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Gold and Silver Rally Continues

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Now at the beginning of the third consecutive week, gold and silver prices continue to climb. After trading to a low of $1215 per ounce during the week of May 5th, gold futures have moved roughly $45 higher, currently up $7.20 (+0.59%) and trading at $1260.80. Silver futures have also gained substantially over the last three weeks. During the week of May 8th, silver futures were just above $16 per ounce. In just three weeks, silver has gained well over a dollar per ounce. Today alone, silver is trading up over 2% on the day at 17.14 per ounce, a net gain of roughly $0.35.

Multiple Factors Have Been Favorable to Precious Metals Pricing

One key contributor to the recent advances in gold and silver pricing has been a weak U.S. dollar. Although the U.S. dollar index has been under pressure for the better part of this year, last week’s 2% decline added substantial value to the precious metals complex, as well as any other commodity paired in dollars for trading.

Last week’s U.S. dollar decline resulted in a 2% increase in gold pricing. These impressive gains were roughly equal to weekly gains exhibited in March of this year and were the largest weekly gains since mid-April.

Geopolitical Tensions Add to The Mix

North Korea continues its aggressive nuclear proliferation program with yet another missile launch this weekend. Even though this action has not been cited as a supportive factor in gold, the safe haven aspect of the precious yellow metal cannot be overlooked. It would be unlikely that recent activity by North Korea would have a dampening effect on current precious metals pricing.

An Anticipated Rate Hike Maintains a High Probability of Implementation

Although it was widely anticipated that the Federal Reserve would implement another rate hike in June, the likelihood of a hike has diminished considerably. As reported by MarketWatch, “Financial markets now rate the probability of the U.S. Federal Reserve’s policy-setting committee raising interest rates at its next meeting in mid-June as being roughly 70%. That is down from nearly 100% odds priced in earlier this month but still shows that many are convinced the Fed is ready to move again. Higher rates tend to make gold, which doesn’t bear a yield, less appealing relative to other investments.”

Whatever the underlying reasons for gold and silver gaining tremendous value over the last three weeks, there is no sign of this current trend subsiding soon. As such, we continue to believe that both gold and silver will gain value over the next few months.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer