Silver mining giants Silver Wheaton Corp, Coeur Mining, and Hecla Mining all made noteworthy gains as U.S. stocks climbed. In turn, the Standard & Poor’s 500 Index reached an all-time high as industrial and commodity shares soared. Alongside these gains, positive data improved confidence in the economy on the eve of Friday’s job report.
Investors began shuffling their positions in a volatile market as gold rose above $1200 an ounce and was boosted by firmer oil prices Wednesday. On Monday, gold had fallen to a near three-week low when Switzerland voted against a boost in gold reserves. But as oil rose from a five-year low, gold pulled out a recovery to its highest in over a month.
The world’s largest gold-backed exchange-traded fund, The SPDR Gold Trust, witnessed an influx of 2.4 tons on Tuesday. “There is some position reshuffling … due to the level of volatility we have seen in the past few sessions,” said Carsten Menke, an analyst at Julius Baer. “I wouldn’t read too much into it, though, because the key drivers in the medium to longer term are the recovering US economy and expected rate hikes next year, which should dent investor demand for gold.”
Geopolitical tension and underwhelming economic data out of the U.S. helped gold gain around 10% in the first half of the year. Soon after gold submitted to the surging dollar and the expectation for a rise in interest rates. Given these trends, investors are encouraged to reinvest and withdraw more money from non-interest-bearing assets, including gold, especially if rates rise sooner than forecasted.
A steady dollar, which rose to a five-and-a-half-year high, kept Wednesday’s gains in check while European shares and US yields increased. Commerzbank was recently cited, “We expect the gold price to remain under pressure initially in the first half of next year on the back of growing speculation about increasingly imminent interest rate hikes in the United States.”
On Thursday, gold didn’t stand a chance as the stronger dollar cruised above the $1,200 level. The European Central Bank was set to meet later in the day, while China’s actions in easing their import restrictions for the precious metals remains to be seen.
