Silver Leads Precious Metals Rally on Rising Haven DemandDebarati Roy
Silver prices, which jumped the most in more than four months yesterday, may extend a rally today as as signs that the U.S. economy is slowing boosted the appeal of haven assets.
U.S. companies boosted payrolls by 175,000 last month, trailing the 185,000 projection in a Bloomberg survey, ADP Research Institute said yesterday. The data added to economic concerns after a private report this week showed factories expanded in January at the weakest pace in eight months. Silver and gold are rebounding after declines last year that were the biggest since 1981. A brightening growth outlook prompted the Federal Reserve to start cutting stimulus in December.
About $3 trillion has been erased from the value of equities worldwide this year amid a slump in emerging-market currencies and slowing expansion in China. The global turmoil reignited demand for precious metals after some investors lost faith in them as stores of value in 2013. Sales of gold coins by the U.S. Mint rose 63 percent in January to the highest since April, while silver purchases almost tripled.
“The correction in equities and disappointing economic data are pushing people to safe-haven assets,” Tommy Capalbo, a broker at Newedge Group in New York, said in a telephone interview. The “ADP data did not meet market expectations, and people have started wondering whether the Fed will continue to taper.”
Silver for immediate delivery gained 0.1 percent to $19.9202 an ounce at 6:22 p.m. New York time. Prices yesterday climbed as much as 3.8 percent, the biggest intraday day jump since Sept. 18. An advance today would be the fifth straight and the longest rally this year.
On the Comex in New York, silver futures for March delivery climbed 2 percent to settle at $19.805 an ounce. Prices rose as much as 4.7 percent. The metal slumped 36 percent last year.
Gold futures for April delivery rose 0.5 percent to $1,256.90 an ounce on the Comex, after reaching $1,274.50, the highest for a most-active contract since Jan. 27.
“Precious metals are bouncing as the equity markets take a hit, and there is turmoil in emerging markets,” Scott Gardner, who helps manage $400 million at Verdmont Capital SA in Panama City, said in an e-mail. “Gold and silver are attracting safe-haven buying”
South Africa’s central bank increased interest rates, Turkey more than doubled them and Argentina’s peso dropped 19 percent against the dollar in January, more than any other currency tracked by Bloomberg. The tumult drove gold 3.1 percent higher, the first monthly gain since August.
Money managers increased their wagers on a gold rally by 40 percent in the week ended Jan. 28 to 60,672 contracts, U.S. government data show. That was the biggest gain since July. The U.S. Mint sold 91,500 ounces of gold coins last month, the most since April, joining counterparts from Australia to Europe in reporting higher demand.
The Fed said Jan. 29 it will cuts its monthly bond buying to $65 billion from $75 billion, the second straight $10 billion cut. Gold rose 70 percent from December 2008 to June 2011 as the Fed pumped more than $2 trillion into the financial system.
Bullion holdings through exchange-traded products fell 33 percent in the past year, erasing about $70 billion from the value of the funds.
For gold investors, there’s “more pain to come” after prices tumbled 28 percent last year, Morgan Stanley analysts Peter Richardson and Joel Crane wrote in a report Jan. 22. The bank cut its 2014 target 12 percent to $1,160 an ounce. Goldman Sachs Group Inc. sees prices at $1,050 in the next 12 months, the banks said in a Jan. 12 report.
“In the short term, there could be some upside, but I am not convinced as yet that there is any strength in the rally,” Bill O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview.