Author: Paul Ploumis21 Jun 2014 Last updated at 05:17:14 GMT
EDGWARE (Scrap Monster): Silver and gold prices eased back Friday morning in Asia and London after jumping in what analysts variously called "short covering", a response to worsening fighting in Iraq, and a reaction to this week's US Federal Reserve hinting at 0% rates well into 2015.
Both gold and silver prices yesterday made their sharpest 1-day gains since autumn 2013 as the Dollar slipped and US equities stalled near record highs.
World stock markets meantime stalled at record highs, while Treasury bonds edged down in price to nudge yields higher.
The Dollar pushed the Euro back towards $1.36, but the British Pound ticked near 5.5-year highs above $1.70.
Crude oil was on track Friday for a second weekly rise as the US sent military advisors to help the Iraqi army fight ISIS militants.
"The political turmoil in Iraq and Ukraine continues to provide support," reckons $1 billion portfolio manager Dan Denbow at the USAA Precious Metals & Minerals Fund , quoted by Bloomberg.
"But the main reason for the rally is Yellen...[The US Fed chair's] words [in Weds' press conference] worked like magic for the gold market, which has otherwise been very lackluster."
"The price rally," agrees Commerzbank's commodity analysts, "was evidently triggered by Wednesday evening's meeting of the US Federal Reserve, despite it yielding no surprise.
"These were not purchases of physical gold however, but predominantly transactions on the futures market."
Silver futures volume Thursday was twice the last month's daily average.
"There was no one factor that explained gold's large spike," reckons US broker INTL FC Stone, but "massive short covering may have played a role, particularly after key resistance levels gave way."
Another dealing desk calls it "safe haven and technical buying". But betting against silver prices by speculative traders this month hit all-time record levels.
Silver prices jumped 5.0% on Thursday, touching the highest level since mid-March at $20.93 per ounce, and pushing some $2 billion-worth of silver short positions into the red.
The Gold/Silver Ratio fell to a 3-month low, with market prices setting one ounce of gold at 64.1 ounces of silver, down sharply from May's four-year peak above 68.
"Momentum indicators [in gold] are bullish," says the New York office of Scotia Mocatta, but the Relative Strength Index "is approaching 70, suggesting that this rally is nearly overbought."
In silver prices "we expect near term support around 20.40, near...the 200-day moving average."