Gold held just below a record high and silver traded above US$40 an ounce, as the prospect of Federal Reserve rate cuts and growing concerns over the central bank’s future gave fresh legs to the multi-year rally in precious metals.
Spot silver steadied after surging as much as 2.7 per cent on Monday to breach US$40 an ounce for the first time since 2011, while gold held a 0.8 per cent gain to trade just below its April record above US$3,500 an ounce.
The latest run has been underpinned by expectations that the US central bank will reduce interest rates this month, after Fed chair Jerome Powell cautiously opened the door to a reduction. A key US jobs report on Friday is likely to add to signs of an increasingly subdued labour market – supporting the case for cuts. That has boosted the allure of precious metals, which do not pay holders interest.
“With technical resistance levels breached, we may well see momentum taking gold to a new all-time high this week,” BMO Capital Markets analysts Helen Amos and George Heppel said in a note. With holdings in gold-backed exchange traded funds last week expanding the most since April, the analysts see “another week of net inflows on the cards and potential for non-commercial futures positioning to lengthen”.
Both gold and silver have more than doubled over the past three years, with mounting risks in the spheres of geopolitics, the economy, and global trade driving increased demand for the time-honoured haven assets. An escalation in US President Donald Trump’s assaults against the Fed this year has become the latest cause for investor alarm, with concerns over the central bank’s independence threatening to erode confidence in the US.
