Gold steadied on Friday (September 20) after losing momentum mid-week following the US Federal Reserves decision to cut interest rates by 25 basis points to a new target range of 1.75 percent to 2 percent on Wednesday (September 18).
In addition to the second round of cuts made this year, the Fed also had a quite dovish outlook for potential decreases in the future. During a press conference, chair Jerome Powell said the Fed would be keeping an eye on geopolitical concerns and has not ruled out further cuts in the future.
“If (the US) economy weakens more extensive cuts may be needed,” he told reporters.
Even with gold weakening in the last few weeks, market watchers are noting that ongoing geopolitical concerns continues to support the precious metal.
Despite the mid-week decline, gold is headed for its first weekly climb in four weeks, as investors turn their focus to tensions in the Middle East.
“The jittery situation in the Middle East is one of the reasons to be concerned and switch to safe havens, after disappointing knee-jerk reaction following the US Federal Reserve rate cut,” said Eugen Weinberg, analyst at Commerzbank.
Also adding to gold’s appeal as a safe haven investment is an announcement from the United States that said it was building a coalition to shield itself from Iranian threats following last week’s attack on Saudi Arabian oil facilities.
“Indicators suggest that market participants have reduced longs and are focusing on the US$1,480 support area all the way down to US$1,450 as attractive levels to re-engage,” stated Lukman Otunuga, analyst at FXTM.
Speaking last week at the Precious Metals Summit in Beaver Creek, Colorado, Rob McEwen, chairman and chief owner of McEwen Mining (TSX:MUX,NYSE:MUX), told the Investing News Network (INN) that he sees more gains in store for the yellow metal.
“I’ve always had a US$5,000 number, and I think it can go much higher than that,” he commented.
McEwen pointed to overarching global elements like high levels of debt and monetary expansion as factors he sees moving the gold price.
As of 9:43 a.m. EDT on Friday, gold was trading at US$1,501.60.
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Give me my free report!Silver also rebounded on Friday to sit within arms reach of the US$18 per ounce level.
The white metal is being supported by the recent interest rate cut and ongoing geopolitical issues. The metal managed to gain 2 percent and is heading for its first weekly gain in three weeks.
Silver was also in the news this week after the US Department of Justice (DoJ) charged three JPMorgan (NYSE:JPM) executives with allegedly manipulating prices of precious metals between 2008 and 2016.
“It is one trader after another at JPMorgan getting in trouble for market manipulation, with their superiors in on the case about what is going on. Ironically, these trader operations are rinky-dink compared to the overall rigging of the gold and silver prices, which involve massive price suppression, that have been ongoing for a very long time,” Bill Murphy of the Gold Anti-Trust Action Committee (GATA) told INN.
Ed Steer of the Gold and Silver Digest also commented on the news, telling INN via email, “The price of silver is still at US$18 … not US$100-plus, which is where it would be if this price management scheme didn’t exist.”
As of 10:00 a.m. EDT on Friday, silver was changing hands at US$17.76.
As for the other precious metals, platinum was up close to 1 percent on Friday, continuing to trade above the US$900 per ounce level.
Platinum prices have surged over the last month thanks to greater safe haven demand paired with supply concerns,
While analysts at FocusEconomics see the price of the metal rising slightly from its current level, they believe it will continue to be muted and trail behind its sister metal palladium. However, the market is currently regarding platinum as the cheaper precious metal when stacked against gold. If predictions that the yellow metal will continue its price increase prove true, platinum will more than likely continue to be supported by this as investors look for a cheaper alternative to gold.
As of 10:10 a.m. EDT on Friday, the metal was trading at US$943.
For its part, palladium made gains again this week, climbing over 1 percent on Friday and experiencing an all-time high earlier in the week when it peaked at US$1,649.09.
Looking ahead, panelists for FocusEconomics believe that while prices will dip slightly, but 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.”
As of 10:30 a.m. EDT, palladium was trading at US$1,610 per ounce.
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.