Precious Metals Weekly Round-Up: Sector Hits New Highs on Global Tensions
Geopolitical tensions stemming from attacks in the Middle East have pushed gold and palladium up significantly.
The precious metals sector benefited broadly from growing geopolitical uncertainty in the Middle East following last week’s drone attack in Baghdad.
Gold’s sister metal, silver, was also bolstered by the unrest, reaching a year-to-date high on Tuesday (January 7) of US$18.55 an ounce. Platinum has had a similar story this past week, trending to US$989 an ounce on Sunday (January 5) before slipping lower, where it remains.
An aerial assault carried out by Iran on Iraqi targets late Tuesday night shocked the market. The value of safe haven assets rose, with gold moving as high as US$1,610 following the missile attack.
As the dust settled and there were no reported casualties, metals prices began to retreat back to their rangebound levels. However, that may change due to speculation that an Iranian missile may have shot down an airplane departing the airport in Tehran on Tuesday evening.
“In the very short-term, investor sentiment will continue to be dominated by developments in the Middle East. More aggressive actions by the White House will clearly provide another catalyst for price gains,” reads a precious metals summary from Metals Focus.
The weekly outlook goes on to note: “That said, it is worth stressing that sharper geopolitical tensions usually generate a short-term boost for gold prices. Without a dramatic escalations, we would not be surprised if gold retreats towards or below US$1,500 in the coming weeks.”
Gold was trading for US$1,556.77 as of 10:53 a.m. EST on Friday (January 10).
In contrast to gold, palladium has retained this week’s gains and has even moved higher.
The automotive metal has been the most successful precious commodity over the last year, gaining more than 10 percent year-to-date. The metal, which is used in catalytic converters in gasoline-powered cars, is instrumental in reducing emissions from vehicles.
The metal continues to break its own records, and hit another all-time high on Thursday (January 9), when it was selling for US$2,122.
“Palladium prices are expected to continue rising during the first quarter of 2020,” Rohit Savant of CPM Group told the Investing News Network via email.
The vice president of research for the commodity intelligence company pointed to a variety of factors that are likely to drive the palladium story through the quarter.
For Savant, the most notable factors include mine supply concerns from South Africa, which he said are related to energy generation and load shedding. Ongoing tightening emissions standards in China are also worth noting.
Another area that will impact the palladium narrative, said Savant, is the exchange-traded fund sector, which has experienced heightened interest in 2019.
“While the net increase in demand is very small, it still is a reversal in trend from what has been observed over most of the period since the middle of 2015, and further tightens an already tight market.”
Palladium was selling for US$2,098 as of 10:55 a.m. EST on Friday.
Platinum has not had the same breakout story as gold and palladium, despite recording gains this week. The gray metal has climbed less than 1 percent year-to-date, and recorded a decade low in 2019.
Although growth has been subdued, Metals Focus foresees gold motivating the platinum price in 2020.
“Metals Focus are cautiously optimistic about platinum prices in 2020, although this has little to do with the fundamentals,” states the firm’s report. “Even though platinum autocatalyst demand is expected to start improving from 2020 onwards (due to rising heavy duty vehicle production and tightening emissions regulations), gains will be fairly modest.”
An ounce of platinum was trading at US$976.50 as of 10:56 a.m. EST on Friday.
Silver is also expected to benefit from gold’s advances, plus investor appetite for save haven assets.
“Given its far smaller market size (relative to gold) and therefore its higher volatility, we also expect silver to outperform the yellow metal, resulting in the gold:silver ratio falling to the low 70s later this year,” Metals Focus wrote.
At 10:56 a.m. EST on Friday, the price of silver was US$18.06.
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.
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