Metals Prices Close Higher On A Weak Dollar And Hopes For Additional U.S. Pandemic Stimulus

Rich Asplund - Barchart - Mon Oct 19, 1:47PM CDT

Dec Comex gold (GCZ20) on Monday closed up +5.30 (+0.28%), and Dec silver (SIZ20) closed up +0.293 (+1.20%).

Precious metals on Monday pushed higher on a weak dollar and hopes for additional U.S. pandemic stimulus. Silver prices also gained Monday on better-than-expected U.S. and Chinese economic data. Weakness in stocks on Monday was also positive for the safe-haven demand for precious metals.

Hopes that U.S. lawmakers can pass additional pandemic stimulus measures are positive for gold demand as a store of value. After weekend discussions with Treasury Secretary Mnuchin, House Speaker Pelosi set a Tuesday deadline for more progress with Republican negotiators on a pandemic stimulus package before the Nov 3 election. President Trump countered by saying he could persuade Republicans to back a "good" deal. House Speaker Pelosi and Treasury Secretary Mnuchin are scheduled to talk later Monday afternoon in an attempt to hammer out a virus relief package.

Monday's U.S economic data was negative for gold but supportive of industrial metals demand and silver prices. The U.S. Oct NAHB housing market index unexpectedly rose +2 to an all-time high of 85 (data from 1985), stronger than expectations of unchanged at 83.

Comments on Monday from Fed Vice Chair Clarida were supportive of gold prices when he said, "additional support from monetary and likely fiscal policy will be needed as it will take some time to return to the levels of economic activity and employment that prevailed at the business cycle peak in February."

Silver prices garnered support Monday on signs of strength in China's economy that is positive for industrial metals demand. China Sep industrial production rose +6.9% y/y, stronger than expectations of +5.8% y/y and the most in 9 months. Also, China Sep retail sales rose +3.3% y/y, stronger than expectations of +1.6% y/y and the most in 9 months. On the negative side for silver, China Q3 GDP rose +4.9% y/y, weaker than expectations of +5.5% y/y.

Gold has support from the Covid pandemic that has curbed global growth prospects and prompted the world's central banks to maintain or even expand their QE programs, which is bullish for gold demand as a store of value. Global Covid infections reached a single-day record of more than 415,000 on Friday. The Covid virus has now infected 40.367 million persons globally, with deaths exceeding 1.119 million.

A bearish factor for gold prices was Monday's hawkish comments from ECB Governing Council member Holzmann who said, "based on the current information. I don't see the need yet to give further monetary impulses."

Precious metals have continued safe-haven support from heightened U.S. political tensions, U.S/China tensions, and the risks of a no-deal Brexit at year-end.

Safe-haven demand and dovish central bank expectations have sparked fund buying of precious metals in recent months. Long gold positions in ETFs last Thursday rose to a new record high of 3,459.8 metric tons (data since 2002). However, liquidation of long silver positions has emerged with long silver positions in ETFs falling to a 2-1/4 month low on Sep 25, down from Aug's record high of 897.10 million troy ounces.
https://www.barchart.com/story/futures/quotes/GC*0/futures-prices/459496/metals-prices-close-higher-on-a-weak-dollar-and-hopes-for-additional-us-pandemic-stimulus