Gold and silver are fresh from posting their best annual performances since 1979, hitting a series of records throughout last year with support from central-bank buying and inflows to bullion-backed exchange-traded funds. — Reuters
WASHINGTON: Gold steadied, after slipping nearly 1% in the previous session, ahead of an annual rebalancing of commodity indexes and the release of key US economic data.
Bullion was near US$4,455 an ounce, with passive tracking funds due to begin selling precious metals futures this week to match the new weightings required by the indexes.
Sales are expected to be greater than usual due to the blistering rallies in gold and silver over the past year.
Silver – which fell 3.8% on Wednesday – is particularly vulnerable to a sharp selloff, given its recent volatility.
Citigroup Inc estimated that roughly US$6.8bil of silver futures could be sold as a result of the rebalancing, equivalent to about 12% of open interest on Comex.
“I’ve been running this process for many years, and we haven’t seen any outsized flow like this one,” said Kenny Hu, a strategist at Citigroup.
The bank’s estimate is based on funds tracking the Bloomberg Commodity Index and the S&P Goldman Sachs Commodity Index. Outflows from gold futures will follow close behind silver and are also estimated at around US$6.8bil, according to Citigroup.
Gold and silver are fresh from posting their best annual performances since 1979, hitting a series of records throughout last year with support from central-bank buying and inflows to bullion-backed exchange-traded funds.
Heightened geopolitical tensions around China-Japan trade relations and the capture by the United States of Venezuelan leader Nicolas Maduro have lent some support in recent days to gold, which is still up roughly 3% for the week.
Silver’s rally – it gained around 150% last year – has been even more spectacular than gold’s.
This week alone, it had advanced 7.4% by Wednesday’s close. A historic short squeeze gripped the market in October, and the white metal has also benefited from concerns the US administration could eventually impose import tariffs.
The index rebalancing could “dampen the potential upside in the near term, but in the longer run, silver has more momentum,” said David Wilson, director of commodity strategy at BNP Paribas SA.
Traders are also turning their attention to the release of key US economic data today, including the December jobs report.
A softer print would support bets on more interest-rate cuts by the US Federal Reserve, a tailwind for non-yielding precious metals.
Gold edged down 0.1% to US$4,452.63 an ounce as of 9:34am Singapore time yesterday. Silver rose 0.7% to US$78.72.
Platinum also recovered some losses from Wednesday, and palladium gained.
The Bloomberg Dollar Spot Index was little changed after ending the earlier session up 0.1%. — Bloomberg
