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Silver Price Gains on US-Iran Tensions

Posted on 2012-11-05, By A-Best Staff
By Michael Montgomery—Exclusive to Silver Investing News

Silver prices made moderate gains despite a stronger greenback and positive economic data from the US. Precious metals may be deriving some support as a risk asset due to rising oil prices due to the tensions with Iran. On the day, spot silver made a slight gain of $0.21, to $29.37 per ounce, a gain of 0.72 percent.

The saber rattling continues between the US and Iran. Strong sanctions have been placed on Iran. This has led to Iran to threaten military action by closing the Strait of Hormuz, the choke point for one fifth of the world’s oil.

As a result, crude oil prices have risen in recent days on speculation about supply disruptions. Rising oil prices have historically been a supporting factor for precious metals.

“The focus this week is on the US and Iran… Crude oil pushed to a fresh high that has also supported some buying in the gold market,” stated Jim Wyckoff, for Kitco. Wyckoff added, “Gold and silver are going to continue to be significantly impacted by what the crude oil market does. Crude oil is the leader of the raw commodity complex; gold and silver are included in that mix.”

If oil prices were to average $120 per barrel in 2012, the added costs would consume around 9 percent of global GDP. Previous spikes in oil prices have coincided with severe recessions, a supporting factor for precious metals.

Positive US economic data

The US economic outlook has gotten a boost from robust jobs data. The ADP employment report showed that non-farm private employment rose by 325,000 jobs. The gains for December mark the largest monthly improvement since December 2010.

The better-than-expected report may show that the US economy is back on the road to recovery, albeit slowly. However, some have questioned the accuracy of the December ADP report in the past.

“Some have made the argument that ADP has had a problem in the past handling December’s data in particular, due to some seasonal adjustment problems,” stated Josh Feinman, Global Chief Economist for DB Advisors. He added, “Even if you discount the 325K jobs, and cut it down by 100,000 jobs it would still imply a strong gain.”

ADP reported that November employment rose by 176,000 jobs. The December data may show that the trend is moving towards a recovery for US employment.

Tomorrow the all-important US Labor Department employment report will be released, which will show a more complete picture of the US economy.

“Most of the labor market indicators have been looking a bit better. The decline in jobless claims the last month or two, household assessments of the labor market have been positive,” stated Feinman, adding, “putting it all together there are indications that the labor market is looking healthier, I expect tomorrow’s data to be positive.”

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