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Gold Price Rebounds Sharply as Stock Rout Boosts Haven Demand

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Gold rebounded sharply on Thursday, as traders returned to the relative safety of precious metals following the worst stock rout since February. U.S. equity markets appear to have stabilized by mid-morning, though downside pressure is likely to persist.

Gold Regains $1,200

Precious metals rose across the board Thursday, with gold futures returning above $1,200 for the third time in the last four weeks. December gold, the most actively traded futures contract, jumped $24.20, or 2%, to $1,217.70 a troy ounce on the Comex division of the New York Mercantile Exchange. That’s the highest since August.

Comex silver futures notched gains of 21 cents, or 1.5%, to trade at $14.54 a troy ounce.

The gold/silver ratio that is used by investors to determine when to buy and sell precious metals widened to 83.84 on Thursday. This essentially means that 83.84 ounces of silver at spot price are needed to purchase one ounce of gold. The ratio is down 1.5% over the past month but has risen by more than 5% over 60 days.

Industrial metals were also trading higher on Thursday, with copper futures climbing $1.45, or 0.5%, to $279.50 a pound.

The U.S. dollar, which often trades inversely with precious metals, declined 0.3% against a basket of major currencies. The dollar index is currently valued at 95.25.

China Leads Stock-Market Selloff

A sharp and sudden selloff on Wall Street Wednesday ignited a panic sale in global markets, with all major indexes in Europe and Asia reporting heavy declines. Asian markets were the heaviest hit, with Chinese stocks shouldering massive losses.

The mainland’s CSI 300 Index plunged 4.8% to 3,124.11, the lowest in two-and-a-half years. China’s benchmark Shanghai Composite Index sold off 5.2% to close at 2,583.46.

Chinese markets have been under heavy selling pressure since Monday as traders returned from Golden Week celebrations to find dismal economic data, rising U.S. government bond yields and what many believe is an ineffective response from the central bank to ease capital restrictions.

U.S. President Donald Trump and Chinese counterpart Xi Jinping are planning to meet at the upcoming Group of 20 summit in Buenos Aires, Argentina at the end of November. Both countries are locked in a bitter trade dispute, with the U.S. levying tariffs on some $250 billion in Chinese imports. Negotiators had planned more fruitful dialogue in September before the Trump administration moved ahead with new tariffs.

The International Monetary Fund (IMF) has warned that a prolonged trade dispute between the superpowers threatens to undermine global economic stability. The Washington-based lending institution downgraded its 2019 outlook for both countries and the global economy as a whole.

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Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 691 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Commodities

Oil Prices Dip Following OPEC-Russia Boost

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Crude oil was back on the defensive Monday, as the OPEC-induced rally showed signs of fizzling amid apparent geopolitical and economic headwinds. In short: traders are still doubting whether the planned output cut announced on Friday will be enough to drain the supply glut in the face of waning economic growth and lower demand projections.

Rally Falls Short

The U.S. and international benchmarks declined at the beginning of the week, partially offsetting Friday’s short rally. The U.S. West Texas Intermediate (WTI) benchmark swung from an intraday high of $52.81 a barrel all the way back down below $52. At the time of writing, WTI for January settlement was worth $51.91 a barrel, down 70 cents, or 1.3%. Brent crude for February delivery slipped 55 cents, or 0.9%, to $61.12 a barrel.

Natural gas prices were also down on Monday. The benchmark Nymex futures contract dipped 3 cents, or 0.6%, to $4.46 MMBtu.

A stronger U.S. dollar was a primary source of headwinds for commodity prices on Monday. The dollar index (DXY), which values the greenback against a basket of six currencies, rose 0.3% to 96.76.

OPEC+ Deal

On Friday, the Organization of the Petroleum Exporting Countries (OPEC) announced it had reached a deal with Russia to reduce global crude output by a combined 1.2 million barrels per day. The output cut was higher than expected and signaled a renewed readiness to re-balance the market following a two-month collapse in prices. Crude officially entered bear-market territory last month, having lost roughly one-third of its value since the October high.

According to analysts, the decision by OPEC, Russia and their allies should stem the price collapse for the time being and support a recovery towards $70 a barrel. However, it’s not entirely clear whether the strategy is sustainable given the resurgence of U.S. shale and America’s push for energy independence under President Trump.

The U.S. leader has blasted OPEC for its production policies and has called on the cartel not to support any initiative that would raise prices drastically. The Trump administration is relying on competitive crude prices to feed the nation’s economic recovery, which is showing signs of slowing.

