Precious Metals Weekly Round-Up: Gold Dips on Steady Greenback

Gold declined on Friday (September 27) thanks to pressure from a stronger US dollar.

The yellow metal is on course for its worst week in six months as investors seek out the greenback over the precious metal.

“The main reason gold is down is because the US dollar is strengthening to its highest level against the euro in more than two years,” said Commerzbank (OTC Pink:CRZBF,ETR:CBK) analyst Eugen Weinberg.

“However, we have seen massive exchange-traded fund inflows into gold in the past few days. This shows people are buying on dips and we may see further buying with prices now below US$1,500 because the outlook for gold is still bullish,” he added.

The greenback reached a three week peak on Friday, but ongoing political tensions within the US have investors keeping an eye on gold.

On Tuesday (September 26), less than 24 hours after US Democratic House Speaker Nancy Pelosi announced the launch of an official impeachment investigation regarding US President Donald Trump’s dealings with Ukraine, the yellow metal surged to US$1,534.10 per ounce.

“Gold is holding on to the gains from yesterday because of announcements which seem to have hit the dollar and risk appetite,” said OANDA Senior Market Analyst Craig Erlam.

“(That) is almost perfect for gold.” He went on to note that the coming days will be ripe with commentary that will likely weigh on risk appetite.

Despite the gains, by the end of Wednesday (September 25), gold had lost its footing and began a downward trend to trade below the US$1,500 level.

However, not all market watchers believe that the yellow metal’s ability to climb comes from a crisis or turbulence within the markets.

Speaking at the Denver Gold Forum, Frank Holmes, CEO and chief investment officer at US Global Investors (NASDAQ:GROW), told the Investing News Network (INN) that gold has the potential to go much higher even without a major calamity.

“Gold can take off without (a) world-coming-to-an-end scenario — and so can your art if you’re an art collector. Your prints from Andy Warhol — they’re going to go up dramatically,” he said.

“Rolex watches, you’re seeing all of a sudden those watches are going up that they’re not making any longer — they’re going up at a very rapid rate in value because there’s so much money printing.”

While Holmes pointed out that gold would not reach US$10,000 without something catastrophic happening, a gradual rise to a significantly higher price is not unlikely.

“If gold was US$250 in 2001 and gold ran to US$1,900 — well, you’ve got an eight times increase. Gold then fell to US$1,000 and laid there for over five years. So if it went up another eight times that’s US$8,000. Well, that doesn’t mean the world’s coming to an end.”

As of 9:27 a.m. EDT on Friday, gold was trading at US$1,491.70.

Silver also slipped on Friday to sit within arm’s reach of the US$18 per ounce level.

Like gold, investors have turned away from the white metal in favor of the US dollar. The metal managed to shed 2 percent for the week and is heading for a weekly loss.

Also speaking at the Denver Gold Forum, EB Tucker, director at Metalla Royalty & Streaming (TSXV:MTA,OTCQX:MTAFF), offered INN a shorter-term prediction for silver, saying that ahead of what he believes to be an upcoming gold move, silver will pass the US$20 mark.

“In our view, gold’s going to stabilize here at US$1,500, (and) silver will go from US$18 to US$20. And so we are focusing a lot of our capital and resources on silver, because that to us is the easiest trade right now. And I would be shocked if that doesn’t happen before American Thanksgiving, which is only about eight weeks away,” said Tucker, who also runs two publications at Casey Research.

He explained that while he does see the white metal eventually rising to US$25, it’s important not to miss its increase to US$20. “I think in the short run if you miss that move in silver you’re missing a very easy way to make money,” he said.

As of 10:05 a.m. EDT on Friday, silver was changing hands at US$17.42.

As for the other precious metals, platinum steadied on Friday, continuing to trade above the US$900 per ounce level.

Platinum prices have surged over the last month thanks to greater safe haven demand paired with supply concerns.

While analysts at FocusEconomics see the price of the metal rising slightly from its current level, they believe it will continue to trail behind its sister metal palladium. However, the market is currently regarding platinum as the cheaper precious metal when stacked against gold.

If predictions that the yellow metal will continue its price increase prove true, platinum will more than likely continue to be supported by this as investors look for a cheaper alternative to gold.

As of 10:17 a.m. EDT on Friday, platinum was trading at US$926.

Palladium lost 1 percent on Friday, but continues to head for an eighth consecutive weekly gain.

Looking ahead, panelists polled by FocusEconomics believe that, while prices will dip slightly, the metal will continue to be supported throughout the year.

“Prices will still be elevated by recent historical standards, aided by the ongoing supply deficit and a shift to cleaner vehicles, which should support demand. The evolution of the US-China trade spat, a potential faster-than-expected economic slowdown and the possible substitution for platinum in vehicles remain key factors to watch,” they said.

As of 10:30 a.m. EDT, palladium was trading at US$1,650.

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Securities Disclosure: I, Nicole Rashotte, 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.