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PM Gold/Silver Round Up-Another rush to cash? Analysts

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JD400   Friday, 09/18/20 07:52:59 PM
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PM Gold/Silver Round Up-Another rush to cash? Analysts are cautiously watching stocks, gold price

with TGYS soundtrack

by Anna Golubova

Friday September 18, 2020 15:34

(Kitco News) Recent gold price action has been highly dependent on the stock market and analysts are carefully watching another potential move into cash if there is a major market selloff.

Gold prices continue to trade in the middle of the $1,900-$2,000 an ounce range, as the yellow metal consolidates and gears up for its next move. At the time of writing, December Comex gold futures were trading at $1,958.80, up 0.46% on the day.

"One of the primary catalysts of the metals market until we get a little closer to the election is going to be the equity market," said Kitco Metals global trading director Peter Hug.

The valuation in the equity space is concerning considering the economy is still in the beginning stages of its recovery, Hug pointed out.

"FANG stocks took equity market up. But that bubble has certainty been pricked and rotation has to go into normal economy stocks. When only 30%-40% of the economy is open of pre-COVID levels, the valuation is as if the economy is at full guns. Something is not balanced here and if the market takes a big hit, people might be moving into cash ahead of the election," he said.

Hug is bullish on gold next week with one caveat — that the equity market at least holds or rises. "If the equity market takes a hit and sells off, that is going to be negative for the industrial complex — palladium, platinum, silver, and will drag gold down with it," he explained.

Another fiscal package from the U.S. administration will also be critical before the election, Hug added.

"People will get nervous with this valuation of equity markets without a fiscal stimulus … Powell was a bit weak in his urging of the US government to add more stimulus to the economy. It appears that it may not happen before the election", he said. "If there is a package that gets out, then both the equity markets and the metals will go higher."

The short-term rates will continue to play a key role in gold's price action going forward, noted RJO Futures senior commodities broker Daniel Pavilonis.

"If they come off, they can push the metal higher," he told Kitco News, Friday. "Equities are in a risk-off environment and could weigh on the metals."


Stocks were weaker today, continuing the slide from yesterday for the quad witch option expiration.

They did recover some of their losses into the closing hour for the weekend.

The Dollar was choppy and weak, but managed to close almost unchanged.

Gold and silver were a little stronger but closed almost unchanged.

Next week is a Comex option expiration for gold, for the October contract.

The physical inventories in Hong Kong Comex warehouses remained very thin.

Have a pleasant weekend.

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