Precious Metals Weekly Round-Up: Gold Reacts Negatively to Brexit Deal

Gold dipped marginally on Friday (October 18) after Britain and the European Union struck a Brexit deal on Thursday (October 17), more than three years after Britons voted to exit the bloc.

The agreement alleviates the possibility of an economic shakeup, and as a result investors eased up on purchasing precious metals as a safe haven.

“The focus is on Brexit. The risk of a no deal Brexit has dropped and overall the sentiment on the Brexit front has improved a lot, but now it’s just the uncertainty of the vote,” Georgette Boele, an analyst at ABN Amro (AMS:ABN), told Reuters after the news hit.

“If the Brexit deal goes through, there will be a bit of pressure on gold, because there are a few investors who bought gold on the Brexit story,” she added.

Despite the yellow metal’s reaction to the deal, losses were limited thanks to weak economic data from powerhouse countries China and the US.

This week, China revealed that economic growth slowed in Q3 to its weakest pace in close to three decades.

This news came after it was reported that US retail sales fell for the first time in seven months in September, suggesting that manufacturing weakness could be spreading to the broader economy. Industrial output during the month also dipped.

“Economic data out of US and China are in favor of further (monetary policy) easing that will be supportive for gold,” said SP Angel analyst Sergey Raevskiy.

The US Federal Reserve will meet at the end of October to decide on further interest rate cuts this year.

As of 10:13 a.m. EDT on Friday, gold was trading at US$1,490.40 per ounce.

Silver did not respond to the Brexit deal and global economic concerns the way its sister metal gold did, instead putting on a relatively steady performance on Friday. The white metal still remains outside of the US$18 per ounce level that it reached in the previous month.

However, a potential interest rate cut next month could give silver some renewed stamina, and there are still many industry insiders who believe that the metal is primed to make substantial gains.

Randy Smallwood, president and CEO of Wheaton Precious Metals (TSX:WPM,NYSE:WPM), sees value in investing in the silver space, especially with the metal making gains.

“Silver is the high beta play on precious metals. One of the reasons that silver moves like that is because so much of it is produced as a by-product from lead–zinc mines and copper mines,” he told the Investing News Network this past summer.

“Those mines don’t change their production, so that just results in a very delayed response on the supply side … so silver always lags gold, but then it outperforms, and it has done that for the last 50, 60 years. It’s going to continue to do that; silver is a good place to play.”

As of 10:26 a.m. EDT on Friday, silver was changing hands at US$17.51.

As for the other precious metals, platinum was flat on Friday, remaining below US$900 per ounce.

Despite the decrease, the World Platinum Investment Council (WPIC) released a report last month that states platinum demand is expected to climb by 9 percent this year.

During the first half of 2019, a surge in exchange-traded fund (ETF) activity accounted for 855,000 ounces of investment demand. The WPIC expects demand to outpace supply, reducing the surplus of platinum from 375,000 ounces to 345,000 ounces.

“Today’s report shows continued investment demand growth, driven by investor recognition of platinum’s demand and price growth potential. This has been supported by uncertain capital markets that have seen inflows for most precious metals ETFs this year, of which platinum has been a standout beneficiary,” Paul Wilson, CEO of the WPIC, said at the time.

“Institutional investment demand has had an unprecedented start this year with ETF buying of 720,000 ounces in H1’19.”

As of 10:41 a.m. EDT on Friday, platinum was trading at US$886.

While palladium dipped slightly on Friday, it was the most successful precious metal for the week, climbing over 3 percent after hitting a record high of US$1,783.21 per ounce in the previous session.

“The palladium market is still structurally tight, keeping prices resilient, with intermittent volatility,” ANZ Bank (ASX:ANZ) noted.

As of 10:44 a.m. EDT on Friday, palladium was on track for its biggest gain in over a month, trading at US$1,732.

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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.