Precious Metals

Precious Metals Investing

Precious metals made marginal gains this week as investors braced their portfolios for the end of the decade.

The gold price steadied on Friday (December 27) after experiencing its biggest gain in nearly two months earlier in the day’s trading session.

The yellow metal leveled out as investors became more cautious over thin year-end trading and adjusted their positions on the precious metal.

“At the end of this year and beginning of the next, a lot of investors will take and quit their positions in gold, keeping it kind of steady,” Frederic Panizzutti, managing director at MKS Dubai, told Reuters.

“We expect gold prices to be supported by ongoing US-China trade war, geo-political tensions and very low interest rate environment. Central banks are on the buying side and that is not expected to change next year as well,” he added.

Over the course of the year, gold has been largely supported by the trade war, which has helped it gain over 17 percent. The dispute between two of the world’s largest economies has caused turmoil in the markets and has had investors concerned over a global economic slowdown.

Looking forward, 2020 is expected to produce more uncertainty in the markets with unresolved US-China trade issues, Brexit and upcoming US presidential elections.

For their part, investors are searching for signs on the health of the market from US gross domestic product data, due out later on Friday.

“With the given uncertainties, US$1,500 is quite a good pivot level for gold. If and when the phase one (trade) deal goes through, we might see gold breaking that level and trade in the US$1,400s, but only for a short period of time,” MKS’ Panizzutti said

A final element giving gold a boost is talk that Russia could consider a partial investment in gold via its National Wealth Fund.

“If Russia starts holding gold, being one of the biggest suppliers to the market, that would significantly dampen supplies. This is a significant macro driver,” said Stephen Innes, a market strategist at AxiTrader.

As of 9:23 a.m. EST on Friday, the yellow metal was once again trading above the US$1,500 per ounce level at US$1,510.40.

Silver dipped slightly on Friday, but is on track for its best week since the end of August.

Despite a slightly shaky month, the white metal remains stronger in 2019, as it is close to 10 percent higher on a year-to-date basis.

“Going forward, prices are seen rising marginally, supported by stronger global industrial production next year,” states a recent FocusEconomics report. “The possible signing of a partial trade deal between the US and China will be a key factor to watch ahead, due to its potential to affect both safe haven and industrial demand.”

With even higher hopes for the white metal is David Morgan of the Morgan Report. He recently told the Investing News Network (INN), “For 2020 I see (silver) picking up momentum. I see a high of US$22 (per ounce), which is about a 30 percent gain from where we have been in 2019.”

As of 9:27 a.m. EST on Friday, silver was changing hands at US$17.86.

In terms of the other precious metals, platinum was up marginally on Friday, and had managed to gain US$20 from this time last week.

Going forward, FocusEconomics believes that prices are likely to pick up slightly on the back of a fall in global supply. Despite this, weak automotive demand — the result of a shift away from diesel vehicles in the European Union — is seen capping the metal’s gains.

While many investors have had their eyes glued to platinum’s sister metal palladium, Mercenary Geologist Mickey Fulp told INN at the New Orleans Investment Conference in November that platinum is a better place for investors to park their money right now.

“I didn’t think (palladium) was going to US$1,800 (per ounce); I didn’t think it was going to go to US$1,200. It’s just gone out the roof,” he said. “When metals go exponential, or any financial market of any kind when prices go exponential, they will go parabolic and come right back down the other side, so I wouldn’t be buying palladium right now, I would be buying platinum.”

As of 9:46 a.m. EST on Friday, platinum was trading at US$943 per ounce.

Palladium has slipped from the US$1,900 level that it broke records with two weeks ago, but it is still managing to trade far higher than gold.

The metal pushed past US$1,900 on December 10 following a power outage in South Africa that stopped production at several mines and exacerbated concerns over a supply shortage. Since the outage, the metal has continued to climb and is headed for its fifth straight week of gains.

Beyond this recent event, palladium has been making continuous upward strides for the majority of the year. Speaking to INN recently, Vice President of Research at CPM Group Rohit Savant noted that there was growth in the palladium investment sector in 2019, which was further compounded by supply and demand fundamentals in the space.

“Palladium prices are expected to continue rising over the course of 2020, albeit at a slower pace than seen over the past few years,” he said via email.

“Investors are the primary drivers of palladium prices and they are unlikely to sell their holdings unless there is a meaningful deterioration in the supply and fabrication demand fundamentals. This is not expected to occur in 2020,” Savant added. “That said, investors are less likely to aggressively chase palladium prices higher in 2020.”

As of 9:56 a.m. EST on Friday, palladium was trading at US$1,883.

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



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