Precious Metals Rebound on Italian Election Fears

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On Monday, gold (NYSEARCA:GLD) futures for April delivery, the most active contract, gained $13.80 to settle at $1,586.60 per ounce, while silver (NYSEARCA:SLV) futures for March jumped 53 cents to close at $28.99.

Both precious metals rallied, despite hedge funds cutting bullish bets on gold by the most in about five years. According to U.S. Commodity Futures Trading Commission data, money managers and other large speculators decreased net-long positions in gold contracts and options by 40 percent.

The Italian election appears to be providing support for gold and silver, as exit polls raised fears that the country may not have a stable government. Projections show former Italian Premier Silvio Berlusconi’s center-right party ahead in the Senate, which could threaten austerity measures and bring the euro zone financial crisis back into focus. Earlier readings had Pier Luigi Bersani’s center-left party leading the field.

Christopher Vecchio, currency analyst at DailyFX, explains, “Unlike in the United States or in other European countries, the Italian Senate and the lower house share power; so if Bersani can’t generate a coalition in the Senate, Italy essentially is ungovernable.”

By the end of the day, the SPDR Gold Trust (NYSEARCA:GLD) and iShares Silver Trust (NYSEARCA:SLV) both gained nearly 1 percent. Gold miners (NYSEARCA:GDX) such as Barrick Gold (NYSE:ABX) and Yamana Gold (NYSE:AUY) jumped 1.64 percent and 2.41 percent, respectively. Meanwhile, silver names such as Pan American Silver (NASDAQ:PAAS) and Endeavour Silver (NYSE:EXK) surged 3.98 percent and 5.84 percent, respectively.

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Disclosure: Long EXK, AG, HL, PHYS

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