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Gold finds support as silver rockets 6%, taking it above $29.00

Commentaries & Views

Both physical gold and gold futures effectively found strong support above $2000 an ounce. Physical gold closed off by approximately $9.40 and is currently bid at $2026. Concurrently gold futures, basis the most active December 2020 contract gained $8.00 and is currently fixed at $2036. In trading overseas yesterday gold opened lower in Australia, however any selloff was short-lived as market participants were able to move gold futures and spot higher buying the initial dip. The December contract of gold futures traded to a low of $2027.80 before recovering and closing higher on the day.

However, silver did not face the strong selling pressure that was evident in gold. Silver futures basis the most active September contract gained 6.21% today, with a net gain of a $1.71. This took the precious white metal above $29 an ounce, closing at $29.25. Silver has almost tripled in price from the lows of mid-March when market forces briefly took pricing below $12 per ounce. Currently silver has been moving up and closing higher for the last consecutive nine weeks.

Both gold and silver have been highly supported by dollar weakness. Both metals have been reacting to the massive quantitative easing initiated by the Federal Reserve along with other central banks. This had the net effect of reducing the value of many core currencies including the U.S. Dollar.

Market participants were also focusing on if a stimulus bill can be agreed upon by members of the house. However, this weekend President Trump signed an executive order.

Now increased tensions between the United States and China have been added to the mix of underlying fundamental support for both precious metals. Today China announced new sanctions in retaliation of similar measures by the United States which imposed actions against Hong Kong.

According to MarketWatch, “China’s move comes as tensions between the U.S. and China, partly centered on Beijing’s perceived handling of the COVID-19 pandemic and national-security laws being imposed in Hong Kong, have been escalating on a number of fronts, including the decision by the superpowers to force the closures of respective consulates in Houston and the southwestern Chinese city of Chengd.”

According to Mark DeCambre, markets editor at MarketWatch, “Investors also were watching developments around additional funding from the government to help Americans who have lost jobs due to the deadly pandemic, after Congressional negotiations failed to reach an agreement on aid last week and Trump on Saturday signed executive orders that aim to pause the collection of payroll taxes, provide help on rent, assist with student-loan payments and extend a portion of additional unemployment benefits that had lapsed at the end of last month.”

These fundamental events that have been at the root of the massive gains in both gold and silver remain. These factors should continue to be highly supportive of both metals. While gold seems to be consolidating, silver continues to surge forward as it tries to catch-up with the new record highs in gold. That being said silver at $29 is still $21 away from its all-time record high.

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.