Gold Breaks Record, Silver Surpasses $34 As Central Banks Drive Precious Metals Rally

Precious metals continued their ascent this week, with gold reaching new highs and silver touching its highest price in 12 years. This surge was spurred by mounting geopolitical concerns, shifting monetary policy, and a looming presidential election.

Gold futures surged past $2,760 per ounce on Friday, extending a rally that has pushed the precious metal up more than 30% since January. Silver followed suit, briefly exceeding $34 per ounce – not seen since 2012.

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The surge in precious metals outpaces broader market gains, with gold and silver rising 26% and 35% respectively this year, compared to the broad market S&P 500’s 19% advance.

Central bank purchasing is a key driver behind gold’s rise. According to a Yahoo! Finance report citing Bank of America analysts, gold has overtaken the euro as the world’s second-largest reserve asset, trailing only the U.S. dollar. The shift comes as central banks reported record gold acquisitions in the first quarter of 2024.

“On top of the concerns in the Middle East, you are also nearing the U.S. election, which is looking like a very closely contested election,” Nitesh Shah, commodity strategist at WisdomTree, said to Reuters. “Gold often is the place to go in times of uncertainty.”

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Market sentiment remains decidedly bullish. At last week’s London Bullion Market Association conference, delegates projected gold prices to reach $2,941 per ounce within the next year. The outlook for silver appears even more optimistic, with JPMorgan reporting that conference attendees forecast prices averaging $45 per ounce.

Recent policy decisions by major central banks support precious metals. Last month, the Federal Reserve implemented a half-point rate cut, while the European Central Bank announced its third quarter-point reduction this year. The moves have bolstered the appeal of gold, which typically benefits from lower interest rates.

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However, recent economic data has introduced some volatility. U.S. retail sales exceeded expectations in September, while unemployment figures unexpectedly declined. “Those two reports fall into the camp of the monetary policy hawks,” Jim Wyckoff, senior market analyst at Kitco Metals, said to Reuters.

Phil Streible, chief market strategist at Blue Line Futures, attributes the ongoing rally to “declining inflation expectations and the rotation of assets that tend to perform well with a more dovish Fed.” His firm projects gold reaching $2,850 by year-end.

Silver’s surge reflects its dual role as a precious metal and industrial commodity. The metal’s applications span electronics, automotive components, and more.

However, JPMorgan analysts note potential headwinds for industrial metals prices in 2025, particularly if trade policies shift following the U.S. presidential election.

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