Precious Metals Weekly Round-Up: Gold Steady as Stock Markets Rise

- March 22nd, 2019

Precious metals were supported by a down dollar after the US Federal Reserve decision to pause interest rate hikes for 2019.

Gold held steady on Friday (March 22), hitting a three-week peak in the previous session but losing some traction as it felt the pressure from rising stock markets.

The yellow metal remains on track for a third-straight weekly gain thanks to the US Federal Reserve pausing on interest rate hikes for 2019.

“Technically, gold is getting good support at the US$1,300 price level and fundamentally, the Fed not rising rates this year is a strong signal for gold,” said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.

 

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On Wednesday (March 20), the Fed abruptly ended its three-year monetary tightening policy, while noting that it does not see the need for any interest rate hikes for the rest of this year.

“Gold should push higher, especially once the Brexit uncertainty lifts [as it seems to be doing], allowing the dollar to resume its downward drift, especially now that the Fed has sidelined itself on the rate front,” INTL FCStone (NASDAQ:INTL) analyst Edward Meir stated.

EU leaders have given Prime Minister Theresa May until April 12, two extra weeks, to persuade lawmakers to back the withdrawal treaty she put together with Brussels. During this time, the greenback will more than likely face pressure, and the yellow metal should feel the positive effects of that.

As of 9:19 a.m. EST on Friday, gold was trading at US$1,309.30 per ounce.

Meanwhile, silver was down slightly on Friday, but was up for the week as it was also supported by a pause in interest rate hikes.

“[A] more dovish Federal Reserve will support silver prices over the medium-term. Moreover, China’s continued economic stimulus measures should feed through to stronger industrial fabrication demand, while India is expected to remain a principal consumer of silver,” stated analysts at FocusEconomics.

As of 9:26 a.m. EST, silver was trading at US$15.38 per ounce — still remaining below the US$16 threshold.

As for the other precious metals, platinum was down 1.28 percent on Friday and, as of 9:32 a.m. EST, the metal was trading at US$849 per ounce. While the metal slipped towards the end of the week, it was up over US$20 from the same time last week.

For its part, palladium dipped close to 2 percent on Friday, but earlier in the week it climbed to an all-time high of over US$1,600 per ounce. The metal continues to be supported by high demand and a growing tightening of supply. As of 9:37 a.m. EST, the metal was trading at US$1,558.

 

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Precious metals top news stories

Our top precious metals stories this week include an interview with Gold Newsletter Editor Brien Lundin from this year’s Prospectors & Developers Association of Canada (PDAC) convention, a report on palladium’s record-setting price movement and details surrounding the Fed’s two-day monetary policy meeting and how it affected gold.

1. VIDEO — Brien Lundin: The Smart Investors Aren’t Bailing on Gold

The gold price may be struggling to stay above the US$1,300 level, but Lundin still believes the yellow metal’s long-term outlook is bullish.

“I think the stocks are reflecting that [bullish long-term outlook] in that investors aren’t bailing on the sector — the smart investors aren’t, at least,” he said at the PDAC convention.

Lundin believes that once gold can hold above US$1,300 or US$1,320 “the key points are the 2016 highs, [which were] around US$1,370, US$1,372.”

2. Palladium Reaches All-time High as Supply Woes Continue

Palladium climbed to an all-time high of over US$1,600 during Tuesday’s (March 19) session thanks to a supply outlook that has grown tighter.

In addition to the growing supply deficit, there are also whispers that Russia may soon cut its output of the precious metal.

“The story remains the same [for palladium] as long as there is tight supply,” said Saxo Bank analyst Ole Hansen.

3. Gold Climbs After Fed Officially Pauses Interest Rate Hikes

After two days of meetings regarding monetary policy, the Fed officially announced on Wednesday that it will be pausing interest rate hikes for the entirety of 2019, sending gold on an upward trajectory.

The Fed also said it will only raise borrowing costs once more through 2021, and will slow the monthly reduction of its holdings of treasury bonds from up to US$30 billion to up to US$15 billion as of May.

The Fed noted that the reason behind these decisions is that it no longer feels the need to offset inflation with restrictive monetary policy.

“Recent indicators point to slower growth of household spending and business fixed investment in the first quarter […] Overall inflation has declined,” the Fed stated in its policy statement. The central bank kept federal funds rates at 2.5 percent.

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Also in the news

Reuters is reporting that Paulson & Co. will not support Newmont Mining’s (NYSE:NEM) US$10-billion acquisition of Goldcorp (TSX:G,NYSE:GG), stating that the premium offered is “unjustified.”

In a letter sent to Newmont, Paulson & Co. Founder John Paulson added that the transaction is dilutive to Newmont shareholders and only Goldcorp shareholders will benefit from the deal’s synergies.

Paulson & Co. holds 14.2 million Newmont shares, making it one of the company’s biggest shareholders.

Newmont spokesman Omar Jabara said the company had just received the letter and is still evaluating it.

Paulson noted that his investment firm will only support a deal in which Goldcorp shareholders receive a maximum of 0.254 Newmont shares rather than the 0.328 shares they currently stand to get.

“At this level, the transaction would generate value for Newmont shareholders while providing Goldcorp shareholders attractive consideration and an opportunity to participate in the shared upside of the combined company,” Paulson wrote.

Also in the news, Barrick Gold (TSX:ABX,NYSE:GOLD) announced on Thursday (March 21) that it is contemplating closing its Golden Sunlight mine, which has been in operating in Montana since 1975. The miner noted that it has already ceased underground development and is limiting mining to existing areas only. A final new mill run to process gold ore is scheduled for May of this year.

Barrick revealed that it will continue underground and surface exploration drilling, with a focus on the southern extension of the Sunlight vein. The company also plans to evaluate the potential to reprocess historic tailings, while conducting hydrological and geochemical studies to support ongoing water treatment and reclamation work.

“In the coming months, Barrick will review the findings from these different work streams and determine the path forward for the operation, at which time a further update will be communicated,” the gold major stated.

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

 

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