Metals Stocks: Silver scores biggest monthly gain in 9 years as U.S.-China tensions boost gold prices

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Silver futures on Friday posted a gain of nearly 24% for the month, the largest since 2011, with the industrial metal finding support as global economies continue to reopen from pandemic-related shutdowns.

Gold futures, meanwhile, rose for Friday’s session buoyed by U.S.-China tensions and global monetary stimulus measures.

“COVID-19 and the economic fallout that followed has clearly impacted” industry/technology and jewelry demand, with “75% of the global silver demand…dependent on the consumer who has been either temporarily or permanently wounded by the downturn,” said Steven Dunn, head of exchange-traded funds at Aberdeen Standard Investments, in emailed commentary.

“Unlike gold, silver may get a boost as major economies ease coronavirus-linked restrictions which will only fuel hopes of an economic recovery,” he said.

On Friday, July silver SIN20, +2.93% picked up 53 cents, or 3%, to end at $18.499 an ounce, retaking a psychologically significant level above $18. for the month, it gained nearly 24%, which was the best monthly performance since April 2011, according to Dow Jones Market Data.

“Silver’s rampage continued on a near uninterrupted basis throughout the month of May,” said Ryan Giannotto, director of Research at GraniteShares. “While silver is one of the more volatile metals, after a 20% monthly gain on the back of a 6% gain in April, trend exhaustion may be approaching.”

Meanwhile, August gold GCQ20, +1.42% GC00, +1.42% rose $23.40, or about 1.4%, to $1,751.70 an ounce. Gold tacked on 3.4% for the month.

“Gold enjoyed one of its steadiest months of return in May,” Giannotto told MarketWatch. Even with the market optimism surrounding reopening, gold saw a gain, “underlying the precious metal’s all-weather investment characteristics.”

“Tensions surrounding Hong Kong’s autonomous status are in clear focus for gold’s next movements, with potential for not only a weakened dollar but also a heightened safe-haven demand,” he said. “This scenario would represent a two-fold gain for gold.”

As of 2 p.m. Eastern Friday, traders were awaiting a news conference from President Donald Trump. His expected remarks would come after the U.S., Australia, Canada and the U.K. governments issued a joint statement Thursday reiterating their “deep concern regarding Beijing’s decision to impose a national security law on Hong Kong,” after China’s parliament, the National People’s Congress passed legislation Thursday that could greatly curtail democratic freedoms.

Fawad Razaqzada, market analyst at ThinkMarkets, said that “the rising U.S.-China rift, which has deepened over moves by Beijing to impose a security law on Hong Kong, has further boosted the appeal of the haven metal,” in a Friday research note.

In addition, Federal Reserve Chairman Jerome Powell said Friday that while he was a bit less tense about the economy, he is still concerned about a potential “second wave” of the coronavirus outbreak.

The Fed’s balance sheet rose to $7.1 trillion as of Wednesday, up from $7.04 trillion last week, as the central bank continues to act to support financial markets during the public health crisis. A large chunk of that growth came from a $33 billion increase in the central bank’s emergency lending programs aimed at buying corporate bonds, which kept yields for government and corporate debt lower and had the effect of bolstering the appeal of gold, which doesn’t offer a coupon.

Traders also digested the latest batch of U.S. economic reports. Personal income rose 10.5% in April, helped by the government’s coronavirus relief payments, though consumer spending plunged. The May Chicago Purchasing Managers Index fell to 32.3 from 35.4 in April. The University of Michigan’s consumer confidence index rose to final reading of 72.3 in May, from a final April level of 71.8.

Among other Comex metals, July copper HGN20, +0.66% rose nearly 0.5% at $2.4255 a pound but prices, based on the most-active contracts, logged a monthly rise of around 4%, according to FactSet data.

“Copper has continued its slow yet steady grind upwards as the industrial economy recovers from the nadir of the shutdown,” said Giannotto.

July platinum PLN20, +0.56% rose nearly 0.8% to $874.60 an ounce—up about 7.7% for the month. September palladium PAU20, -0.29% added 1.4% o $1,972.90 an ounce, with most-active prices down around 0.5% for the month.

Read:Palladium shows signs of life after the pandemic halts its record rally, but a bargain it is not

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