Despite a considerable amount of upheaval on the global markets, the seemingly steady performance of the U.S. economy as the calendar turns from summer to autumn has dampened investors' desire for safe haven assets. Instead, money is again piling into stocks, especially after U.S. indices gave up essentially all of their gains on the year and are now seen as a bargain.
Spot gold briefly dipped below the $1,120 mark on Friday morning before recovering to about $1,121.50/oz, a loss of about $4 during the trading session. Silver slumped more than 1% before cutting those losses slightly, settling about 12¢ (0.8%) lower at $14.70/oz. Platinum was the biggest loser, tumbling 1.4% to slide below $1,000/oz—a $14 loss down to $995/oz.
Oddly enough, palladium went the other direction as the lone gainer among the metals. It added $5 to about $582 per ounce, although spot palladium has sunk as much as 35.5% in the last 6 months and 40.33% year-to-date.
Broader View: Commodities Sector
Part of the persistent drag on the precious metals prices (despite widespread fear and uncertainty about the direction of the global economy) has been the ongoing slump for commodities, which have been trading at the trough of their down cycle.
Although crude oil prices have recently bounced from their apparent bottom, the world benchmarks remain weak and volatile. After both Brent crude and WTI crude surged some 10.25% in a single trading day last week, they also gave back 8% on Tuesday alone. Brent crude fell back below the $50 per barrel mark on Friday, while WTI hovered around $46/bbl. Gas prices in the U.S. this Labor Day (Monday, September 7th) will be at their lowest levels by the annual fall holiday in 11 years.
Precious Metals Building Momentum
The case that the precious metals can recover even amid the vicious downswing for commodities generally centers around gold and silver's unique functioning as financial assets in addition to being raw commodities used in industry. This is why we discuss concepts like safe haven demand, profit-taking, short-covering, monetary policy, and market sentiment when dissecting the reasoning behind the price movements for the precious metals—rather than relying entirely upon jewelry demand and industrial use as the only factors explaining the ups and downs of the precious metals trade.
As expert investor Marc Faber has said in the past, the de facto mechanism for "going short" on central banks is to buy gold; the short-sighted manipulation of monetary policy is basically the antithesis of the stability of precious metals. The best bet against the central banks is to hold gold and silver.
That is not to say, however, that precious metals have no aesthetic and symbolic appeal.
For instance, the new King of Saudi Arabia, Salman bin Abdulaziz, is visiting the White House this week to shore up U.S.-Saudi relations, which may have taken a hit with the potential Iran nuclear deal. According to reports, the Saudi king insists on just about everything in his suite at the Four Seasons hotel in Washington, D.C. being pure gold: mirrors, light fixtures, furniture, and even the smallest details like coat racks are expected to gleam a golden hue. Aside from gold's usefulness as a hedge in one's portfolio, it is clearly also the element most closely associated with wealth, power, and beauty that never dulls or fades.