Precious Metals Close Out Week Strong

October 9th, 2015 by

Friday was a solid end to the week of trading for precious metals. Across the board, the metals gained advanced on the back of a softer dollar and a general upswing for the commodities sector.

Gold jumped about $20 per ounce to $1,160/oz this morning, adding 1.75%. Spot silver was 1.25% higher (+20¢) to $15.95/oz, while platinum and palladium added $30 per oz and $7 per oz, respectively. This brought spot platinum up to nearly $985/oz, while palladium hung around $712/oz.

Weaker Dollar

dollar

Source: Bloomberg

The dollar fell by about 0.5% to 94.8 on DXY index this morning, losing ground against its major peers. The Japanese yen moved back toward 120 to the dollar after the Bank of Japan held off on instituting more monetary easing for the time being. Meantime, the euro surged 0.8% against the dollar, hitting a monthly high of $1.137. The euro reached as high as $1.14 in mid-September after approaching $1.16 during August. This was the strongest the Eurozone’s common currency had been against the Greenback since it traded at $1.25 to close out 2014.

The largely inverse relationship between the dollar and the gold price has been well-documented. The chart below clearly shows the divergent paths that the USD and the gold price chart relative to one another.

Source: Bloomberg

A comparison of the gold spot price to the dollar index on Friday. Source: Bloomberg

The performance of the dollar, although sharing such a strong inverse correlation with gold, cannot entirely explain the jump in precious metal prices this morning.

Commodities Rally

Overall, commodity prices have also rallied to close out the first full week of trading in October. Copper and iron advanced solidly this week—two of the most important industrial metals, often used as a benchmark for judging the entire sector—and crude oil finally broke back above the $50 per barrel mark. WTI crude traded at $49.75/bbl on Friday afternoon while Brent crude, although slightly off, was still above $52.80/bbl.

gold rallyThe influence of other commodities on gold, silver, and the Platinum Group metals shouldn’t be overlooked. Although the precious metals are undoubtedly in an asset class all to themselves, with its own price dynamics, these metals are still mined by the same companies that dominate the coal, oil, and copper markets. Keep in mind that newly-extracted gold and silver often come from mines whose primary resource is copper or some other metal.

Besides their appeal as safe havens and stores of wealth, the precious metals to some degree track along with the other industrial metals and commodities generally. A turnaround in the sector could have a more profound impact on prices than even the influences from the financial markets.

 

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.