Will Precious Metals Halt their Bullish Gains?
Yesterday's session that saw main commodity indices around the world decline, it still witnessed precious metals continued gains. Today we notice new historical records by gold due to the upside move it continued yesterday and today. The S&P GSCI Index plummeted by 4.03 points to 459.04 in yesterday's New York session; whereas, RJ/CRB COMMODITY Index also closed in red at 258.37 points, while crude managed to follow their lead and slightly declined to trade at $70 per barrel.
Gold managed to gain in yesterday's trading session heading towards 1045.80 and closed at 1044.60, with a rise of 0.27%; whereas, silver continued its highly volatile wide ranged trading and it surged again by 1.38% and close at 17.58; platinum closed at 1327.00 by gaining 1.07%, where yesterday's gains were based primarily on silver and platinum. Gold indulged in minor profit-taking by speculators; however, the final word was to investors hedging demands.
On the other hand, the U.S. dollar motivated the purchase of gold as a safe haven due to the dollar's purchasing power plunge; being the most traded currency in financial markets. The dollar’s depreciation has direct effects on precious metals, highlighted by the inverse proportion between metals and the dollar, since they are dollar denominated assets. However, another factor affecting the dollar is investors buying gold as a safe haven, as the dollar’s purchasing power drops in similar effects of inflation.
The performance by U.S. equity markets yesterday was mixed; whereas today's Asian stocks humbly inclined, as financial company’s earnings are worrying investors; investors are now vigilant and will rationally assess earning reports. They need to valuate the recent rally in equities and assess the price-to-earnings valuations as some equities are overvalued.
However, caution that is overshadowing stock markets around the world is in fact benefiting precious metals; where investors seem to be heading towards them in speculative investments and also as hedge. Meanwhile, gold is trading today around new record levels at 1052.60 rising by 0.77%; whereas, silver continued its bullish move rising by 1.25% trading at $17.80 per ounce; platinum managed to gain by 0.53% to currently trade at 1334.00; data as of 02:17 EST.
The undergoing bullish wave for precious metals is expected to continue, where the global economy is currently slowly recovering from the recession at a time when growth is still frail. Stock markets are witnessing recovery, but worries of a bubble formation in the near future or major profit-taking after valuations (according to the awaited reveal of third-quarter earnings. All these factors continue to favor precious metals for extended gains.
We should not forget that if the dollar continues to freefall it will help precious metals gain more bullish momentum, which is why we see gold recording all-time highs, as well as platinum and silver's continued ascend. Another thing that we should not overlook is the fact that correctional waves might occur every once in a while by traders; thus, embedding either sideways or corrective bearish moves, but the overall medium term direction still seems to be dominantly to the upside.