Gold prices extended their best start to a year in more than 30 years this month, jumping 5.1% to 82 amid a broad precious metals rally.
Silver has mostly caught up to its investment metal cousin, too, thanks to its dual use as an industrial and precious metal. Silver miners are seeing their stock prices increase as supply has been constrained by recent mine shutdowns.
As with most of the metals we track, China is the biggest consumer and biggest producer of gold. So, the news that China’s central bank and customs service will allow companies that have “frequent imports and exports” of gold and gold products to apply for a single permit that can be used in as many as 12 shipments was welcome for both producers and consumers. The trial to simplify the rules takes effect June 1 and applies to Beijing, Shanghai, Guangzhou, Qingdao, Nanjing and Shenzhen, the bank said in a statement.
Aside from loosened regulations, the investment metals are sitting in a good, fundamental place. The safe haven status of both gold and silver continues to help their prices as the Federal Reserve again showed no stomach for interest rate increases this month.
As my colleague, Raul de Frutos, recently wrote, this has led to the weakest U.S. dollar in 15 months and sent investors flocking to silver, gold and even the platinum group metals. That’s right, 15-month high for gold, 15-month low for the U.S. dollar index. The correlation, gold-to-dollar, is way more reliable that any physical demand indicator of gold.
It seems as if the Fed’s dovishness is catching on globally, too. Japan was expected to implement a fresh round of stimulus to weaken the yen to combat low inflation. However The Bank of Japan kept interest rates unchanged this month.
There is little sign that investors will stop flocking to safe havens and with strong consumer demand in automotive and electronics it’s difficult to see an end to this bull run.
Actual Precious Metal Prices
U.S. Silver increased to $17.53 an ounce this month, up 13.5% from its April value, $15.45/ounce. U.S. Gold increased to $1,266.40 an ounce, up from $1,232.40/ounce in April, a 2.8% increase. U.S. Platinum increased to $1,051/ounce from $975/ounce in April, a jump of 7.8%.