Silver marks biggest profit since 2008 .. why?
Silver prices rose on Tuesday for the third straight session, hitting four-week highs as demand strengthens on the white metal.
Silver marked the biggest profit since September 2008 yesterday as most commodities and metals surged as well.
There are multiple reasons behind this historic profit for silver, that we can condense into two, the first is the collapse in US treasury yields, and the second is an expected surge in actual demand on the metal in upcoming months.
Silver Prices
Silver rose 1.8% on Tuesday to $21.04 an ounce, the highest since June, after spiking 9% on Monday, the second profit in a row, and the largest since September 2008.
US Treasury Yields
US 10-year treasury yields fell 2.2% today for the second straight session, hitting two-week lows at 3.564% and boosting non-yielding assets like silver.
US ISM manufacturing PMI tumbled to 2-1/5 year lows in September, triggering concerns about the health of the economy in the third quarter.
The data cut chances of a 0.75% rate hike by the Federal Reserve at the November meeting from 62.5% to 55%.
Actual Demand
The Indian government announced a raise in import taxes on platinum from 10.75% to 15.40% in an attempt to achieve equivalency in importing taxes between silver, gold, and platinum.
Such restrictions on platinum are expected to boost actual demand on gold and silver, with India considered the world's second largest consumer of both metals.
Gold hovers above $1,700 for first time in 3 weeks as dollar weakens
Gold prices rose in European trade for the sixth straight session above $1,700 for the first time in three weeks as the dollar tumbles against a basket of major rivals.
Dollar's declines is in tandem with a drop in US treasury yields following weak US manufacturing data.
Prices Today
Gold prices rose 0.7% to $1,710 an ounce, the highest since September 13, after rising 2.35% yesterday, the fifth profit in a row, and the largest since March 8.
The Dollar
The dollar index fell over 0.5% on Tuesday for a second session, hitting two-week lows at 110.99 against a basket of major rivals, in turn underpinning gold and other dollar-denominated commodities.
US 10-year treasury yields fell 1.9%, almost hitting two-week lows at 3.574% and pressuring the greenback
US ISM manufacturing PMI tumbled to 2-1/5 year lows in September, triggering concerns about the health of the economy in the third quarter.
The data cut chances of a 0.75% rate hike by the Federal Reserve at the November meeting from 62.5% to 55%.
The SPDR
Gold holdings at the SPDR Gold Trust rose 3.19 tones yesterday, the largest increase since August 19, to a total of 942.89 tones, away from a March 2020 low at 939.70 tones.
Euro hits two-week high on European interest rate prospects
Euro rose in European trade for the second straight session against dollar, hitting two-week highs on prospects of a 0.75% rate hike by the European Central Bank this month.
Euro benefited as well from dollar's decline as the US treasury yields tumble following weak manufacturing data for September.
EUR/USD rose 0.5% to 0.9872, the highest since September 22, after rising 0.25% yesterday, the third profit in the past four sessions following weak US data.
European Rates
As inflation hit double digits at 10% for the first time ever in September, analysts now expect the ECB to increase interest rates by 75 basis points in October.
ECB President Christine Lagarde said last week the ECB will keep hiking rates until inflation is brought under 2% and inflation forecasts have been changed deeply.
The Dollar
The dollar index fell 0.35% on Tuesday, sharpening losses for another session and hitting two-week lows at 111.20 against a basket of major rivals.
US 10-year treasury yields fell 1.9%, almost hitting two-week lows at 3.574% and pressuring the greenback.
US ISM manufacturing PMI tumbled to 2-1/5 year lows in September, triggering concerns about the health of the economy in the third quarter.