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Multiple Factors Could Move Gold Higher

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Both gold and silver are trading modestly lower on the day, and platinum and palladium are trading higher. As of 4:20 PM Eastern standard time February gold Comex futures are trading off by $2.70 (-0.21%), and fixed at $1291.10. Silver futures are also trading lower on the day. The most active March contract is currently fixed at $15.55, with a net decline of almost 9 cents on the day.

However, it is been palladium that has been the recipient of incredible rally as supply-side issues continue to create strong bullish sentiment. Currently March Palladium futures are at $1356 per ounce, gaining $37.50 on the day (+ 2.84%).

However, current pricing at $1356 is well off of today’s highs which swelled at $1396.40. During today’s high Palladium was trading up $74 on the day before moving to current pricing.

There are multiple fundamental factors that have been highly supportive of the precious metals taking them higher. More so these factors continue to weigh heavily on market participants and continue to fuel a robust bullish sentiment.

First off, the US dollar has been under pressure recently. After hitting 97.50 during the first week of December last year, pricing has been consistently declining on a weekly basis up until this week. Currently the dollar is at 95.73, which translates to almost a 2% drop in value since the beginning of December 2018.

Recent dollar weakness is a reflection of a shift in market sentiment based upon the Federal Reserve maintaining a much more dovish tone recently. Market participants believe that the Fed will be much less aggressive in terms of the number of rate hikes initiated this year. Also, there has been talk for the first time about addressing their massive balance sheet liquidation which has been on autopilot since the Federal Reserve shifted their monetary policy to favor normalization.

Secondly, Brexit continues to shake up the financial markets. U.K Prime Minister survived a no-confidence vote. However, the disunity between Theresa May and the opposition party continues to grow. This uncertainty has been supportive of the dollar as European central banks continue a policy of monetary easing.

Third, the U.S government is still partially shutdown, now for the 27th day. This is the longest shutdown of the government in history. Although it has not had a tremendous influence on the financial markets, if politicians are unable to resolve their issues in a timely manner and fund the government, it could affect GDP.

Lastly if negotiations regarding the trade war between the United States and China begin to make some headway that would be bullish for gold as it would put more pressure on the US dollar.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer