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Gold Bounces As Dollar Slips

January 24th, 2017 by

Precious metals saw slight weakness yesterday in afternoon trading in London before recovering on the New York open. The dollar also lost ground, however, hitting a seven-week low against a basket of its largest peer currencies.

At 10 am in New York, NYMEX prices for spot gold and February gold futures were both nearly flat at $1,216.40 per ounce. Spot silver and March silver futures are also flat, while spot and “paper” platinum is up by $14 an ounce. Palladium futures are $19/oz higher, while spot prices mirrored platinum, gaining $14.

Trump Talks Trade

Profit-taking in the precious metals are being counterbalanced by buying that is fueled by economic uncertainty. Twice to begin this week, the gold bulls have made a run at pushing the yellow metal to a two-month high. The Platinum Group Metals (PGMs), meanwhile, were hit yesterday over concerns that America’s withdrawal from the Trans-Pacific Partnership (TPP) would hurt auto sales in China and the U.S.

In addition to fulfilling one of his campaign promises by pulling the country out of the TPP, perhaps the signature trade agreement of the Obama era, there is some anxiety that Trump’s repeated comments about tariffs could also have an adverse impact on automakers. Still, the new administration has consistently vowed to slash rampant regulations, including those that relate to energy and the environment. Any economic boost from the loosening of such restrictions and bureaucratic red tape may counteract any negative outcomes of the president’s trade policy.

In general, the present uncertainty over trade policies if the Trump administration and concerns over possible trade wars that could result, have investors making safe haven plays in gold and U.S. Treasurys. Over the last month, gold prices are up over 7% while the 10-year Treasury yield continues to trend lower.

The dollar traded at just 99.899 overnight on the DXY index, briefly recovering to 100.430 before falling back into negative territory this morning. Many analysts are attributing the softer dollar directly to President Trump’s recent declaration that the greenback was overvalued. The dollar was volatile while the British pound sterling rose to its highest in a month.

In economic news, existing home sale stalled in December in line with the sluggish trend throughout 2016. The “inventory” or supply of properties is tightening all the same, causing home prices to appreciate at fairly quick pace: the median sale price last month was 4% higher year-on-year, and home prices rose over 40% during the past five years. The final 2016 data on U.S. housing prompted the National Association of Realtors (NAR) to forecast an average mortgage rate of 4.6% for this year.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product