PRECIOUS-Gold eases in narrow range as traders eye economic data

Source: Written by Arundhati Sarkar for Reuters 

Dec 21 (Reuters) – Gold prices eased in a tight range on Wednesday as the U.S. dollar firmed, although bullion was not far from a one-week high scaled in the previous session as traders looked ahead to impending economic data later this week.

Spot gold XAU= fell 0.2% to $1,813.23 per ounce by 0957 GMT, after rising more than 1% on Tuesday on the back of a dip in the dollar. U.S. gold futures GCv1 eased 0.2% to $1,822.70.

“After yesterday’s sharp rally, traders are waiting for fresh cues, especially from tomorrow’s GDP data and the performance of U.S. dollar,” said Hareesh V., head of commodity research at Geojit Financial Services.

Reports of a surge in COVID-19 cases in China may be another trend setter for the market, he said, adding prices are most likely to be choppy, possibly between $1,760 and $1,840.

The dollar index .DXY was firm on the day after a yen driven fall in the last session following a Bank Of Japan surprise policy tweak.

On the data front, the U.S. gross domestic product (third estimate) due on Thursday and the core personal consumption expenditure (PCE) price index scheduled on Friday are also on the investors’ radars.

Gold prices have risen nearly $200 since falling to a more than two-year low in late September as expectations around slower rate hikes from the Fed dented dollar’s allure.

“As we head into 2023, the Federal Reserve is expected to pivot in its rate hiking drive and the dollar is likely to soften, benefiting gold due to the inverted price correlation between the two assets,” Ricardo Evangelista, senior analyst at ActivTrades said.

While gold is traditionally considered a hedge against inflation it tends to loose its shine in a higher interest rate environment.

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Silver Just Had Its Best Month In 40 Years: Here Are July’s Best And Worst Performing Assets

by Tyler DurdenMon, 08/03/2020 – 13:22

When looking at the torrid market performance in July, Deutsche Bank’s Jim Reid notes that silver (+35%) had its best month since December 1979 while the dollar the worst for a decade. US equities had a good month in spite of rising virus caseloads due to a strong earnings season relative to expectations, especially in tech towards the end of the month. YTD Silver, Gold and the NASDAQ have been the three best performers while at the bottom of the leaderboard Brent, WTI and European Banks are all down at least 30%.

Below we present some of the key highlights from Deutsche Bank’s July 2020 performance review

While July proved to be another decent month for risk assets, it was the performance of two other assets in particular which caught the eye. The first was Silver, which had its strongest month since December 1979. The second was the weakness in the USD, which ended with the USD spot index dropping by the most in a single month since September 2010.

Indeed the impact of the latter was fully felt when looking at returns in USD terms, with 36 of the 38 assets in DB’s sample finishing with a positive total return. In local currency terms, that number dropped to a still-impressive 30 assets. As markets move into August, typically a more subdued month for volumes but perceived to be a weaker month for risk, the focus remains on the reopening of economies on the one hand and signs of rising cases in certain countries on the other.

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Precious Metal ETFs Shines in July

Amid rising U.S.-China tensions and worsening COVID-19 crisis, precious metals have become attractive and more appealing to investors. Gold has skyrocketed to an all-time high nearing $2,000 per ounce while silver has jumped to the highest level of nearly $25 in seven years.

The weakness in the U.S. dollar against major global currencies also raised the metal’s attractiveness, as it does not pay interest like fixed-income assets. The Bloomberg Dollar Spot Index is poised for its worst July in decades, having lost 3.9% so far this month. The index is trading at the lowest since 2018. Additionally, massive liquidity injections by central banks across the globe and hopes of further stimulus supported the price of metals.

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Gold Strategy

Investors continue to find the Equity markets attractive even with no end in sight to the China and Brexit negotiations.

With investors feeling confident that their investments are in good shape, safe haven investments like Gold and Bonds can be overlooked at this time.

But let us not forget that in 2018 market sentiment flipflopped back and forth daily between “Risk-On” and “Risk-Off” ideology. Every day we continue to see risk in the headlines, whether geopolitical or economic, anything can happen in a moment that will turn markets around. Not to mention the continued ongoing political rumor mill here in the States.

These headlines can take a toll on a trader and investors’ emotions, but can also provide opportunities.

That’s where a Dollar Gold cost averaging strategy can make a lot of sense. When the price of Gold declines, many smart Gold investors see it as a buying opportunity to create a truly balanced portfolio.

At the time of this report, Equity markets are called up over two hundred points. So, when the price of Gold is most ignored by investors that might be the best time to, so to speak, “put your toe in the water” and put in place your dollar cost averaging strategy.

Palladium

Palladium prices have experienced a much-needed correction in the past week and may be vulnerable to further declines in the short term. Despite this continued tightness in supply the market is likely to see prices test higher across the medium to longer term.

To back up that philosophy, Johnson Matthey estimates that the Palladium supply deficit could reach one million ounces in 2019. So maybe there still significant room to the upside in the price.

Today’s Palladium EFP is quoted by some dealers at Minus 40 minus 20. If the EFP stays in negative territory higher prices are always a possibility.

Originally published April 1, 2019

Precious Metals Price Jump After Fed Announcement

Posted on June 20, 2019 by Pat Heller

A standard pattern for the past several years has been for the prices of precious metals to be suppressed in the 24-48 hours before the Federal Open Market Committee makes their announcements at the end of their meetings held every six weeks.  The US government, through its primary trading partners and allied central banks, tried again this week.

This week, the FOMC held their two-day meetings on Tuesday and Wednesday and released their announcement at 2 PM Eastern Wednesday afternoon.  The announcement left the federal funds interest rate unchanged, as was expected.  However, the text included more than usual language stating that the Fed would consider more financial data than it has up to now in making interest rate decisions in future meetings.  That can be interpreted as the US government saying that the economy is good now, but it is so weak that it wants to be able to cut the federal funds interest rate because the economy is declining.

Upon the release of Wednesday’s announcement, gold and silver prices took off.  As I type this late Wednesday afternoon, the after-hours trading for gold is at $1,359.50 and silver is as $15.12.  Gold prices are now up 6.8% since May 21, while silver has jumped 5.2%.  This rise has occurred despite major short selling of paper gold and silver contracts on the commodity futures markets.

The price of gold has not closed at $1,360.00 or higher for three years.  It has been more than four years since the US COMEX close exceeded $1,368.00.  There is a major shortage of physical gold in the London and New York markets right now.  Because of this, I think there is a strong prospect we could be near an upward breakout in precious metals prices.

In the meantime, the FOMC will not make another federal funds interest rate announcement until July 30, which will almost certainly be one of the most closely watched releases in recent months.

Patrick A. Heller was the American Numismatic Association 2018 Glenn Smedley Memorial Service Award, 2017 Exemplary Service Award 2012 Harry Forman Dealer of the Year Award, and 2008 Presidential Award winner.  He was also honored by the Numismatic Literary Guild in 2017 and 2016 for the Best Dealer-Published Magazine/Newspaper and for Best Radio Report.  He is the communications officer of Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects.