Stock Market Watch

Gold Prices Rally; Silver Prices Also Rise Sharply

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Gold prices rallied more than 3% on Thursday as the dollar tumbled against a basket of rival currencies amid widespread expectations that the Federal Reserve might delay its plans for squeezing the multi-billion dollar bond purchase program until early next year due to the recent government shutdown, which impacted both the business and consumer sentiment.  Silver prices also rose sharply in trading on Thursday.

At last check, gold futures for December delivery climbed 3.13% to $1,322.50 an ounce while spot gold jumped 3.14% to $1,321.18 an ounce.

The SPDR Gold Trust (ETF) (NYSE: GLD) leaped 3.27% to $127.58.

The dollar index, which measures greenback’s performance vis-à-vis a basket of six major currencies, fell about 1% on Thursday, making dollar-dominated commodities cheaper for dealers holding other currencies.

Several banks believe that the government shutdown has had a very serious impact on the economic momentum. Besides, the agreement (budget deal) is only a temporary solution. In this backdrop, the Fed might probably show disinclination towards pulling back its economic stimulating measures.

In a note to investors, Deutsche Bank’s Jim Reid, wrote, “The good news for markets is that it seems highly unlikely that the Federal Reserve will risk tapering in December or January assuming the next budget negotiations go close to the wire again… it could be March at the earliest for tapering.”

Echoing Reid’s sentiment, Commerzbank analyst Carsten Fritsch said, “The U.S. debt deal is seen (as) positive for gold by market participants, for good reason, since the whole mess is just being postponed by 3-4 months, which makes a reduction of Fed asset purchases rather unlikely for the time being,” according to Reuters.

An extension of the bond purchase program will keep interest rates low in the U.S., which will in turn boost the demand for non-interest bearing assets such as gold.

Silver futures gained 2.53% to $21.90 an ounce.

In late trading, the iShares Silver Trust (ETF) (NYSE: SLV) was up 2.92% to $21.12, and the ProShares Ultra Silver (ETF) (NYSE: AGQ) was up 5.99% to $20.34.

 








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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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