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Gold prices fall today for first time in 3 days silver rates decline

Gold prices fall today for first time in 3 days, silver rates decline

Investors booked some profit after the recent run-up in gold prices

Both gold and silver prices have moved sharply higher this month

 

Gold and silver prices edged lower in Indian markets today as higher rupee, and profit-taking after the recent run-up pushed prices lower. On MCX, February gold futures prices were down 0.18% to ₹40,511 per 10 gram, their first decline in three days. Tracking gold, silver prices also moved lower today. Silver futures on MCX were down 0.33% to ₹46,850 per kg.

SMC Global expects gold prices to remain sideways in near term as rising concerns over the fast-spreading coronavirus in China and its economic impact offset a firmer dollar. "Gold can move higher towards 40,800 while taking support near ₹40,450 while silver can test ₹47,300 while taking support near ₹46,700," the brokerage said.

In global markets, gold prices were steady today at $1,581.09 per ounce after their recent run-up as investors assessed the the economic and human impact of China’s deadly coronavirus. China's health authorities said that the death toll from the coronavirus rose to 106 and the total number of confirmed cases increased to 4,515.

"Gold’s safe haven demand may edge higher on expectations that the virus outbreak in China may pressure the already weakened global economy. Weaker global equities due to the large scale risk aversion may also assist the yellow metal. At the same time, a stable dollar and limited physical market activities may limit major gains in the overseas market," said Hareesh V, head of commodity research at Geojit Financial Services.

On the technical side, as long as gold prices stay above $1568 expect rallies to continue with strong resistance is seen at $1592 followed by $1610 levels, he said, adding: "A direct drop below $1548 would negate any bullish expectation."

In global markets, gold prices are up 4% in less than a month, benefiting from a flight to haven assets as investors are assessing the extent of the hit to growth in China, as well as in the other parts of the world.

The virus outbreak in China is expected to hurt the world's second-largest economy, as authorities step up preventive measures, impose travel restrictions and extend the Lunar New Year holidays to limit the spread of the virus.

The US and Canada have also warned against travel to China. Meanwhile, holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, fell 0.13% to 899.41 tonnes on Monday. (With Agency Inputs)

 

Edited By Surajit Dasgupta

PRECIOUS-Gold rises to over 2-week high as China virus spreads

PRECIOUS-Gold rises to over 2-week high as China virus spreads

Jan 27 (Reuters) – Gold prices climbed to a more than two-week high on Monday as rising concerns over the spread of a virus outbreak in China and its potential economic impact prompted investors to buy the safe-haven metal.

FUNDAMENTALS

* Spot gold rose to its highest since Jan. 8 at $1,586.42 and was up 0.6% at $1,579.94 per ounce by 0131 GMT. U.S. gold futures advanced 0.5% to $1,579.50.

* The new coronavirus in China has killed 80 and infected more than 2,000, as residents of Hubei province, where the disease originated, were banned from entering Hong Kong amid global efforts to halt the rapid spread of the outbreak.

* Asian stocks slipped as investors remained wary of the virus outbreak in China, while the yen jumped.

* The coronavirus transmission ability is getting stronger and infections could continue to rise, China’s National Health Commission said on Sunday, and the country might extend Lunar New Year holidays due to the virus outbreak.

Investors are also keeping a close eye on the U.S. Federal Reserve’s first meeting of the year scheduled on Jan. 28-29.

* Canada’s Barrick Gold Corp signed a deal with Tanzania on Friday in which the government will take stakes in three gold mines, ending a long-running tax dispute.

* Armenia’s prime minister called for environmental protesters to end their 18-month-old blockade of a foreign-owned gold mine on Saturday, saying the protest was not in the national interest.

* Physical gold demand was subdued in major Asian hubs last week on account of the Lunar New Year holidays, with growing fears the virus outbreak in China could further dampen activity.

* Hedge funds and money managers cut their bullish positions in COMEX gold contracts in the week to Jan. 21, data showed on Friday.

 

Precious Metals Weekly Round-Up – Gold Reacts to Pandemic Fears

Precious Metals Weekly Round-Up – Gold Reacts to Pandemic Fears

On Thursday, gold hit its highest price for the week at US$1,566.80 as cities outside of China began reporting cases of the flu-like virus.

