Disclaimer: All information on this section is of a general nature.
Before making any investment decision, you should consult your adviser.
Daily Resources Overview - 13 Aug 2018
PRECIOUS METALS COMMENTARY
The gold price fell despite the Turkish currency crisis as money preferentially moved into the
US dollar. Although analysts correctly believe that if this crisis expands it would have a
profound impact on gold pricing, the real question becomes will gains in gold be able to
compensate for dollar strength in any real sense?
Obviously, gold has made a sizable move when paired against other foreign currencies such
as the euro-dollar and British pound. However, for those that pair gold against dollars, it is an
uphill battle at best, and at least for today, the U.S. dollar has come out on top.
What is it going to take? That is the question many frustrated investors are asking
themselves as the yellow metal is seeing only modest buying pressure as half of the world’s
economy teeters on the brink of a currency crisis.Although reaction has been relatively small
in the gold market, some analysts are expecting the metal’s safe-haven appeal to pick up as
the world grapples with Turkey’s growing currency crisis. Loose monetary and government
fiscal policies have boosted the nation’s economy but they have also created a significant
risk for the lira. Friday saw the lira hit historic lows against the U.S. dollar. At one point, the
U.S. dollar was up 24% against Turkey’s currency.
The one bright side for the lira is that it is not the worst performing currency out there. Bitcoin
still holds that title, but that is probably not much consolation. This isn’t just a Turkey story
either. Three European banks have been identified as having significant exposure to Turkey:
Spanish Bank, BBVA, Italian Bank Unicredit and French Bank BNP Paribas. There is
growing concern that Turkey’s problems could spill into Europe, which would be a significant
drag on the region’s economy.
You can see that concern in the gold market as the precious metal rose more than 1% on the
week against the euro. At least some investors still see gold as a safe-haven asset. We just
need American investors to pay attention. The question is, can this latest crisis be the spark
that ignites new buying momentum in the marketplace. Many analysts have noted that
speculative positioning is at historic lows and it would not take much to spook those
investors, creating a short-covering rally. Source: Kitco