Silver top performer on weak economic data, ratings revision

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CORONAVIRUS IMPACT

On Tuesday, in electronic trading gold and silver reached their highest level in more than five months. This was after the manufacturing figures from around the globe triggered speculations of imminent easing measures from central banks.

In addition, credit rating agency Moody’s has reduced its outlook on the Aaa rating of the European Union to negative. It also warned that it might slash the bloc if it decides to lower the ratings on the EU’s four biggest budget backers: France, Germany, the Netherlands and the United Kingdom.

Last week, Ben Bernanke, the U.S. Federal Reserve Chairman, didn’t deny that there could be more incentive measures. After that, data released on Monday indicated that manufacturing activity has contracted globally and that put additional pressure on policymakers to take action.

Gold and silver prices went higher as investors bet on the precious metals in their attempts to be prepared for potential inflation risks.

The most-active U.S. silver futures contract climbed nearly 3 percent earlier in the day to a 4-1/2 month high of $32.38 per ounce, before falling slightly to $32.21.

Spot silver, which is a precious and an industrial metal, has gone up nearly 10 percent over the past two weeks, exceeding a 4 percent gain in gold, even though the recent figures speak of a negative global growth outlook.

Silver is known for changing its price a lot and fast, especially as we take into account the relatively small size of the market and limited liquidity.

Meanwhile, spot gold went up to $1,696.91 per ounce, which is the highest since mid-March, then fell to $1,693.84.

The physical market of Asia witnessed some scrap selling as prices almost reached the key $1,700 level. But traders generally believe that prices will keep rising and prefer not to sell at this point.

Investors will be watching closely the European Central Bank’s policy meeting on Thursday and the press conference with ECB President Mario Draghi.

The market will also focus on U.S. non-farm payrolls data, which is expected later in the week. According to analysts, a weak reading may back up the expectations for another round of quantitative easing from the Fed.

Holdings of gold-backed exchange-traded funds went up to a record high of 71.729 million ounces by the end of the past week. August indicated an inflow of 1.8 million ounces, which is a near 3 percent increase – the biggest monthly gain since November.

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