Gold prices drifted slightly lower on Monday morning following the open of markets in New York. Although this supports the pattern of gradually trickling lower that the precious metals have exhibited over the past few weeks, there are still several factors that are pointing toward higher prices going forward. Spot gold traded around $1,312/oz while the spot silver price was about 25¢ lower to $19/oz.
The minor pullback for the precious metals opens up opportunities for bargain hunting among traders and retail investors. This is especially true given that the fundamentals that have caused gold and silver to rally this year remain firmly in place.
Dealing with the Dips
Gold actually posted a modest quarterly loss during the third quarter. This represents a prolonged opportunity to "buy on the dips," as several of the factors applying downward pressure on the precious metals are likely to be fleeting.
Markets are rejoicing over the news that Deutsche Bank (DB) and the Department of Justice (DOJ) may be close to striking a deal that will reduce the massive fine the bank is being threatened with. Rather than $14 billion, reports are that the two sides may settle for a much lower price tag of about $5 billion. This has helped restore some confidence to the broader markets, which were feeling increasingly shaky due to Deutsche Bank's role as a "systemically important" institution.
Shares of DB jumped over 6% on the rumors, marking its best performance since April.
Trading volumes for gold and silver will probably be unusually low today, considering that China is on holiday and its markets are closed.
A separate but related development that is impacting global markets is the announcement by new British Prime Minister Theresa May that a deadline has been set for March for the U.K. to begin Brexit negotiations. Working out the details of the divorce with Europe could take up to two years, placing a conclusion to the discussions sometime around Spring 2019.
The pound sterling fell to a three-year low (and not far from a three-decade low) after the announcement, losing ground against all of its major peer currencies. It is currently trading at about $1.28. The drop in the currency is overall seen as a risk—and supportive of higher gold prices—but the weaker pound has helped U.K. exporters. The country's PMI manufacturing data was the best in two years last month.
The Brexit news is seen as benefiting gold prices as fears of a "hard Brexit" begin to mount. Even with a date finally being set, there's no telling what the post-Brexit alignment will look like for Europe. Nonetheless, many people took advantage of slightly higher prices to sell their gold and silver holdings, especially when measured in terms of GBP. As this initial wave of selling at higher prices subsides, the drag on the precious metals will also probably abate.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.