The gold and silver markets are experiencing a turbulent period influenced by global political events, economic concerns, and shifting investor sentiment. Following the U.S. election, both precious metals saw sharp declines before staging partial recoveries.
StoneX Head of Market Analysis Rhona O’Connell released a note Monday breaking down the turbulent November.
Peace agreement rumors lead losses
Gold prices initially dropped 9% after the election but quickly regained ground, rallying by 7% to $2,720 per ounce as investors seized the buying opportunity. However, reports of potential peace deals between Israel and Hezbollah saw gold retreat by $90 on Monday, November 25.
Key drivers behind gold’s movements include the anticipated appointment of Scott Bessent as U.S. Treasury Secretary. Known for his expertise and pragmatic approach, Bessent’s selection has been well-received, potentially easing economic uncertainty. However, his appointment also contributed to the market's cautious retreat as optimism grew over reduced geopolitical tensions.
Looking ahead, gold remains well-supported on dips due to persistent geopolitical risks, strong central bank purchases, and increased demand from professional investors. Analysts expect continued volatility with new price highs on the horizon, though not imminent.
Silver favored heading forward
Silver’s post-election decline was steeper, falling 14% from $34.50 to $29.70 per ounce. Its subsequent recovery was more muted, rallying just 7%, as ongoing economic challenges in Europe and China weighed on the market. Unlike gold, silver ETFs have seen mixed activity, with some profit-taking limiting gains.
Despite this, silver remains a favored long-term investment. However, its outlook is tempered by disappointment over China’s lackluster stimulus measures and Europe’s persistent economic woes.
Gold ETFs show significant profit taking
Gold and silver ETFs have shown contrasting patterns. Gold ETFs have seen significant profit-taking, with holdings declining by 33 tons since October. Yet recent data suggests renewed investor interest as prices near $2,700. Silver ETFs, by contrast, have faced net redemptions, with holdings dropping by 268 tons, though the scale of selling has been modest relative to total supply.
On the COMEX, both metals saw substantial reductions in speculative positions post-election, signaling a cautious approach among traders.
Geopolitical landscape moving forward
Geopolitical risks, including tensions in the Middle East and the shadow of conflict in Europe, remain dominant tailwinds for gold. Central bank purchases continue to underpin the market, while the emergence of shadow banking risks evokes memories of the 2008 financial crisis, adding to investor caution.
Headwinds for gold include potential de-escalation of global tensions and a return to tighter monetary policies. Meanwhile, silver’s headwinds are tied to economic stagnation in major markets.
As the year approaches its close, gold and silver are up 28% and 27%, respectively, year-to-date. While gold’s fundamentals suggest a peak could occur next year as geopolitical and economic stability improves, silver’s recovery may lag as it grapples with more immediate economic pressures.
In the short term, gold’s path remains resilient, buoyed by consistent demand and investor interest. For silver, patience will be key as global economic conditions evolve.
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