Precious metals markets witnessed a historic rally this week, with silver scaling unprecedented peaks and gold posting solid gains, fueled by shifting expectations around US monetary policy and robust investor appetite.
Record Rally for Silver, Steady Gains for Gold
On Friday, spot silver prices soared by 2.6% to settle at $67.14 per ounce. During the trading session, it even touched a record high of $67.45. For the week, silver registered an impressive gain of 8.4%. Meanwhile, spot gold increased by 0.4% to $4,347.07 per ounce, logging a weekly advance of 1.1%. In the futures market, U.S. gold futures settled 0.5% higher at $4,387.3.
Drivers Behind the Meteoric Rise
The surge in precious metals, particularly silver, is attributed to a powerful combination of factors. Investment demand, especially through Exchange-Traded Funds (ETFs), and significant supply constraints have been primary catalysts. Phillip Streible, Chief Market Strategist at Blue Line Futures, noted, "ETF flows continue to dominate that theme as well as some speculation from the retail investor."
Furthermore, recent macroeconomic data has bolstered market optimism. U.S. consumer prices rose by 2.7% year-on-year in November, falling short of the 3.1% forecast. Additionally, the unemployment rate climbed to 4.6% in November, the highest since September 2021. "We've seen the lower inflation data, the weakening labor report. It really reaffirms that the Federal Reserve should keep on their easing path," Streible added.
Market Dynamics and Expert Outlook
Interestingly, the relationship between gold and silver has seen a shift. Michael Matousek, head trader at U.S. Global Investors, observed, "The two are highly correlated and typically gold leads but the last two months, we saw silver lead. So, whenever you see a spread that wide, people will start to pick on gold and tighten on it in the short term."
The data underscores silver's outperformance: it has skyrocketed by 132% this year, far outpacing gold's 65% rise. Traders are now betting on at least two interest rate cuts by the U.S. Federal Reserve next year, according to LSEG data, which continues to support the bullish sentiment for non-yielding assets like gold and silver.
The rally extended to other precious metals as well. Platinum gained 3.1% to $1,975.51 after touching a more than 17-year high, and palladium rose 0.8% to $1,709.75, following a near three-year peak. Both metals posted weekly gains, highlighting broad-based strength in the sector.
