Precious Metals Review
Never Miss Investing News from Monex
Week of October 16, 2020
Quotes of the Week
“Gold settled in the green zone for a second straight day on Thursday, staying above the key $1,900 an ounce level despite a din of confusion over what the Trump administration wants for a new Covid-19 relief deal.
After U.S. Treasury Secretary Steven Mnuchin unwittingly triggered Tuesday’s financial markets’ implosion by doubting an agreement on a coronavirus stimulus anytime soon between him and House Speaker and Democrat rival Nancy Pelosi, more talk emerged from the White House and Senate on Thursday that didn’t take the matter further.
Mnuchin gave a call-in interview to CNBC on Thursday, reiterating that he was open to doing a modest and “targeted” deal with Pelosi, suggesting she move some $300 billion of previously allotted money to needy Americans. The House Speaker, arguing that President Donald Trump was seeking a symbolic victory ahead of the Nov. 3 election rather than genuinely helping struggling poor people, has refused to do half measures, sticking to her proposed $2.2 trillion package.
Trump, who faces Democrat Joe Biden in the Nov. 3 election, reiterated his $1.8 trillion offer in an interview on Fox Business. But Senate Majority Leader and Trump’s top ally Mitch McConnell later told reporters that he could only get votes for a $500 billion account, and that too after the election.
Despite the back and forth, gold prices rose. Though modest, it was a remarkable performance by the yellow metal, considering that the dollar also rallied.
U.S. gold for December delivery settled at $1,908.90 an ounce on New York’s Comex, up $1.60, or 0.1%. On Wednesday, December gold rose 0.7%, recovering some ground after a 1.8% plunge the previous day.
Spot gold, which reflects real-time trades in bullion, was up 4.16, or 0.2%, at $1,905.82 by 3:00 PM ET (19:00 GMT).
“Gold is hovering around the $1,900 level and seems poised to consolidate until the U.S. presidential election passes,” said Ed Moya, analyst at OANDA in New York.
“Fiscal stimulus before November 3rd seems less likely and if the election yields a blue wave, Biden’s infrastructure spending plan will be very negative for the U.S. dollar and in turn positive for gold,” Moya said, referring to the blue colors of the Democrat party.”
“Move is intended to prevent speculators from causing price swings; agricultural, metal and energy commodities affected
The nation’s top derivatives regulator voted Thursday to establish limits on the size of speculators’ bets in markets for commodities including gold, cattle and crude oil, completing a long-delayed effort to enact a provision of the 2010 Dodd-Frank Act.
The Commodity Futures Trading Commission established so-called position limits for the first time on 16 agricultural, metal and energy commodities, while updating federal caps on nine agricultural products that were already subject to them. By limiting the number of contracts that a single participant can amass, the rule aims to prevent speculators—as opposed to users or producers of the commodities—from causing price swings that don’t reflect underlying supply-and-demand dynamics.
The Dodd-Frank Act, passed after the 2008-09 financial crisis, included a provision requiring the CFTC to set position limits in response to lawmakers’ belief that speculators had caused a sharp increase in oil prices.
But the issue proved remarkably thorny, as it affects a swath of market participants including farmers and ranchers, hedge funds, futures exchanges, energy producers and banks. Four previous formal attempts by the CFTC to establish position limits failed amid opposition from industry, including one final rule that was thrown out by a federal court in 2012.
Completing the rule was a top priority for commission Chairman Heath Tarbert, who took office last year.
“We’ve come a long way, and today we’ve reached the end of an arduous journey,” Mr. Tarbert said. “We’ve balanced the interests of all the participants in this market, some of which are in diametric opposition, and we’ve crafted a workable and flexible system.”
Commissioners voted 3-2 to approve the final rule, with the panel’s two Democrats, Rostin Behnam and Dan Berkovitz, dissenting. Both have said the rule delegates too much authority to futures exchanges.
“The proposed rule demoted the Commission from head coach to Monday-morning quarterback,” Mr. Berkovitz said in a statement during a webcast meeting. “I support effective position limits to restrain excessive speculation in physical commodity markets, coupled with legitimate bona fide hedge exemptions for commercial market participants.”
Messrs. Behnam and Berkovitz also said the CFTC should have waited to vote on a final rule until it had completed a report on a collapse in oil prices in April that sent prices for one commonly used futures contract to minus $37.63 a barrel on April 20.”