Palladium jumps above $1,500 to highest finish since late March
Gold prices continued their march toward a six-year high on Monday, with weakness in the U.S. dollar and 10-year Treasury yield, expectations for lower interest rates among global central banks and geopolitical concerns all contributing to haven demand for the precious metal.
“A modestly weaker U.S. dollar, as measured on the U.S. Dollar index DXY, +0.07% and slightly lower yields on the U.S. 10-year treasury note TMUBMUSD10Y, +0.00% the German 10-year, the Italian 10-year and the U.K 10-year” were all helping to lift gold Monday, said Dana Samuelson, president of precious metals and rare coin dealer American Gold Exchange. “Gold loves cheaper money.”
“This market looks like it will tend to grind higher from here on the back of cheaper money, while yields continue to erode. The trend is your friend, and gold’s trend is clearly higher,” he told MarketWatch.
August gold GCQ19, +0.97% GCQ19, +0.97% rose $18.10, or 1.3%, to settle at $1,418.20 an ounce, after trading as high as $1,421. Prices saw their highest most-active contract settlement since August 28, 2013, according to FactSet. That followed a gain of 4.1% last week.
Gold’s gains last week came after a Fed meeting in which the central bank held rates steady but spoke of “uncertainties” over the U.S. economic outlook. The European Central Bank and Bank of England also made dovish comments during the week. Precious metals like gold tend to attract buyers in a low interest-rate climate.
But geopolitical tensions between the U.S. and Iran and uncertainties on the global trade front have also lured investors into gold, seen as a haven investment in times of political and economic uncertainty.
U.S. President Donald Trump on Monday signed an executive order imposing financial sanctions on Iranian leaders, according to pool reports from the White House. The moves comes days after calling a halt to airstrikes on the country which shot down a U.S. military drone. But he also suggested the two countries will eventually have a positive relationship, toning down harsher rhetoric he has employed for much of his presidency.
Last year Trump unilaterally withdrew from the seven country agreement known as the JCPOA which was containing Iran’s nuclear ambitions and imposed sanctions on Iran’s oil exports.
UBS strategists Joni Teves and Roque Montero on Monday lifted their three-month gold target to $1,430 from $1,380 an ounce. “A few years and several false starts later, we think the macro backdrop has now started moving more convincingly in gold’s favor,” the analysts said, though they added that the route for gold is “unlikely to be a straight path higher.”
They still maintain gold will end the year under that $1,400 level, lifting their end-year target to $1,370 from $1,325 an ounce. Their end-2020 forecast was lifted to $1,450 from $1,350, and from 2021 to 2023, the strategists expect gold to end those years at $1,500.
The precious metal “continues to be extremely overbought with short positions staying at their yearly lows and long positions climbing to their highest level since February 2018,” said strategists at Societe Generale, in a note published Monday. “This extreme positioning is likely to linger as [Fed Chairman] Jerome Powell reassured markets about the Fed’s capacity and willingness to support economic expansion with rate cuts and other unconventional management tools.”
Elsewhere, July silver SIN19, +0.28% rose 8.71 cents, or 0.6%, to $15.377 an ounce after gaining 3.3% last week.
July copper HGN19, +0.89% added 0.04% to $2.706 a pound. July platinum PLN19, +0.33% rose almost 0.1% to $811.70 an ounce, while September palladium PAU19, -0.81% rose 1.9% to $1,528.60 an ounce—the highest most-active contract settlement since late March.
Meanwhile, global equities saw mixed trading Monday after China’s state-run Xinhua News Agency said Sunday that China’s President Xi Jinping will attend the G-20 summit in Japan this week, giving the first official confirmation of his attendance at the meeting, where he has been expected to talk on the sidelines with Trump.
“With press reports that U.S and Chinese officials are working on the logistics of a meeting between the two leaders in Japan, the hope for trade progress is given fresh credence. Therefore palladium and other commodities impacted by the Chinese economy are benefiting,” said analysts at Zaner Metals.