Precious Metal Prices Shoot Up Lower Interest Rates Fuel Big Increase
Gold and silver prices shot upward Thursday on the strength of lower interest rates and some technical factors, analysts said.
Gold rocketed up $5.20 an ounce to close at $410.80 in New York, a five and a half-year high.
Silver followed suit, jumping 21 cents to finish at $5.77 an ounce. Silver prices had hung around $5.20 for much of the fall before embarking on a New Year’s rally, much like gold has.
Wednesday’s drop in interest rates contributed to investors seeking better returns in gold and silver, said Ted Kemps, research analyst with the CPM Group Ltd. in New York City.
The prices rose on some technical market factors as well, Kemps said. But don’t count on the price rallies to continue, he said.
“This won’t hold on for very much longer,” Kemps said. “The next record high for gold is $420 an ounce, but it would be very unlikely for the market to get there. I expect some profit-taking to factor in very soon.”
The silver market often follows gold, but in this case “joined” the gold rally as an attractive short-term investment, Kemps said. A flurry of silver options activity set to expire on March 9 has pushed the market up substantially, he said.
Rising gold prices improve the margins for local gold producers such as Spokane-based Pegasus Gold Inc.
Rising silver prices give hope to Idaho’s Silver Valley, where idled mines await silver prices consistently in the $7 an ounce range before the companies that own them will consider new operations there.
Silver prices edged over $6 an ounce briefly last spring, but quickly fell back to around $5 an ounce. The silver market’s volatility has led many mining companies to favor more stable gold mines to create predictable profits.
Demand for gold has outstripped supply, and recent reports of lower gold production at large South African mines has helped push the market ahead.
Local mining stocks benefitted from the rally. Coeur d’Alene Mines Corp. rose $1 to $23.75. Hecla Mining Co. rose 63 cents to $9.25. Pegasus Gold rose $1 to $17.13. Gold Reserve Corp. rose 50 cents to $8. Sunshine Mining and Refining Co. rose 13 cents to $1.50. Asarco rose $1.50 to close at $33.25.