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LAWRIE WILLIAMS: Gold plunges below $1,800 and other precious metals weak too.

Now the North American early Fall holiday is behind us, the precious metals markets should be returning to near normal, but as I write the immediate post-holiday period has not been positive for precious metals or equities alike.  After strong performances ahead of the long weekend, Monday’s trading in Europe and today’s openings have seen some fairly sharp falls in the prices of gold, silver and the pgms.  Whether these falls will continue once the U.S. markets stabilise and settle down remains to be seen, but initial trends are far from strong for gold, with the yellow metal plunging down to the $1,800 level and even breaching  it on the downside.

The boost to precious metals prices ahead of the North American end-of-summer holidays, with gold rising to around $1,830 an ounce, arose largely because of disappointing employment data, signifying that the path out of the virus pandemic hit to the U.S. economy might well be slower than had been anticipated.  U.S. Fed Chair Jerome Powell had hinted at this in his Jackson Hole statement and the market conclusion was that the U.S. pandemic recovery might well be slower than had been previously predicted.  In this case the start of tapering of bond purchases could well be delayed until 2022, while any increase towards ‘normalisation’ of Fed interest rates is also seen to be receding until later in 2022 – if then.

The above conclusions should be seen as being gold positive overall with negative real interest rates staying in place for longer  Such speculation may continue  to dominate the markets up until the next FOMC meeting, scheduled to take place late this month, when new Fed guidance on timing should be forthcoming.  However, the initial weakness in post-Labor Day U.S. markets may tend to indicate continuing precious metals price weakness ahead of this meeting. 

As well as gold falling through the $1,800 level, platinum too breached the psychological $1,000 level on the downside while silver and palladium prices were also substantially weaker in initial trade on Tuesday morning in the U.S.  Not a good start to the Fall markets for precious metals!

We have warned in the past that trade before and after major U.S. holidays often seems to see a major inflection point in price performance and it very much looks as if this time around will confirm this tendency.  The dollar was showing signs of strength, while the Dow, S&P and bitcoin also seemed to be on the way down after showing previous positive moves – the latter falling by around $6,000 demonstrating its continuing volatility.  This is somewhat disappointing for the U.S. investment sector in particular.  European equities too were following their U.S. counterparts in their downwards direction.

It now remains to be seen whether U.S. markets stabilise and precious metals, equities and bitcoin make any kind of recovery in the weeks ahead..  We could conceivably be seeing the start of the oft-predicted markets crash, although we don’t see this as necessarily likely for now.  But there’s little doubt the markets are nervous and the high levels of new virus infections being seen in the U.S. in the face of vaccine take-up reluctance in Republican-leaning states in particular has to be worrying for any overall U.S. economic recovery.

07 Sep 2021 | Categories: Gold, Silver, Dollar, US, Bitcoin, FOMC

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