The precious metals sector performed flatly this week despite gold experiencing a slight uptick in relation to concerns that the coronavirus may be a global pandemic.

On Thursday (January 23), gold hit its highest price for the week at US$1,566.80 per ounce as cities outside of China began reporting cases of the flu-like virus. The novel respiratory illness has forced the Chinese government to quarantine 12 cities containing a combined 35 million residents.

Following a World Health Organization press conference Thursday during which officials eased fears that a pandemic was afoot, gold edged back.

By Friday (January 24) morning, the US dollar was making gains, which also weighed on gold’s growth, indicating that investors were again showing interest in riskier assets.

The precious metals sector has experienced increased interest in recent months due to heightened global tensions and broad economic uncertainty, which always seems to benefit the safe haven asset class.

Despite the weak performance the sector exhibited this week, experts are steadfast in their belief gold and the wider precious metals space are the smart investment for 2020.

“I think the easiest money in our sector will continue to be made in precious metals,” Rick Rule told the Investing News Network at the Vancouver Resource Investment Conference.

The CEO of Sprott (TSX:SII,OTC Pink:SPOXF) also sees value in gold’s sister metal.

“I think that if we keep going in the gold market, if the gold market continues to strengthen, we’ll see follow through in the silver market,” he said.

Gold exchange traded funds (ETFs) are also performing well and offer investors some diversity within the gold space. According to Commerzbank (OTC Pink:CRZBF,ETR:CBK), the holdings of gold ETFs have already grown by 16 tons for 2020 and are expected to continue to grow.

“In our opinion, the price should be well supported at roughly its current level, as ETF inflows also suggest,” the German bank pointed out. “Gold ETFs have seen inflows of 10 tons so far this week, and of over 16 tons since the start of the year.”

Spot gold was selling for US$1,566.08 an ounce at 10:15 a.m. EST on Friday (January 24).

After briefly breaking the US$18 threshold on Monday to trade for US$18.02 an ounce, silver spent the rest of the week locked just below US$18.

The metal had been steadily trending higher since early December, but has been hindered by gold’s poor showing this week as well as easing of tense relations between Iran and the US.

US trade deals with China and Canada have also quelled some of the appetite investors were exhibiting for safe haven assets and monetary metals.

Positive news in recent weeks may have prevented the precious metals sector from continued gains; however, analysts remain convinced that low interest rates, ongoing geopolitical risks and the presidential impeachment proceedings will result in price growth for precious metals.

Silver was selling for US$18.01 as of 10:29 a.m. EST, breaking back above US$18.

Following five consecutive weeks of price growth, platinum performed with volatility this session. The metal, which surpassed the US$1,000 an ounce mark on January 16 to trade for US$1,037, was able to maintain a range bound level, oscillating from US$1,001 to US$1,014.

An ounce of platinum was trading for US$1,011.88 at 10:39 a.m. EST.

The other platinum group metal, palladium, was also experiencing volatility this week, with a new high of US$2,422 on Monday.

The metal, which has industrial applications, has climbed 77 percent over the last 12 months and is expected to keep its pace as demand continues to climb from the automotive sector.

Earlier this week, analysts at Goldman Sachs (NYSE:GS) predicted the price may go as high as US$3,000 an ounce before a correction.

“The upside potential is significant as the market is now in a demand-rationing phase,” said Jeffrey Currie, head of global commodities research.

He went on to note that gains at that level would be sustainable and weigh on the demand, which would then make prices drop.

As of 11:05 a.m. EST, palladium was sitting at US$2,229.17 an ounce.
 

Georgia Williams – January 24th, 2020

Gold eyes 1600 as Fed meeting new virus threat in focus next week

Gold eyes $1,600 as Fed meeting, new virus threat in focus next week

Gold eyes $1,600 as Fed meeting, new virus threat in focus next week

Gold is well supported and has room to run higher next week as analysts point to the Federal Reserve meeting and the spread of the new coronavirus as the two key issues to keep an eye on.

The yellow metal battled against risk-on sentiment this week but managed to hold above $1,550 an ounce level and even rise about 0.8% on the week. February Comex gold futures were last trading at $1,572.40, up 0.45% on the day.

