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Gold retreats as dollar firms; silver hits 11-month high
[LONDON] Gold prices eased on Wednesday as a firmer dollar halted the previous day's rally, while silver held near an earlier 11-month peak, boosted by technical momentum and perceptions it is undervalued versus gold.
The price of silver has climbed nearly 10 per cent so far this month, helped by a break through chart resistance at its late October high on Tuesday, and is on track for its biggest monthly rise since January last year.
Spot gold was down 0.2 per cent at US$1,247.36 an ounce at 1135 GMT, off a one-week high of US$1,258.00 touched overnight. US gold futures for April delivery were down US$4.90 an ounce at US$1,249.40.
"We are seeing a little bit of a drop today, but it shouldn't be too excessive," Capital Economics analyst Simona Gambarini said. "Sentiment towards precious metals, particularly towards gold and silver, has been quite good both in the futures market and the ETF market, and that should help build a floor underneath prices.
"Fears about China sustained gold prices at the beginning of the year, but now that those have subsided, we're seeing other factors having a major impact: rising inflation expectations in the US and possibly negative rates in Japan and the eurozone. That should stimulate demand for gold."
The dollar rose 0.1 per cent against a currency basket on Wednesday, weighing on gold, while a 2 per cent drop in oil prices fed into a softer tone across commodities.
Silver was up 0.5 per cent to US$17.02 an ounce, having earlier hit its highest since May 2015 at US$17.23. The metal posted its biggest weekly gain in nearly a year last week and rose by another 4.4 per cent on Tuesday.
The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, hit its lowest in nearly six months at 73.3.
Silver exchange-traded funds tracked by Reuters, which have attracted inflows of more than 1,200 tonnes since early March, rose another 38 tonnes on Tuesday.
"The ETFs help explain the rally," HSBC said in a note. "The silver ETFs are up nearly 30 million ounces this year so far, a very strong increase, which more than wipes away losses incurred in 2015."
Platinum was up 0.2 per cent at US$1,013.40, having reached a six-month peak of US$1,019.90 in earlier trade, while palladium was at US$585.72 an ounce, up 0.9 per cent, after hitting a one-month high of US$588.10 earlier.