Analysis

Commodities Weekly: Gold near one-month high on growth concerns

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Friday’s weak flash PMI readings from Europe and the US raised concerns about global growth going forward, and an increasingly inverted US yield curve both weakened the US dollar and heightened concerns about a pending recession. Most commodities benefited from a weaker greenback.

 

Precious metals

GOLD advanced to its highest level this month yesterday as uncertainty and a falling dollar raised its appeal as a safe haven. The precious metal traded above the 61.8% Fibonacci retracement level of the February 20 to March 5 drop at 1,321.72 for the first time since February 28 yesterday, and looks on track for the fourth consecutive weekly gain this week. Gold is now at $1,321.88.

Speculative accounts added to their net long positions for the first time in four weeks in the week to March 19, the latest data from CFTC shows, after net longs had fallen to the lowest level in seven weeks. India’s gold imports slid 5.5% to $29.5 billion in the April 2018 to February 2019 period.

 

Gold Daily Chart

Source: OANDA fxTrade

 

SILVER has been testing resistance at the 55-day moving average, which is at 15.5847 today, for the past week but has so far failed to close above it. Prices were last above this average on March 1. Speculative investors appear to have been taking note of this failure and reduced net long positions for a third straight week, CFTC data as of March 19 shows. Net long positions are now at the lowest since the week of December 18.

The gold/silver (Mint) ratio has been trading within the parameters of an 84.0 to 85.5 corridor this month and is currently at 85.074.

 

PALLADIUM traded above the psychological 1,600 mark for the first time last week on continuing shortage concerns. Speculative investors have been using the metal’s current rally to take profit on long positions, as they reduced their net longs for a fourth straight week in the week to March 19. Net long positions are now at the lowest since the week of October 30, according to the latest data from CFTC.

The global shortage is further evidenced by exchange-traded funds reducing their palladium holdings by 625 troy ounces last Friday, Bloomberg reported. However, the 17% drop in car sales in China during February, even though it included the Lunar New Year period, may raise concerns about demand in the future, since China’s push for greener emissions in its automobiles has been one of the major drivers of palladium demand.

Some analysts expect the metal’s bullish run to peter out as the year progresses, according to a recent Bloomberg survey. The average year-end forecast for palladium among poll respondents was about $1,350.

 

PLATINUM continues to struggle to match palladium’s gains and has traded in an 810-876 band so far this month. It’s now at 858.68. The 55-day moving average at 823.15 is above the 200-day moving average at 822.34 today for the first time since April 30. This so-called golden cross

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