At the same time, there are considerable doubts about how the OPEC+ coalition will implement its production cuts. Analysts at Goldman Sachs Group Inc. and Morgan Stanley have expressed concern about whether producers can stay on the same page given how difficult compliance has been in the past.

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Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 691 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Commodities

Oil Prices Drop Ahead of OPEC Production-Cut Figures

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Oil prices faced a brisk selloff Thursday after investors caught wind of news that the Organization of the Petroleum Exporting Countries (OPEC) had agreed to reduce output by an unspecified amount. The Saudi-led cartel is reportedly waiting for Russia to come on board before declaring specific output levels for the new year.

Crude Drops

Both U.S. and international crude benchmarks declined sharply through the morning session. The West Texas Intermediate (WTI) benchmark for U.S. crude futures reached a session low of $50.23 a barrel on the New York Mercantile Exchange. Nymex futures were last down $1.21, or 2.3%, to trade at $51.68 a barrel. WTI recently established a new yearly low of $49.41 a barrel.

Brent crude, the international futures contract, bottomed at $58.36 a barrel on London’s ICE futures exchange. That’s 58 cents higher than the 52-week low. At last check, Brent was down $1.07, or 1.7%, at 60.49 a barrel.

OPEC Reaches Tentative Deal

OPEC concluded its meeting in Vienna on Thursday with a tentative deal to cut production levels. However, the producer group has yet to communicate an official output target as member countries awaited Russia’s participation in the agreement. Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman agreed last week to reduce output levels collectively but Moscow has yet to confirm.

According to Reuters, Saudi Energy Minister Khalid al-Falih said a final decision by OPEC and its allies was likely before the weekend.

It was reported earlier that the 15-member cartel was eyeing production cuts of 1.3 million barrels per day to stem the more than 30% drop in crude prices since October. The two-month slide has been exacerbated by a political standoff between the United States and China, which has undermined the outlook on global trade, economic growth and energy consumption.

U.S. President Donald Trump has been highly critical of OPEC’s production policies. On Wednesday, the U.S. president once again called on OPEC to keep output steady and not support any policy that would raise prices.

Al-Falih on Thursday implied that an output cut of 1 million barrels per day was more than enough to drain excess supply from the market. That’s because Canada recently called on its producers in Alberta to slash output levels by roughly 325,000 barrels per day.

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Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 691 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Commodities

Palladium Tops Gold for the First Time in 16 Years

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Palladium, gold’s lesser known sister metal, extended its rally to new record highs on Wednesday in a buying frenzy that has been fueled by a major shift in the automotive industry.

Outshining Gold

For the first time in 16 years, the price of palladium has topped gold. The shiny, silvery metal used in primary manufacturing jumped $24.21, or 2%, to $1,250.22 an ounce on the New York Mercantile Exchange. The spot price peaked at $1,261.80, according to Bloomberg, and is now trading 51% higher than its August low.

Palladium’s technical indicators show strong momentum in the underlying price, though the relative strength index (RSI) suggests that the market has entered overbought territory.

At the same time, spot gold drifted slightly lower to $1,237.16 a troy ounce. The yellow metal has gained significant ground over the past four weeks, with prices rebounding 3%. However, gold’s returns have been less reliable with the seven-year bear market showing little signs of abating.

The crossover in price has been largely driven by improving fundamentals in the palladium market and a prolonged supply crunch that is making the cost of borrowing extremely expensive. As Bloomberg notes, “Holdings in exchange-traded products backed by palladium are at the smallest in almost a decade as investors pull the metal and offer the commodity for lease.”

The cost to borrow the metal for one month has reached a record high of 22% amid the buying frenzy.

Severe Shortfall

Palladium is a key commodity in gasoline-powered automobiles and is expected to see higher input in the future as markets shift away from diesel fuel. At the same time, the shift toward electric vehicles is also expected to catalyze the use of palladium in the foreseeable future. This has created a severe shortfall of available palladium, with the London-based Metals Focus Ltd. forecasting a deficit of 1.4 million ounces next year.

As Hacked reported last month, investors should keep a close eye on raw materials over the next two years as the market for electric cars heats up. The International Energy Agency (IEA) expects there to be 125 million electric vehicles on the road by 2030, up from just 3.1 million last year.

The supply crunch isn’t just limited to palladium, but includes primary metals such as copper, aluminum and nickel. Following years of underinvestment, the price of raw materials could skyrocket next year as demand grows and investors scramble for available supplies.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 691 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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