Gold, Silver Hit 4.5-Mo. Highs

(Kitco) Gold and silver prices both hit 4.5-month highs and ended the U.S. day session moderately higher Thursday. An eroding U.S. dollar and a rallying crude oil market are bullish outside elements boosting the metals. February Comex gold was last up $7.40 an ounce at $1,363.80. March Comex silver was last up $0.136 at $17.625 an ounce. The U.S. Dollar Index was solidly lower and hit another 3.5-year low today. Meantime, Nymex crude oil prices were firmer and traded above $66.00 a barrel, and hit a more-than-three-year high.  I’ve covered commodity markets on a full-time basis for 33 years. I’ve seen a few cyclical ups and downs in the raw commodity sector during that time. Price actions in many markets to start 2018 strongly suggest the raw commodity sector is now starting a cyclical upturn. It appears much better times are ahead for raw commodity market bulls, including the precious metals. Following are some of my observations on why we have ended a bust cycle in raw commodities and are entering a boom cycle. The Goldman Sachs Commodity Index is a basket of raw commodity futures markets’ prices rolled into one composite index price. The GSCI has been trending higher since early 2016 and just hit a more-than-three-year high. The solid price uptrend on the weekly chart for the GSCI suggest more gains in the index in the coming weeks and months, and even longer. The U.S. dollar index (USDX) is a basket of six major world currencies stacked up against the greenback. The weekly chart for the index shows prices are in an accelerating downtrend. Most raw commodity markets are priced in U.S. dollars on world markets. When the dollar depreciates it makes those commodities cheaper to purchase in non-U.S. currency.  Importantly, in my years of following all the markets, trends in the currency markets tend to be stronger and longer-lasting than trends in other markets. As the U.S. dollar index continues to decline, such will continue to be a bullish element for the raw commodity sector.