Gold ticked up on Friday (October 4) thanks to increased concerns surrounding a possible downturn in global economic growth.
The yellow metal is also being supported by expectations of additional US interest rate cuts, which have increased in the past week.
“We’ve received more evidence that global growth is struggling. We most likely have a global manufacturing recession and there is a risk that this spills over into the services, which is why gold has recovered quite rapidly after that sell-off last week,” said Carsten Menke, analyst at Julius Baer.
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Give me my free report!“Fundamentals for gold are still positive, we have slowing global growth, lingering trade tensions and we see more rate cuts by the Fed. So this is an environment where gold should prosper and prices should be at US$1,575 towards the end of the year,” he added.
The precious metal rallied as investors reacted to data from the US showing that the services sector activity slowed to a three-year low last month, following the manufacturing sector, which has found itself at the weakest levels in a decade. Additionally, hiring by private employers continued to decrease in September.
Adding to gold’s appeal is the increased chances that there will be another interest rate cut before the year is over. On Thursday (October 3), two US Fed policymakers alluded to the fact that they are open to delivering another rate cut, and Vice Chairman Richard Clarida said, “(The central bank) will act as appropriate to sustain a low unemployment rate and solid growth and stable inflation.”
“Fed Chair Jerome Powell stated in July that this (rate cut) step was just an insurance against international risks and not the beginning of a new cycle, but in September it became clear it is a cycle, and now more FOMC members are being supportive to rate cuts,” said Quantitative Commodity Research analyst Peter Fertig.
Market participants will now turn their focus to the US non-farm payrolls report, which is expected to be released today at 12:30 p.m. EDT, for clarity on where the world’s biggest economy stands.
As of 10:13 a.m. EDT on Friday, gold was trading at US$1,503.
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Give me my free report!Silver did not respond to the global economic concerns the way its sister metal gold did, but was relatively steady on Friday. However, the white metal remains outside of the US$18 per ounce level that it reached in the previous month.
Despite coasting for the last few weeks, a potential interest rate cut could give silver some renewed stamina, and there are still many industry insiders who believe that the metal is prime to make substantial gains.
EB Tucker, director at Metalla Royalty & Streaming (TSXV:MTA,OTCQX:MTAFF), recently told the Investing News Network that silver will pass the US$20 mark before 2019 comes to a close.
“In our view, gold’s going to stabilize here at US$1,500, (and) silver will go from US$18 to US$20. And so we are focusing a lot of our capital and resources on silver, because that to us is the easiest trade right now. And I would be shocked if that doesn’t happen before American Thanksgiving, which is only about eight weeks away,” said Tucker, who also runs two publications at Casey Research.
He explained that, while he does see the white metal eventually rising to US$25, it’s important not to miss its increase to US$20. “I think in the short run if you miss that move in silver you’re missing a very easy way to make money,” he said.
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Give me my free report!As of 10:26 a.m. EDT on Friday, silver was changing hands at US$17.46.
As for the other precious metals, platinum lost more than 1 percent on Friday, falling below the US$900 per ounce level and experiencing its largest weekly decline since May.
Despite the decrease, the World Platinum Investment Council (WPIC) released a report last month that stated platinum demand is expected to climb by 9 percent this year.
Additionally, during the first half of 2019, a surge in exchange-traded fund (ETF) activity accounted for 855,000 ounces of investment demand. The WPIC expects demand to outpace supply, reducing the surplus of platinum from 375,000 ounces to 345,000 ounces.
“Today’s report shows continued investment demand growth, driven by investor recognition of platinum’s demand and price growth potential. This has been supported by uncertain capital markets that have seen inflows for most precious metals ETFs this year, of which platinum has been a standout beneficiary,” Paul Wilson, CEO of WPIC, said at the time. “Institutional investment demand has had an unprecedented start this year with ETF buying of 720,000 ounces in H1’19.”
As of 10:41 a.m. EDT on Friday, platinum was trading at US$875.
Palladium was the most successful precious metal for the week, rising over 1 percent on Friday.
Looking ahead, panelists polled by FocusEconomics believe that, while prices will dip slightly, the metal will continue to be supported throughout the year.
“Prices will still be elevated by recent historical standards, aided by the ongoing supply deficit and a shift to cleaner vehicles, which should support demand. The evolution of the US-China trade spat, a potential faster-than-expected economic slowdown and the possible substitution for platinum in vehicles remain key factors to watch,” they said.
As of 10:44 a.m. EDT, palladium was trading at US$1,656.
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.