Commodity Trade Mantra

Gold Jumps, Silver Soars As The U.S. Dollar Slumps

Gold Jumps, Silver Soars As The U.S. Dollar Slumps

Gold Jumps, Silver Soars As The U.S. Dollar Slumps

Gold prices jumped to a seven-week high and silver soared to a 15-month peak. With Japan closed today, and unable for now to do more damage (or damage control), China stepped in with some modest turmoil of its own by strengthening the Yuan fix by the most since 2005, pressuring the USD weaker for the 5th day in a row. World stocks fell and the US dollar remained downbeat after the Bank of Japan left its main policies unchanged after the conclusion of a two-day monetary policy meeting, disappointing market expectations the central bank would take further extraordinary steps to stimulate Japan’s economy. The dollar and euro posted their biggest daily losses against the yen in more than five years on Thursday after the BOJ policy decision. The yellow metal has been witnessing good bargain buying amid rising crude oil prices. Ideas that Indian demand would hold steady in coming months is also keeping the metal well protected. COMEX Gold is currently quoting at $1282.60 per ounce, up 1.2% on the day. MCX Gold futures hit highs at Rs 30,050 per 10 grams and currently trade at Rs 29990 per 10 grams, up 1% on the day. Silver surged 2% to $17.867 an ounce, its highest since January 2015. MCX Silver futures shot up to Rs 41,768 per kg, up 1.6% on the day. The main reason for the gold and silver price rally is that the markets expected the BOJ to announce more easing measures and the dollar continues to weaken.

U.S. data on Thursday supported views the Fed will take a cautious stance in hiking rates this year. U.S. economic growth braked sharply in the first quarter to its slowest pace in two years. Gold prices are highly sensitive to rising interest rates, which lift the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced. All precious metals rose as a gauge of the dollar touched an 11-month low after weaker-than-expected U.S. economic growth cut prospects for higher interest rates, adding to the appeal of non-yielding assets. Traders now see a 59 percent chance of the Federal Reserve raising borrowing costs this year, down from 64 percent at the start of this week.

In a keenly watched update, the Federal Reserve left interest rates unchanged on Wednesday, but kept the door open to a hike in June even as it implicated that it is no hurry to tighten monetary policy amid an apparent slowdown in the US economy. The committee continues to closely monitor inflation indicators and global economic and financial developments, the Fed said following a two-day meeting. The Fed acknowledged that economic growth seemed to have slowed. The Federal Reserve’s decision on Wednesday to leave interest rates unchanged also supported gold and silver bullion prices.

It also said it was closely watching inflation and noted that global economic headwinds remained on its radar, though it made no mention of the risks they posed, as it had last month. The committee continues to closely monitor inflation indicators and global economic and financial developments. Investors currently see a 23% probability that the Fed’s overnight lending rate will rise in June, up from 21% prior to the decision, according to CME’s FedWatch group.

On the European front, Eurozone economic confidence improved more-than-expected in April after falling for three consecutive months to reach a one-year low level. The economic sentiment index rose to 103.9 from 103.0 in March, survey data from the European Commission showed Thursday. The increase in sentiment resulted from improvements in confidence among consumers and in all business sectors except retail trade, where confidence decreased slightly.

Silver’s 15 percent surge this month has bettered gold’s advance amid optimism that industrial usage will increase as China’s economy shows signs of stabilizing. About half of the metal’s demand comes from products ranging from electronics to solar panels. The country’s silver imports climbed 39 percent in March, rebounding from the lowest since 2014, customs data show. After three straight years of losses, analysts are finally prepared to say gold prices have found a bottom, with rising prices seen this year and next as concerns over the pace of U.S. monetary policy tightening fade.


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