Key Points
- Silver prices topped $40 an ounce for the first time since 2011, fueled by expectations of a Fed interest rate cut.
- Gold prices neared their all-time high, boosted by haven demand and technical factors.
- The US jobs report, released this Friday, is crucial in influencing the Fed’s decision on interest rates.
- Trump’s criticism of the Fed and legal challenges to his tariffs are contributing to market uncertainty.
Precious metals experienced a significant rally, with silver reaching its highest point since 2011, trading above $40 an ounce. This surge, coupled with gold nearing its all-time high, is largely attributed to growing market expectations of an interest rate cut by the Federal Reserve later this month.
The anticipation is fueled by signs of a cooling US labor market, with Friday’s crucial non-farm payrolls report expected to provide further clarity. This potential rate reduction has increased the appeal of non-yielding precious metals, such as gold and silver.
Adding to the bullish sentiment, concerns about the Federal Reserve’s independence, stemming from President Trump’s repeated criticism and the ongoing legal battles surrounding his appointments, have increased haven demand for precious metals.
The uncertainty surrounding the outcome of these events further contributes to market volatility and investor anxieties. A federal appeals court’s ruling against Trump’s tariffs, while allowing them to remain in place temporarily, also adds to the overall market uncertainty.
Saxo Capital Markets strategist Charu Chanana highlights the confluence of fundamental and technical factors driving the price increases. The recent breach of key resistance levels for both gold ($3,450) and silver ($40) triggered momentum buying, amplifying the upward trend.
Analysts, such as Christopher Wong from Oversea-Chinese Banking Corp., emphasize the importance of Friday’s jobs report, suggesting that weaker-than-expected data could further weaken the dollar and boost precious metals prices, potentially even leading to a larger 50-basis-point rate cut.
Beyond the macroeconomic factors, silver’s remarkable performance this year—with gains exceeding 40%—also reflects the increasing investor interest in silver exchange-traded funds (ETFs). This heightened demand has depleted readily available silver supplies in London, resulting in a persistent tightening of the market and an increase in lease rates.
The inclusion of silver on Washington’s list of critical minerals further bolsters its appeal as a safe-haven asset. With gold also experiencing a steady rise and other precious metals like palladium and platinum following suit, the precious metals market remains dynamic and closely watched.
