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Gold made headway for the fifth day in a row in heavy trade on Friday as the Trump-trade on financial markets begin to unwind, the dollar weakens and interest rates in the US trend lower again.
Gold for delivery in April, the most active contract on the Comex market in New York with nearly 19m ounces traded be early afternoon, was exchanging hands at $1,261.10, bringing its year-to-date gains to 9.5%. Gold is now at it’s the highest since November 11, erasing much of its losses since the US presidential election.
Statements yesterday by US Treasury Secretary Steven Mnuchin bolstered arguments made by the gold bulls camp
Gold bears had been making big bets that Trump’s plans for fiscal stimulus, including a $500 billion infrastructure spending program, will lead to strong US economic expansion, higher interest rates. A number of prominent hedge fund managers and billionaires running family offices moved aggressively out of gold and into stocks.
Gold bulls pointed to likely inflation arising from deficit spending by a Trump administration, burnishing gold status as a hedge against inflation and geopolitical uncertainty boosting gold’s allure as safe haven asset.
Source: CME Group
Source: CME Group
Statements yesterday by US Treasury Secretary Steven Mnuchin bolstered arguments made by the gold bulls camp. Mnuchin said that the Trump administration’s proposed tax cuts and other stimulus measures would have a limited impact on the economy this year which sent the dollar lower which usually moves in the opposite direction of gold.
A relatively dovish Federal Reserve statement this week also convinced the bond market that rate hikes this year may be fewer than expected and may only happen later in the year. Because gold is not yield-producing and investors have to rely on price appreciation for returns, the metal has a strong inverse correlation to US government bond yields.
Gold was also buoyed by safe haven buying as uncertainty about upcoming elections in the Netherlands, France and Germany and the impact on the European Union.
Gold helped to drag May silver contracts higher which were priced at $18.46 in afternoon trade in New York, up 1.5% from Thursday’s close. It is the ninth straight week of gains for the silver price, the metal’s best weekly run of gains in more than a decade. Year to date silver is up 13.7% and compared to lows hit January 2016, the metal has recovered more than 34% in value.
Hedge funds or so-called managed money investors in gold futures and options cut their exposure to the yellow metal further last week according to trader positioning data supplied by the government.
Overall bullish positioning or net longs held by derivatives traders fell 10% to 6.7 million ounces, well below July’s all-time record of nearly 29 million ounces when gold was hitting its 2016 peak.
Large scale speculators in silver is taking a different tack with CFTC data indicating that traders added to long positions and cut shorts – bets that silver can be bought back cheaper in future – at the same time. Net bullish positioning has now reached the equivalent of close to 354 million ounces, a 20-week high.
Source: www.tradingfloor.com
8 Comments
Thomas Henricksen
What does this article have to do with “Trump trade unwinds” ????? This sounds negative – is it?
MINING.com Editors
Description of the Trump trade in paragraph 3: “Gold bears had been making big bets that Trump’s plans for fiscal stimulus, including a $500 billion infrastructure spending program, will lead to strong US economic expansion, higher interest rates. A number of prominent hedge fund managers and billionaires running family offices moved aggressively out of gold and into stocks.”
Notice the steep decline after the election on the graph. That’s the Trump trade that is now being unwound.
Ray
I thought so too! Why the negative spin?
Anon-Y-Mous-e
Here is my No.1 gold exploration stock pick that should see a big pop in early 2017, see Mining Journal http://miningmarketwatch.net/bmk.htm (recommended reading) “MacDonald Mines advancing Gold laden zones, and highly prospective for new discovery next to multi-million oz miners”
Here are some excerpts of some stuff that caught my eye on first pass (the oxide sands can be mined quickly as aggregate for cash flow, and the load gold zones have very high grade material (the Soocana Mining Company Limited calculated a gold resource (historical non NI43-101) of 54,000 tons of material grading 0.556 oz/t (19.06 g/t) — still there and MacDonald can build on this (already have on initial walk of property by finding new shear zone)
Mr Jimmy
gold is going to decline from 1256 https://uploads.disquscdn.com/images/eb7fceb908eda125519f4f58676cf6c142f1c9dedc69e4e47f1c2f73d60c5541.jpg
Rock Cabin
The only people concerned about prices are people buying metal at spot price. We just bought into a junior placer operation that got group funded (placer is lower operational costs) that will deliver metal way below spot price so it’s no matter which way gold goes we’re still ahead. The easing of regulations on mining is driving money towards juniors like we bought into that creates the opportunity for getting metal through a Royalty at “wholesale” prices.
Gary
It’s the media, there is nothing Mr Trump can/will do that will make them happy
Dan Farrow
The effect of Mnuchin’s statement on the dollar’s value is logical enough. Frik’s use of the Trump-trade phrase may have been an attempt to catch the reader’s eye with a slightly provocative approach. Unfortunately, polarized politics seem to have compromised unbiased reporting.