Precious Metals Weekly Round-Up: Gold Dips on US-China Deal Hopes

- November 15th, 2019

Precious metals were negatively affected again this week as the markets responded to renewed hopes surrounding a US-China deal.

The gold price tumbled on Friday (November 15) as renewed hopes surrounding a US-China deal led investors to boost their appetite for riskier assets, sending the yellow metal down. 

The US dollar rose when comments from White House officials sparked belief that the two powerhouse countries could be close to a deal and that there may be some end in sight for the ongoing trade war.

“Comments from the White House economic adviser are injecting renewed optimism surrounding the prospects of a trade deal,” Han Tan, FXTM market analyst, told Reuters.

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Tan added that if there are significant bouts of risk-on sentiment, the yellow metal could fall below the US$1,450 per ounce support level.

Despite that news, the metal is still primed to make gains for the week. Because its movement hinges on the outcome of the trade discussions, any declines are likely to be contained until there is official confirmation that a deal has been signed.

Over the course of the year, gold has been largely supported by the trade war, which has helped it gain over 14 percent. Disputes between two of the world’s largest economies have caused turmoil in the markets and have had investors concerned over a global economic slowdown.

Also keeping the precious metal from facing larger declines is the fact that just this week US President Donald Trump stated that if a deal can’t be reached between Washington and Beijing, he will retaliate with substantial new tariffs on China.

“We will have a first positive signal if the price climbs above US$1,470, while another fall below US$1,445 would denote sellers dominating while markets wait for further news on the trade war or further input from central banks, particularly from the (US) Federal Reserve,” Carlo Alberto De Casa, chief analyst at ActivTrades, noted.

As of 9:39 a.m. EST on Friday, the yellow metal was trading at US$1,465.20.

Silver was also down on Friday, but, like its sister metal gold, it is set to make marginal gains for the week.

The white metal took hits as its safe haven appeal declined, but it came out of the week relatively unscathed thanks to additional tariff talk from Trump.

However, the uncertainty of an actual trade agreement coming to fruition has many industry experts believing that silver will rebound.

“Going forward, prices are seen remaining relatively stable, propped up by a recovery in industrial production next year,” states a recent FocusEconomics report. “The evolution of the US-China trade war will be a key factor to watch in coming months, due to its potential to affect both safe haven and industrial demand.”

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As of 10:08 a.m. EST on Friday, silver was changing hands at US$16.93 per ounce, roughly the same as this time last week.

In terms of the other precious metals, platinum made strides in the opposite direction of gold and silver, enjoying a small gain of just under 0.6 percent on Friday.

As of 10:14 a.m. EST on Friday, platinum was once again below US$900 per ounce, trading at US$885.

Unfortunately for palladium, it too could not find itself in the green, falling 0.64 percent by Friday morning. However, its decline was relatively marginal, as it remains supported by the same factors that helped it break records at the end of last month.

Since the beginning of the year, the metal has gained over 40 percent, with its large gains being attributed to stricter environmental regulations around car emissions.

While sales for traditional vehicles are slipping, air quality rules in line with cutting pollution have prompted automakers to increase the amount of palladium used in catalytic converters, which help vehicles reduce their emissions.

As demand increases from the automotive sector, supply shortfalls are beginning to emerge, giving the spot price a boost on the market.

“There’s just a persistent, continuing shortage of the metal,” Tai Wong, head of base and precious metals derivatives trading at BMO (TSX:BMO,NYSE:BMO), told Reuters.

As of 10:19 a.m. EST on Friday, palladium was trading at US$1,703 per ounce.

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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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