ECM: Silver Prices Edge Higher after Last Week’s Rebound
Silver futures were on pace for their third consecutive daily advance Monday, although gains were limited after the US dollar recouped some of Friday’s massive decline.
Silver for July delivery rose 9 cents or 0.5% to $16.46 a troy ounce on the Comex division of the New York Mercantile Exchange. The grey metal spiked 2.1% Friday after disappointing jobs data sent the US dollar spiralling.
Relative strength is approaching 50, having rebounded sharply from oversold levels. Price action remains weak, with the 50-day moving sloping sharply downward.
Gold futures advanced moderately on Monday. The August futures contract was last up 90 cents or 0.8% at $1,243.80 a troy ounce. Meanwhile, platinum prices rose 45 cents or 0.1% to reach $987.48 a troy ounce.
Precious metals rebounded sharply Friday after the May nonfarm payrolls report showed the weakest pace of hiring in nearly six years, raising fresh fears about the health of the world’s largest economy. US employers added a mere 38,000 workers to payrolls last month, well below forecasts calling for 162,000. Nearly half a million people exited the workforce, pushing the unemployment rate down to 4.7% from 5%.
The dismal report sent the US dollar into freefall against a basket of world peers. The dollar index closed down 1.6% at 94.03, a three-week low.
The dollar recovered some of those losses Monday morning. The dollar index climbed 0.2% to 94.18, having reached an earlier high of 94.27.
Weak jobs numbers all but guarantee the Federal Reserve will not raise interest rates at its next policy meeting on June 14-15. The prospects of a July rate increase have also faded, according to the CME Group’s FedWatch tool. As of Friday, the probability of a July rate hike was only 31%, down sharply from around 60% earlier in the week.
The 30-day Fed Fund futures prices are used to express the market’s views on the probability of changes in US monetary policy.
Further delays in the Federal Reserve’s rate tightening plans could help silver and other precious metals recoup last month’s losses. The grey metal was considered bullish at the end of April, when it spiked above $17 a troy ounce. As it currently stands, precious metals and the dollar are trading inversely with one another, a trend expected to continue over the short term.
Fed Chair Janet Yellen will deliver a speech on Monday that will be closely followed by market participants.
In economic data, a private gauge of Australian inflation declined in May, which could leave the door open for another rate cut by the Reserve Bank of Australia (RBA). The Melbourne Institute’s monthly inflation gauge declined 0.2% in May. That translated into an annualized gain of 1%, down sharply from 1.5% the previous month.
The RBA, which targets inflation between 2% and 3%, will hold its monthly policy meeting on Tuesday. Stronger than expected economic growth in the first quarter will likely keep policymakers on hold for the time being.
Australia’s gross domestic product rose 1.1% in the first quarter and 3.1% annually, the biggest gain in three years.
In European data, German factory orders declined more than expected in April, highlighting weak export demand for Europe’s largest economy. Factory orders declined 2% from March, data from the Economy Ministry showed on Monday. Economists forecast a decline of only 0.5%.
Meanwhile, a gauge of Eurozone investor confidence rose faster than expected. The Sentix investor confidence index rose to 9.9 in June from 6.2 last month. That was well above forecasts calling for a reading of 7 and the highest level since December.
In addition to the RBA, several other events will make headlines Tuesday. Japan will release its leading economic index, a closely followed indicator of the world’s third largest economy. In Europe, Germany will report on industrial production for the month of April. Meanwhile, the European Commission’s statistics branch will release revised first quarter Eurozone GDP figures.
Japan will also release revised first quarter GDP numbers Wednesday morning, followed by Chinese trade figures for the month of May. In Europe, the UK Office for National Statistics will report on industrial and manufacturing production for the month of April. Separately, the National Institute of Economic and Social Research (NIESR) will release its latest estimate of UK GDP growth for the three months to May.