Next week, analysts are keeping a close eye on the Federal Reserve interest rate decision on Wednesday, the spread of the new coronavirus, and the possibility of any new geopolitical tensions.

The U.S. central bank meeting, which will be followed by the Fed Chair Jerome Powell’s press conference, is the main event to watch next week, according to TD Securities commodity strategists Daniel Ghali.

The consensus is that the U.S. central bank will keep rates on hold. The CME FedWatch tool is showing an 87.3% chance of rates staying at current levels, and a 12.3% chance of a 25-basis-point rate hike.

Some analysts see the Fed leaning towards the dovish side in its statement or during Powell’s press conference.

“If anything, [the Fed] is going to quell any lingering fears that it might be looking to take back its insurance cuts any time soon. And instead, it is probably going to reinforce the market’s lean on the dovish side. The market still has some cuts priced in for 2020. That should be supportive for gold prices,” Ghali told Kitco News on Friday.

TD Securities projects for the Fed to remain on hold for most of the year and then cut rates once by year’s end.

Not all, however, see the Fed meeting as the major event next week, noting that it might turn into a non-event as the market’s attention shifts to the spread of the coronavirus.

“It will be a bit of a non-event. It is pretty unlikely that the Fed makes any adjustment to its monetary policy at this point in time. We think the Fed will remain on hold for the foreseeable future,” said Capital Economics assistant commodities economist Kieran Clancy. “The main driver next week will probably be any headlines on this coronavirus outbreak.”

There are a lot of data releases next week as well, which are also likely to take a backseat to new virus news headlines, Clancy added.

“We don’t have any special insight into how the virus is going to spread. The only thing we can do is go back and see what previous outbreaks of viruses played out in the past. The most obvious one you can draw parallels from is the outbreak of SARS back in 2003. And if there is a similar run of play as back then, we will probably see a lot of the moves reversed as the virus is brought into control,” he said.

On Friday, the U.S. Centers for Disease Control and Prevention (CDC) confirmed a second U.S. case of the new coronavirus in Chicago. The CDC added that it is investing another 63 possible cases as the sometimes deadly virus is spreading into the U.S.

Gold has benefited from the virus fears due to the risk-off sentiment that the outbreak created, Clancy said, noting that its impact on the gold price is only temporary.

“It has already been a pretty strong factor supporting the gold price. It promoted a risk-off move in markets, which normally is very beneficial for gold. And if things get worse from here, there is no reason to suspect that we wouldn’t see the same thing happening again,” he noted. “Until we hear of any sort of concrete evidence that the virus has been contained, it will probably be one of the main drivers.”

Clancy is also watching geopolitical risks, which are still lingering in the background and could potentially boost gold once again soon.

"One of the most surprising things this week has been the lack of reaction in the oil market to the events in Libya and Iraq. Those factors could be positive for the gold price,” he said.

Chinese markets closed for Lunar New Year celebrations

The Chinese markets are closed for the Lunar New Year celebrations and will not re-open until late next week.

“Chinese markets are now closed. Technically it is a week, but it will take longer to get back into full swing. Made everything quieter,” said Rhona O’Connell, INTL FCStone’s head of market analysts for EMEA & Asia regions.

The preparations for the Lunar New Year have not boosted gold demand by much, said O’Connell. “With the rest of the physical market quiet, gold is holding up pretty well. Any upward momentum has to be generated by the professional market,” she noted.

There is a stark difference between what physical demand can do for gold prices versus increased professional market participation, O’Connell highlighted.

“Upward momentum in prices does tend to always come from the professional market,” she said, pointing to a lot of interest in gold during the U.S. market hours.

“The nature of the two different sides of the system is that physical demand at the retail level is never capable of driving prices higher. What it can do is cushion weakness. At the moment, there is good bargain hunting coming through between $1,550 and $1,555. That seems to be almost exclusively concentrated in the U.S. hours, which points to people continuing to look at all different professional parameters as opposed to underlying physical,” she said.

Important gold price levels

Analysts are watching a potential close above $1,568 an ounce, which is looking very probable as of Friday afternoon. A close above that level would indicate that gold might be ready for another rally, said Ghali.

