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3 Developments That Could Propel Precious Metals in the Second Half of 2018

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Gold and silver prices have continued to lag in July. A rate hike from the United States Federal Reserve in June buried the base value of precious metals prices, as the dollar regained momentum. U.S. indexes also surged on data that showed the country added 213,000 jobs in June.

What does this mean for precious metals equities? It has been a mixed bag so far. Wheaton Precious Metals Corp. (TSX:WPM)(NYSE:WPM), a Vancouver-based silver producer, has seen its stock rise 2.4% month over month as of close on July 9. Silvercorp Metals Inc. (TSX:SVM)(NYSE:SVM) has dropped 0.27% over the same period, and Kinross Gold Corporation (TSX:K)(NYSE:KGC) has surged 10%.

The second half of 2018 could spark big moves for gold and silver. Today, we are going to look at three crucial developments that may have an impact moving forward.

U.S.-North Korea talks on shaky ground

The meeting between U.S. president Donald Trump and North Korean leader Kim Jong-un appeared to give hope to a new stage in relations. The enthusiasm was even enough to drive gold and silver down following the Singapore summit. A two-day round of talks between U.S. secretary of state Mike Pompeo and top North Korean official Kim Yong Chol in Pyongyang is testing the renewed optimism.

After the meetings had concluded, the North Korean foreign ministry released a statement that sharply criticized the U.S. for “its unilateral and gangster-like demand for denuclearization.” North Korea declared that trust between the two sides was now at a “dangerous” stage. It characterized the stance of the Trump administration as “the same cancerous ones that the past U.S. administrations had insisted on.”

President Trump has continued to express confidence that a deal can be made. With no concrete deal on the table, and North Korea pushing back on U.S. demands, it is possible that tensions could reignite on the Korean Peninsula.

Political crisis in Britain

Gold prices were up marginally following the resignation of United Kingdom foreign secretary Boris Johnson. His resignation made him the third minister in the last 24 hours to leave the Theresa May government after her proposals for a “soft Brexit.” There have been sharp divisions within the Conservative party over a “hard” and “soft” Brexit that could now threaten Prime Minister Theresa May’s political position.

The ouster of Theresa May would likely result in a general election, which could see a Labour victory under Jeremy Corbyn. A recent poll from the Independent showed a two-point lead for Labour over the Tories. Fierce opposition to a potential Corbyn-led government has been a rallying cry for the Tories, and May pushed this angle in an address to backbench MPs following her appearance before the Commons.

The political crisis in Britain has entered a new stage, and the fate of the earth-shattering Brexit vote hangs in the balance. The 2016 referendum saw gold and silver surge as the results became apparent.

Proliferation of protectionism

The tit-for-tat trade disputes have sparked volatility in recent weeks. The United States imposed a 25% tariff on $34 billion of Chinese imports this week, while also sending two U.S. navy destroyers through the Taiwan Strait. North American investors are also eagerly awaiting the decision from the Trump administration on possible auto tariffs. These developments should represent the greatest concern for investors looking long term and those who may see gold and silver as a potential safe haven.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. Wheaton Precious Metals is a recommendation of Stock Advisor Canada.

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