Hawaii Six O - Gary Wagner
Gold Regains its Status as the Most Expensive Precious Metal
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Gold prices have skyrocketed to the second highest level this year. As of 4 PM EDT gold futures basis the most active August contract is currently fixed at $1332.30, after factoring in today’s gains of $21.20. Gold is now within striking distance of surpassing the current high of 2019 at approximately $1350 per ounce. This rally which in essence began on Thursday of last week has taken gold pricing from a low of $1273 and climbed $50 in the last three trading days.
At the same time palladium has been under pressure and trading to lower pricing. Currently palladium futures are down by $11.40 and fixed at $1320 per ounce. Gold has retaken its status as king of the hill, the most expensive precious metal in the complex of gold, silver, platinum and palladium.
Clearly market sentiment has shifted away from risk on assets to the safe haven asset class with gold providing investors a level of safety as global equities trade under pressure and the U.S. dollar moves lower. Currently the dollar index is down 0.63% and fixed at 97.05.
U.S. equities continue to trade under pressure with the Dow Jones industrial average currently trading off by over 100 points, and with the less than a half hour of trading is fixed at 24,715.85. Hardest hit today is the tech heavy NASDAQ composite which is down by 1.70% (-125.31) and fixed at 7328.66.
The recent fundamental shift in market sentiment is directly related to the growing concerns about the United States and its trading partners. While the United States is still deeply entrenched in a trade war with China, real concerns have emerged that this dispute will not be result as quickly as anticipated. Last week’s war of words between China and the United States elevated the dispute to a new level, and put into question as to whether or not two superpowers can move past their differences in a timely manner.
There is also genuine concern about the United States and is trading partner just to the south, Mexico. Last week President Trump announced his intent to initiate tariffs on all imports from Mexico. This move according to Trump was predicated on the belief that Mexico is not doing enough to help the United States curb illegal crossings. The president has threatened a 5% tariff on all imports from Mexico which will move higher if Mexico does not help secure its northern border to the United States.
On Monday the Mexican Foreign Minister spoke of dire consequences if in fact the United States imposes tariffs. According to the Washington Post, “Mexico’s foreign minister warned Monday of dire economic consequences if the United States imposes the tariffs that President Trump has threatened as punishment for the flow of migrants transiting to the U.S. border. Marcelo Ebrard, who spoke at a news conference in Washington, said the threat would have no impact on Mexico’s immigration policy.”
Lastly, there has been chatter about the potential for the federal reserve to initiate rate cuts. Today the St. Louis Federal Reserve President James Bullard said “A reduction in interest rates "may be warranted soon" due in part to escalating global trade tensions,”
These fundamental events have collectively been highly supportive of gold pricing. As long as these fundamental events continue we could expect to see gold pricing move to a new record high this year.
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Wishing you as always, good trading,