By John McDonald
Investors who feared gold and precious metal palladium might have hit their price peak for this bull run were proven wrong when both precious metals climbed higher as the end of September nears.
Weak economic data from Europe and generalized fears of another global recession have sent investors running toward precious metals in recent weeks. Palladium and bullion both hit record values in this “supportive environment,” RJO Futures strategic commodities strategist Phillip Streible said of the bull trend.
He added, “The weak German PMI numbers gave a little bit of a shock to the stock market and led investors into safety like gold and silver.”
At present, investors and analysts predict gold might climb as high as $1,550 by the end of this week, particularly if trade tensions with China continue unabated and U.S. data indicates the potential for a recession.
With countries like Germany edging even closer to a recession themselves (private-sector activity in that country shrank for the first time in nearly seven years this month), investors are likely to seek the relative refuge of bullion and other precious metals as 2019 concludes.
Since stock prices remain, at present, solid, U.S. investors will have plenty of capital to sink into safe-haven investments like gold – at least for now.
Palladium is climbing partly due to its status as a precious metal, but also in response to U.S.-China trade tensions. The metal is a key component in catalytic converters, which are used in the manufacture of automobiles and other machines with exhaust lines that convert pollutants from the combustion process into harmless gases.
Some analysts had been concerned that palladium values might fall as automotive costs rose when automotive production lines exited China for other countries. However, that has not proven to be the case.
“People are starting to realize that auto sales and production outside of China is actually not so bad,” explained Jeffrey Christian, a managing partner at CPM Group. “Demand from the industrial sector is stronger than what people thought [it would be],” he added.
At time of publication, palladium was priced at more than $1,600 an ounce, while the metal’s December futures were similarly elevated. Some analysts believe the metal could hit a record high of $1,700 an ounce by year’s end.
Silver and platinum are also gaining at present. Silver added 3.5 percent to reach $18.61 an ounce earlier this week while platinum rose 1.8 percent to $962.55 an ounce.
The fact that precious metals are gaining value despite the Federal Reserve’s interest rate cuts last week indicates investors are likely to remain firmly entrenched in safe-haven assets for now, which is good news for any investor with a strong allocation of precious metals in their portfolio.