Silver futures rally by more than 6%
Gold futures climbed Tuesday to a nearly nine-year high and silver rallied to prices not seen since 2014, with the precious metals lifted by an agreement on a fiscal rescue plan by European leaders and expectations for additional spending by the U.S. government.
European Union leaders ended a grueling four-day summit with an agreement on a €1.8 trillion ($2.1 trillion) budget and rescue-fund package aimed at shoring up the worst-hit economies in the wake of the COVID-19 pandemic.
The EU deal also lent support to equities, with U.S. benchmark stock indexes headed higher on Wall Street. However, gold, a traditional haven asset, was also boosted on expectations fiscal stimulus efforts could stoke inflation and lead to a weaker U.S. dollar.
A weaker dollar can be a positive for commodities priced in the currency, making them cheaper to users of other currencies. In Tuesday dealings, the ICE U.S. Dollar Index
traded down nearly 0.3% at 95.59.
“Clearly, the passage of the EU recovery fund combined with the beginning of negotiations on another U.S. stimulus package provides a solid backdrop for the bull camp,” analysts a Zaner Metals wrote in a daily note. “In fact, overnight the dollar broke out down to the lowest level since the March 10th U.S. lockdown panic and therefore currency forces should be poised to add to the bull track.”
Gold for August delivery
on Comex rose $23.20, or 1.3%, to $1,840.60 an ounce, after touching a high of $1,843.70. Prices based on the most-active contracts, haven’t traded or settled at level this high since September 2011, according to Dow Jones Market Data.
Silver also surged, with the September contract
up $1.293, or 6.4%, at $21.485 an ounce after a high at $21.55. Most-active silver futures touched their highest intraday level and were headed for their highest settlement since July 2014.
“Silver has also been on fire and continues to play catch up to gold,” said Edward Moya, senior market analyst at Oanda. “Now that the $20 level has been cleared, bullish momentum might not see much resistance until its closer to the $22.50 level.”
Silver prices had settled early last week, and again on Monday, at the highest since September 2016.
Europe’s fiscal package “comes on the back of vast monetary support from the European Central Bank, as well as other major central banks around the world. In the U.S., talks are about to kick off on the next virus relief plan, which could see at least an additional $1 trillion added to the previous stimulus measures – especially as some of the existing measures are about to expire,” said Fawad Razaqzada, analyst with ThinkMarkets, in a note.
Other metals climbed as well, with platinum and palladium moving up sharply. October platinum
rose 6.8% to $915.20 an ounce and September palladium
added 5.6% to $2,228.30 an ounce, headed for the highest settlement since late March. September copper
rose 1.1% to $2.947 a pound.
“The platinum and palladium markets have begun to show very positive sensitivity in sync with gains in gold and silver prices,” said analysts at Zaner Metals.