Metals Futures Prices

by cmdtyNewswires - Fri Jan 18, 2:55PM CST
Feb Comex gold (GCG19) on Friday closed down -9.7 (-0.75%) and March silver closed down -0.137 (-0.88%). Precious metals sold off Friday with Feb gold at a 1-week low and Mar silver at a 3-week low as rising T-note yields and a rally in stocks spurred long-liquidation in gold and silver. The 10-year T-note yield climbed to a 3-week high of 2.79% and the S&P 500 rallied to a 1-month high Friday. Also, a rally in the dollar index to a 2-week high kept pressure on metals prices. Ongoing fund liquidation of silver positions is bearish for silver as long silver positions in ETFs dropped to a 2-3/4 year low Thursday. Also, demand concerns for industrial metals weighed on silver prices as the partial shutdown of the U.S. government entered its 28th day with no resolution in sight, which has stoked fears of slower economic growth that is negative for industrial metals demand. Losses in gold were limited as global geopolitical concerns and stock market volatility have spurred demand for gold as a store of wealth after long gold positions in ETFs rose for the 15th consecutive day to an 8-month high Thursday. A positive factor for silver was Friday's stronger-than-expected U.S. manufacturing production surge of +1.1% m/m (vs expectations of +0.3% m/m), the biggest increase in 10 months.Big Picture Gold-Silver Market Factors: Bullish factors include (1) expansive Bank of Japan and European Central Bank monetary policies, although the ECB ended its quantitative easing program in Dec 2018, (2) an easier monetary policy by China's central bank, which cut the bank required reserve requirement ratio by 100 bp on Jan 4, (3) safe-haven demand for precious metals due to the global stock market correction, trade tensions, and Brexit. Bearish factors include (1) concern that a slowdown in U.S. manufacturing activity will reduce demand for industrial metals after the Dec ISM manufacturing index fell -5.2 to a 2-year low of 54.1, (2) strength in the dollar as the dollar index recently rallied to a 1-1/2 year high, (3) tighter dollar liquidity as the Fed raises interest rates and draws down its balance sheet, (3) the slump in inflation expectations that reduces demand for gold as an inflation hedge after the 10-year T-note breakeven inflation expectations rate recently fell to a 1-1/2 year low, and (5) the slower Chinese economy and US/Chinese trade tensions that dampen Chinese demand for industrial metals.