (January 24) morning, the US dollar was making gains, which also weighed on gold’s growth, indicating that investors were again showing interest in riskier assets.

The precious metals sector has experienced increased interest in recent months due to heightened global tensions and broad economic uncertainty, which always seems to benefit the safe haven asset class.

Despite the weak performance the sector exhibited this week, experts are steadfast in their belief gold and the wider precious metals space are the smart investment for 2020.

“I think the easiest money in our sector will continue to be made in precious metals,” Rick Rule told the Investing News Network at the Vancouver Resource Investment Conference.

The CEO of Sprott (TSX:SII,OTC Pink:SPOXF) also sees value in gold’s sister metal.

“I think that if we keep going in the gold market, if the gold market continues to strengthen, we’ll see follow through in the silver market,” he said.

Gold exchange traded funds (ETFs) are also performing well and offer investors some diversity within the gold space. According to Commerzbank (OTC Pink:CRZBF,ETR:CBK), the holdings of gold ETFs have already grown by 16 tons for 2020 and are expected to continue to grow.

“In our opinion, the price should be well supported at roughly its current level, as ETF inflows also suggest,” the German bank pointed out. “Gold ETFs have seen inflows of 10 tons so far this week, and of over 16 tons since the start of the year.”

Spot gold was selling for US$1,566.08 an ounce at 10:15 a.m. EST on Friday (January 24).

After briefly breaking the US$18 threshold on Monday to trade for US$18.02 an ounce, silver spent the rest of the week locked just below US$18.

The metal had been steadily trending higher since early December, but has been hindered by gold’s poor showing this week as well as easing of tense relations between Iran and the US.

US trade deals with China and Canada have also quelled some of the appetite investors were exhibiting for safe haven assets and monetary metals.

Positive news in recent weeks may have prevented the precious metals sector from continued gains; however, analysts remain convinced that low interest rates, ongoing geopolitical risks and the presidential impeachment proceedings will result in price growth for precious metals.

Silver was selling for US$18.01 as of 10:29 a.m. EST, breaking back above US$18.

Following five consecutive weeks of price growth, platinum performed with volatility this session. The metal, which surpassed the US$1,000 an ounce mark on January 16 to trade for US$1,037, was able to maintain a range bound level, oscillating from US$1,001 to US$1,014.

An ounce of platinum was trading for US$1,011.88 at 10:39 a.m. EST.

The other platinum group metal, palladium, was also experiencing volatility this week, with a new high of US$2,422 on Monday.

The metal, which has industrial applications, has climbed 77 percent over the last 12 months and is expected to keep its pace as demand continues to climb from the automotive sector.

Earlier this week, analysts at Goldman Sachs (NYSE:GS) predicted the price may go as high as US$3,000 an ounce before a correction.

“The upside potential is significant as the market is now in a demand-rationing phase,” said Jeffrey Currie, head of global commodities research.

He went on to note that gains at that level would be sustainable and weigh on the demand, which would then make prices drop.

As of 11:05 a.m. EST, palladium was sitting at US$2,229.17 an ounce.

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