Silver Posts Biggest Monthly Surge Since 2011

On May 29, the silver futures recorded a gain of around 24% for May 2020. That gain is the biggest in nine years, with the industrial metal getting some support from the reopening of the global economies after the coronavirus-related shutdowns.

On the other hand, the gold futures surged for May 29’s session enhanced by the global monetary stimulus measures and U.S.-China tensions. The head of exchange-traded funds at Aberdeen Standard Investments, Steven Dunn, said in an email:

“COVID-19 and the economic fallout that followed has 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. Unlike Gold, Silver may get a boost as major economies ease coronavirus-linked restrictions, which will only fuel hopes of an economic recovery.”

The July silver SIN20, +2.88%, gained 3% or 53 cents to end the month at $18.499 an ounce. The gain enabled the metal to retake a psychologically significant level of over $18 for the month. According to Dow Jones Market Data, it gained almost 24%, which was the greatest performance since April 2011.

The director of Research at GraniteShares, Ryan Giannotto, commented:

“Silver’s rampage continued on a near uninterrupted basis throughout May. 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.”

Gold Performance

Looking elsewhere, August gold GCQ20, +0.85% GC00, +0.85% rose $23.40 translating to a 1.4% gain to reach $1,751.70 an ounce. The precious metal gained 3.4% for the month. Giannotto told reporters:

“Gold enjoyed one of its steadiest months of return in May. 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. This scenario would represent a two-fold gain for Gold.”

Global Tensions

By 2 p.m. Eastern on May 29, traders were awaiting a press conference from President Trump. His remarks came after the U.S., Australia, Canada and the U.K. governments met and issued a general statement on May 28 confirming their:

“deep concern regarding Beijing’s decision to impose a national security law on Hong Kong.”

They issued that statement after China’s parliament passed legislation that may curtail democratic freedoms in the Asian region. One analyst, Fawad Razaqzada, said in his May 29 research note 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.”

The Federal Reserve

The Federal Reserve Chairman Jerome Powell said on May 29 that he was currently less tense about the current performance of the economy. However, he was quick to add that he is worried about a probable “second wave” of the coronavirus outbreak.

By May 27, the Fed’s balance sheet had risen to $7.1 trillion up from $7.04 trillion a week ago. The increase is attributed to the central bank’s acts to support the financial markets during the current health crisis.

A major part of that increase resulted from a $33 billion increase in the bank’s emergency lending programs aiming to buy corporate bonds. That strategy kept the yields for government and corporate debt lower. It also had a significant effect on boosting the appeal of gold, which offers no coupon.

Economic Reports

Traders were also served with the latest U.S. economic reports. Data shows that personal income increased by 10.5% in April, supported by the government’s coronavirus relief payments. However, consumer spending plummeted. The May Chicago Purchasing Managers Index dropped to 32.3 from 35.4 in April.

Reviewing the University of Michigan’s consumer confidence index increased to 72.3 in May, from an April level of 71.8. Looking at the other Comex metals, July copper HGN20, +1.20% gained around 0.5% to reach at $2.4255 a pound. However, according to FactSet data, the prices based on the most-active metal contracts recorded a monthly surge of about 4%. Giannotto added:

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

September palladium PAU20, +0.31% gained 1.4% to reach $1,972.90 an ounce, with the most-active prices down about 0.5% for the month. July platinum PLN20, +0.57% surged by about 0.8% to $874.60 an ounce representing almost 7.7% for May 2020.

by John Wanguba May 30, 2020 in Analysis, FX Industry, News

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