Precious Metals Rally to 2-Week Highs on Expectations for Additional Central Bank Stimulus
Dec Comex gold (GCZ19) on Monday closed up +16.4 (+1.08%), and Dec silver (SIZ19) closed up +0.862 (+4.83%).
Precious metals on Monday rallied to 2-week highs Monday on the outlook for additional stimulus measures from global central banks. Weak manufacturing data from Europe on Monday suggests the ECB may expand stimulus measures, which is bullish for gold as a store of wealth.
The Eurozone Sep Markit manufacturing PMI unexpectedly fell -1.4 to a 6-3/4 year low of 45.6, weaker than expectations of +0.3 to 47.3. Also, the German Sep Markit/BME manufacturing PMI unexpectedly fell -2.1 to a 10-1/4 year low of 41.4, weaker than expectations of +0.5 to 44.0.
Comments Monday from ECB President Draghi were also supportive for precious metals prices when he told the European Parliament that the Eurozone economy faces "persistent downside risks" and that monetary policy needs to remain highly accommodative for a prolonged period of time.
Comments on Monday from St. Louis Fed President Bullard were also bullish for precious metals prices when he said "the FOMC may choose to provide additional accommodation going forward" to offset downside risks from trade conflicts and too-low inflation.
No-deal Brexit concerns have also boosted safe-haven demand for precious metals after UK Prime Minister Johnson on Monday cautioned against the chances for a Brexit breakthrough when he meets European leaders on the sidelines of the UN General Assembly this week.
Precious metals still have strong safe-haven demand from geopolitical risks in the Middle East after Iran's foreign minister last Thursday warned that any U.S. or Saudi strike on his country in response to Saturday's attack on Saudi oil installations would lead to "all-out war." Also, the U.S. Treasury last Friday said it will impose sanctions on the Central Bank of Iran. Monday's U.S. economic data was stronger-than-expected and negative for the safe-haven demand of precious metals after the Aug Chicago Fed national activity index rose +0.51 to 0.10, stronger than expectations of +0.33 to -0.03. Also, the Sep Markit manufacturing PMI rose +0.7 to 51.0, stronger than expectations of +0.1 to 50.4.
Ongoing trade and geopolitical tensions, along with dovish central bank expectations, sparked fund buying of precious metals as long gold positions in ETFs rose to a 6-1/2 year high last Friday and long silver positions in ETFs rose to a new record high on Sep 2. More recently, however, fund liquidation reduced long silver positions in ETFs to a 1-month low Thursday.
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