Precious Metals Weekly Round-Up: Gold Slips as Investors Book Profits

Gold declined on Friday (August 2) after gaining more than 2 percent in the previous session when US President Donald Trump threatened new tariffs on China.

As investors booked profits following gold’s price increase, the yellow metal faced a downward trajectory. Despite the loss, gold is still on track for a weekly gain.

The metal also faced headwinds this week after the US Federal Reserve cut interest rates by a quarter point to a range of 2 to 2.25 percent on Wednesday (July 31). The news caused a rally in the US dollar, sending the precious metal on a downward spiral.

“In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the committee decided to lower rates,” the Federal Open Market Committee, led by Jerome Powell, said in a statement after the meeting in Washington.

However, the metal did not experience a drastic loss, as the Fed did not broadcast what might happen to interest rates as the year progresses.

“The Fed statement was very carefully crafted to not make suggestions of the next move — it is very much a ‘wait and see’ approach after this one interest rate cut,” Chantelle Schieven, research head at Murenbeeld & Co., told the Investing News Network (INN) via email.

“If global conditions, i.e. global trade, worsen, and economic data is weaker, then the Fed could cut again by year end. But if economic data is about the same or better, the Fed is likely to hold for now,” she continued. “The uncertainty surrounding the next move by the Fed will likely create additional volatility around each major US data release, and the upcoming Fed statements, until a more solid direction is projected by the Fed.”

Looking ahead, market watchers will turn their attention to the release of US non-farm payrolls data on Friday afternoon. Investors will pay close attention to the report for cues on where economic strength stands.

Many analysts believe that this down period for gold won’t last and still see the metal continuing to climb as the year progresses.

EB Tucker, a director at Metalla Royalty & Streaming (TSXV:MTA,OTCQX:MTAFF) and the mind behind two publications at Casey Research, told INN on the sidelines of the Sprott Natural Resource Symposium that he believes that the Fed’s decisions moving forward will be beneficial for the yellow and white metals.

“The Federal Reserve made some statements that they were going to take seriously the notion of making the money supply softer. And historically … they never do a little bit of loosening. They start loosening and they tend to loosen for awhile, so to me that meant, ‘Here it comes,’” he said.

Tucker went on to forecast relatively big gains for both gold and silver. “You’ve got to be in this market. Gold’s going to hit US$1,500 (per ounce) and silver’s going to hit US$20 (per ounce), and there’s not going to be a break before that happens. Investors need to really think about that — you’re not going to get a chance between now and US$1,500.”

As of 9:36 a.m. EDT on Friday, gold was trading at US$1,445.60 per ounce.

Silver has also felt the same pressures as gold, ending its rally from the two previous weeks this week. Fortunately, the white metal has managed to stay within the US$16 per ounce level.

“The scenario is slightly more complicated for silver, as the component of the demand for this metal coming from the industrial sector is much higher than gold and the trade war could have a more significant impact,” Carlo Alberto De Casa, chief analyst at ActivTrades, told Reuters.

However, many market watchers are paying attention to what gold does in order to forecast where silver should be headed.

Lobo Tiggre, CEO of Louis James LLC, told INN at the Sprott Natural Resource Symposium that market watchers need to keep an eye on silver as the gold price continues to climb.

“It’s well known … how silver tends to lag gold. Gold moves first and then silver more than catches up,” Tiggre said. “If gold goes bananas, silver will go bananas — no question in my mind, and it will go more bananas than gold.”

Tiggre believes that the white metal will go bananas with more gusto because the conditions that can drive gold upwards can also drive industrial metals like copper downwards, and most of the silver mined in the world is a by-product of copper mining.

As of 9:46 a.m. EDT on Friday, silver was changing hands at US$16.16.

As for the other precious metals, platinum took some hits and was down just over 0.6 percent for the week. Despite the dip, many analysts believe that platinum is set to make gains this year.

Trevor Raymond, director of research at the World Platinum Investment Council, told INN at the Sprott Natural Resource Symposium that a potential turnaround in the market share of diesel vehicles in Europe could drive demand for platinum in 2019.

“It’s turned around slightly. The rate of decline is a lot slower, and we’ve seen a rise of diesel car sales in Germany. If that settles at 33 or 34 percent rather than 25, each 4 percent is an extra 100,000 ounces of demand, so I think that’s been the main driver (of interest in platinum).”

As of 9:50 a.m. EDT on Friday, the metal was trading at US$845.80 per ounce.

For palladium‘s part, it was also down just over 1 percent on Friday, making drastic drops throughout the week. The metal slipped from the US$1,500 per ounce level to sink to the US$1,300 range.

There are still many market participants in palladium’s corner, with Metals Focus stating that it believes the metal will continue to rise. The firm forecasts that autocatalyst demand will more than likely go up by 3.6 percent in 2019, setting records at 8.59 million ounces due to tighter emissions standards.

As of 9:54 a.m. EDT, palladium was down 1.62 percent, trading at US$1,391.40 — down close to US$120 from this time last week.

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