Precious Metals Weekly Round-Up: Gold Rallies as Greenback Dips

The gold price climbed on Friday (December 21) and the US dollar slipped in a week that saw the US Federal Reserve allude to the idea that it may soon pause its monetary tightening campaign.

While the precious metal dropped directly after the hike, it made gains later as investors reacted to the possibility that there may be fewer hikes in both 2019 and 2020.

“The Federal Reserve, in their statement, remarked that they see a stable economy with low unemployment, strong household spending and an inflation rate which is within the targeted range. Given this outlook, it’s no surprise that they raised rates by 0.25 percent, up to 2.5 percent overall,” Brian Leni, founder of Junior Stock Review, told the Investing News Network.

As of 9:20 a.m. EST on Friday, the yellow metal was trading at US$1,258 per ounce.

Meanwhile, silverdipped following the Fed hike, then rebounded the next day. It trended down 0.58 percent on Friday and as of 9:22 a.m. EST that day, the white metal was sitting at US$14.68 per ounce.

Lukman Otunuga, a research analyst with FXTM, addressed the current environment for the precious metals, stating, “[a] depreciating dollar coupled with expectations of fewer rate hikes in 2019 remain the primary factors supporting gold [and silver] prices.”

“The US Federal Reserve’s failure to reassure investors that they understand the risks across global markets is seen fuelling appetite for safe-haven gold in the short- to medium-term,” he added.

“Market sentiment towards zero-yielding gold is at risk of souring ahead of the Fed meeting next week where interest rates are expected to be hiked. However, with the Fed potentially taking a pause on rate hikes next year, gold remains somewhat supported,” Otunuga continued.

“The near-term outlook for gold hangs on the dollar performance … [b]ulls remain safe above the US$1,240 support level with US$1,250.60 acting as a level of interest.”

As for the other precious metals, platinum was flat and trading at US$793 per ounce as of 10:30 a.m. EST. Palladium was down 2.17 percent, and as of 10:35 a.m. EST was trading at US$1,217 per ounce.

Precious metals top news stories

Our top precious metals stories this week include our 2019 silver outlook, a look at what happened to gold following the Fed hike and how Premier Gold Mines (TSX:PG) and Centerra Gold’s (TSX:CG) joint venture Hardrock project received federal environmental approval (EA).

1. Silver Outlook 2019: Will Disinterested Investors Come Back?

The price of silver has plunged almost 14 percent in 2018, becoming one of the biggest upsets in the precious metals sector.

In Q3, the white metal dropped below the US$16 mark and even crashed to lows not seen in two and a half years when it fell under US$14 on September 11. Geopolitical concerns, consistent interest rate hikes and a rallying US dollar have kept prices down throughout the year.

With the start of 2019 just around the corner, many investors are now wondering what will happen to silver next year. This article looks at silver’s price performance in 2018 and what companies and analysts expect for the silver outlook in 2019.

2. Gold Price Declines After Fed Makes Fourth 2018 Rate Hike

After two days of meetings on monetary policy, the Fed officially announced its fourth and final interest rate hike of 2018 on Wednesday (December 19).

The Fed lifted the target federal funds rate by 25 basis points from 2.25 percent to 2.5 percent, leaving gold to trend down following the news. This was the Fed’s ninth hike in two years, and the decision to increase rates came despite a stock market selloff and stern warnings from US President Donald Trump.

The hike dampened gains gold made in the previous session, and continued a trend seen all year. Gold has fallen more than 5 percent in 2018 thanks to the greenback rallying on the back of an increasingly positive US economy, expectations of higher US interest rates and fears of a global trade war.

3. Premier and Centerra’s Joint Venture Gets Federal Approval

Premier Gold Mines and Centerra Gold’s joint venture Hardrock project received EA from Canada’s federal government, the companies announced on Monday (December 17).

The approval marks a significant milestone for joint venture company Greenstone Gold Mines as the project is expected to produce approximately 288,000 ounces of gold a year.

“The Ministers’ approval of the EA is a significant milestone for the Hardrock project. Our engagement with representatives of the local Indigenous communities, local communities and the various government agencies has been very positive throughout the process and we look forward to continued advancement of the project,” said John Begeman, executive chairman of Premier.

Also in the news

Also making news this week was the news that Mexico’s new government will not seek to implement drastic changes to the mining sector. There are also no plans to cancel concessions or raise the royalties that companies pay to extract minerals.

Last month, shares of Mexico’s top miners dipped by over 10 percent after the party of new president Andres Manuel Lopez Obrador made a Senate proposal that would toughen rules for the sector.

On Wednesday, Francisco Quiroga, the undersecretary for mining, revealed that indigenous consultation will be required only for new permits.

“There is a principle of non-retroactivity of the law,” he said. “No rights will be violated, neither those of the communities nor those of the companies.”

Quiroga also noted that the new government will be reviewing the country’s nearly 26,000 concessions for anomalies, as Lopez Obrador has proposed. Additionally, Quiroga said that for now, his efforts are focused on simplifying procedures, promoting new projects and boosting exploration.

Mexico is the world’s top silver producer and one of the largest producers of copper and gold. The mining sector contributes about 4 percent of Mexico’s gross domestic product.

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