Key Points
- Gold prices rose close to $5,000 an ounce on Friday, while silver touched $100.
- Gold is on track for its best week since 2020 and is up 13% for the year.
- A weaker dollar is driving the rally, as are rate cut expectations and geopolitical tensions.
- Silver’s rally has been even stronger, with prices up 29% year to date.
The incredible rally in precious metals shows no signs of slowing. On Friday, gold prices climbed to near $5,000 an ounce, while silver briefly touched $100 an ounce. Gold is now up 13% for the year and is on track for its best week since 2020.
A perfect storm of factors is fueling the epic run. A weaker U.S. dollar, expectations of Federal Reserve interest rate cuts, and massive government deficits are all pushing investors toward the haven of precious metals.
Geopolitical tensions are also playing a major role. The recent standoff between the U.S. and Europe over Greenland has only added to the market’s anxiety. One Danish pension fund has already said it will sell off its U.S. Treasury bonds, and other large European investors are reportedly reassessing their U.S. assets.
“One of the key reasons gold has been accumulated for months — and is likely to remain in demand — is the steady erosion of fiscal discipline in the United States,” wrote one commodity strategist.
Silver’s rally has been even more spectacular than gold’s, with prices up 29% so far this year. The metal is in high demand for industrial uses, and China has been hoarding its supply and restricting exports, creating a major supply squeeze.
While the momentum is clearly on the bulls’ side, some analysts are starting to get nervous. One strategist at Bloomberg sees parallels to the rapid price moves of 1979 and 1980, which were followed by a major crash. “Momentum is on pace for $100, but if the commodity lives up to its reputation as the ‘devil’s metal,’ silver can rapidly retrace toward $50,” he said.
