The precious metals opened mixed on Monday morning, with gold and silver both slightly lower while the Platinum Group Metals (platinum and palladium) were each about 1.5% higher. After the markets broadly felt the pain of weaker commodities and a jumpy bond market on Friday, the metal prices have been held in place by these two counteracting forces.
Gold was less than $2 per ounce lower at $1,073.80/oz at 9:45 am ET while spot silver dropped below $14 per ounce, 12¢ into the red at $13.88/oz. Platinum and palladium, meanwhile, were in the green at $858/oz and $551/oz, respectively.
The markets were pulled lower almost across the board on Friday, as well as for much of last week. Oil continued its slide, with WTI closing barely above $35 per barrel to end the week. Brent crude hasn’t fared much better, falling in 7 consecutive trading days in London. The general commodities collapse has investors rattled, although industrial metals like nickel and copper saw some support over the weekend due to reports of slowing production (supply) in China.
The S&P 500 had its worst week since August. Since the most recent nonfarm payrolls report was released last Friday (December 4th), the S&P lost 3.8%; the Dow Industrials lost 3.3%; and the Nasdaq tumbled 4.1%. Through all of this, the metals were comparatively consistent.
Stuck in Neutral
The downward pressure that the broader commodities markets are exerting on the precious metals seems to be neutralized by the general uncertainty in the financial markets due to the Fed rate hike decision this Wednesday. Junk bonds have received a great deal of focus as these risky debt instruments continue to show signs of instability. In just the last few weeks, three junk bond investment funds have folded completely. Prices for junk bonds saw their largest single-day drop since 2011 on Friday, and investors are expecting more difficulties heading into the FOMC meeting.
Essentially, both the financial and commodity markets have been slumping, so the precious metals have been caught in the middle. (This dynamic is why so many investors use gold and silver as a hedge in their portfolios.) Even as the steady bleeding in commodities tries to drag the metals lower, the upheaval and uncertainty in stocks and bonds has been supportive of precious metals prices. These fundamental drivers are cancelling each other out while the bears and bulls in the speculative market continue to play tug-of-war.
Gold’s technical levels remained essentially unchanged, with resistance at $1,080/oz and $1,088/oz and support levels at $1,062/oz and then $1,057/oz.
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.