Gold records biggest one-day rise since March, silver jumps nearly 7% due to Fed-inspired ‘short squeeze’

Gold and silver rose sharply on Thursday, with gold posting its biggest one-day percentage gain since March, while silver rose about 7% to close at its highest price in a month.

price movement
  • GC00 gold,
    + 1.78%

    + 1.78%
    For October, it gained $31.20, or 1.8%, to settle at $1,750.30 an ounce. FactSet data showed that this was the biggest one-day gain for the most active decade since March.

  • silver SIU22,
    + 7.15%

    + 7.15%
    For September delivery it added $1.27, or 6.8%, to settle at $19.868 an ounce, the highest finish since June 30. Silver has not seen daily gains of this magnitude since February 1, 2021, according to Dow Jones market data.

  • Platinum PAU22,
    + 3.72%
    For October, it lost 40 cents, or roughly 0.1%, to $876.80 an ounce, while palladium lost PLV22 for September,
    + 0.07%
    Gained $75.80, or 3.8%, to $2,080.20 an ounce.

  • HGU22 copper prices,
    + 1.30%
    For September delivery it advanced 4 cents, or 1.3%, to $3.4745 a pound.

What the analysts say

Both gold and silver benefited from Federal Reserve Chair Jerome Powell’s comment on Wednesday that the next interest rate hike in September will depend on the duration of the upcoming US economic data. Traders interpreted Powell’s ambiguous guidance as opening the door to a 50bp rate hike in September after the Fed chose to raise 75bp in June and July.

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Because of Powell’s comments, “we could see the Fed begin to shift” toward a slower pace of rate hikes, said Daniel Ghaly, director of commodity strategy at TD Securities. This should benefit gold and silver at the expense of the US dollar and Treasury yields.

While Powell’s comments helped launch the initial movement in gold and silver, they were exacerbated by short-covering among money managers, who were recently exposed to the trade in gold for the first time since 2019, according to Ghaly, who cited a combination of available positioning data and metrics. The internals of TD Securities.

“Money managers cover sell-throughs via gold and silver, but in gold you have another group that takes the other side, where you don’t do it like in silver,” Ghaly said.

Gold prices continued to rise after US data released on Thursday showed that the domestic economy contracted at an annualized pace of 0.9% in the second quarter, the second consecutive decline. GDP contracted at a pace of 1.6% in the first three months of the year.

Brian Lundin, editor of Gold Newsletter, told MarketWatch that Powell’s perceived lack of commitment on Wednesday to monetary tightening, along with “today’s confirmation of a recession, the investor believes the pivot is likely to come sooner than the previous consensus view.”

“Gold and silver are significantly oversold, so all components of the price recovery have fallen into place,”

– Brian Lundin, The Golden Bulletin

“Gold and silver are very much oversold, so all components of the price recovery have pulled back nicely,” he said.

“Economic growth is stifled, and resolving the situation today seems more difficult, not without significantly higher wages,” Lundin said. “This adds to a deeper and longer recession as well as ongoing inflationary pressures, which are a major predicament for the Federal Reserve.”

It also represents a “positive setting for gold, especially from the current low price levels,” he said. Metals are now likely to have bottomed, and even if we don’t see a strong rally, we should at least see a slow rally from the lows ahead.

Gold and silver suffered major weakness this summer, as a strong dollar and higher yields took away some of the precious metal’s luster. After dropping for five consecutive weeks, gold reached its lowest level since the first quarter of 2021 earlier this month, while silver briefly traded at its lowest level in more than two years.

ICE DXY US Dollar Index,
+ 0.06%And the
A measure of the dollar’s strength against a basket of competitors, it rose less than 0.1% in Thursday’s trading.

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