Precious Metals Hit a Wall

October 17th, 2017 by

Spot gold plunged in early trading on Tuesday, carrying over the trend that emerged on Monday afternoon when the yellow metal lost considerable ground. Gold prices traded down nearly $10 per ounce to $1,285/oz. Spot silver was likewise deeply in the red, losing 17ยข (-1%) to trade around $17.04/oz.

Meanwhile, palladium looked to rally anew, gaining 1.35% to $976/oz after following the other precious metals lower during Monday’s session. Platinum was mostly flat, just below $930/oz.

Wall St looked to build on its gains from yesterday as big banking firms like Morgan Stanley and Goldman Sachs report earnings today. Interestingly, Goldman recently compared gold favorably to Bitcoin, the current darling of the finance world. In fact, the market exuberance over cryptocurrencies has extended far beyond Bitcoin itself: in just the last two months, initial coin offerings (ICOs) have garnered $1 billion in new investment. However, there is still some doubt about how regulators will treat these “securitized” digital coins in the coming months and years.

Global stocks were mixed on Tuesday, as were major commodities. The WTI crude oil price hit a three-week high above $52/bbl yet copper prices fell for the first time in more than a week. Perhaps not surprisingly, the dollar was 0.35% higher on the DXY index to a one-week high of 93.6.

The euro was down another 0.4% to $1.17 and the British pound lost 0.55% to trade under $1.32. Both currencies were weighed on by the uncertainty and difficulty associated with Brexit. The Organization for Economic Cooperation and Development (OECD) estimates that if Brexit were somehow reversed, it would significantly boost economic growth in the U.K. Such a reversal would undoubtedly require a change in leadership in Britain, but that possibility seems less far-fetched by the day. Other economic data showed that inflation has picked up in the U.K., as the country’s consumer prices rose 3% year-on-year, the fastest clip in five years.

In terms of U.S. monetary policy, speculation over the possible replacement for Fed Chair Janet Yellen has focused in on John Taylor, who is well-known for being an interest-rate hawk. Most of the other candidates that have been floated for the central bank’s top job have tended to be on the dovish side of the policy debate. There is still the possibility, though it seems remote at the moment, that Yellen will stay on as chair when her current term expires in 2018.

Tensions on the Korean peninsula continue to dominate the geopolitical news. North Korea once again stoked the fire by warning the West that the possibility of nuclear war may “break out [at] any moment.” This is far from the only challenge facing the Trump administration from a foreign affairs standpoint, the sum of which provides a consistent baseline of safe-haven demand for gold.

 

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.