Precious metals are seeing a jump in prices after last weeks big drop. Gold has broken to back above the $1,500 level and silver has jumped 6% this Monday. Many expect volatility to be high in the next few sessions as well.
By Myra P. Saefong and V. Phani Kumar
SAN FRANCISCO (MarketWatch) — Silver futures led a recovery in the precious metals sector Monday and gold topped $1,500 an ounce as investors tested the waters for price stability in a still-cautious market after commodities’ plunge last week.
Silver futures for July delivery SIN11 +5.80% rose $2.25, or 6.4%, to $37.54 an ounce on the Comex division of the New York Mercantile Exchange after tapping a high of $37.98 overnight.
The contract skidded $2.63, or 1%, on Friday to complete its worst week in more than three decades. The metal was still down more than 20% so far in May. Read about Friday’s action in metals.
June gold futures GCM11 +1.04% , meanwhile, rose $18.10, or 1.2%, to $1,509.70 an ounce, extending its $10.20, or 0.7%, increase on Friday. Prices are still more than 3% lower month to date.
For the precious metals, “volatility is likely to remain high in the coming sessions, with traders and investors cautious of another bout of long selling, particularly in silver,” analysts at TheBullionDesk.com said in an early morning note to clients.
“While the corrections are likely to entice fresh demand from physical and investment sources buyers, may hold-off until some price stability emerges with the metals still vulnerable to downside pressure,” they said. Read about investors pulling money from commodity-sector funds.
The precious-metals complex may be seeing some support from political unrest over the weekend in Syria, Egypt and Bahrain, according to Ben Potter, markets strategist at IG Markets in Melbourne.
Several protestors were reportedly killed in Syria over the weekend in clashes with government forces, while the Los Angeles Times reported 12 deaths in Egypt in the wake of violent riots between Muslims and Christians.
Overall, there is some price risk for the precious metals from a possible rebound in the dollar when the U.S. Federal Reserve’s second round of quantitative easing is diminished, said Richard Hastings, a macro strategist at Global Hunter Securities.
“This should result in a brief rebound in the dollar and perhaps some pressure on some materials prices, but it will very likely be temporary,” he said in emailed comments.
In recent dealings, the U.S. dollar index DXY -0.12% , which measures the greenback against a basket of six currencies, rose to 75.042 from 74.790 late Friday after Standard & Poor’s lowered its credit rating on Greece, reviving worries that peripheral debt woes will force European officials to change the terms of its bailouts. Read about smart money leaving silver.
“They understood that silver was temporarily over-bought and the tipping point was the unprecedented margin increases by the exchange,” he said.
In other metals trading Monday, July platinum futures PLN11 +0.59% climbed $8.60 to $1,795 an ounce and June palladium PAM11 +1.83% added $14.50 to $730.80 an ounce. July copper HGN11 +1.30% rose 6.3 cents to $4.04 a pound.
Myra Saefong is a MarketWatch reporter based in San Francisco. Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau.
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