Gold Is Just Getting Started - Scotiabank
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(Kitco News)- Although the gold market has beenunable to maintain October’s momentum, one Canadian bank is not ready to giveup on the precious metals just yet.
Analysts at Scotiabank said thatthey see further potential for the yellow metal as the bank sees a wave of risk-offsentiment sweep through financial markets and inflation pressures rise,according to its November Metals Matters precious metals report.
“Economic data has generally beenshowing weakness, including some U.S. data, and economic bellwethers such asthe base metals have remained under pressure as the U.S. trade disputes havedragged on,” the analysts said. “Gold has turned more favorable as othermarkets have started to become more risk-averse. As such, there does seem to beroom for more safe-haven demand for gold as money rotates out of equity andbond markets.”
The comments come as gold pricescontinue to hold above a critical support level at $1,220 an ounce; Decembergold futures last traded at $1,223.70 an ounce, relatively unchanged on theday. Meanwhile, equity markets struggle to find momentum with the S&P 500last trading at 2,704 points, down nearly 1% on the day.
The analysts noted that alongwith economic uncertainty, geopolitical instability surrounding global tradeissues will continue to support inflationary pressures, which could help goldfight against ongoing strength in the U.S. dollar.
“Gold prices and the dollar havegenerally both been strong in October, so further dollar strength may not betoo strong a headwind for gold from these still generally low price levels,”the analysts said. “We said in the October Metal Matters report, we may not bethat far from a turning point in gold prices - this may well now havehappened.”
The analysts said that newmomentum in the gold market could also breathe some life into silver, which hasbeen lackluster through most of the year. Data on Kitco.com shows thegold-silver ratio holding near a 25-year high, last trading at 84.82.
The analysts noted that silverhas been suffering because of weak demand for industrial metals due to globaleconomic growth concerns. December silver futures last traded at $14.385 anounce, nearly flat on the day.
“Should gold prices extend gainsand investor interest return, then silver would likely outperform gold’srebound in percentage terms as it has a history of being more volatile thangold,” the analysts said.
By Neils ChristensenFor Kitco News
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nchristensen@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.  |