“On the upside, we are watching $1,568. A close north of there would imply that gold has resumed its upward trajectory, he said. “On the downside, we are looking at $1,550 support.”

O’Connell said she is neutral on prices in the short-term, watching a tight range of $1,550-$1,570 an ounce.

Data next week

Some important macro releases next week, aside from the Fed interest rate announcement, include U.S. housing data — new home sales are out on Monday and pending home sales are out Wednesday.

The U.S. durable goods orders report and CB consumer confidence are scheduled for Tuesday. Followed by U.S. Q4 GDP numbers and jobless claims on Thursday. The PCE price index and personal spending are out on Friday.

In addition, the Bank of England (BoE) will also be making its interest rate announcement on Thursday, which will mark governor Mark Carney’s last monetary policy meeting. The market consensus is projecting for the central bank to remain on hold and keep rates at 0.75%.

By Anna Golubova
For Kitco News
Friday January 24, 2020 14:03

PRECIOUS-Gold inches lower as investors seek clarity on virus severity

PRECIOUS-Gold inches lower as investors seek clarity on virus severity

* China gears up for Lunar New Year celebrations

* Spot gold may retrace range of $1,551-$1,554/oz- technicals

* SPDR Gold holdings rose 0.2% on Thursday

 

Jan 24 (Reuters) – Gold edged lower on Friday after the World Health Organisation stopped short of declaring the China virus outbreak a global emergency, though prices were still on track to post a weekly gain.

Spot gold fell 0.1% to $1,561.86 per ounce by 0356 GMT. For the week, prices were on track to gain 0.3%. U.S. gold futures slipped 0.3% to $1,561.50.

“There is not enough information out there in the street yet to be sure that we have a negative situation on our hand and that it would require a move into havens,” Jeffrey Halley, senior market analyst, OANDA, said.

“It is also the eve of the Chinese New Year, so mostly it’s just muted activity ahead of the holidays across Asia, with rising equities, earnings and stable U.S. data weighing on gold.”

Asian shares inched higher following the WHO statement on Thursday that the new coronavirus that emerged in China and spread to several other countries does not yet constitute an international emergency.

However, investors remained concerned about the spread of the virus ahead of the Lunar New Year, a peak period of travel and gold demand in the region.

Data on Thursday showed, the number of Americans filing for unemployment benefits increased less than expected last week, suggesting the labor market continues to tighten even as job growth is slowing.

Further weighing on bullion, the dollar against a basket of currencies, hovered near a one-month high hit in the previous session after the European Central Bank kept interest rates steady on Thursday.

Investors are now focused on the U.S. Federal Reserve’s first meeting of the year scheduled on Jan. 28-29.

“With a low interest rate environment, geopolitical risks and uncertainties such as U.S. President’s impeachment, the conditions are still quite conducive to further upside in gold,” ANZ analyst Daniel Hynes said.

Spot gold may retrace into a range of $1,551 to $1,554 per ounce, said Reuters technical analyst Wang Tao.

Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.2% to 900.58 tonnes on Thursday.

Elsewhere, palladium dipped 0.8% to $2,440.82 an ounce, and was on track to register its worst week in five, falling about 1.7%.

Silver was flat at $17.79 and platinum edged lower by 0.3% to $999.37. (Reporting by Sumita Layek in Bengaluru; Editing by Shailesh Kuber)

 

By Sumita Layek

Gold Weakens But Safe Haven Appeal Still in Focus

Gold Weakens But Safe Haven Appeal Still in Focus

kinesis money

Gold prices are trading somewhat steady after having climbed to a two-week high during the previous trading session over rising concerns of the spread of the coronavirus across and beyond China. At the time of writing, GOLD is trading at a little above $1,551.

The safe haven appeal of gold was boosted by rising fears of an outbreak of coronavirus, which has spread across major Chinese cities like Beijing and Shanghai. With the upcoming Chinese New Year holidays which would see significantly higher travel in and out of China, markets are concerned that the epidemic could spread more rapidly, affecting more people across China and other countries and possibly even impact economic growth.

