Profit-taking Stalls Rally for Metals

October 8th, 2015 by

profit-taking

After riding an impressive 5-day rally in the wake of the Fed’s non-decision in September that pushed spot prices to a 3-month high above $16 per ounce, silver was stopped in its tracks on Thursday morning. Many traders, including those in China returning from a week-long holiday, took profits this morning. Several large funds were also seen cutting their positions on silver overnight and this morning to capitalize on the higher price levels. Silver fell by as much as 50¢ (-3.15%) at one point. Spot silver traded around $15.70/oz by the time stocks opened lower in the New York.

Meantime, platinum and gold were each roughly 0.4% lower, and palladium was actually flat at $700/oz.

As the market lowered its expectations for when the Federal Reserve will raise interest rates, the precious metals broadly saw demand over the last week. Gold slipped as low as $1,115/oz near the end of September. The near-term bottom may well have been in at this point. The precious metals benefited as mounting concerns about the health of the global economy began to stir some safe haven buying. Although falling yields on government bonds indicated that sovereign debt absorbed some of this safe haven flight, there was clearly more room to run.

silver_spotThe recent rally was the best stretch for the metals since January.

Weekly jobless claims came in at a 2-and-½-month low, pointing to more strength in the labor market. First-time claims fell to 263,000, a decline of 13,000 from the week previous and about 11,000 below analysts’ projections. This was also a hair away from a 42-year low for the weekly indicator. Although the Labor Department saw “nothing unusual” about the jobs numbers, the expectation-beating figures helped boost the dollar. The Greenback erased losses of 0.4% from earlier in the morning on the DXY index, returning to 95.5.

While the consistent jobless claims numbers are encouraging, new hiring has slowed. Unemployment has been steady at 5.1% (a 7-year low), and the more telling labor participation rate has improved somewhat. Firms may not be laying people off, but they aren’t making a lot of new hires. The most recent non-farm payrolls showed only 142,000 new jobs added in September. Moreover, wage compensation has been as flat as inflation. (In other words, non-existent.)

India Top Silver Buyer

Source: Reuters

Source: Reuters

According to demand data based on import numbers, India has now surpassed the United States as the world’s top importer of silver. (The focus is on imports. This doesn’t take into account America’s domestic silver production, however.) This continues a gradual trend over the past 5 years of rising silver demand in India, a country known more for its affinity for gold. Draconian gold import duties have made silver an increasingly attractive alternative for Indian bullion buyers. Both precious metals are traditionally found in the form of jewelry in the country.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.