Precious Metals News Update - 14 November 2018

PRECIOUS METALS RANGES: Trade Date - November 13th

COMMENTS / HIGHLIGHTS:

• A strong US dollar (with the US Dollar Index touching one and a half year highs on Monday) has weighed like an anchor upon precious metals values over the past week, especially since last week’s “hawkish” FOMC monetary policy announcement by the US Federal Reserve all but spelt out to investors that US interest rates are destined for an upward trajectory.

• In spite of a significant retreat in precious metals values over the past week, a couple of factors have created uncertainty amongst investors (in the Eurozone particularly) and  have paradoxically prevented the trap-door opening beneath gold and silver, even though they have contributed to USD strength overall and commensurate Euro weakness.

• Specifically these are, the dithering and vacillation, bordering on ham-fisted incompetence by Theresa May’s Conservative government to satisfactorily conclude Brexit negotiations with the European Union and deliver the result demanded by the majority of voters at the June 2016 Referendum with the March 29th 2019 Brexit deadline approaching. Additionally, another deadline of sorts yesterday, required the Italian government to bring its budget in line with the EU’s budgetary processes but the conflicting desire of Italian officials for a higher ratio of budgetary deficits to GDP than permitted by EU rules, has led to considerable investor angst.

• As much as XAU/USD has retreated in recent sessions however, XAG/USD has backpedalled at a greater rate, leading to a surge to 25 year highs in the Gold/Silver ratio just shy of 86.00. The silver market straining under the weight of the general retreat across the entire precious metals complex due to the powerful Greenback, in addition to weak base metal markets (a common historical correlation seen with the white metal).

• When all is said and done however, in relative terms, no commodities market has been given the “baby-seal treatment” by investors in recent times the way the crude oil market has been dealt with. Crude Light has seen 28.64% pared from its value since it topped out on the 3rd of October at USD 76.72/barrel before reaching low yesterday of USD 54.75/barrel. Quite simply the reason for this has been a heavily oversupplied market. A fact that US President Trump took the opportunity to highlight in a Tweet overnight when he noted that “Oil prices should be much lower based on supply”. Commerzbank highlighted in its ‘Commodities Daily’ yesterday that: “The OPEC monthly report that is due to be published today should confirm that the oil market is oversupplied as we look ahead to 2019 and that supply must therefore be reduced. The US Energy Information Administration (EIA) will be releasing its new estimate of US shale oil production this evening. It is likely to reach a new record level in December and thus add to the oversupply.”

• Elsewhere, President Trump yesterday met with his trade team to discuss a Draft of Car Import Tariffs. The President continued pressuring the EU with the threat of 25% tariffs on cars just as negotiations with China proceed. The basis for the US government’s stance is the US President’s view that that auto imports are a threat to US national security under section 232 of the 1962 Trade Expansion Act.

Kind regards,
Andre