Apr gold (GCJ21) on Friday closed down -3.60 (-0.20%), and March silver (SIH21) closed up +0.281 (+1.04%).
Gold and silver prices on Friday settled mixed. Improved chances for U.S. pandemic stimulus were a supportive factor for precious metals prices Friday. Also, an increase in U.S. inflation expectations to a 6-1/2 year high was positive for gold demand as a hedge against inflation. Gold prices gave up their gains on a stronger dollar and higher government bond yields.
Improved chance for additional U.S. pandemic stimulus was bullish for precious metals. The House Ways and Means Committee late Thursday advanced legislation that would provide $593.5 billion in benefits, most of which is made up of $1,400 stimulus payments to most Americans. That measure is part of the overall $1.9 billion pandemic aid bill that the full House is expected to approve during the week of February 22, then forwarding the legislation to the Senate for its consideration.
Friday's U.S. economic data was supportive of gold but negative for industrial metals demand and silver prices. The University of Michigan U.S. Feb consumer sentiment unexpectedly fell -2.8 to a 6-month low of 76.2, weaker than expectations of an increase to 80.9.
Central bank comments on Friday were positive for precious metals. Dallas Fed President Kaplan said, "over the next year, it wouldn't surprise me if we see more price pressures." Also, ECB Governing Council member Makhlouf said there was "no reason" for a change in interest rates anytime soon.
An increase in inflation expectations is positive for gold demand as an inflation hedge after the 10-year breakeven inflation expectations rate climbed to a new 6-1/2 year high Friday of 2.232%.
Silver prices garnered support Friday on a stronger pace of UK economic growth, which is positive for industrial metals demand, after UK Q4 GDP of +1.0% q/q and -7.8% y/y was stronger than expectations of +0.5% q/q and -8.1% y/y.
Gold has support from the Covid pandemic, which is dovish for central bank policies. However, the pandemic is negative for industrial metals demand and is bearish for silver prices. Globally, Covid infections have risen above 108.391 million, and deaths have exceeded 2.380 million.
Safe-haven demand and dovish central bank expectations have sparked fund buying of precious metals in recent months. Long silver positions in ETFs soared to a record high last Wednesday of 1.019 billion troy ounces (data from 1990), although long silver positions fell to a 1-1/2 week low Thursday. Also, long liquidation has set in gold after long gold positions in ETFs fell to a 6-1/2 month low Thursday, down from October's record high of 3,459.8 metric tons (data since 2002).
Big Picture Gold-Silver Market Factors: Bullish factors include (1) highly stimulative monetary policies by the world's key central banks to prevent systemic stress in the global financial system and combat the economic damage from the Covid pandemic, (2) the recent sell-off in the dollar index to a 2-3/4 year low, (3) low global inflation that is dovish for central bank policies, (4) fund and retail buying of precious metals with long gold and long silver positions in ETFs near or at record highs, and (5) safe-haven demand due to the Covid pandemic, trade tensions, and global geopolitical risks involving Iran, North Korea, and Venezuela. Bearish factors include (1) fears of long-term deflation due to the massive economic damage from the pandemic, (2) sharply reduced industrial metals demand, including for silver, due to the pandemic and the weak global economy, (3) the recent surge in T-note yields to a 10-1/2 month high, which encourages investors to move out of non-interest-bearing metals and into better-yielding government debt, (4) optimism that new Covid vaccines could soon spur an economic recovery, which sparked long liquidation pressure in gold, and (5) record-high stock prices, which curb the safe-haven demand for gold and silver.
