As I prepared to write this week’s installment of my “Front Burner” feature, I was considering various topics. Initially, I intended to focus on precious metals, especially since gold (GCZ25) reached a remarkable peak of $4,072.00 per ounce in December Comex futures today. Similarly, silver (SIZ25) soared to a historic high of $49.55 an ounce in December Comex futures.
A Reuters metals journalist contacted me to discuss the factors propelling the significant surges in gold and silver prices. I detailed the fundamental aspects increasing safe-haven demand for these precious metals, citing the prevailing uncertainty in the markets due to the ongoing U.S. government shutdown, which has created a lack of fresh economic data to influence pricing. Additionally, political unrest in France has unsettled European markets and leadership, while the Russia-Ukraine conflict remains intensifying. There are also economic crises unfolding in Argentina as its currency depreciates. Japan’s political and economic troubles are adding to anxiety in global currency markets.
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Additionally, I mentioned to the Reuters reporter that many central banks are currently adopting a more lenient stance on monetary policy, which is likely to bolster demand for precious metals in the coming months. Moreover, these central banks are increasingly accumulating gold. This shift is partly attributed to the trend of “de-dollarization,” as nations strive to reduce their reliance on U.S. dollars in their reserves. Such factors are incredibly positive for the gold market, hinting at consistent demand in the longer run.
Furthermore, both gold and silver are experiencing upward trends in prices, both short-term and long-term, according to technical analysis. This has spurred increased speculative buying in both metals.
The Reuters reporter then inquired about potential factors that could hinder the bullish momentum in gold and silver markets. I explained that a more stable geopolitical environment could negatively impact the demand for safe-haven investments in these metals. A cease-fire in the Russia-Ukraine conflict or a peace agreement in the Middle East would represent significant calming influences.
Declining crude oil prices also pose a downside risk for metal markets. As the leading force in the raw commodity sector, any downturn in crude oil (CLX25) could weigh heavily on the prices of most raw commodities, including metals. Recently, Nymex crude oil prices touched a near four-month low. Ongoing decreases in oil prices could subsequently dampen the overall market for raw commodities.
