Gold held just below a record high and silver traded above US$40 ($51.36) 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% on Monday to breach US$40 an ounce for the first time since 2011, while gold held a 0.8% 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 this Friday is likely to add to signs of an increasingly subdued labour market — supporting the case for cuts. That’s 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 analyst 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.
See also: Gold pushes toward record as ETFs expand in run-up to the Fed
Markets are waiting for a court ruling over whether Trump has legitimate grounds to remove Fed Governor Lisa Cook from the central bank. Separately, a federal appeals court ruled late Friday that the president’s global tariffs were illegally imposed under an emergency law, increasing uncertainty for American importers while delaying the economic dividends the administration has promised.
Gold spiked to its record in April after Trump unveiled an initial plan to introduce sweeping tariffs on most US trading partners. Prices have since eased and remained largely range bound as haven demand cooled, due to the president walking back some of his most aggressive trade proposals.
Silver, meanwhile, has climbed more than 40% this year to outpace gains in gold. The metal is also valued for its industrial uses in clean-energy technologies including solar panels. Against that backdrop, the market is headed for a fifth year of supply deficits, according to industry group the Silver Institute. A weaker dollar has also boosted buying power in major consuming countries like China and India.
See also: State Street’s gold ETF rakes in billions as metal hits record
Investors have piled into ETFs backed by silver, with holdings expanding for a seventh consecutive month in August. That’s drawn down the stockpile of freely available metal in London, leading to persistent tightness in the market. Lease rates — which reflect the cost of borrowing metal, generally for a short period of time — remain elevated at around 2%, well above their normal levels of close to zero.
Precious metals have also found support on concerns they could face US tariffs, after silver was added last week to Washington’s list of critical minerals, which already includes palladium.
Spot gold was up 0.1% to US$3,479.38 an ounce as of 7:43 a.m. in Singapore, after jumping as much as 1.2% on Monday to trade around US$10 shy of its all-time high. A London Bullion Market Association auction on Monday recorded a new all-time high of US$3,474.90 an ounce.
The Bloomberg Dollar Spot Index was steady. Silver was down 0.1% to trade at US$40.6730 an ounce. Platinum rose, while palladium fell.
