Precious metals have been losing their shine on interest rate expectations and a stronger U.S. dollar. However, with more observers anticipating a gradual Federal Reserve rate hike, bullion-related exchange traded funds surged Friday.
Leading the charge, the ETFS Physical Palladium Shares (NYSEArca: PALL) jumped 5.1% Friday while the palladium spot price rose 5.4% to $567.4 per ounce. The ETFS Physical Platinum Shares (NYSEArca: PPLT) rose 3.6% while the platinum spot price was 3.7% higher to $878.3 per ounce.
The iShares Silver Trust (NYSEArca: SLV) and the ETFS Physical Silver Shares (NYSEArca: SIVR) were up 2.8% and 2.7%, respectively, on Friday. Comex silver futures rose 3.2% to $14.5 per ounce.
Additionally, the SPDR Gold Shares (NYSEArca: GLD) was 1.8% higher, iShares Gold Trust (NYSEArca: IAU) added 1.9% and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) returned 2.0% on Friday. Comex gold futures were up 2.1% to $1,083.6 per ounce.
The precious metals were trading at their highest levels since mid-November after the Labor Department revealed strong gains in nonfarm payrolls last month and added to speculation that the Fed would hike rates in its Dec 15-16 meeting, reports Ira Iosebashvili for the Wall Street Journal.
Higher interest rates would typically weigh on the precious metals market, but many observers believe the Fed will follow a slow and gradual interest rate normalization schedule, given the weak overseas growth, diverging international monetary policies and strengthening U.S. dollar.
Even if rates rose a couple basis points, the continued low rate environment is good for gold, which does not pay a yield and would struggle to compete with yield-generating assets when rates rise.