Precious metals were all higher Friday morning, supported by a weaker US dollar, gold touching seven-week highs of $1,280/oz, while silver continues to outperform, hitting 15-month highs close to $18/oz.
As currency investors continue to mull the US Federal Reserve's hesitation to raise interest rates this month, in addition to the Bank of Japan's surprise decision to keep rates steady Thursday, the dollar has weakened to multi-month lows.
The euro pushed above $1.14 in early trade Friday for the first time since April 11, sterling over $1.45 for the first time since February. The US Dollar Index has slumped to its lowest level since August, at $93.49 at 1000 GMT against a basket of major currencies.
A weak dollar means dollar-denominated commodities are cheaper, while lower interest rate expectations decrease the opportunity cost of holding non-yielding assets such as gold.
Following the first interest rate hike in almost a decade in December, the US central bank held rates unchanged at 0.25-0.50% Wednesday, as expected, while it noted a slowdown in US economic growth and more sluggish household spending.
A tightening Fed cycle, expected by many investors at the beginning of the year, has since been thrown off course by concerns around the world economy.
According to CME Fed Fund Futures, the probability of a rate hike at the next meeting in June is below 12% Friday, and still under 50% for November.
Meanwhile, investment demand has boosted the strength of both silver and gold this year.
Bullish gold positions on commodity exchange COMEX are at their highest level for four years, and silver the strongest level on record, according to the most recent data from the US Commodity Futures Trading Commission.
Demand in exchange-traded funds has soared this year for both silver and gold, while strong physical demand can be seen in robust coin sales in the US.
According to the US Mint, gold coin sales for April have recovered to 3.28 mt, up from 1.18 mt in February and 1.2 mt a year earlier.
The end of an eight-week national strike by India's jewelers this week should also see a recovery in physical demand in the country, the world's second-largest consumer of gold.
Physical gold demand has struggled this year with high international prices, with global demand at a six-year low in the first quarter, according to a Gold Fields Mineral Services study this week.
First-quarter demand 781 mt, primarily on weak Asian demand, according to GFMS, down from 1,097 mt in fourth quarter of 2015, and 1,025 mt in Q1 2015.
INDUSTRIAL DEMAND
Precious metals with industrial demand have also outperformed recently, platinum trading at nine-month highs around $1,060/oz Friday morning, and palladium at seven-month highs over $620/oz.
Silver, with over half its demand from the industrial sector, has benefited from a recovery in the industrial outlook, with demand set to grow for the fourth consecutive year to its highest level in five years, according to Commerzbank.
In a report this week, Commerzbank said it expects photovoltaics demand for silver to grow 10% to a record 2,600 mt, accounting for 17% of global industrial demand.
"In the medium to long term, we continue to envisage upside potential for silver due to accelerating industrial demand," Commerzbank said, as it raised its price forecast for the end of 2016 to $18/oz, from $17/oz previously.
The gold-silver ratio has fallen this week to below 72, its lowest level for over a year, and down from over 84 in February.
While gold has stalled this year's bull run at around $1,280/oz, silver has climbed 20% since the start of April.
