Bright day for precious metals

Gold ends at two week highs

Bullion prices ended the U.S. day session with good gains and gold hit a two-week high on Thursday, 10 April 2014. The metal was boosted by safe-haven demand, perceptions of a more dovish U.S. Federal Reserve, and a weaker U.S. dollar index.

Gold prices climbed by more than 1% on Thursday to settle at their highest level in nearly three weeks after minutes from the Federal Reserve's most recent meeting had a less hawkish tone than investors expected. Gold for June delivery climbed $14.60, or 1.1%, to settle at $1,320.50 an ounce on the Comex division of the New York Mercantile Exchange.

Silver also got a boost from the Fed minutes. May silver rose 32 cents, or 1.6%, to $20.09 an ounce, after closing down 1.4% on Wednesday.

The sell-off in the U.S. stock market Thursday, rallying U.S. Treasuries and the rise in gold all pointed to a risk-off trading daypossibly due in part to worries about the Russia-Ukraine tensions as the weekend approaches. The Russia-Ukraine situation is still on the minds of traders and investors this week. Gold would likely increased see safe-haven demand increase on any escalation of this conflict.

The market place Thursday was still digesting Wednesday afternoon's release of the minutes of the latest meeting of the Federal Reserve's Open Market Committee (FOMC). The U.S. stock indexes and gold rallied and the U.S. dollar index sold off in the wake of that report. Traders and investors looked at the FOMC minutes and decided the last FOMC meeting, combined with recent remarks from Fed Chair Janet Yellen, paint a picture that is decidedly more dovish than they had earlier reckoned. Most now believe it will be a longer period of time before the Fed starts to raise its interest rates. More money in the U.S. banking system (quantitative easing) is bullish for the U.S. stock market and also bullish for raw commodities due to the inflationary implications.

The U.S. dollar index has taken a beating this week and fell to a three-week low overnight. The eroding greenback is a bullish underlying factor for the raw commodity sector.

In overnight news, China's latest trade data again disappointed the market place. March exports were down 6.6% year-on-year, while imports fell 11% in the same period. Part of the decline in exports was blamed on companies over-inflating their invoices on exports last year. This news is a bearish underlying factor for the raw commodity sector, as China is the world's largest raw commodity importer.

U.S. economic data released Thursday included the weekly jobless claims report, import and export price indexes, the monthly Treasury budget statement, and ICSC chain store sales trends. None of this data impacted the market place much.

The weekly initial claims level fell to 300,000its lowest point since May 2007from an upwardly revised 332,000 (from 326,000), while the consensus expected the claims level to fall to 325,000. The size of the drop in claims was unusual, and while the Department of Labor did not issue any statements explaining the decline, there tends to be normal seasonal volatility over the first few weeks of April due to yearly calendar shifts in the Easter holiday.

Export prices, excluding agriculture, increased 0.5% in March after increasing 0.6% in the prior reading. Excluding oil, import prices rose 0.3%, which follows last month's downtick of 0.1%. The Treasury Budget for March showed a deficit of $36.90 billion, which followed the prior month's deficit of $106.50 billion. The consensus expected the deficit to hit $36.00 billion.

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