Gold Futures Market News and Commentary
Dec Comex gold (GCZ19) on Friday closed up +8.9 (+0.59%), and Dec silver (SIZ19) closed down -0.035 (-0.20%). Precious metals settled mixed on Friday. Gold found support on dovish global central banks and Middle East tensions, but was undercut by strength in the dollar. The Chinese central bank (PBOC) on Friday eased monetary policy slightly by cutting its 1-year reference rate for bank loans by 5 bp to 4.20% from 4.25%, which boosts demand for gold as a store of value. Slack global price pressures may also prompt the world's central banks to keep boosting gold-positive stimulus measures after Friday's data showed Japan Aug national CPI rose by only +0.3% y/y, the smallest pace of increase in 6 months. Also, German Aug PPI rose by only +0.3% y/y, weaker than expectations of +0.6% y/y and the smallest pace of increase in 2-3/4 years. Precious metals still have strong safe-haven demand from geopolitical risks in the Middle East after Iran's foreign minister on Thursday warned that any U.S. or Saudi strike on his country in response to Saturday's attack on Saudi oil installations would lead to "all-out war." Also, the U.S. Treasury on Friday said it will impose sanctions on the Central Bank of Iran. No-deal Brexit concerns have also boosted safe-haven demand for precious metals after comments Friday from Irish Foreign Minister Coveney dampened speculation of a Brexit deal when he said there is still "quite a wide gap" between the U.K. and European Union. Uncertainty about progress in U.S./China trade talks also undercut stocks Friday and boosted the safe-haven demand for precious metals after a Chinese trade delegation canceled a planned trip to farms in the U.S. and headed back to China. Ongoing trade and geopolitical tensions, along with dovish central bank expectations, sparked fund buying of precious metals as long gold positions in ETFs rose to a 6-1/2 year high on Sep 6 and long silver positions in ETFs rose to a new record high Sep 2. More recently, however, fund liquidation reduced long gold positions in ETFs to a 2-week low last Friday and long silver positions in ETFs to a 1-month low Thursday. 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 Fed's go-slow approach to cutting interest rates, (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.