Precious Metals Weekly Round-Up: Gold Steady After Fed Cuts Rates

Gold steadied on Friday (September 20) after losing momentum mid-week following the US Federal Reserve’s decision to cut interest rates by 25 basis points to a new target range of 1.75 to 2 percent on Wednesday (September 18).

The Fed also indicated a fairly dovish outlook for potential decreases in the future. During a press conference, Chair Jerome Powell said the Fed will be keeping an eye on geopolitical concerns and has not ruled out further cuts in the future.

“If (the US) economy weakens more extensive cuts may be needed,” he told reporters.

Even with gold’s value falling in the last few weeks, market watchers are noting that ongoing geopolitical concerns continue to support the precious metal.

Gold is headed for its first weekly climb in four weeks, as investors turn their focus to tensions in the Middle East.

“The jittery situation in the Middle East is one of the reasons to be concerned and switch to safe havens, after disappointing knee-jerk reaction following the US Federal Reserve rate cut,” said Eugen Weinberg, an analyst at Commerzbank (OTC Pink:CRZBF,ETR:CBK).

News that the US is building a coalition to shield itself from Iranian threats following last week’s attack on Saudi Arabian oil facilities is also adding to gold’s appeal as a safe haven investment.

“Indicators suggest that market participants have reduced longs and are focusing on the US$1,480 support area all the way down to US$1,450 as attractive levels to re-engage,” stated Lukman Otunuga, an analyst at FXTM.

Speaking last week at the Precious Metals Summit in Beaver Creek, Colorado, Rob McEwen, chairman and chief owner of McEwen Mining (TSX:MUX,NYSE:MUX), told the Investing News Network (INN) that he sees more gains in store for the yellow metal.

“I’ve always had a US$5,000 (per ounce) number, and I think it can go much higher than that,” he commented.

McEwen pointed to overarching global elements like high levels of debt and monetary expansion as factors he sees moving the gold price.

As of 9:43 a.m. EDT on Friday, gold was trading at US$1,501.60.

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

Like gold, the white metal is being supported by the recent interest rate cut and ongoing geopolitical issues. The metal managed to gain 2 percent and is heading for its first weekly gain in three weeks.

Silver was in the news this week after the US Department of Justice charged three JPMorgan (NYSE:JPM) executives with allegedly manipulating prices of precious metals between 2008 and 2016.

“It is one trader after another at JPMorgan getting in trouble for market manipulation, with their superiors in on the case about what is going on. Ironically, these trader operations are rinky-dink compared to the overall rigging of the gold and silver prices, which involves massive price suppression, (and has) been ongoing for a very long time,” Bill Murphy of GATA told INN.

Ed Steer of Gold and Silver Digest also commented on the news, telling INN, “The price of silver is still at US$18 … not US$100-plus, which is where it would be if this price management scheme didn’t exist.”

As of 10:00 a.m. EDT on Friday, silver was changing hands at US$17.76.

As for the other precious metals, platinum was up close to 1 percent 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 10:10 a.m. EDT on Friday, platinum was trading at US$943.

For its part, palladium made gains again this week, climbing over 1 percent on Friday and experiencing an all-time high earlier in the week when it peaked at US$1,649.09 per ounce.

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.”

As of 10:30 a.m. EDT, palladium was trading at US$1,610.

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