Precious metals take hit as investors eye the greenback
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JOHANNESBURG - PRECIOUS metals, gold, platinum, and silver retreated yesterday as the greenback strengthened on higher US Treasury yields.
Platinum led the retreat, declining 2.21 percent to $1 181.50 an ounce and silver fell 1.86 percent lower at $24.85 per ounce.
The spot gold price was 0.64 percent lower at $1 732.93 an ounce compared with $1 737.99 an ounce on Friday while the rand gold price was also 0.83 percent lower at 812 306 per kilogram.
The US dollar jumped 0.26 percent to R14.58 to the rand. Data released on Friday showed that US producer prices in March had registered their highest annual growth in 9½ years, signalling the start of higher inflation as the economy reopens.
Trades chief analyst Carlo Alberto De Casa said the dollar was showing fractional gains against the eurozone currency, while the dollar index was also recovering and US yields were in the green as well. “These movements are similarly reflected on the gold price, which is showing a marginal loss … Only a clear surpass of this threshold could open space for further recoveries in the yellow metal.”
While gold is classified as a buffer against inflation, higher yields threaten the status as they translate into higher opportunities for holding bullion.
The US Labour Department showed increases in producer prices across the board in March. The department said goods prices had risen 1.7 percent, accounting for almost 60 percent of the increase in the producer price index – the biggest jump since December 2009 and followed a 1.4 percent rise in February.
Compared with the historic run last year when gold surpassed $2 000 an ounce in August, the gold price has tumbled from $1 867 an ounce in January.
Anchor Capital’s investment analyst, Seleho Tsatsi, said over the longer term, there was the potential for some switching of demand back to platinum. “The question of the emergence of ‘the green economy’ is also very important for where platinum and other Platinum Group Metals prices end up,” said Tsatsi.
According to the latest report by the World Platinum Investment Council, investors continued to be interested in platinum given its key roles in the hydrogen economy, to produce green hydrogen and its use in fuel cell electric vehicles, the accepted views of significant near-term substitution of platinum for palladium, and the substantial discount to both gold and palladium suggests strong future fundamentals. While platinum traded lower yesterday, it was higher than the $600 an ounce plunge a year ago.
The FTSE/JSE All Share Index opened trade at 66 931 yesterday, down from Friday’s 67 191 close to its lowest level in two weeks, tracking its global peers, as the Covid-19 threat persists worldwide. On the domestic economic front, traders were concerned about the pace of South Africa’s recovery, as poor manufacturing data pointed to a sticky rebound in 2021.