Category Archives: Precious Metals

Gold Tumbles to Four-Month Low as Biden Begins Formal Transition

Yvonne Yue Li and Eddie Spence
Tue, November 24, 2020, 9:19 PM GMT+5:30

(Bloomberg) — Gold dropped to the lowest since July as positive vaccine news, strong economic data and the start of U.S. President-elect Joe Biden’s formal transition undermined the metal’s haven appeal.

Prices tumbled for a second day to just above $1,800 an ounce as U.S. stocks rallied toward records. Gold had been trading in a tight range for weeks before the U.S. election, and looked set to break upward immediately after the poll. Then Pfizer Inc. announced its Covid-19 vaccine was 95% effective at preventing the disease on Nov. 9, sparking a rotation into risk assets that drove down gold.

“Gold prices are tumbling at a fast clip following a technical break below support. This suggests that the crowded trade is further being unwound,” which is in line with investment outflows seen in exchange-traded funds during recent weeks, TD Securities analysts led by Bart Melek said in a note. “Investment appetite for precious metals has significantly suffered, pointing to a reversal in safe-haven flows catalyzed by the vaccine announcement.”


Traders will now be watching the $1,800-an-ounce mark, which represents a key support for gold, according to Ole Hansen, head of commodity strategy at Saxo Bank A/S.

“In the short term, short sellers may look for additional stops down toward support at $1,800, the 200-day moving average,” he said. “With vaccine news occupying the headlines, gold is likely to struggle.”

The metal is under additional pressure as political uncertainty eases. Following weeks of inaction, the General Services Administration acknowledged Biden as the apparent winner of the U.S. presidential election, and President Donald Trump called on his agencies and departments to cooperate.

Funds Sell Off

Meanwhile, a sell-off in gold-backed ETFs resumed on Monday after pausing at the end of last week. The funds, which were crucial to gold reaching its August record, have dropped more than 60 tons since Pfizer’s vaccine announcement.

Spot gold declined as much as 2% to $1,800.47 an ounce, the lowest level since July. Silver dropped 1.8% while palladium and platinum rose.

Still, some market observers remain optimistic about the longer-term outlook for gold.

Biden plans to nominate former Federal Reserve Chair Janet Yellen to serve as his Treasury secretary, people familiar with the matter said. That should boost prospects for fiscal stimulus going forward, which along with protracted low interest rates will provide a supportive environment for gold, according to Carsten Fritsch, an analyst at Commerzbank AG.

“After its current losing streak, gold should therefore begin climbing again, even if this may well take some time yet, and is likely to start from a lower level,” he wrote in a note.

©2020 Bloomberg L.P.

Silver price falls 7% on vaccine news, but here’s key difference between gold and silver?

(Source: Kitco News)

Silver tumbled more than 7% on Monday as precious metals sold off in response to positive coronavirus vaccine news, which investors interpreted as good for the economy.

“The initial reaction was that stimulus may not be necessary,” RJO Futures senior commodities broker Daniel Pavilonis told Kitco News. “With a vaccine, we have a way to change the dynamic of the way everybody is living post-COVID. Maybe everyone can go back to work, or maybe there is less economic risk. Maybe pent-up purchasing picks up.”

Monday’s price action has seen an unwind of the pandemic-era trades, said TD Securities commodity strategist Daniel Ghali.

“Vaccine is seen as opening the door to other assets that haven’t performed as well during the pandemic. The market is selling the winners and buying some losers. During the pandemic, gold and silver were popular investment haven vehicles,” Ghali said.

This comes as Pfizer Inc said that its experimental COVID-19 vaccine was more than 90% effective.

At the time of writing, December Comex silver has seen a bit of a recovery, last trading at $24.29, down 5.35% on the day.

Silver followed gold down on Monday, said LaSalle Futures Group senior market strategist Charlie Nedoss. After the selloff in silver, “the technicals began to firm up,” Nedoss said.

Also, gold’s ability to hold on to $1,850 has helped silver out, Nedoss added. “Silver hasn’t even taken out last week’s low. It is seeing some short-covering.”

Another reason why silver is is not lower is its industrial component, analysts said. “Silver is holding on because of its industrial component and its uses. That’s the difference between gold and silver,” Nedoss said.

A key technical level to watch in silver is the 100-day moving average at $23.59. If silver breaks that, it could go down to $21.50, said Pavilonis.

Another important level to watch is $24.24, noted Nedoss. “Technically, watch the day session close. The $24.24 level is a big mark.”

Bullish sentiment remains

Overall, the vaccine news does not change the bullish environment for precious metals, Pavilonis noted.

“Once we start to look at when this might be implemented. Are whether people are going to want to take the vaccine. It will be questionable,” he said.

On top of that, Joe Biden winning the presidential race points to more bailouts in the future. “Stimulus is still in the cards,” Pavilonis added.

The vaccine does not mean the world economy is out of the woods yet, he stated. “There has been a lot of damage done to the economy. Even with a vaccine, things are not going to get back to normal. The amount of money that has been printed is going to have an inflationary effect on things. Unlike quantitative easing, this is like money literally being printed up and given out. I think the move in the metal to the upside is not over.”

