Stock Market Watch

Gold Prices Gain; Silver Prices Also Edge Higher

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Gold futures settled higher on Thursday and recovered previous session’s losses after the European Central Bank (ECB), in line with expectations, slashed benchmark interest rate by 25 basis points to record low level of 0.50%, boosting metal’s inflation hedge appeal. Silver prices also rose sharply on Thursday.

U.S. gold futures for June delivery gained $21.40, or 1.5%, to settle at $1,467.60 an ounce on the Comex division of the New York Mercantile Exchange while spot gold was last up 0.75% to $1,467.60 an ounce.

The decision from the ECB comes just a day after when the Federal Reserve reaffirmed its pledge to continue supporting the U.S. economy with its $85 billion worth monthly bond purchase program (quantitative easing /QE3) and left the interest rate unchanged.

Central banks’ extremely accommodating monetary policies stoke fears of currency debasement which in turn boosts the demand for inflation-hedge assets such as gold.

Earlier on Wednesday, the metal slumped more than 1%, which was its biggest one-day loss since the spectacular plunge in bullion prices recorded in mid-April. Spate of unexpectedly weak U.S. economic data releases and disappointing PMI data from China weighed on the sentiment in the previous session, triggering across-the-board sell-off.

Physical-side demand eased

The demand from Asia for physical metal subsided on Thursday. While  markets in China reopened after remaining closed for Labor day Holidays on Thursday,  the demand from Hong Kong was also significantly lower than what was witnessed a week before.

Meanwhile holdings of the SPDR Gold Trust (ETF) (NYSE: GLD) continued to dwindle. A data provided by Reuters showed that the fund’s holdings fell another 0.31% to 1,075.23 tons on Wednesday, which was the lowest level since September 2009.

Silver futures climbed 1.72% to $23.75 an ounce, at last check.

In late trading, the iShares Silver Trust (ETF) (NYSE: SLV) was up 0.70%, and the ProShares Ultra Silver (ETF) (NYSE: AGQ) was up 1.50%.

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edliston
Post Written By: Ed Liston
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.

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Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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