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31 Oct 2017
Wall Street drifts on tax cut worries - AM Briefing
31 Oct 2017
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30 Oct 2017
Spanish IBEX rallies sharply - AM Briefing
30 Oct 2017
Risk appetite strong on earnings/ECB - AM Briefing
27 Oct 2017
ECB finally announces QE taper - PM Bulletin
26 Oct 2017
ECB expected to begin tapering - AM Briefing
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Earnings, UK GDP and US Durable Goods ahead - AM Briefing
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Earnings season in focus - AM Briefing
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Quiet start after record close on Wall Street - AM Briefing
23 Oct 2017
Wall Street reverses early losses-AM Briefing
20 Oct 2017
Equities slide as Catalan deadline approaches - AM Briefing
19 Oct 2017
Gold retesting 50-day moving average - PM Bulletin
18 Oct 2017
Dow surges above 23,000 - AM Briefing
18 Oct 2017
UK inflation data in focus - AM Briefing
17 Oct 2017
Gold and silver break out of downtrend - PM Bulletin
16 Oct 2017
Oil rallies on threat of fresh Iranian sanctions - AM Briefing
16 Oct 2017
US economic data in focus - AM Briefing
13 Oct 2017
FOMC Minutes Released Tonight - Video Update
11 Oct 2017
Spain’s IBEX jumps after Catalan speech - AM Briefing
11 Oct 2017
US dollar - correcting or recovering?
10 Oct 2017
Investors prepare for earnings season - AM Briefing
10 Oct 2017
Has gold broken its long-term downtrend? - PM Bulletin
09 Oct 2017
BoE meeting will decide what sterling does next - Video Update
01 Oct 2017
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Gold is struggling to make further gains in 2017, despite breaking out of a six-year downtrend back in the summer

Gold continues to reel under wave after wave of selling pressure. This is leading many investors to dump the metal as both a safe-haven, and as protection against all the loose monetary policies of the world’s major central banks. It could be argued that precious metals are losing their appeal as an asset class, which in some ways is unsurprising. After all, why commit money to a non-yielding asset which has been in a steep downtrend for six years? And if you want protection from debased currencies which have been undermined by years of quantitative easing, why not put some money into cryptocurrencies? If there’s one thing that’s for sure, there are a large number of gold bulls out there who seriously resent the fact that so much money is pouring into Bitcoin, Ethereum and the like when there are better arguments in favour of owning precious metals when it comes to protecting oneself from irresponsible bankers and policymakers.

On top of this we still have plenty of issues to worry about. The US and North Korea continue to square up to each other; there are numerous other political concerns such as the worry that Trump’s tax reforms won’t be in place this year, or may fail to get through Congress. There’s also the ongoing fall-out from Brexit as EU and UK negotiators fail to make progress while Spain is still reeling from Catalonia’s referendum on independence and Madrid’s aggressive and cack-handed attempt to stop the vote taking place. But for now we have a US stock market which is consistently making fresh highs as investors brush aside all concerns as they scale a wall of worry. With risk appetite so strong and volatility so low there seems little incentive to hedge risk by diversifying into gold and silver. On top of this, the dollar is having a counter-trend rally after falling for nine months. The feeling is that the Federal Reserve will cast aside any concerns it has about tepid inflation and hike rates by 25 basis points this December, with a further three rises pencilled in for 2018. This doesn’t look like a positive environment for precious metals.

Yet situations can change quickly and there’s plenty of scope for gold and silver to recover. But looking at the charts we may see some further downside before that happens. As we can see from the first chart, in August gold broke out from its long-term downtrend. However, we may see prices fall further to test the old resistance line as support.

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Looking at the second chart we can see that gold is currently trading near its 50-day smoothed moving average. A break below here would also indicate further weakness. But it’s worth bearing in mind that the equity market rally is very long in the tooth now. On top of this the Federal Reserve may row back from raising rates in December should inflation continue to fall. So while there’s scope for more downside it’s really taking it too far to suggest that precious metals are no longer a serious asset class for investors. 

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Posted by David Morrison

Category: PM Bulletin


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