Silver could even get hit $30 fairly quickly if a Democrat-sized stimulus package is eventually passed. “The moves we saw today in stocks, we’ll see a move like this in silver on the upside if the bailout package passes,” said Pavilonis.

Longer-term, vaccine news is a price-positive for precious metals, Ghali pointed out.

“Gold and silver are inflation hedge assets. As the vaccine is implemented, it will help the world recover, help growth re-enter into the status quo from the past. These are tailwinds for inflation expectations as higher growth elicits higher inflation expectations. And the Fed is not going to look to stem those inflation expectations. This is a positive for gold and silver,” Ghali said.

Ghali noted that TD Securities sees silver averaging $26 during Q4 and then rising to $30 by the end of 2021.


By Anna Golubova

For Kitco News

Markets tank; why is gold not trading like safe haven? March all over again? Expert answers

(Source: Kitco News)


Equities indices fell more than 3% on Monday, with gold and silver also selling off, as Germany and France resume lockdown measures.


Phil Streible, chief market strategist at Blue Line Futures, noted that investors were looking for safety outside of precious metals.


“The Japanese Yen was up and bonds are higher, and what that tells me if gold and silver are down, and those two markets are higher, some people are looking for safety but they’re not looking for it in gold and silver,” Streible said.


The lockdowns in Europe will necessitate more money to support the European economy, and with more euros supplied, the value of the currency goes down, Streible noted.


The other factor is a possibility of a contested election.


“If you have a contested election, chances are fiscal stimulus is not going to come anytime soon at all,” he said.


Long-term fundamentals are still with gold, Streible said.


“The pendulum swings against gold and silver but remember the long-term thesis: the Federal Reserve is going to keep interest rates near zero, they’re going to do whatever it takes into 2021, we will get that stimulus, and that’s when the balance sheet continues to expand and gold and silver start to take off again,” he said.


In a long-term lens, today’s sell-off presents a buying opportunity.


“You’ve got to use these pullbacks in order to add to positions. Don’t be a consensus trader, don’t chase the highs, buy the corrections like what we’re seeing today,” he said. “A lot of people see red, I see a great thing.”


By David Lin

For Kitco News

Gold price enters election countdown mode, here’s what analysts are watching next week. By Anna Golubova,

(Source: Kitco News)

It has all been about the fiscal stimulus package this week and whether or not something can be passed before the election.

According to analysts, who are now in the election countdown mode, the market turmoil is far from over.

Optimism over more federal fiscal aid has pushed the stock market and gold higher at the end the week. Trump tweeted on Friday: “COVID Relief Negotiations are moving along. Go Big!”

The news came amid reports that the White House will increase its coronavirus stimulus offer to $1.8 trillion.

In response, the U.S. dollar index continued to weaken, stocks climbed, and gold advanced 2% on the day with December Comex gold futures last trading at 1,933.70 an ounce.

“What is happening in gold is we’ve had a stimulus-on/stimulus-off style news flow. This has whipsawed a lot of gold traders,” TD Securities commodity strategist Daniel Ghali told Kitco News on Friday. “Right now, the focus will continue to be on the election. Election countdown mode is here, so the next 20 days will mostly revolve around that.”

The situation remains a difficult one at the moment. On top of political headlines, coronavirus cases are climbing, and there are continued China-U.S. tensions, MKS SA senior vice president Afshin Nabavi noted.

“A couple of days ago the White House said there was not going to be a stimulus package and the whole thing dropped like a rock. Yesterday evening, they signaled they are leaning towards a large stimulus package. They changed their decision rather quickly,” Nabavi pointed out.

The current trading environment is a risk-on one, noted RJO Futures senior commodities broker Daniel Pavilonis.

“It seems like the U.S. government will be moving forward with the stimulus package. The only caveat is that it sounds like it won’t get done before the election, and they might drag it out a bit,” Pavilonis told Kitco News. “The idea that it is in play is bullish for the metals.”

However, if the deal falls apart next week, the gold market might see another pullback, Pavilonis warned.

One piece of advice for investors trading into the election is to view gold price dips as great buying opportunities, Nabavi said. “Global economy is going up in smoke with all the pressure from coronavirus picking up again. There is no reason why gold should come off. If it does, it is just an opportunity to jump in.”

One major issue that is adding to volatility in gold is the lack of market liquidity. “The good old days when there was a lot of interest in the market have disappeared. If someone decides to put on a trading position or take it off, the market reacts very badly. That’s why we ran getting daily ranges between $30-$40,” Nabavi explained.

Gold’s bullish outlook

Gold’s longer-term outlook remains bullish, according to Ghali, who sees the yellow metal is being “agnostic” to either presidential candidate.

“We reiterate that regardless, gold bugs need not look too far on the horizon to expect a large-scale fiscal deal … With both the Trump and Biden agendas estimated to cost between $5 trillion and $5.6 trillion over the next decade, both plans would provide substantial tailwinds for the long gold trade,” he said.

