Gold And Silver Close At 1-Week Lows On Long Liquidation After Central Banks Fail To Boost Stimulus

Rich Asplund - Barchart - Thu Sep 17, 2:01PM CDT

Dec Comex gold (GCZ20) on Thursday closed down -20.6 (-1.05%), and Dec silver (SIZ20) closed down -0.376 (-1.37%).

Precious metals prices on Thursday tumbled to 1-week lows on long liquidation pressure after global central banks failed to signal that they would boost stimulus measures. Losses were limited by a decline in the dollar along with weaker-than-expected U.S. economic data.

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Gold prices fell further Thursday after the BOJ failed to boost its stimulus measures and instead upgraded its economic assessment. The BOJ at Thursday's policy meeting kept its benchmark interest rate at -0.1%, and left the yield target and asset purchases unchanged. The BOJ also upgraded its economic assessment for the first time since the Covid pandemic began by saying the economy had started to pick up, with activity resuming gradually.

Thursday's weaker-than-expected U.S. economic data was supportive for gold but bearish for industrial metals demand and silver prices. U.S. weekly initial unemployment claims fell -33,000 to 860,000, showing a weaker labor market than expectations of 850,000. Also, Aug housing starts fell -5.1% to 1.416 million, weaker than expectations of 1.488 million. In addition, Aug building permits, a proxy for future construction, unexpectedly fell -0.9% to 1.470 million, weaker than expectations of an increase to 1.512 million.

Dovish ECB comments on Thursday were bullish for gold. ECB Governing Council member Rehn said Eurozone inflation has "persistently lingered too low, and there is a risk that this trend will continue." Also, ECB Vice President Guindos said the ECB "watches very closely the evolution of the exchange rate and its impact on inflation and our target for price stability."

A negative factor for industrial metals demand and silver prices was Thursday's European economic data that showed Eurozone Aug new car registrations fell -18.9% y/y to 769,525, the eighth consecutive month that registrations have declined and a sign of weak auto sales.

Gold prices garnered support Thursday as a store of value after the 10-year UK gilt yield dropped to a 1-month low of 0.157% when the BOE said that policymakers discussed negative interest rates at Thursday's policy meeting. The Monetary Policy Committee (MPC) was briefed Thursday on how such a policy could be implemented effectively, should the outlook for inflation and output warrant it at some point during this period of low equilibrium interest rates. The BOE said it would work with the Prudential Regulation Authority (PRA) and "will begin structured engagement on the operational considerations" for negative interest rates in Q4 of this year.

Gold prices still have safe-haven support on heightened U.S/China tensions and risks of no-deal Brexit.

Precious metals prices have ongoing support from the Covid pandemic that has curbed global growth prospects and prompted the world's central banks to maintain or even expand their QE programs, which is bullish for gold demand as a store of value. The Covid virus has now infected 30.191 million persons globally, with deaths exceeding 946,000.
https://www.barchart.com/story/futures/quotes/GC*0/futures-prices/281904/gold-and-silver-close-at-1-week-lows-on-long-liquidation-after-central-banks-fail-to-boost-stimulus