Last week Gold plummeted in value – Is now the right time for you to be putting your money into Precious Metals? According to RAKBANK, it appears that all is not as it seems…
With all the hints from central banks that the era of easy money is coming to end, Gold eased on Friday to stay on track for its first monthly loss this year, as hints from leading central banks that the era of easy money may be coming to a close pushed bond yields higher, hurting the non-interest bearing metal. While it is still up nearly 8 per cent in the first half, gold has stalled in the second quarter after a strong start to the year, and is little changed from where it ended in March. Spot gold was down 0.3 per cent at $1,241.41 an ounce by 2:34 p.m. EDT (1834 GMT), while U.S. gold futures GCv1 for August delivery settled down 0.3 per cent at $1,242.30. The futures market will trade an abbreviated session on Tuesday for the U.S. Independence Day holiday. Spot prices have fallen around 2 per cent so far in June, and are on track to fall 0.6 per cent in the second quarter, advised Reuters.
Comments from the euro zone, British and Canadian central banks this week indicated that quantitative easing programs in place since the financial crisis may be being wound up, leading to a gradual normalization of interest rates. “The knee jerk reaction was that even as risk appetite got smoked by lower equity prices, gold didn’t do great either and that is almost a direct reaction to higher yields essentially,” said Bart Melek, head of commodity strategy for TD Securities in Toronto. While the European Central Bank remains cautious on tightening monetary policy, the trend is turning more towards the hawkish side, said LBBW analyst Thorsten Proettel. “The most important thing for the gold market is that we have monetary policy tightening in the United States, and so with a further interest rate hike the gold price has gone down.” Germany’s benchmark bond yield recorded its biggest weekly jump since December 2015 as investors appeared to position for an end to the era of ultra-easy monetary policy. U.S. Treasury yields rose for a fourth straight day, as inflation data was not seen as weak enough to delay the Federal Reserve’s expected path on interest rate hikes. Among other precious metals, silver was up 0.3% at $16.63 an ounce. Silver has seen the biggest fall among major precious metals this quarter, down nearly 9%, while palladium is the best performer, up 6.1%. Palladium was down 0.5% at $842.93 an ounce on Friday, while platinum was down 0.05 per cent at $919.50
Gold had a highly volatile start to the week as the price plummeted from an early high of $1256 in Asia on Monday to $1241 in a matter of minutes. Eventually it posted a low of $1237 three hours later, in reaction to a massive sale of 56 tons ($2.2 billion) that has been attributed by some to a ‘fat finger’ error (18,000 lots, each of 100 oz., instead of 18,000 ounces?) into thin markets prior to the New York opening. Our view is that this was probably real selling at a time of day designed to have the most impact, however the yellow metal quickly stabilised with the price recovering to $1251 by Wednesday on the back of a weaker USD and physical and investor bargain hunting. But the sheer scale of Monday’s liquidation proved difficult for the market to digest and gold fell back to end the week at $1241.25 bid, a loss of $15 or 1.19%, and despite the downward trajectory of the USD we could well see gold test the 100 day Moving Average set at $1234 in the coming week with a break targeting the next point of support pegged at $1225. Unless an unexpected ‘Trump Tweet’ or geo-political event disturbs global financial markets and triggers safe haven buying it would be no surprise to see gold probe towards the key $1200 level over the physically fallow summer period.
Silver plunged from $16.73 to a low for the week of $16.41 in Asian trading on Monday in reaction to the massive gold sale but gradually recovered its poise to reach a high of $16.90 by Wednesday before easing back to end with a marginal 10 cents or 0.61% loss at $16.60 bid. If gold comes under renewed downward pressure next week silver could well probe key long-term support pegged at $16.00, although such a move should attract physical and ETF buyers given the improving outlook for industrial demand.
Platinum had another low-key week with the price trading narrowly between $929 and $909 before ending down $5 or 0.54% at $921 bid. As expected the noble metal has entered the ‘summer doldrums’ amid light volumes but with gold and silver likely to probe lower we could see platinum test key support pegged at $890 in the coming weeks with chart watchers well aware that a clear break would the next main point of support pegged at $840.
Palladium’s retreat from the 3 year high of $914 posted on 9th June continued last week with the price falling from a high of $872 on Tuesday to a low point of $835 on Friday before ending down $13 or 1.52% at $841. The key driver of this decline has been an easing of the physical squeeze with short-term lease rates falling from 15% to 4% and if this trend of improving nearby liquidity continues we could see the junior precious metal extend its summer sell off towards $800 with potential to probe the long term uptrend line that now intersects at $776.