Dealing Desk: Gold Looks Appealing as Fed Maintains Gradual Rate Hike Outlook

Goldmoney clients have been net buying all precious metals this week, with silver being the most heavily traded. Clients have preferred vaults in Zurich, London, Singapore, and Toronto, and have shown less preference for the New York, Ottawa and Hong Kong vaults.

Gold fell to a three-and-a-half month low of $1,207 after the published rise in both private and non-farm U.S. payroll data. A stronger employment trend, improving economy, and stronger consumer health saw the metal reflect an anticipated further U.S. rate hike. Consumer credit expanded at the fastest rate in seven months, indicating strong levels of confidence and increased consumption.

Gold then rose to $1,218 on buying interest after Fed chair Janet Yellen hinted at an unwinding of the balance sheet later this year, which was interpreted by traders and the market as negating the need to raise interest rates. Yellen expects the Fed to keep making gradual increases to achieve and maintain maximum employment and stable prices but gave no indication about timing. Gold then moved to - and maintained - a two-week high of $1,236.

Silver dropped to $14.34 but immediately rebounded to $16; the cause of the aggressive move was suspected to have been the result of online trading that disrupted markets outside of liquid trading hours. An onslaught of orders knocked out stops on the downside and pushed silver to $15.30. The industrial sector bought on dips and the demand caused silver to follow gold and reach a high of $16.22.

Platinum declined to $895 – its lowest level since December 2016 – before it recovered to $935 on the back of a weaker South African rand and then fell to $910. The anticipated growth of electric cars, with Volvo stating the company would only offer hybrid or electric cars beginning in 2019, indicates sustained weakness for the demand of platinum.

Palladium held steady before it hit $870 and then settled at $855. Tighter emissions controls in the Asian automotive industry will bolster demand for the metal, which coupled with slow growth of supply in the mining industry should support the price for some time.

All precious metals were up over the past two weeks: Silver saw the biggest rise of 2.2%, platinum gained 1.8%, palladium rose by 1.6%, and gold increased by 1.7%.

20/07/17 16:00 – Gold: $1,245.23; Silver: $16.35; Platinum: $925.00; Palladium: $850.81 Gold/Silver Ratio: 76.17

NOTES TO EDITOR
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