One distinction that Ghali made was that a Biden win is likely to lift gold prices even more. “Blue wave is starting to get priced in more seriously, and in that context, it is a more bullish scenario for gold. A blue wave would lead to more dollar weakness and stronger gold,” he said. “One part is that the Democrats will spend more, and the other part is global reflation. Currency strategists expect the U.S. dollar to continue to weaken under the blue wave.”

The inflation expectations support much higher gold prices in the long-term, especially with $3.5 trillion already spent and more on its way, explained Pavilonis.

“We are starting to see some data coming out that points to possible inflation. Different indicators are showing better than expected figures to the upside. And now, we are adding another layer to it. This could be a self-fulfilling cycle of more inflation,” he said.

On top of all that spending, the U.S. central bank will now be keeping rates low until inflation is above 2% for an extended period of time, Pavilonis added. “This is ultimately bullish for gold in the long-term,” he said.

After the election, gold will remain on top of everybody’s list, hitting $2,000 and going higher, noted Nabavi.

One significant risk that remains for Q4 is a contested election, Pavilonis pointed out. “The risk is that after the elation, the result is not called. If there is political infighting and then possible civil unrest … that is the worst-case scenario,” he said.

Also, a contested election would delay stimulus if it is not passed ahead of the November 3 date, added FXTM market analyst Han Tan.

“Unless the fiscal stimulus deal is agreed before November 3, a delayed result from the polls, in turn, starves the world’s largest economy of some much-needed aid,” Tan said on Friday.

Levels to watch

The majority of analysts Kitco News spoke to on Friday were pricing in higher gold prices next week, highlighting the $1,960-$1,980 range.

After gold broke $1,920 on Friday, the next critical level becomes $1,960 an ounce, said Nabavi. Meanwhile, the $1,870-80 level offers great support in case gold edges down next week, he added.

Nabavi did not rule out a swift climb to $2,000 but warned that such a move would be “sloppy” and would likely be followed by a significant correction.

Pavilonis said he is watching $1,960 and $1,980 on the upside next week. Meanwhile, Ghali is looking at gold tackling the $1,975 an ounce level while keeping an eye on $1,875 as support.

Next week’s key data sets

Next week kicks off with the U.S. inflation figures from September on Tuesday, followed by PPI numbers on Wednesday, and then jobless claims, N.Y. Empire State manufacturing index, and Philly Fed manufacturing index on Thursday.

“The data flow includes inflation numbers, which have surprised on the upside recently, but given the flatlining energy components, we look for fairly benign 0.2% month-on-month increases in both headline and core inflation,” said ING economists on Friday.

Wrapping up the week will be U.S. retail sales numbers from September as well as industrial production.

By Anna Golubova
For Kitco News

Has the gold market picked a side?

(Source: Kitco News)


The gold market is finding some buying momentum this Friday as prices are at a roughly two-week high, but according to analysts, this latest move still isn’t a firm signal that prices are ready to break out above $2,000 an ounce.


There are a lot of catalysts supporting gold prices in its current range, but from the price action that we have seen this past week, the one factor that will drive gold prices higher still remains intangible: the idea of further stimulus.


At the start of the week, Kitco News’ Anna Golubova reported that gold prices dropped 2% after President Donald Trump shut down the prospect of a comprehensive stimulus package in a tweet. Of course, he has since reversed course and now supports a $1.8 billion aid bill. According to analysts, this is what is driving the U.S. dollar down and gold prices up 2% Friday.


Investors should prepare themselves for further back and forth on stimulus talks, but analysts have warned that they shouldn’t get their expectations too high. The reality is, with the election less than a month away, neither side is going to be willing to agree to any deal. Neither party wants to give the other side a perceived win on stimulus.


With the Nov. 3 election looming closer and closer, many analysts are looking at what scenario is going to be the best for gold. Some analysts have said that the damage Trump did with his ill-conceived tweet at the start of the week has given Democratic nominee Joe Biden a clearer advantage and that is another factor that could be driving gold prices.


This past week, two banks published reports saying that a Biden victory would be the best-case scenario for gold. Standard Charter’s precious metals analyst Suki Cooper said that a Biden victory would be positive for gold and the market hasn’t priced this scenario in.


“A Biden victory and Democrats gaining full control of Congress paints the weakest scenario for the USD, UST yields and U.S. risk assets in light of intended fiscal stimulus and tax increases,” she said.


Meanwhile, Ole Hansen, head of commodity strategy at Saxo Bank, said that a Biden victory and his plan to support the economy with major spending initiatives will drive inflation higher. 


“Investors, asset managers and pension funds are increasingly waking up to the need for tail-end protection against inflation and it has led a continued increase throughout the year to the current record above 111 million ounces,” he said.


Of course, there are those who say that no matter who wins, gold will continue to go higher, which is true. When the dust settles after Nov. 3, the president will be faced with slower economic growth, interest rates that are practically at zero and a deficit that is only going to grow.


I think Frank Holmes, CEO of U.S. Global Investors, summed up the situation perfectly in this heated political environment: “Some are betting on blue, some betting on red, and I’m betting on gold.”


By Neils Christensen

For Kitco News