Gold and silver futures rose to the highest since February as the dollar’s decline boosted demand for the precious metals as alternative investments.
The greenback slumped against a basket of 10 currencies to the lowest since January after a government report showed Wednesday that U.S. retail sales stalled in April, damping prospects for an increase in interest rates by the Federal Reserve. On Thursday, gold climbed for the third straight day, the longest rally in seven weeks.
Higher rates curb gold’s appeal because the metal generally offers returns only through price gains, while a weaker dollar can increase demand for the metal as a store of value. A spate of disappointing U.S. economic data pushed the Bloomberg Economic Surprise Index this month to the lowest in six years, suggesting policy makers aren’t close to raising their benchmark.
“The strong correlation between gold and the dollar is back,” Michael Smith, the president of T&K Futures & Options Inc. in Port St. Lucie, Florida, said by telephone. “Gold has found a bottom.”
On the Comex in New York, gold futures for June delivery rose 0.6 percent to settle at $1,225.20 an ounce at 1:50 p.m. Earlier, the price reached $1,227.70, the highest for a most-active contract since Feb. 17. The metal topped the 200-day moving average for the first time since February.
Most economists in a Bloomberg survey late last month predicted the central bank will start tightening in September, rather than at next month’s meeting. The Fed has held rates near zero percent since 2008.
Wholesale costs in the U.S. unexpectedly fell in April, government data showed Thursday. Fed officials are looking for signs that price growth will rise toward their goal as they consider raising rates for the first time in nine years.
Silver futures for July delivery climbed 1.4 percent to $17.465 an ounce on the Comex. The price reached $17.585, the highest since Feb. 4. Volume on all contracts was 33 percent above the 100-day average, according to data compiled by Bloomberg.
Platinum futures for July delivery advanced 1 percent to $1,162.40 an ounce on the New York Mercantile Exchange.
Palladium futures for June delivery fell 1.3 percent to $779.50 an ounce, the first decline in three days.
This year, silver has climbed 12 percent, and gold is up 3.5 percent. Platinum has dropped 3.9 percent, and palladium is down 2.4 percent.