Market Overview of Precious Metals: April 3 to 9, 2019
Last week, the gold, silver and platinum markets grew as a result of the weakening of the US dollar, while the palladium market continued to decline. The expectation of monetary easing by the Fed also keeps the precious metals markets from declining.
The optimism of market participants strengthened against the background of the growing likelihood of concluding a trade agreement between the USA and China. However, at the beginning of this week it became obvious that the process could be delayed at least until the end of June 2019. Geopolitical tensions remain very high, which supports the demand for precious metals.
US President D. Trump continues to criticize the behavior of the Federal Reserve, urging the regulator to lower interest rates. At the same time, representatives of the Fed heard statements that the current level of interest rates is adequate for the state of the economy, but also the regulator does not force the rate increase. This factor provides significant support to the gold and silver markets.
In Europe, continues to develop
There is a crisis over the UK exit from the EU, which led to the possibility of obtaining a Brexit delay at least until the end of June 2019, but it is also possible to postpone it to the next year.
In the past period, the stocks in ETF funds of all precious metals declined, with the exception of growing stocks in platinum ETF funds. Stocks in palladium ETF funds showed a particularly strong decline.
According to GFMS, in March 2019, the investment demand for gold in ETF funds increased by 0.2% or 3.3 tons to 2,482.8 tons. The largest increase occurred in North American ETF funds, which increased reserves by 2.5 tons. According to the CFTC report, as of April 2, 2019, all precious metals, with the exception of silver, maintained a predominance of short positions. At the same time there was a significant reduction in short positions in gold.
Last week, prices for precious metals in Shanghai at SGE slightly increased, trading volumes fell, as trading on the stock exchange did not take place on Friday due to an official holiday. The yuan exchange rate against the US dollar weakened. According to the Bank of China, gold reserves in reserves continued to grow in March and amounted to 60.62 million ounces (1,885.5 tons) or $ 78.5 billion, which also amounts to only 0.03% of the total international reserves of the country. Demand for physical gold in China over the past period fell slightly, and premiums dropped to + $ 13.0 / + 15.0 per ounce.
The Bank of Russia announced a decrease in the purchase prices for gold in reserves since May 2019, by introducing a discount to the market price. The purpose of this policy is to align the prices of gold purchases to the reserve with the export price. This may reduce the level of purchases of gold in reserves, subject to more favorable export prices.
Last week, the gold market again declined to a strong support level of $ 1286 per ounce, after which prices sharply rebounded to the level of $ 1305, which they are still unable to overcome upwards. The accumulation of market energy at strong support levels indicates a growing mood among market participants for price increases, despite the usually seasonally weak second quarter. Silver prices in correlation with the gold market declined to the level of $ 14.92, from which there was a correction upwards to the level of $ 15.27. The ratio of gold to silver is 85.36 points. The ratio of platinum to silver is 59,206 points.
The platinum market shows strong upward movement, outpacing other precious metals markets in growth rates. Prices on the CME futures market reached $ 920 under the influence of rising investment demand, after which they dropped to $ 907.3. The spread between gold and platinum is + 392 $ / ounce. The spread between platinum and palladium is $ 478.5 / oz. Prices in the futures market for palladium last week failed to consolidate above $ 1,400, after which the price went down to $ 1298.7. Breakdown of the strong support level of $ 1300 sharply increased the probability of breaking the growing trend in the palladium market, despite the recovery in prices to the level of $ 1363.
Author: Oksana Lukicheva, an analyst at Otkritie Bank