Gold prices also remain supported after rockets struck inside Baghdad’s Green Zone, a safe area where government buildings and foreign missions are located. In addition, the precious metal received additional bids after the IMF downgraded global economic growth forecasts for 2020 and 2021.

In addition to upcoming economic data releases, gold can be further impacted by latest developments at the World Economic Forum in Davos, Switzerland. Special focus will stay on the issue of international trade when world leaders converge to set the agenda for the upcoming year.

 

Posted Wednesday, January 22, 2020 by Arslan Butt

Gold Price Eyes Monthly High as RSI Continues to Track Upward Trend

Gold Price Eyes Monthly High as RSI Continues to Track Upward Trend

GOLD PRICE TALKING POINTS

The price of gold extends the advance from the previous week even though the US and France settle on a trade truce, and the precious metal may continue to exhibit a bullish behavior as the Relative Strength Index (RSI) tracks the upward trend from December.

GOLD PRICE EYES MONTHLY HIGH AS RSI CONTINUES TO TRACK UPWARD TREND

The price of gold retraces the decline from the monthly high ($1611) despite the narrowing threat of a global trade war, and the weakening outlook for the world economy may keep the precious metal afloat as the International Monetary Fund (IMF) trims its growth forecast for 2020.

The IMF warns that downside risks “remain prominent” amid the ongoing shift in US trade policy, with the agency going onto say that “the 2019 global growth estimate and 2020 projection would have been 0.5 percentage point lower in each year without monetary stimulus.”

It remains to be seen if the Federal Reserve will continue to insulate the US economy as French President Emmanuel Macron pledges to work with the Trump administration “on a good agreement to avoid tariff escalation,” and the development may keep the Federal Open Market Committee (FOMC) on the sidelines as “participants regarded the current stance of monetary policy as likely to remain appropriate for a time.”

In fact, Fed Fund futures reflect a greater than 80% probability the FOMC will keep the benchmark interest rate in the current threshold of 1.50% to 1.75% on January 29, and the FOMC may largely endorse a wait-and-see approach for monetary policy as “a number of participants observed that the domestic economy was showing resilience in the face of headwinds from global developments.”

However, the FOMC may come under pressure to implement lower interest rates as the Trump administration remains reluctant to rollback tariffs, and Chairman Jerome Powell and Co. may end up adjusting the forward guidance when Fed officials update the Summary of Economic (SEP) at the next quarterly meeting in March amid the weakening outlook for the world economy.

In turn, the weakening outlook for global growth paired with speculation for lower interest may keep gold prices afloat as market participants look for an alternative to fiat-currencies.

With that said, the broader outlook for the price of gold remains constructive, with the reaction to the former-resistance zone around $1447 (38.2% expansion) to $1457 (100% expansion) helping to rule out the threat of a Head-and-Shoulders formation as the region acts as support.

GOLD PRICE DAILY CHART

 

David Song, Currency Strategist

Gold price today – Yellow metal trades lower amid volatility but may move above Rs 40K soon

Gold price today – Yellow metal trades lower amid volatility, but may move above Rs 40K soon

Pritam Patnaik of Reliance Securities advised buying gold February in the range of Rs 39,900-39,850 with a stoploss at Rs 39,790 and target of Rs 40,100 levels.

 

kinesis money

1. USA | The largest economy in the world has the most gold, nearly double of Germany, at 8,133.5 tonnes.

Gold futures traded lower amid volatility in the morning on January 20, after rallying more than a percent in previous three trading sessions on the hope of improving consumer demand following the phase one trade deal signed between the United States and China.

The February gold futures contract was trading at Rs 39,890 per 10 gram on the MCX, down Rs 56 or 0.14 percent, at 0905 hours IST. It closed at Rs 39,946 on January 17, after rising 1.26 percent in three consecutive sessions.

Experts expect prices to cross psychological Rs 40,000 mark soon as it continued to hold its support levels.

"MCX Gold February have well sustained above Rs 39,700 levels which indicates positivity. On a daily chart, gold has sustain above 21-daily moving average which is placed at Rs 39,360 levels which will act strong support to the counter," Pritam Patnaik of Reliance Securities told Moneycontrol.

