20 July 2020

Metals Become Even More Precious Amid Uncertainty

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News shaping
the markets today

     

What’s happening: Gold and silver futures rose on Friday to record their sixth consecutive weekly gain.

What happened: With growing expectations for additional fiscal stimulus packages being announced by the US and Europe and concerns over the global economic outlook due to escalating covid-19 cases, precious metals continued their upward momentum last week.

The overall weakness in jewellery demand due to the pandemic was offset by investors looking for safe-haven options. Investments into precious metals also rose with the US dollar losing favour. The greenback, which is also considered a safe haven, has been on a downturn, with the US dollar index booking losses for the fourth consecutive week.

Why it matters: The White House is under immense pressure to announce further fiscal stimulus to shore up the markets with the current Federal CARES Act unemployment plan expiring by the end of the month.

Meanwhile, EU leaders commenced a two-day meeting on Friday to discuss a €750 billion recovery plan.

Last week was rife with vaccine headlines, with various pharma leaders announcing positive results from trials of their respective covid-19 candidates. Although equity markets posted overall gains for the week, but investor optimism remained constrained by news of record daily cases in the US.

Gold for August delivery rose 0.5% to end at $1,810 an ounce on the Comex on Friday, recording a weekly gain of 0.5%.

Gold prices had reached their highest level in around nine years earlier this month and are trading higher by 18.8% year to date.

September silver gained 1% to settle at $19.764 an ounce on Friday, surging 3.7% for the week.

Among other metals, September copper edged higher by 0.1% to $2.9045 per pound, rising 0.2% last week. October platinum gained 1.5% to $849.60 an ounce on Friday, recording a 0.4% gain for the week.

What to watch: With the US continuing to report a steep rise in daily covid-19 cases, the share of precious metals in investment portfolios support is expected to grow. Investors will continue to keep an eye on news related to progress with any vaccine or a drastic reduction in the number of infections. However, some profit taking is also possible given the persistent rise in precious metal prices over the past couple of months.

The Markets Today

     

The US dollar will be in focus today, after closing the week on a lower note.

Context: The greenback closed lower on Friday, booking losses for the fourth consecutive week and sending the US dollar index lower versus a basket of major currencies.

Details: While investors are hopeful of Washington announcing more fiscal stimulus packages to support the flailing economy, EU leaders kickstarted a two-day summit on Friday to discuss a €750 billion recovery plan for the Eurozone.

The rise in covid-19 cases continued to haunt investors, with the US reporting another record high of more than 70,000 daily infections on Thursday. California and some other US states witnessing a surge in cases have been forced to partially close their economies again.

Tensions between the US and China escalated last week, with the Trump administration reportedly planning to implement a travel ban on all members of the Chinese Communist Party to the US.

Unemployment data did not support sentiment as well. The Labor Department announced that 1.3 million people had filed for state unemployment benefits in the week ending July 11, slightly down from 1.31 million in the previous week. The report fuelled concerns over rising nevertheless covid-19 cases slowing the recovery in employment.

The US dollar index, which measures the greenback’s performance versus a basket of major currencies, dropped to 96 on Friday, recording losses for the fourth week in a row. The index recorded lost 0.7% last week.

What to watch: With the US not scheduled to release any major economic report today, investors will continue to focus on the daily covid-19 numbers, with total infections in the country exceeding 3.7 million. Markets will also keep an eye on news related to the US-China tensions and the White House for any announcements of additional stimulus.

Other Markets: European indices were trading lower at 8:30am GMT, with Germany’s Dax 30 index, French 40, STOXX Europe 600 index and London’s FTSE 100 down by 0.4%, 0.8% and 0.8% and 1.0%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Minutes of the European Union’s 2-day meeting as well as the US 3-month and 6-month bill auctions.

 

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