Silver futures regained their footing Wednesday to renew a charge to a fresh, nearly two-year settlement high, and gold tipped higher as surging U.S. stocks looked to pause their ascent.
The multiday rally in U.S. equities SPX, -0.14% DJIA, -0.07% tarnished the appeal of precious metals, often used as a hedge against higher-risk investments.
September silver SIU6, +0.91% which has been the highflier relative to gold in recent weeks, was up 17.4 cents, or 0.9%, to $20.345 an ounce. Silver had traded as high as $20.595 an ounce intraday in the previous session, buoyed in part because of its use as an industrial commodity, but it followed gold to settle that session lower. Wednesday’s move may take silver to its highest settlement since late July, according to FactSet.
Meanwhile, August gold GCQ6, +0.55% gained $5.50, or 0.4%, to $1,340.80 an ounce. On Tuesday, gold closed down for a fourth-straight session on the back of a rally in the U.S. stock market.
“We will be watching to see how gold performs against a backdrop of steadily improving equity markets,” said Edward Meir, independent commodity consultant at INTL FCStone, in a note.
“We still think that the preponderance to ease further, now being pursued by a host of central banks, will likely provide an element of support to gold and prevent a noticeable deterioration in the hard-won gains the precious metal has chalked up so far th is year,” he said.
On Wednesday, the U.S. Dollar Index DXY, -0.37% fell 0.2%, resuming a typical relationship in which the buck and precious metals move inversely. Major U.S. stock indexes traded narrowly higher.
Interest-rate fundamentals—higher rates tend to reduce demand for precious metals that don’t offer a yield—remain a perennial backdrop theme for gold trading. And interest-rate expectations continue to shift.
According to the federal-fund futures market, the probability of a Fed rate increase happening this year is now above 30%. The Fed releases its Beige Book report on the economy Wednesday afternoon after the settlement for gold futures, which could confirm or refute interest-rate predictions.
Taiwan’s President Tsai Ing-wen says an international court’s ruling over the South China Sea dispute has damaged the island’s rights to the Spratly Islands. Photo: EPA
As for gold specifically, the interest-rate headwind for precious metals was “no longer offset by ETF inflows yesterday,” said analysts at Commerzbank in a commentary.
In fact, the gold ETFs tracked by Bloomberg recorded outflows of 10.6 tons Tuesday—their sharpest daily outflow this year. The world’s largest gold ETF, the SPDR Gold Trust, reported an outflow of 16 tons.
“It is still too early to draw any conclusions about trends from this, however,” Commerzbank said. “There are still numerous reasons for investors to choose gold as a safe haven. And another one has emerged since yesterday: the Permanent Court of Arbitration in The Hague has dismissed China’s claims in the South China Sea as unlawful. This verdict could spark renewed political tensions between China and its Asian neighbors, and between China and the U.S.”
In Wednesday trading, the SPDR Gold Trust ETF GLD, +0.76% was up 0.6%, while the iShares Silver Trust SLV, +1.01% gained 1.1%.
Elsewhere in metals, October platinum PLV6, +0.36% added 60 cents, or 0.1%, to $1,098.50 an ounce, while September palladium PAU6, +2.41% gained $12.55, or 2%, to $641.50 an ounce.
September copper HGU6, +1.24% added 3.3 cents, or 1.5%, to $2.246 a pound.
Copper is often sensitive to China developments, said Colin Cieszynski, chief market strategist at CMC Markets, but copper traders ignored June data showing a decline from a year ago in Chinese imports in yuan terms. Read the Asia Markets column.
“This indicates traders remain positive about the prospects for the broader global economy? and the potential for more stimulus in Japan (amid talk of fiscal programs and denial of helicopter money) and the U.K. (ahead of Thursday’s Bank of England meeting),” said Cieszynski.
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