Precious Metals Fall as Dollar Stabilizes

Precious metals pulled back from multiweek highs Thursday, as the combination of a firmer dollar and technical re-positioning weighed on gold and silver.

At their lowest, silver prices were down more than 2% on Thursday, reversing weekly gains. Gold prices also fell from five-week highs after a sizable move higher during the previous session.

The US dollar, which normally trades inversely with precious metals, rose against a basket of other major currencies. The dollar index reached a session high of 97.32.

A firmer dollar poured cold water on the euro, which rallied near yearly highs during the previous session. The common currency was unable to rally even after a string of upbeat PMI figures pointed to a rebounding euro area economy.

The Markit Eurozone manufacturing purchasing managers’ index (PMI) held at a firm 57 in May, on a scale where 50 separates expansion from contraction. German manufacturing PMI edged up slightly to 59.5 from 59.4.

“The Eurozone upturn is developing deeper roots as factories enjoy a spring growth spurt. Demand for goods is growing at the steepest rate for six years, encouraging manufacturers to step up production and take on extra staff at a rate not previously seen in the two-decade history of the PMI survey,” Markit chief business economist Chris Williamson said in the official release.

Meanwhile, payrolls processor ADP Inc. reported Thursday that the US private sector added 253,000 jobs last month, following a revised gain of 174,000 in April. Analysts in a median estimate called for an increase of 185,000. The Labor Department will release the official nonfarm payrolls report on Friday.

Silver

Silver prices traded in the low $17.00 range on Thursday after the metal was rejected at the 50% Fibonacci retracement extending all the way back to the April high. The metal’s short-term outlook has turned neutral after a prolonged multiweek uptrend. Longer term, silver prices are expected to remain choppy, providing traders with buy-on-the-dip opportunities.