As geopolitical tensions rise and expectations around Federal Reserve monetary policy evolve, gold and silver have demonstrated noteworthy strength in recent weeks. Both precious metals achieved impressive weekly gains, marking gold’s fifth positive week in the last seven and silver’s sixth.
The week kicked off with a significant surge, as gold experienced a remarkable increase of $116, or 2.71%, just on Monday. Silver even surpassed gold in terms of percentage growth, climbing by $3.81, or 5.24%. This price rally was largely driven by a growing demand for safe-haven assets amidst escalating conflicts, particularly the situation surrounding the US-Venezuela relationship.
Concerns about the unstable governance of the oil-rich nation—should US attention shift elsewhere—helped sustain this safe-haven interest throughout the week. Both metals managed to remain above Monday’s closing prices, solidifying their substantial gains.
Mid-week profit-taking occurred following the release of the ISM manufacturing report, which indicated robust economic conditions. This temporarily minimized expectations for imminent Federal Reserve interest rate cuts. However, this bearish sentiment proved short-lived. On Friday, a disappointing employment report revealed significantly lower-than-expected job creation, reigniting speculation that the Federal Reserve might resume its easing cycle. The narrative around these developments is set to face a crucial test with the upcoming release of December’s Consumer Price Index (CPI) data, which could heavily influence market sentiments and determine gold’s trajectory in the coming week. Overall, gold showcased cumulative gains of $177, translating to a 4.09% rise for the week.
Silver’s trajectory closely mirrored that of gold but displayed more volatility, which is common due to its smaller market capitalization. The white metal faced pronounced selling pressure mid-week in response to the aforementioned manufacturing data. Despite its recent strong performance, analysts suggest that silver may have additional upside potential compared to gold.
The gold-to-silver ratio has narrowed to 56.43, a level not seen since January 2013, signaling that silver is closing the performance gap with gold. If this trend continues, historical support levels are identified at 50, and subsequently at 46. It’s worth noting that the ratio hit an all-time low of 31 during the precious metals bull market in 2011, yet such extreme valuations are far from the current figures.
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Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect those of Kitco Metals Inc. While an effort has been made to ensure the information is accurate, neither Kitco Metals Inc. nor the author can guarantee its accuracy. This article is for informational purposes only and is not a solicitation for any trading in commodities, securities, or other financial instruments. Kitco Metals Inc. and the author of this article disclaim any liability for losses or damages arising from the use of this publication.
