Gold ends higher; silver scores 14% weekly jump

Both gold and silver advanced Friday, with silver scoring the best weekly performance in nearly five years. Metals were supported this week as investors bailed out on equities and Treasurys on higher prospects of a September stimulus taper by the Fed.

By Myra P. Saefong and Victor Reklaitis
Aug. 16, 2013, 2:55 p.m. EDT
Market Watch

SAN FRANCISCO (MarketWatch) — Futures for gold and silver advanced Friday, with silver a standout in the metals complex as prices for the white metal scored their best weekly performance in nearly five years.

“Precious metals were well supported this week as investors bailed out of equities and [Treasurys] on higher prospects of a September stimulus taper by the [Federal Reserve],” said Mike Meyer, assistant vice president of EverBank World Markets.

“The large drop earlier in the year for both gold and silver are now presenting buying opportunities for investors sitting on cash,” he said.

Gold for December delivery GCZ3 +0.83% rose $10.10, or 0.7%, to settle at $1,371 an ounce on the Comex division of the New York Mercantile Exchange. That was the highest close for a most-active contract since June 19, FactSet data show.

The yellow metal built on its gain from Thursday, when it staged a haven rally, leaving prices up by $27.50, or 2%.

Gold futures saw a weekly rise of 4.5%, the strongest gain since the week ending July 12, according to FactSet data. “Historically, gold always moves upwards in August,” said David Beahm, executive vice president at precious-metals investment firm Blanchard & Co., adding that prices Thursday saw a big increase due to huge physical demand.

“Even though gold has fallen 30% since its all-time high, the metal is up over 15% since its lows earlier this year,” he said. “During the time of the fall in price, Blanchard never saw a decrease in demand” and it expects gold to break through $1,400 within the next 30 days and finish the year around $1,500. “I do not think gold will finish the year in the positive, but we were due after 12 straight years of gains,” said Beahm.

Gold futures were on track for a loss of around 19% for the year, which would mark their first yearly decline since 2000.

Silver rally

Silver prices, meanwhile, leapt 14% for the week — the biggest weekly percentage increase for a most-active contract since the week ended Sept. 19, 2008, FactSet data show.

Silver for September delivery SIU3 +1.20% on Friday tacked on 39 cents, or 1.7%, to settle at $23.32 an ounce after Thursday’s surge of more than 5%. That was the highest settlement for a most-active contract since mid-May.

Some analysts have credited strong physical demand and expectations of an improving global economy as among the reasons for silver’s recent surge.

“On the fundamental front, there is expectation that the recession will be over in the euro zone and U.K. by the end of the year and [the] U.S. economy is headed for higher growth and the Chinese economy will stabilize. This will result in more industrial demand for silver,” said Chintan Karnani, chief analyst at New Delhi-based Insignia Consultants, adding that his clients are long in silver around $20.

Jan Skoyles, head of research at The Real Asset Co., a precious-metals investment platform provider, said physical silver is “one to watch on the back of both industrial demand and a more accessible alternative to gold.”

Over the last six weeks, there have been over 1,400 metric tons of silver added to the iShares Silver Trust SLV +1.44% according to Julian Phillips, a contributor to GoldForecaster.com and SilverForecaster.com.

By contrast, holdings in the gold-backed SPDR Gold Trust GLD +0.83% stood at 912.92 metric tons on Thursday, that’s down about 26 metric tons from July 11.

“Silver will continue to move with gold in directional terms, but over the last few weeks has fallen less than gold on the fall and risen more on the rise,” said Phillips. “We should continue to see this. I do not expect silver to perform like a base metal because of its link to gold.”

The World Gold Council said Thursday that overall gold demand fell in the second quarter to its lowest value in dollar terms in more than three years, with the biggest hit coming from outflows among exchange-traded funds.

Also, filings with the Securities and Exchange Commission late Wednesday showed hedge-fund heavyweights John Paulson and George Soros cut holdings in the SPDR Gold Trust GLD +0.82% at the end of the second quarter.

J.P. Morgan analysts said in a note Thursday that gold had “shrugged off” news of the Paulson sale. “This may be delivering an exclamation mark to define the end of the 10-month, 25% fall in gold and 50% fall in gold equities,” they said.

Investors should “buy the bounce,” they said in a J.P. Morgan note.

In terms of U.S. data, investors on Friday took in a worse-than-expected report on housing starts, plus a reading on productivity that beat forecasts.

And the preliminary August reading of the University of Michigan/Thomson Reuters consumer sentiment fell to a reading of 80.0 in August, down from 85.1 in July, according to reports.

On Friday, October platinum PLV3 -0.40% slipped $4.70, or 0.3%, to $1,527.60 an ounce, ending about 1.8% higher on the week.

September palladium PAU3 +0.78% rose $6.20, or 0.8%, to $763.05 an ounce for a 3% gain for the week, and copper for September delivery HGU3 +0.69% added nearly 3 cents, or 0.8%, to $3.36 a pound, up about 1.6% from a week ago.

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