Based on the this week’s market data, the market sentiment for both gold and silver appears to be influenced by several factors, including economic indicators, monetary policy expectations, geopolitical tensions, and industrial demand.
Gold Market Sentiment:
– Gold has not had a strong start to the year, despite traditional seasonal tailwinds. This seems to be due to a combination of global gold ETF outflows, a reduction in COMEX futures net long positions, unexpectedly strong US economic data, and rising Treasury yields which bolstered the US dollar.
– Speculation over the Federal Reserve’s actions plays a big role in gold’s performance. There were expectations that the Fed might cut rates in March, but due to hot economic data and firm stances from Fed members, those expectations were doused.
– In general, falling rates are beneficial to gold, but the market’s response to the initial rate cut following a hiking cycle has historically been mixed.
– Additional factors like rising Red Sea tensions impacting freight costs and uncertainties tied to a series of elections across various geographies are adding to the complexity of the gold market.
– Despite these intricacies, the price of gold stands at $2,034 per ounce, indicating a robust demand for physical safe assets.
Silver Market Sentiment:
– Silver is forecasted to have a strong year, with potential to outperform gold, according to the Silver Institute’s DiRienzo. The market anticipates global silver demand to reach 1.2 billion ounces in 2024.
– Currently trading at $22.4 per ounce, silver is seen as having greater volatility compared to gold and is sensitive to economic changes.
– Its industrial demand, especially from automobile manufacturing, implies its performance is closely tied to economic growth. Conversely, a slowing Chinese economy could pose a risk to silver prices.
– Market watchers are expecting Fed rate cuts in the second half of 2024, which could lead to silver outperforming gold due to its higher sensitivity to rate cuts.
– Silver, then, has both industrial and investment demand factors at play, which could lead to a “terrific year” for the metal if economic and Fed rate forecasts hold true.
Looking at these points, from a local perspective, investors may find reasons to be concerned about economic stress affecting gold and could look to diversify with silver, especially as silver has potential industrial tailwinds. However, both assets continue to attract investors who seek a hedge against inflation and currency devaluation, especially amidst geopolitical tensions and an uncertain economic horizon. The prospects of the US Federal Reserve easing rates later in the year may further reinforce the attractiveness of these assets as alternatives to paper money, which holds the risk of further inflation.
For local markets, the assessment must consider the actual regional demand for physical gold and silver, exchange rates, import costs, and the impact of local economic conditions. In addition, local investors may exhibit sentiment driven by cultural and historical affinities for precious metals, which can influence their preference for physical safe assets over paper money.
For the first time since 2008 the gold and silver markets are in play again. As inflation continues to rise, expect these metals to increase in price with inflation.
Happy Investing: Silver Savior
* Note We are not giving advice, only our opinion, We are not a financial advisor. This article represents our thoughts about the economy only.
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