by Umar Farooq
Gold prices fell Wednesday, setting the yellow metal up for its lowest finish in about a month as investors await clues from U.S. Federal Reserve officials on the pace of interest-rate increases and the economic outlook.
Spot gold extended losses as the Federal Reserve officials left interest rates unchanged while signaling they’ll look past a recent deceleration in U.S. economic growth and stay on a gradual path of policy tightening.
The Fed decision also comes two days ahead of U.S. employment data for April, scheduled to be released on Friday, and another likely market mover across the risk spectrum.
“David Beahm, president and chief executive officer of precious-metals retailer Blanchard and Company, makes the case that now may be the appropriate time to scoop up metals that have been dinged in recent trade. “With all of the uncertainty out there, now is the time to add gold and silver to a portfolio,” said Beahm.“ Both metals performed exactly as they should have during the 2008 financial crisis and they will do the same during the next crisis, wherever it comes from,” he said. Gold futures prices GCM7, -0.79% which settled at $1,257 an ounce Tuesday, scored a gain of 1.4% in April, but lost 1.6% last week and dropped to a three-week low of $1,255.50 on Monday, according to FactSet data tracking the most-active contracts. Meanwhile, silver prices SIN7, -1.64% finished Tuesday at $16.83—the lowest since mid-January. They’ve suffered from two-straight monthly and weekly declines. “There are a number of economic, political and military events that Blanchard feels serve as the trigger for the next leg up in gold, and the current price consolidation for metals, while equities are pushed to all-time highs, serve as a great buying opportunity for diversification-seeking investors,” Beahm said.” cnbc
Gold and silver prices have generally declined since mid- to late-April, as geopolitical tensions, particularly those associated with the elections in France, have started to recede. Precious metals tend to benefit from haven demand amid uncertainty. With a runoff between centrist candidate Emmanuel Macron and right-wing candidate Marine Le Pen, “the fears for a Frexit have now been reduced whilst in the U.S.A., a government shutdown was avoided as well,” said Nico Pantelis, head of research at Secular Investor. “Two positive developments for the world, but this obviously reduces the demand and appeal of gold as an insurance policy against world-wide turmoils.”
The equities market is “overbought, overvalued and vulnerable to a cycle turn or correction lower at any time,” said Beahm. “Gold would benefit from a downturn in equities.” He said gold is likely to trade in the $1,250 to $1,350 range during the second quarter of this year, and moves to the downside should be seen as “buying opportunities.” He added that the same holds true for silver, which is likely to trade in the $16.80 to $19 range for the period. Gold prices may rise to $1,400 by year-end, and test all-time highs at $1,900 in the long term, he said.
by Umar Farooq