Precious Metals Close Higher On A Weak Dollar And Lower Global Bond Yields
Dec Comex gold (GCZ20) on Monday closed up +15.8 (+0.81%), and Dec silver (SIZ20) closed up +0.498 (+1.85%).
Precious metals prices on Monday moved higher on a weaker dollar. Also, lower global bond yields on Monday boosted demand for gold as a store of value. Gold prices were undercut by reduced safe-haven demand with Monday's rally in stock prices and by vaccine optimism.
The likelihood that the Fed will maintain its overly easy monetary policies at this Tuesday's and Wednesday's FOMC meeting also underpinned metals prices on Monday.
Lower global bond yields on Monday boosted demand for gold today as a store of value. The Japanese 10-year JGB bond yield fell to a 5-week low Monday of 0.109% on expectations that new Japanese Prime Minister Suga will maintain outgoing Prime Minister Abe's ultra-easy "Abenomics" monetary policy. The 10-year T-note yield dropped to a 3-week low Monday of 0.649% on reduced inflation expectations after the 10-year T-note breakeven inflation expectations rate fell to a 3-week low Monday of 1.648%.
Speculation the ECB may boost stimulus measures to fight the risks of deflation is another bullish factor for gold. ECB Governing Council member Rehn said Monday that "the inflation outlook is a concern" as the core inflation level is "clearly below our target." Also, ECB President Lagarde said the recent appreciation of the euro has partly offset the positive impact that the ECB's stimulus had in boosting inflation and that the Governing Council stands ready to adjust all of their instruments if needed.
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 29.259 million persons globally, with deaths exceeding 929,000.
Safe-haven demand and dovish central bank expectations have sparked fund buying of precious metals in recent months. Long gold positions in ETFs last Thursday rose for the twelfth consecutive session to a new record high of 3,412.75 metric tons (data since 2002). However, liquidation of long silver positions has emerged with long silver positions in ETFs falling to a 1-month low last Thursday. Long silver positions in ETFs had risen to a new record high of 897.10 million troy ounces on Aug 25.
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