Precious Metals

Precious Metals Investing

A mixed US jobs data report caused the US dollar to rally and precious metals to fall. Oil made gains over concerns of possible sanctions against Iran.

The gold price found itself trading down on Friday (May 4), heading for three consecutive weeks in the red. The yellow metal declined on the back of a US jobs report that appears to support interest rate hikes.

As of 10:40 a.m. EST on Friday, the precious metal sat at US$1,312.10 per ounce — down US$7 from the same time last week.

While the US employment data shows jobs growth increased less than expected in April, with the unemployment rate dropping to 3.9 percent, the results point to an interest rate hike in June.

“This is a bit disappointing on the earnings front after the employment cost index we received last week. Still this is not enough for the Fed to pause. They will still hike in the June meeting,” said Collin Martin, fixed income strategist at the Schwab Center for Financial Research in New York.

The US dollar rallied following the report, as investors reacted to the possibility that the US Federal Reserve will continue to raise rates; other central banks may act at a slower speed.

Fortunately for the yellow metal, it could find gains next week as it is likely to be supported by concerns over the possibility of the US withdrawing from the Iran nuclear accord.

“Even if gold dips below US$1,300, the past has shown that there is buying interest below that level, so we don’t expect gold to drop significantly for the moment,” said Commerzbank (OTCMKTS:CRZBY) analyst Daniel Briesemann.

Like gold, silver was no match for the strengthened greenback, trading down on Friday and losing 0.6 percent for the week. The white metal was trading at US$16.39 an ounce as of 11:18 a.m. EST on Friday.

While silver made some gains following a dovish Fed statement on Thursday (May 3), precious metals are not popular with investors lately.

“Safe-haven buying has been absent of late,” said ANZ analyst Daniel Hynes. However, Hynes believes that as weith gold, geopolitical concerns will support the white metal in the coming weeks.

“[T]here have been some signals for the past few days that the [US-China] negotiations won’t be as smooth as expected. That would definitely be a focus, particularly now we have got past the FOMC meeting,” he added.

Rounding out the week in metals is copper, which was up 1.43 percent for the week, trading at US$3.07 per pound as of 11:26 a.m. EST.

Meanwhile, oil made gains this week as global supplies were tight and market watchers continued to wait for news over possible new US sanctions against Iran.

“Rising geopolitical risks have been a big factor behind oil’s strong rise this year,” said ANZ’s Hynes and Soni Kumari.

“The extent of the rally would have been significantly weaker if not for the recent tightness in the market. We expect the market to tighten even further in H2 2018,” they added.

Oil traders remain concerned that sanctions against Iran may cut oil supplies, with US President Donald Trump stating that unless European allies rectify the “terrible flaws” in the international accord by May 12, he will not be extending any US sanctions relief for the Islamic Republic.

“Prices reflect a premium for Iran uncertainties. Investors are worried about supplies after Iran took a tough stance in its response to the United States,” said Wang Xiao, head of crude research with Guotai Junan Futures. As of 11:41 a.m. EST on Friday, oil was sitting at US$68.94 per barrel.

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

MARKETS

Markets
TSX19078.64-144.10
TSXV626.34-18.57
DOW31029.31+82.32
S&P 5003818.83-2.72
NASD11177.89-3.65
ASX6700.20-63.40

COMMODITIES

Commodities
Gold1814.84-3.98
Silver20.70-0.05
Copper3.73-0.05
Palladium1970.11+8.11
Platinum914.50-4.50
Oil109.32-0.46
Heating Oil3.89-0.06
Natural Gas6.500.00

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