Trade War Concerns Pressure U.S. Equities and Support Precious Metals

Gary Wagner Thursday February 07, 2019 18:13

Featuring views and opinions written by market professionals, not staff journalists.

Commentaries & Views

Share this article:

The Chinese markets might be closed this week, however concerns about the continuation of our looming trade war continues. Resulting in U.S equities closing sharply lower today and as of 4:30 PM Eastern standard time the Dow Jones industrial average is off by well over a full percentage point and currently trading down almost 290 points a net decline of 1.15% on the day. The NASDAQ composite is experiencing deeper losses today currently down approximately 1.5%, and the Standard & Poor’s 500 is down by 1.3%.

At the same time precious metals are not so black and white, as we see major price differences in gold when comparing current futures pricing to that of spot prices. Currently spot gold is fixed at $1310.40, a net increase of $4.20 on the day. At the same time gold futures basis, the most active April contract is currently unchanged at $1314.40.

Most interesting is that today’s moderate gains in the physical price of gold are entirely based on bullish market sentiment, with traders bidding the precious yellow metal higher by $6.00 per ounce. Dollar strength has resulted in a decline of $1.80 limiting today’s upside move in spot gold, this according to the KGX (Kitco gold index).

Although gold futures are showing very little change on the day, most noteworthy is the fact that after trading to a low today of $1306, prices quickly rebounded and are currently range bound between up $.20-$.30, and down $.20-$.40.

Both silver and palladium are trading higher on the day. Currently silver futures basis the most active March contract is trading up almost 2/10 of a percent and currently bid at $15.73. Palladium is exhibiting gains of 6/10 of a percent, which is a gain of $8.10 today. Putting March Palladium futures at $1359.70. Obviously, palladium continues to outshine and outperform the other precious metals in the complex.

It is an uncommon occurrence for spot gold to be trading moderately higher and gold futures to be trading fractionally lower. That being said we have seen this scenario occur twice in the last two weeks of trading. This might be indicating that gold prices will move higher and that the current price correction might in fact be short-lived.

Wishing you as always, good trading,By Gary Wagner