Gold and Silver Post Modest Rebound, IMF Warns About Global Growth

On Tuesday, gold (NYSEARCA:GLD) futures for June delivery, the most active contract, gained $26.30 to close at $1,387.40 per ounce, while silver (NYSEARCA:SLV) futures for May increased 27 cents to finish at $23.68.

Both precious metals posted a modest rebound, after heavy selling pressure in the previous two trading sessions. Yesterday, gold suffered its biggest one-day percentage drop since 1980, and its largest fall in dollar terms on record.

Many people are claiming that the recent sharp correction in gold signals the strength of the economy. However, the International Monetary Fund reminded everyone that the global economy is sluggish at best. The organization lowered its estimate for global growth to 3.3 percent, which is only slightly more than last year and down from the 3.5 percent estimate made earlier this year. The U.S. is expected to expand only 1.9 percent this year.

Central banks are set to keep easing…

The IMF noted that with inflation risks low, central banks should continue with their current policies, with more easing taking place in the euro zone.

“While some tail risks have decreased it is not time for policymakers to relax,” IMF chief economist Olivier Blanchard explained at a news conference. The IMF also said, “Given moderating inflation pressure, monetary policy should remain very accommodative. Room is still available for further conventional easing, as inflation is projected to fall below the European Central Bank’s target in the medium term.”

By the end of the day, the SPDR Gold Trust (NYSEARCA:GLD) gained 1.1 percent, while the iShares Silver Trust (NYSEARCA:SLV) increased 2.6 percent. However, gold miners (NYSEARCA:GDX) such as Yamana Gold (NYSE:AUY) and Barrick Gold (NYSE:ABX) fell 1.9 percent and 4.7 percent, respectively. Silver miners such as First Majestic Silver (NYSE:AG) and Pan American Silver (NASDAQ:PAAS) both dropped more than 2 percent.

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Disclosure: Long EXK, AG, HL, PHYS

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