Gold and Silver Prices Surge Amid Weaker Dollar and Upbeat Economic Outlook

Strategic Insights -

Gold and silver prices experienced significant gains on Tuesday, with gold rising to its highest settlement price since December 23 and silver surging 5.9% on brighter economic outlook. The weaker US dollar and strength in global manufacturing activity, particularly in China and India, contributed to the rally in precious metals. The Comex February gold contract rose $33.70, or 2.2%, to settle at $1,600.50 a troy ounce.

Key Takeaways:

  • Gold prices rose 2.2% to settle at $1,600.50 a troy ounce, the highest settlement price since December 23, driven by a weaker US dollar and strength in global manufacturing activity.
  • Silver prices surged 5.9% to settle at $29.572 a troy ounce, continuing a rebound after futures last week touched their lowest levels in 13 months.
  • The ICE US Dollar Index touched its lowest level since December 21, making dollar-denominated gold cheaper for potential buyers using other currencies.
  • Gold had come under pressure in recent months due to concerns about the potential for a credit freeze in the euro zone, but the chance of a crisis has abated in investors' minds.
  • Traders are beginning to think the selling pressure has abated, with gold futures rising 10% in 2011 and extending the metal's winning streak for an 11th consecutive year.
  • Strength in manufacturing data from India and China, the world's top two gold consumers, also supported futures on Tuesday, as healthier economies there could support more gold buying.

Statistics:

  • The Comex February gold contract rose $33.70, or 2.2%, to settle at $1,600.50 a troy ounce.
  • Silver prices surged 5.9% to settle at $29.572 a troy ounce.
  • The ICE US Dollar Index touched its lowest level since December 21.
  • Gold futures rose 10% in 2011, extending the metal's winning streak for an 11th consecutive year.
  • Benchmark gold futures fell 10% in December.

Sources:

  • Dow Jones Commodities News via Comtex, January 3, 2012
  • RBC Capital Markets, George Gero, Vice President
  • Standard Bank, Marc Ground, Analyst
  • Dow Jones Newswires, Matt Day, Author; 212-416-4986; matt.day@dowjones.com