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On the hourly chart it has given a positive crossover of 50*100 hourly moving average which is a positive crossover, he added.

He advised buying gold February in the range of Rs 39,900-39,850 with a stop loss at Rs 39,790 and target of Rs 40,100 levels.

Manoj Kumar Jain of IndiaNivesh Commodities also feels if the gold sustains above Rs 39,800, then it could test Rs 40,050-40,200 levels.

In the international, gold prices traded at $1,558.50 per troy ounce, down 0.11 percent as strong US economic data is likely to increase demand for riskier assets, hence there could be less demand for safe haven.

"International gold has sustained above $1,550 levels which will hold as support & upside $1,563 will act a strong resistance. It may trade in $1,550-$1,562 range. Break above $1,563 will take prices towards $1,575 levels," Pritam said.

Gold and silver prices rebound on Friday in the international market. Prices gained for the second day in a row and spot gold closed above $1,550 per troy ounce and silver prices closed above $18 per troy ounce. Both precious metals gained after mixed setup numbers from the US and other economies on Friday.

Prices also get support on the hope of rising consumer demand after signing first phase trade deal between US-china.

"We expect both the precious metals to remain range-bound and will continue to get support at lower levels. Gold prices sustain above $1,550 could test resistance level of $1,564-1,572 while $1,542 act as a major support in the international market," Manoj Kumar Jain, Director, IndiaNivesh Commodities told Moneycontrol.

MCX silver February futures traded at Rs 46,621 per kg, down Rs 135 or 0.29 percent at 0905 hours IST. It closed at Rs 46,756 on Friday, up 1.86 percent in previous three days.

"Silver prices are expected to hold support levels of Rs 46,400 and if it sustains above Rs 46,850 then it could test Rs 47,100-47,400 levels again," said Manoj Kumar Jain.

According to him, in the international market, silver prices if sustain above $18 per troy ounce then it could test $18.18-18.40 per troy ounce levels. "$17.70 continues to act as major support."

 

Moneycontrol News
@moneycontrol.com

Gold futures gain for the session but end little changed for the week

Gold futures gain for the session, but end little changed for the week

Kinesis money

Palladium futures soar to more record highs

Gold futures moved higher on Friday, but the yellow metal barely budged for the week as stock rallied to all-time highs, helping to undercut some demand for assets perceived as havens.

“Gold has struggled to shine this week as positive economic data from the United States and China cooled concerns over the global economy,” said Lukman Otunuga, senior research analyst at FXTM.

“Appetite towards the metal was also bruised by the ‘phase one’ [U.S.-China] deal, which offered some light at the end of the long trade war tunnel,” he told MarketWatch. “With stock markets hitting record highs and the dollar stabilizing, gold is positioned to weaken in the short term.”

Gold for February delivery GCG20, -0.19% on Comex gained $9.80, or 0.6%, to settle at $1,560.30 an ounce. March silver SIH20, -0.18%, meanwhile, picked up 13.4 cents, or about 0.8%, at $18.073 an ounce.

For the week, gold futures gained about 20 cents higher than last Friday’s settlement, following gains for each of the last three weeks, according to FactSet data. Silver fell about 0.2% for the week.

“The first two months of the year tend to be bullish for gold from a seasonality perspective,” said Adam Koos, president of Libertas Wealth Management Group. However, some traders who pay attention to seasonality may look to take profit come the end of February, he said.

“So far, the market doesn’t seem to care about the Trump impeachment process, but if the Senate ramps things up in the coming weeks, we could see the fear trade step in and push gold prices higher,” Koos added.

Gold prices briefly pared earlier gains after a U.S. housing report came in at its best level in about 13 years. Housing starts and permits jumped 16.9% to an annual rate of 1.608 million units last month, the highest level since 2006. Consumer sentiment index in January, meanwhile, slipped to 99.1 from 99.3 in December.

Bullion prices have managed to hold above a line viewed as support by technical analyst at $1,550, offering a modicum of optimism for gold bulls.

“The gold markets like gold much more than the risk correlation matrixes do for sure. Indeed, there is demand for all thing’s gold, as evidenced in the sturdy bid around $1550/oz,” wrote Stephen Innes, chief Asia market strategist at AxiTrader, in a daily research report.

