Silver leads precious metals gains on dollar, factory data

Image by Helmut Eppel from Pixabay.

Silver led gains in precious metals as the dollar dropped and a report showed U.S. manufacturing cooled in April, boosting demand for haven assets.

A gauge of factory activity fell in April from a more than 37-year high a month earlier, according to data from the Institute for Supply Management released Monday. Treasuries climbed to session highs following the data and the greenback retreated.

Gold and silver have clawed back gains after dropping earlier this year as signs of an accelerating U.S. economy boosted the dollar and Treasury yields, reducing demand for the metals as stores of value. Slower expansion in U.S. manufacturing reinforces expectations that central banks including the Federal Reserve will keep interest rates near zero. Low rates bolster demand for precious metals, which don’t offer interest.

A weaker-than-expected ISM reading suggests “we’re not running at full speed as many had expected, and that ultimately means that we’re probably not gonna have any letup on the easing,” according to TD Securities analyst Bart Melek.

Silver for immediate delivery rose as much as 4.2% to $26.9946 an ounce, the biggest intraday gain since Feb. 1. Gold advanced 1.3% to $1,792.22 an ounce by 1:47 p.m. in New York after dropping 0.5% last week. July silver futures settled 4.2% higher on the Comex in New York, while June gold futures jumped 1.4%.

Palladium and platinum also gained. The Bloomberg Dollar Spot Index fell 0.3%.

Gold’s advance came after its first weekly decline in four as U.S. Treasury Secretary Janet Yellen said President Joe Biden’s economic plan won’t stoke inflationary pressures. Gold may continue to gain support from the Fed’s dovish approach and a weaker dollar, according to Angel Broking Ltd.’s analysts Prathamesh Mallya and Yash Sawant.

The metal could gain further impetus amid expectations that outflows from gold-backed exchange traded funds will start to reverse, according to Carsten Fritsch, an analyst at Commerzbank AG.

“We expect ETFs to begin registering inflows again in the second half of the year at the latest, and that this will help the gold price climb by year’s end to $2,000,” Fritsch said in a note.

Copper futures for July delivery rose 1.4% to settle at $4.5285 a pound on the Comex.

Japan, China and the U.K. markets are closed for holidays on Monday.

(By Daniela Sirtori-Cortina, with assistance from Felix Njini, Swansy Afonso and Joe Deaux)

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