Gold, silver prices at 15-week highs as Trump trade unwinds

Longest weekly winning streak for silver price in more than a decade

Gold made headway for the fifth day in a row in heavy trade on Friday as the Trump-trade on financial markets begin to unwind, the dollar weakens and interest rates in the US trend lower again.

Gold for delivery in April, the most active contract on the Comex market in New York with nearly 19m ounces traded be early afternoon, was exchanging hands at $1,261.10, bringing its year-to-date gains to 9.5%. Gold is now at it's the highest since November 11, erasing much of its losses since the US presidential election.

Statements yesterday by US Treasury Secretary Steven Mnuchin bolstered arguments made by the gold bulls camp

Gold bears had been making big bets that Trump's plans for fiscal stimulus, including a $500 billion infrastructure spending program, will lead to strong US economic expansion, higher interest rates. A number of prominent hedge fund managers and billionaires running family offices moved aggressively out of gold and into stocks.

Gold bulls pointed to likely inflation arising from deficit spending by a Trump administration, burnishing gold status as a hedge against inflation and geopolitical uncertainty boosting gold's allure as safe haven asset.

Gold, silver prices at 15-week highs as Trump trade unwinds

Source: CME Group

Gold, silver prices at 15-week highs as Trump trade unwinds

Source: CME Group

Statements yesterday by US Treasury Secretary Steven Mnuchin bolstered arguments made by the gold bulls camp. Mnuchin said that the Trump administration's proposed tax cuts and other stimulus measures would have a limited impact on the economy this year which sent the dollar lower which usually moves in the opposite direction of gold.

A relatively dovish Federal Reserve statement this week also convinced the bond market that rate hikes this year may be fewer than expected and may only happen later in the year. Because gold is not yield-producing and investors have to rely on price appreciation for returns, the metal has a strong inverse correlation to US government bond yields.

Gold was also buoyed by safe haven buying as uncertainty about upcoming elections in the Netherlands, France and Germany and the impact on the European Union.

Gold helped to drag May silver contracts higher which were priced at $18.46 in afternoon trade in New York, up 1.5% from Thursday's close. It is the ninth straight week of gains for the silver price, the metal's best weekly run of gains in more than a decade. Year to date silver is up 13.7% and compared to lows hit January 2016, the metal has recovered more than 34% in value.

Hedge funds diverge on gold, silver price

Hedge funds or so-called managed money investors in gold futures and options cut their exposure to the yellow metal further last week according to trader positioning data supplied by the government.

Overall bullish positioning or net longs held by derivatives traders fell 10% to 6.7 million ounces, well below July's all-time record of nearly 29 million ounces when gold was hitting its 2016 peak.

Large scale speculators in silver is taking a different tack with CFTC data indicating that traders added to long positions and cut shorts – bets that silver can be bought back cheaper in future – at the same time. Net bullish positioning has now reached the equivalent of close to 354 million ounces, a 20-week high.

CHART: Hedge funds diverge on gold, silver price

Source: www.tradingfloor.com