Gold Jun '18 (GCM18)
Gold Futures Market News and Commentary
Dec Comex gold (GCZ19) on Friday closed down -12.2 (-0.81%), and Dec silver (SIZ19) closed down -0.058 (-0.33%). Precious metals retreated on Friday with Dec gold at a 1-week low on reduced safe-haven demand after stocks rallied sharply on trade and Brexit optimism. Global stock markets rallied sharply Friday, which curbed safe-haven demand for precious metals, on growing optimism that the U.S. and China can negotiate a trade truce. President Trump said after the markets closed Thursday that the senior-level trade talks on Thursday went "really well" and will continue on Friday. No-deal Brexit risks also receded Friday, which sparked long liquidation in precious metals, after European Council President Tusk said Friday that he received "promising signals" that a Brexit deal is possible. Comments Friday from Minneapolis Fed President Kashkari limited losses in gold when he said he's concerned that the labor market is showing signs of softening and he would probably be in favor if the Fed decided to cut interest rates at the Oct 29-30 FOMC meeting. Another positive for precious metals was renewed Middle East geopolitical risks after Iran said Friday that one of its oil tankers was hit by missiles in the Red Sea, which sparked safe-haven demand for precious metals. Friday's U.S. economic data was hawkish for central bank expectations. The Sep import price index of +0.2% m/m and -1.6% y/y was stronger than expectations of unch m/m and -2.1% y/y. Also, the University of Michigan's Oct U.S. consumer sentiment index unexpectedly rose +2.8 to 96.0, stronger than expectations of -1.2 to 92.0. Fund buying has been prevalent as long gold positions in ETFs have risen for 19 consecutive days up to a 6-1/2 year high on Thursday. Ongoing trade and geopolitical tensions, along with dovish central bank expectations, sparked fund buying of precious metals as long gold positions in ETFs have risen steadily over the past four months up to a new 6-1/2 year high Thursday and long silver positions in ETFs rose to a new record high on Sep 2. Big Picture Gold-Silver Market Factors: Bullish factors include (1) the action by the world's central banks to continue cutting interest rates and boosting stimulus measures as trade tensions take a toll on global growth, (2) low global inflation that is dovish for central bank policies, and (3) safe-haven demand due to trade tensions, Brexit, and global geopolitical risks involving Iran, North Korea, and Venezuela. Bearish factors include (1) the forecast by FOMC members in the September Fed-dot plot for no more rate cuts in 2019-2020 and then a +25 bp rate hike in 2021 and a second rate hike in 2022, (2) the recent rally in the S&P 500 to an all-time high, which reduced safe-haven demand for gold, and (3) concern that a slowdown in the global economy will crimp demand for industrial metals, including silver.
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