Precious metals on Tuesday settled lower. Strength in the dollar on Tuesday pressured metals prices. Also, silver prices fell sharply on concern that the spread of a Covid variant in England will lead to tighter lockdowns that curb economic growth and industrial metals demand. Precious metals retreated Tuesday despite the action by Congress on Monday night to pass a $900 billion debt-fueled pandemic stimulus package.
A mutated strain of Covid is spreading throughout the UK, which prompted the British government to impose a full lockdown in London and southeast England that is forcing 16 million Britons to stay at home. Also, the UK port of Dover, England's biggest, stopped all traffic heading to Europe, and many countries have banned flights from the UK in response to a record surge of Covid infections in the UK. The actions by the UK government to tighten Covid restrictions are dovish for BOE policy and bullish for gold prices, but are negative for economic growth and industrial metals demand and are bearish for silver prices.
A supportive factor for precious metals was the action by Congress late Monday night to finally pass a $900 billion debt-fueled pandemic relief plan. The aid package was attached to a $1.4 trillion omnibus spending bill that will fund government operations through the end of the fiscal year on September 30, 2021.
Tuesday's U.S. economic data was mixed for metals prices. A bullish factor for gold, but a negative factor for silver, was the Conference Board's U.S. Dec consumer confidence index report of -4.3 to a 4-month low of 88.6, weaker than expectations of an increase to 97.0. A bearish factor for gold, but a positive factor for industrial metals demand and silver prices, was the upward revision to U.S. Q3 GDP to +33.4% (q/q annualized) from +33.1% (q/q annualized), the fastest pace of growth since quarterly data began in 1947.
Gold prices have safe-haven support from the Brexit crisis. The EU on Tuesday rebuffed UK Prime Minister Johnson's latest concession on fishing rights. Johnson made an offer that would see the value of the fish EU boats catch in British waters shrink by 30%, more than EU demands of a maximum 25% reduction. Time is running out for a Brexit deal with only nine days left before the UK leaves the EU single-market with or without a trade agreement.
The worsening pandemic is curbing global economic growth and is forcing global central banks to remain highly dovish, which is bullish for gold as a store of value. It also may force countries to keep lockdowns in place for longer, which will undercut economic growth and industrial metals demand. The U.S. 7-day average of new Covid deaths rose to a record of 2,712 on Monday. The Covid virus has infected 77.862 million persons globally, with deaths exceeding 1.712 million.
Safe-haven demand and dovish central bank expectations have sparked fund buying of precious metals in recent months. However, long liquidation has set in after long gold positions in ETFs fell to a 4-3/4 month low last Thursday, down from October's record high of 3,459.8 metric tons (data since 2002). Also, long silver positions in ETFs fell to a 2-1/4 month low on November 30, down from November's record high of 904.165 million troy ounces.