Traders also digested readings of expansion for China, which showed economic growth picked up in December. However, growth slowed to new multi-decade low of 6.1% in 2019.

Rounding out action on Comex, March copper HGH20, +0.02% settled at $2.8455 a pound, down 0.05% for the session. For the week, prices rose 1.1%.

April platinum PLJ20, +0.23% added 2.4%, to $1,024.80 an ounce, with prices up 3.9% for the week, while March palladium PAH20, +1.15% notched a fresh record high, up 2.2% to settle at $2,224.90 an ounce, tallying a weekly climb of more than 7%.

“Given a sea of green in global equity markets, mostly positive Chinese economic data (retail sales were strong enough to consider the data positive) and increased media coverage on the stellar gains” in the platinum group metals markets, the bull camp for palladium looks to have a fundamental edge, analysts at Zaner Metals said in a daily note.

 

By

MYRA
P. SAEFONG
MARKETS/COMMODITIES REPORTER
Published: Jan 17, 2020 2:02 p.m. ET

Domestic Silver gained 20 in 2019 Will the momentum continue?

Domestic Silver gained 20% in 2019. Will the momentum continue?

Silver always lags behind gold price performance. Historically, gold triggers the initial move in bullion complex and, eventually, silver gains traction.

Silver has caught up with Gold’s momentum and ended the previous year by gaining more than 20 percent. Prices of the precious white metal in the domestic market jumped to a six-year high due to robust overseas prices and weak Indian rupee.

Silver always lags behind gold price performance. Historically, gold triggers the initial move in bullion complex and, eventually, silver gains traction.

The commodity has been under pressure for the past few years due to lacklustre industrial demand and bearish sentiments in the entire metal complex.

 

However, weak global economic outlook and increased geopolitical instability ignited the safe-haven demand of the commodity in 2019.

Low-interest rates, steady Dollar, Brexit tensions and limited mine supply are the other factors that boosted the commodity. At the same time, domestic silver got an additional boost due to the feeble Indian currency.

Policy easing measures taken by various Central banks added to the metal’s strength. US Federal Reserve (Fed) cut its rates two times in 2019 to prop up their economy from the trade war fallout.

Both gold and silver are highly sensitive to interest rate cuts as they lift the opportunity cost of holding non-yielding metals such as bullion.

Brexit uncertainties that have continued for the last three-and-half years raised worries over the growth of the region.

Tensions in the Middle East and the Korean peninsula also raised concerns on a fresh bout of hostility between countries and this has lifted the metal’s safe-haven appeal.

Military operations in northern Syria by Turkey and protests in Hong Kong further dialled back risk appetite in favour of safe-haven assets.

Supply shortage and increased physical and investment demand supported the price. As per data from the Silver Institute, global silver jewellery demand has increased by 4 percent in 2018 while the mine production fell by 2 percent.

As a safe haven investment option, silver-backed ETFs have become attractive for investors. This is due to the low cost compared to other precious metals like gold and the better risk-reward ratio the metal offers.

Looking ahead, the biggest driver of silver prices for the current year will be the industrial and investment demand.

If weak global economic sentiments continue, it will support the metal’s haven demand. However, improved economic optimism can lift the industrial demand of the metal as well.

Fed is unlikely to raise rates in the first half of 2020 and that may keep a cap on the US Dollar. A weak Dollar usually lifts the sentiments of precious commodities.

Mine production is the other key price driver of the commodity. For the last few years, silver production has been on the lower side and the trend is expected to continue in the current year as well.

At the same time, demand from the Indian jewellery sector is likely to be higher as buyers prefer to buy silver as a substitute for gold, which is currently at record highs.

Meanwhile, the performance of Indian Rupee will be critical for domestic silver prices. A weak Rupee will put an additional burden on customers as currency weakness lifts the landed cost of the commodity in the country.

On the price front, MCX rates are likely to be congested inside Rs 43,000-49,000 per kg levels initially, breaking any of the sides would suggest a fresh direction to the commodity. In the international market, $20 will be an important upside obstacle and $14 may act as major support.

 

The author is Head Commodity Research at Geojit Financial Services