Due to a confluence of factors, this year has seen the price of precious metals skyrocket. In addition, gold, silver and platinum have made impressive leaps. Gold increased by 27.5% while silver has increased at 24% and platinum has moved up a whopping 36%. All three metals work even better at least in part, thanks to significant economic distortions. Central bank purchases, a weaker U.S. dollar, and increased investor interest driven by market uncertainties are major factors at work.
In April, spot gold prices at one point skyrocketed over $3,500 per troy ounce. This recent spike is an obvious indication of the ardent appetite for the gilded metal. On Wednesday, gold traded around $3,350 per troy ounce. Its widely-regarded role as a safe-haven asset was further entrenched by the global economic uncertainty pervading. Silver gained attention when it crossed the $36 mark per troy ounce, hitting its highest level since 2012.
Central Banks and Demand Dynamics
Central banks around the world – most notably in India and China – are quickly pushing the price of gold higher. As a result of their voracious appetite for gold, this is one of the primary drivers for this spike. Per the World Gold Council, central banks have been the key drivers of gold’s price surge this year. Their purchases have been a critical driver of this trend. In fact, the first quarter of 2024 produced gold’s best quarterly returns since 1986. This jump reflects an increasing trend of people seeking gold as protection against market shakiness.
Gold’s price increases Gold’s upward movement is heavily driven by geopolitical risks and fears of uncertainties impacting global trade. With investors looking for stability across their portfolios, gold continues to shine as the investor safe haven of choice.
“Gold continues to be the primary haven,” – Ole Hansen
The trend doesn’t just stop with gold. For many investors looking to diversify their portfolio, silver and platinum are now more attractive alternatives. With bullion demand finally beginning to stabilize, we’ve seen an interesting trend of investors switching their attention to silver and platinum.
“but with bullion demand showing signs of stalling as investors look for a fresh trigger to propel prices higher, we have instead in recent weeks seen heightened interest in silver (and) platinum.” – Ole Hansen
The Role of the U.S. Dollar
The U.S. dollar’s amazing performance this year has skewed precious metal prices greatly. Bloomberg’s dollar index, which measures the dollar’s value against six major currencies, is down nearly 9% since its peak in early September. A weaker dollar is generally supportive for gold and other precious metals. This makes these assets relatively cheaper for all holders of foreign currencies.
Gold’s recent base building above $3,300 has been underpinned by the ongoing geopolitical risks, trade tensions, and the weakening dollar. Analysts believe these dynamics have produced a market favorable to increased investments in precious metals.
“Gold continues to consolidate above $3,300, underpinned by persistent geopolitical risks, uncertainty on trade and a soft dollar,” – Peter A. Grant
We expect that investor sentiment will continue to be dominated by worries about the global economy. When these types of uncertainties come about, many investors naturally gravitate towards hard assets such as silver and gold.
“There’s just a lot of concern about the global economy, and when that happens, people turn to hard assets like silver,” – Michael DiRienzo
Industrial Demand and Future Prospects
Although gold still captures most investors’ attention, silver’s growing list of industrial uses have made it increasingly valuable for investors as well. Silver may be the most important component to our technology. It is driving major advancements in data centers, solar panels and smartphones — applications that are all extremely popular. Recent confusion over new tariffs have created a scramble for silver. Across a broad range of industries, there is an urgent need for reliable feedstocks to manufacture new products.
Bank of America analysts just released a really cool piece pointing out a major trend. Since then, jewelers have become the second-biggest buyers of platinum behind the auto industry. This change represents the larger development of platinum as a more valuable industrial metal and shorter-term precious metal asset.
“This anticipated shortfall, which will draw down existing above-ground inventories, is being driven by demand from the automotive sector and, notably, a surge in Chinese interest in jewelry, bars and coins,” – Ole Hansen
Just like Platinum’s original intention. As both an industrial metal and an investment vehicle, silver cements its place in the precious metals market.
“It’s really reverting back to its dual use as an industrial metal and as a precious metal,” – Michael DiRienzo
As the year continues, market participants are cautiously optimistic about the future for precious metals. The macroeconomic backdrop is still largely favorable, which is increasing their attractiveness. Consequently, more investors are finding the value in storing their wealth in tangible assets rather than financial instruments.
“These dynamics have further incentivized investors to diversify away from traditional financial instruments and toward tangible assets.” – Ole Hansen