Yellow metal breaches psychological mark above $1,500
Silver prices on Wednesday surged by the most in nearly three years and gold settled sharply above an important psychological level at $1,500, amid a round of easy-money policies that helped to stoke fresh appetite for the perceived safety of precious metals.
The 10-year U.S. Treasury note’s TMUBMUSD10Y, +2.69% fall to new lows not seen since 2016 below 1.7%, also helped to drive demand for bullion.
September silver SIU19, -0.09% surged 75.1 cents, or nearly 4.6%, to end at $17.196 an ounce, after gaining or 0.3% on Tuesday, breaching its own psychologically important level above $17. That marks silver’s highest level since 2018, and the firmest one-day gain for gold’s sister metal one point basis since Sept. 6, 2016 and July 2016 on a percentage basis, according to FactSet data.
Meanwhile, December gold GCZ19, -0.43% on Comex added $35.40, or 2.4%, to finish at $1,519.60, marking the highest level for the precious metal since 2013 based on most-active contracts, according to Dow Jones Market Data. The gain also is the most-active contract’s largest daily advance since June 20 when the precious metal surged $48.10 or 3.6%, according to FactSet data.
“Gold captured the $1,500 an ounce level and the rally seems set to roll on as no one is expecting any immediate progress on the trade front and the proactive easing efforts from central banks globally,” wrote Edward Moya, senior market analyst at Oanda, in a Wednesday research note. “When the Fed capitulates later this month that could be the catalyst to support the drive towards the $1,650 an ounce level.”
Central bank’s in India, New Zealand and Thailand on Wednesday lowered their domestic interest rates to levels that are lower than had been expected, highlighting anxieties centered on the health of the world-wide economy.
Those policy moves come amid worries that the U.S.-China tariff conflict won’t subside soon. An environment with debt yields also hovering at ultra-low levels, and in many cases negative levels, also has supported buying of the yellow metal, which tends to rise during times of global economic uncertainty.
Lower and negative yields for government debt, because precious commodities don’t offer a coupon, have buttressed buying in gold and silver over the past several months, as investors seek places to store capital in a slumping economic backdrop.
For the year, gold has gained 18.5% and silver has climbed 9.3%. By comparison, the Dow Jones Industrial Average DJIA, -0.09% has returned 10.2% year to date, the S&P 500 index SPX, +0.08% has climbed 14%, while the Nasdaq Composite Index COMP, +0.38% has advanced 17.4%.
A recent report from Sprott Asset Management contributor Paul Wong, tracking gold and silver trading in July, notes that buying of those precious metals has spread to individual investors. “We are now just starting to see gold buying broaden out to retail, individual investor level. By all historical measures, we should see silver play a phenomenal catch-up trade to gold in the next few months,” he wrote.
He said mounting anticipation that further interest rate cuts from the rate-setting Federal Open Market Committee will follow, despite Fed Chairman Jerome Powell referring to the July 31 quarter-point rate cut as a “mid-cycle adjustment,” also has elevated gold and silver appetite.
“Any hope that this would be a “one and done” type rate hike has quickly been dashed with the latest trade war salvo,” Wong wrote.
The market is now pricing in a 35% chance (up from 15% a day ago) of a 50-basis-point cut to rates currently at a range of 2%-2.25%, and a 65% likelihood of a quarter-of-a-percentage point rate reduction at the conclusion of the Fed’s next policy meeting on Sept. 18, based on federal-funds futures, according to CME Group data.
Exchange-traded fund, the SPDR Gold Shares GLD, +1.52% has risen 17% in the year to date and the miner-focused VanEck Vectors Gold Miners ETF GDX, +2.06% has gained 40% thus far in 2019. The silver ETF, the iShares Silver Trust SLV, +3.84%, has gained more than 10% over the year.
Elsewhere on Comex, October platinum PLV19, -0.21% added $17.80, or 2.1%, to $871 an ounce. September palladium PAU19, +0.90% shed $26.70, or 1.9%, to settle at $1,410.30 an ounce.
September copper HGU19, +0.84% rose 1.35 cents, or 0.5%, to end at $2.571 a pound.