Precious Metals Climb Higher, Miners Dodge Market Pullback

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On Wednesday, gold (NYSEARCA:GLD) futures for December — the most active contract — increased $12.90 to close at $1,333.40 per ounce, while silver (NYSEARCA:SLV) futures for September jumped 44 cents to finish at $21.79.

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Both precious metals managed to climb higher despite the latest inflation report from the U.S. Bureau of Labor Statistics coming in weaker than expected.

In July, the seasonally adjusted producer price index for finished goods was flat with June. This follows a 0.8 percent increase in June and a 0.5 percent increase in May, and compares against expectations for an increase of 0.3 percent on the month. On the year, producer price growth decelerated from 2.5 percent in June to 2.1 percent in July.

Producer price inflation may be soft, but headline inflation expectations are still targeting about 2 percent in the near term. PCE inflation expectations compiled from U.S. Federal Reserve policymakers call for a headline rate of 2 percent by 2015 with a slightly lower core rate.

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Federal Reserve Bank of St. Louis President James Bullard also noted in a speech that inflation is low and that expectations have declined since March, providing hope that quantitative easing is here to stay for a while. He said, “The committee would not normally remove policy accommodation in an environment where inflation is below target and is projected to remain there.”

By the end of the trading day, shares of the SPDR Gold Trust (NYSEARCA:GLD) increased 1 percent, while the iShares Silver Trust (NYSEARCA:SLV) gained 1.8 percent. Miners across the board avoided the dip in the S&P 500 (NYSEARCA:SPY) and surged higher. Barrick Gold (NYSE:ABX) and Newmont Mining (NYSE:NEM) jumped 5.2 percent and 6.2 percent, respectively. Shares of First Majestic Silver (NYSE:AG) increased almost 10 percent.

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Disclosure: Long EXK, AG, HL, PHYS

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