Silver moves off 3-month high, gold softens

LONDON - Silver attracted selling in Europe on Friday that knocked the metal away from a three-month high, while gold drifted lower awaiting US data later in the day.

By (Reuters)

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Published: Fri 1 Sep 2006, 5:45 PM

Last updated: Sat 4 Apr 2015, 4:13 PM

Spot silver XAG earlier matched Thursday’s peak of $12.89 an ounce, its firmest since May, but retreated to $12.78/12.85 by 0955 GMT. That was also down on its late New York level of $12.83/12.90.

Strong investor demand for the white metal has nevertheless propelled prices higher by more than a third since the middle of June. Overnight news of a drop in output in world number 2 silver producer Mexico was also supportive.

“People think silver is cheap and news of production drops in Mexico also gives them an excuse to buy,” said a dealer in Hong Kong. “But I don’t see any physical buying in Asia,” he said, referring to purchases from jewellers and the electronics sector.

That was backed up by traders in Europe who also reported selling coming in.

“We saw a pick up in silver demand at the lows earlier this week, but today we’re seeing selling and sell orders coming in from the physical market,” one said.

But silver has clearly outperformed gold in the past month, gaining 14 percent versus a drop of 1.6 percent in bullion.

Investor enthusiasm for a new silver investment tool has added to its allure. Physical holdings in Barclays Global Investors’ iShares Silver Trust SLV.A climbed above 100 million ounces on Wednesday for the first time since the ETF was launched in late April.

Gold stuck in rut

Spot gold XAU fell to $623.60/624.60 an ounce from $625.20/626.20 late in New York.

Prices have failed several times to make headway above the upper $620s level, although dollar and geopolitical uncertainty were likely to prevent aggressive selling.

The US market will be closed on Monday for the Labour Day public holiday.

“The driving forces are the three “i’s”: Iran, inflation and interest rates. Those are all positives at the moment for gold, but the technical picture looks weaker as it failed to make headway yesterday,” Wolfgang Wreszniok-Rossbach, head of precious metals marketing at Germany’s Heraeus said.

Gold, like other financial markets, is awaiting payrolls data from the US that could shed light on the interest rate outlook.

The August report is due at 1230 GMT and expected to show employers added 120,000 jobs on the month, suggesting modest but steady growth that would likely make the Federal Reserve comfortable leaving rates on hold.

“It is possible that a good number spurs a knee-jerk dollar rally, which may weaken gold,” James Steel, metals analyst at HSBC, said in a daily report. “Recent longs also may take profits or book square before the long weekend.

Concern about Iran’s stand-off with the West has elevated gold’s safe-haven role.

Platinum XPT rose to $1,242/1,247 from $1,239/1,244, while palladium XPD rose to $343/348 versus New York’s previous $341.50/346.50.

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