Silver Retreats From Record High on Concerns of Overheating

(Bloomberg) -- Silver held losses aft retreating from a grounds high, with a cardinal method indicator showing that a six-day rally has taken it into overbought territory. Gold edged down.

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The achromatic metallic traded astir 2 dollars beneath a record, aft declining arsenic overmuch arsenic 2.4% earlier successful the session. Traders person been betting connected continued proviso tightness and expectations for different interest-rate chopped successful the US, a tailwind for non-yielding precious metals.

The 14-day comparative spot index, however, showed that this caller speculative fervor whitethorn person gone excessively far, excessively fast. A speechmaking of supra 70 shows that the momentum is overheated. In broader markets, Asian stocks roseate aft request astatine this year’s last auction of 10-year Japanese bonds was stronger than the 12-month average.

That drove a rebound successful hazard sentiment, which has steadied markets and triggered immoderate profit-taking, said Saxo Bank A/S Head of Commodity Strategy Ole Hansen. He added that metallic is seeing a “natural pullback,” but the broader uptrend remains intact arsenic agelong arsenic prices clasp supra $54.5 to $55 an ounce.

The rally successful metallic – which had risen much than 8% implicit the erstwhile 2 sessions – has been fueled by bets connected prolonged proviso tightness. Since grounds amounts of the metallic flowed into London to easiness a historical compression successful October, different trading hubs person travel nether pressure. Inventories linked to Shanghai Futures Exchange’s warehouses besides precocious deed their lowest successful a decade.

“We person present moved connected beyond rational momentum,” Daniel Ghali, elder commodity strategist astatine TD Securities, said successful a note. “Demand expectations person declined crossed each categories, leaving concern request arsenic the superior operator today,” helium said, citing anemic carnal trading successful London’s over-the-counter market.

The gold-silver ratio, which indicates however galore ounces of metallic are needed to bargain 1 ounce of gold, has besides fallen to the lowest successful much than a twelvemonth — different indicator that metallic has tally up of itself. Traders sometimes spot specified extremes arsenic turning points.

Bullion has besides been supported by rising expectations that the Federal Reserve volition present different interest-rate chopped adjacent week. Markets person priced successful a near-certainty of a quarter-point simplification astatine the Fed’s last gathering of the year.

Silver fell 1.2% to $57.2887 an ounce arsenic of 3:19 p.m. successful Singapore. Gold edged down 0.4% to $4,216.46. The Bloomberg Dollar Spot Index was flat. Platinum fell, portion palladium was somewhat higher.