Precious Metals Weekly Round-Up: Gold Up on Global Emergency Fears

Gold moved higher this week as fears of an economic slowdown grew, with more countries outside of China reporting instances of the coronavirus.

On Thursday (January 30), the World Health Organization declared the outbreak of the novel respiratory virus a global emergency as China recorded 213 deaths related to the illness and 22 countries reported cases.

Gold, a safe haven asset, is on track to record its highest monthly gain since August, climbing by as much as 4.9 percent from US$1,516 on January 1 to US$1,585 today (January 31).

Gold continues to exhibit the same strength that helped it hit a six year average price high of US$1,477 in 2019, rising 10 percent year-over-year for the first six months and 21 percent for the final two quarters.

“The gold price reflects the amount of risk in the global financial system,” said Brian Leni of the Junior Stock Review. “Therefore, it is easy to see why it has risen and, unfortunately, probably has much higher to go.”

Leni cited the US Federal Reserve’s three consecutive interest rate cuts in 2019 as one of the primary factors that moved the currency metal.

Sister metals gold and silver remained flat following this week’s Fed meeting, in which the central bank decide to leave rates unchanged at 1.5 and 1.75 percent.

Whether the global emergency will remain a long term catalyst for the gold price is unclear, but investor appetite for safe haven metals usually grows amid widespread fears.

However, as Chinese festivities related to the Lunar New Year — a national holiday that often includes gold gift giving — are put on hold, sales of the yellow metal will be impacted in the short term.

“Helping gold along in the early days of 2020 is the outbreak of the coronavirus, which has negative (but as yet unknown) effects on the Chinese economy — and the world economy,” Martin Mureenbeld of Mureenbeld and Co. said via email. “This means monetary policy will remain very relaxed, which is good for gold.”

Gold was trading for US$1,585.99 as of 11:11 a.m. EST.

Silver was unable to benefit from gold’s tail winds this week, and remained locked below US$18 an ounce. The white metal will end the week in the red slipping as low as US$17.39 for the first time since late December.

Despite this week’s losses, David Smith, senior analyst at the Morgan Report, foresees silver climbing for the year, with US$20 an ounce being a key threshold.

“If silver can get to that level and maintain and move above that, I think we could see a strike toward US$26 during the course of the year. Whether it will stay at that level is hard to say,” he told INN at this year’s Vancouver Resource Investment Conference.

Factors that will drive the versatile metal’s price growth include a prolonged production reduction and increased interest in physical silver as a safe haven asset.

An ounce of silver was selling for US$17.97 at 11:12 a.m. EST.

Platinum is also on track to end the week in the red, falling 3.9 percent from its five day high of US$993 an ounce to end at US$956.

The industrial metal, which broke the US$1,000 mark on January 24, will end the month flatly in the same range bound level it sat at the end of December.

As of 11:13 a.m. EST, platinum was trading for US$958.

This week’s palladium story was also marked with volatility. The most expensive traded precious metal had spent the first three weeks of the month steadily climbing, breaking the US$2,300 an ounce level last Friday (January 24).

By Tuesday (January 28), palladium had fallen more than 6 percent to US$2,155 an ounce.

Demand from the automotive sector has been driving the price of the emission reducing metal, and power outages in South Africa — the world’s second largest palladium producer — have impacted mining operations throughout the month.

The output slowdown was a tail wind for palladium, which climbed to a new high of US$2,500 in mid-January.

Palladium was selling for US$2,209 at 11:13 a.m. EST.

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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.