Silver futures extended their gains Tuesday, as a tumbling US dollar and mixed global cues supported another rally in precious metals.
Silver for May delivery climbed 18 cents or 1.1% to $16.13 a troy ounce, putting it on pace for the highest close of the year on the Comex division of the New York Mercantile Exchange. The grey metal experienced initial weakness before turning higher just prior to the North American session.
Relative strength is above 60 and rising rapidly, while the MACD is showing sharp upward momentum. Price action in silver futures is strengthening, with the 50-day moving average on a continuing upward trajectory.
Tuesday marked the grey metal’s fourth consecutive daily gain, a streak that has seen price accelerate more than 7%. The grey metal is considered bullish above the March 31 close of $15.46. However, silver futures are likely to face stiff resistance near $16, a price level that has been difficult to penetrate since September 2015. A clear break above that level could expose a further upside rally in silver futures in the coming months.
Surging silver prices also confirmed gold’s breakout. Gold futures rallied for a fourth consecutive day Tuesday to approach three-week highs. The yellow metal was last up $4.30 or 0.3% to $1,262.30 a troy ounce.
The gold-silver ratio that is used by investors to determine when to buy and sell precious metals plunged to 78.67 Monday. A reading below 80 is generally considered favourable for silver.
Precious metals have surged at a double-digit percentage pace since the beginning of the year, partly reflecting weak investor sentiment and partially in response to a weaker US dollar. The US dollar index, which tracks the performance of the US currency against a basket of rivals, has declined 4.6% this year.
The dollar index was consolidating higher Tuesday, climbing 0.2% to 94.11. The dollar’s gains were largely driven by a stabilizing Japanese yen. The USD/JPY exchange rate referenced by the global currency markets rebounded 0.4% to 108.40. The pair had bottomed near 18-month lows last week, confounding the Bank of Japan’s ongoing efforts to weaken its national currency.
Precious metals priced in US dollars usually have an inverse relationship with the US currency. The dollar index’s record high of 164.72 in February 1985 coincided with a gold price of around $284.25 an ounce, according to mining.com.
Investor sentiment was mixed Tuesday, indicating that the latest rally in precious metals was partly due to risk-off sentiment. Asian stock markets finished mixed, with mainland China’s Shanghai Composite Indexfalling 0.3%. In Tokyo, the Nikkei 225 index rose more than 1%.
European markets drifted between gains and losses Tuesday. Eurozone benchmark Euro Stoxx 50 Pr was little changed in the afternoon session. London’s FTSE 100 Index also held steady, while Germany’s DAXIndex posted modest gains.
American stock futures traded slightly higher ahead of Tuesday’s open. Wall Street’s major indices turned lower in the final moments of trading Monday, as investors looked ahead to first-quarter earnings season. According to financial research firm FactSet, first quarter earnings for S&P 500 companies are expected to fall 8.5%.
In economic data, Germany’s harmonized inflation rate was confirmed at 0.1% in the 12 months through March, the Federal Statistics Office reported Tuesday. Inflation in Europe’s largest economy stood at -0.1% annually in February.
Consumer prices in the UK also gathered pace in March, strengthening to the highest level since December 2014, the Office for National Statistics reported Tuesday. The consumer price index strengthened to 0.5% in the 12 months through March, up from 0.3% in February. So-called core inflation, which strips away volatile goods such as food and energy, improved to 1.5% annually from 1.2%.
The economic calendar heats up Wednesday with several reports from around the globe. China will release its latest trade figures. Exports are expected to rebound from a more than 25% decline in February.
The European Commission will also report on Eurozone industrial production. Output is forecast to decline 0.5% in February.
In the United States, the Commerce Department is expected to report a strong rebound in retail sales on Wednesday. Retail receipts are projected to rise 0.4% in March after declining 0.1% the month before.
Separately, the Labor Department will also release producer inflation data. Producer prices are expected to rise 0.2% month-on-month after declining by the same amount in February.
Courtesy: Sam Bourgi
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