Gold breaks record, silver tops $34 as central banks drive precious metals rally

Precious metals continued their rise this week, with gold hitting new highs and silver hitting its highest price in 12 years. This increase was driven by increasing geopolitical concerns, changing monetary policy and an upcoming presidential election.

Gold futures rose above $2,760 an ounce on Friday, extending a rally that has seen the precious metal rise more than 30% since January. Silver followed suit and briefly exceeded $34 an ounce – a level not seen since 2012.

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The rise in precious metals is outpacing the broader market's gains, with gold and silver up 26% and 35%, respectively, this year, compared with the broader market S&P 500's 19% rise.

Purchasing by central banks is a key driver of the rise in gold. According to a Yahoo! In a financial report citing Bank of America analysts, gold has overtaken the euro as the world's second-largest reserve asset, trailing only the US dollar. The shift comes as central banks reported record gold purchases in the first quarter of 2024.

“In addition to the worries in the Middle East, you are also close to the US election, which looks like a very closely contested election,” Nitesh Shah, commodities strategist at WisdomTree, told Reuters. “In times of uncertainty, gold is often the right place to go.”

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Market sentiment remains extremely optimistic. At the London Bullion Market Association conference last week, delegates predicted gold prices would reach $2,941 an ounce next year. The outlook for silver appears even more optimistic as JPMorgan reported that conference participants were forecasting prices to average $45 an ounce.

Recent policy decisions by major central banks are supporting precious metals. Last month, the Federal Reserve implemented a half-point interest rate cut, while the European Central Bank announced its third quarter-point cut this year. The measures have increased the appeal of gold, which typically benefits from lower interest rates.

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However, recent economic data has caused some volatility. U.S. retail sales beat expectations in September, while unemployment fell unexpectedly. “Both of these reports fall into the camp of monetary policy hawks,” Jim Wyckoff, senior market analyst at Kitco Metals, told Reuters.

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