Apr gold (GCJ21) on Friday closed down -2.20 (-0.13%), and May silver (SIK21) closed down -0.174 (-0.68%).
Gold and silver prices on Friday moved lower, with gold at a new 8-3/4 month low and silver at a new 5-week low. Precious metals on Friday fell for the third day on dollar strength and rising T-note yields. The dollar index on Friday rallied to a 3-1/4 month high, and the 10-year T-note yield climbed to a new 1-year high of 1.624%. Losses in silver prices were limited by Friday's better-than-expected U.S. payroll report.
Friday's global economic data was bearish for gold but supportive for industrial metals demand and silver prices. U.S. Feb nonfarm payrolls rose +379,000, stronger than expectations of +200,000 and the biggest increase in 4 months. Also, the U.S. Feb unemployment rate unexpectedly fell -0.1 to an 11-month low of 6.2%, showing a stronger labor market than expectations of unchanged at 6.3%. In addition, German Jan factory orders rose +1.4% m/m, stronger than expectations of +0.5% m/m.
Hawkish comments Friday from St. Louis Fed President Bullard were negative for precious metals when he said, "we have a very strong outlook for the U.S, economy and we already have a very easy monetary policy" so a shift in policy to lean against higher yields is currently "unwarranted."
Gold has underlying 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 116.341 million, and deaths have exceeded 2.583 million.
Safe-haven demand and dovish central bank expectations have sparked fund buying of precious metals in recent months. However, long liquidation has set in gold after long gold positions in ETFs fell to an 8-month low Thursday, down from October's record high of 3,459.8 metric tons (data since 2002). Long silver positions in ETFs soared to a record high Feb 2 of 1.017 billion troy ounces (data from 1990), although long silver positions fell to a 1-month low last Tuesday.
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, and (4) 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 surge in the 10-year T-note yield to a 1-year 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) near record-high stock prices, which curb the safe-haven demand for gold and silver.
Gold Falls To 8-3/4 Month Low On Dollar Strength And Higher T-Note Yields (barchart.com)
