After the gold price fell slightly on Thursday and silver continued to climb, Friday is seeing some dramatic upward movement in the precious metals markets.
A combination of discouraging manufacturing data from China and growing expectations for interest-rate cuts from central banks are fueling sharply higher gold and spot silver prices this morning. Spot gold has matched its high-water mark for the year, adding over 1% this morning to trade above $1,338/oz. Meanwhile, the silver price has zoomed past a recent 22-month high and is now at $19.40/oz, a gain of better than 3.5%.
Precious Metals Rally
This surge for silver follows up an impressive showing on Thursday that saw the argent metal close more than 20¢ per ounce higher. Although some cooling off can be expected throughout the trading session today, the metal is an eye-opening 67¢ per ounce above where it started.
Gold has certainly been the beneficiary of the turmoil across the global economy, but its cousin silver is really carrying the baton. Yesterday's gains for silver came even while the gold market actually posted modest losses.
In an important technical development, silver broke through a so-called "golden cross," meaning its 100-day moving average (100-DMA) has broken above its longer-run 500-DMA. This is the first time this technical indicator has occurred in the silver market since 2009, when precious metals were squarely in a bull market.
Although it is being out-shined by the dramatic movement in silver, it's still worth noting that gold prices have risen well over 6% from their lows just before the Brexit vote just a week ago.
Other Factors Having an Impact
Interestingly, aside from disappointing news from the Chinese economy, the data has not been particularly bad in the U.S. The most recent weekly jobless claims were right in line with analysts' expectations while sentiment in the manufacturing space appears robust.
The key Chicago Purchasing Managers' Index (PMI) showed considerable expansion, registering at 56.8 when it was forecast to tread water at 50.6. This was the fastest expansion in U.S. manufacturing in a year. (A reading above 50.0 represents growth and anything below this represents contraction.) By contrast, one of China's benchmark manufacturing PMI gauges came in at 48.6 in June after signaling a slight contraction in May, as well. This was its steepest decline in four months.
A big part of what's driving gold and silver higher is the continued pressure on central banks to kick-start economic growth even as they run out of tools to do so. The Bank of England (BOE) has indicated that it will likely engage in some sort of monetary easing (i.e. cutting interest rates) this summer. Similarly, the European Central Bank (ECB) is looking for ways to expand its asset-purchasing program—meaning more quantitative easing (QE). Meanwhile, even the Fed could be forced to reverse direction on interest rates. 10-year and 30-year Treasury yields have fallen to historic lows, with the 10-year note yielding a measly 1.43%.
In addition to the economic uncertainty gripping the U.K. in the aftermath of the Brexit referendum, there are also dramatic political changes that are rocking the boat in Great Britain. Now that Prime Minister David Cameron has announced he'll be stepping down and leading Brexiter Boris Johnson, once the most likely candidate to succeed Cameron, has removed his name from consideration for leadership of the Conservative Party, there is a wide open contest for who will govern the country. The Tories are somewhat split on how to handle the mess of leaving Europe, which is hardly a done deal despite the result of last week's vote.
In other financial news, U.S. stock markets opened higher for the fourth straight session, joining global equities in the green. Crude oil prices fell to about $48/bbl. Platinum, sometimes the forgotten precious metal, added $25 per ounce to trade near $1,050/oz.
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