Turkey And Syria Clash, Asians Take A Shine To Silver

Today’s AM fix was USD 1,790.00, EUR 1,375.55, and GBP 1,105.69 per ounce.

Yesterday’s AM fix was USD 1,786.50, EUR 1,380.92 and GBP 1,109.01 per ounce.

Gold rose $12.30 or 0.69% in New York yesterday and closed at $1,790.80. Gold pulled back after the Fed released Minutes from their September 12th meeting, but it still ended with a gain. Silver finished the day with a gain of 1.16%.

Cross Currency Table – (Bloomberg)
Gold reached an 11 month high on Friday riding its fifth day of gains as quantitative easing from central banks continue to see the yellow metal shine as an inflation hedge while investors await the key US jobs data at 1230 GMT.

The European Central Bank left interest rates unchanged on Thursday and said it was ready to purchase government bonds of debt-laden nations, sending the euro upward and pushing gold near $1,800 - a level that has not been reached since last November.

Tensions in the Middle East are heated as Syria shelled a Turkish town and killed 5 civilians and this has propelled the two former allies into conflict. The United Nations condemned the attack, however yesterday Turkey's parliament gave legal authority to the military to launch cross-border raids into Syria at any time over the next year. The vote passed by 320 to 129. Turkish government officials stated they do not want war with Syria but they are prepared to protect their people and borders.

Certainly this geopolitical crisis is another boost to gold’s appeal in addition to investors who still feel central banks including China, will initiate more QE to stimulate their lacklustre economies.

The Fed minutes released show that the governing board may set up numerical thresholds for inflation and unemployment figures that would serve as a guideline for its monetary policy. The nonfarm payrolls number will indicate whether the Fed’s monetary policy is having the required effect on the labour market. A surprise on the upside could dampen the sentiment in gold, as it would show the monthly liquidity injection of $40 billion would not be needed.

Precious metals have all run up with the recent loose money policies enacted by various governments. Clearly the market darling of late is silver which is now gaining favour in Asia for its value appeal. Spot silver traded in New York has risen by 27% since the end of June, while the price of spot gold has increased by a meek 12%.

Analysts say future Indian demand is key for silver’s price to climb.

Futures contracts for silver at India's largest commodity exchange, the Multi Commodity Exchange, rocketed 30% in September compared with July, while volumes fell by 10% for gold futures contracts over the same period.

Indian rupee weakness sent gold prices in rupees to an all time high this year, while silver never exceeded the record it hit last April. Rupee-denominated silver is currently being quoted around 20% below the record.

Indian investors have ceased purchasing because the 2 weeks ending October 15th is regarded as inauspicious. The buying will commence and peak during the week ahead of the Hindu festival of Diwali on November 13th.

In China, on the Shanghai Futures Exchange silver futures were up 29% at the end of September verses the end of June, while gold climbed 13%, according to data from the exchange's website.

Silver is used both as a precious-metal investment and in applications that use its conductivity like smart phones and semiconductors, where consumption is continuing to grow at fever pitch.

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

Written By: Mark O'Byrne