Precious Metals Soar to New Heights Amid Expectations of Deeper Rate Cuts
The price of gold has shattered its previous record, surging to an unprecedented high of $2,665.25 an ounce, driven by a weak US economic outlook and heightened expectations of deeper interest rate cuts. Silver, often considered gold’s understudy, is not far behind, hovering near its highest level in four months.
The recent slump in US consumer confidence, which suffered its largest decline in three years, has bolstered the case for more aggressive monetary easing. As a result, traders are betting on more than three-quarters of a point of rate cuts by the Federal Reserve this year. This shift in sentiment has propelled gold and silver prices higher, as lower interest rates reduce the opportunity cost of holding these non-yielding assets.
The two metals tend to move in tandem, driven by their shared macro- and currency-hedging properties. However, silver’s exposure to the economic cycle, particularly its use in clean-energy technologies, makes it more sensitive to industrial trends. China’s recent stimulus package, aimed at reviving its flagging economy and real estate market, has provided an added boost to silver prices.
Analysts attribute the recent surge in silver to the gold rally, which has been fueled by expectations of deeper rate cuts. The industrial metal’s rally has also been driven by China’s stimulus measures, which are expected to benefit the clean-energy sector.
Gold has now rallied almost 30% this year, with silver notching an impressive 35% gain. The momentum behind these rallies is expected to continue, driven by strong central bank purchases, geopolitical tensions, and the looming US presidential election.
As investors seek catch-up buying opportunities, silver is gaining attention, particularly given its sharp rally in recent weeks. The metal’s bullish outlook is unchanged, with many expecting it to outperform in an environment of rising gold prices, Fed easing, and forecasted market deficits.
Looking ahead, investors will be closely watching upcoming US data releases, including the personal consumption expenditures gauge and jobless claims, for further indications of the Fed’s likely easing path.
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