Merciless to those not yet on board, i.e. invested, metal prices have continued to rise, with new record prices for copper, silver and gold. Even previously “neglected” industrial metals such as nickel and tin saw significant appreciation, but the focus remains on silver, with a spectacular rise of almost 28 percent within the first nine trading days of the new year. Gold investors, however, may also rejoice in view of a price increase of over seven percent within the same period, holding steady above 4,600 US$ per ounce.
Geopolitical situation and Fed conflict drive gold demand
Precious metals benefited, amongst others, from the conflict between the US government and the Fed chairman, Jerome Powell, which escalated at the beginning of the week. This intensified the yearning for safe-haven investments, as did the uncertain situation in Iran and the potential impact of further escalation there on oil supplies and the global economy. For most metals – especially copper, silver and platinum – the financial markets also fear increasing supply shortages in the medium term and potential US import tariffs over the course of this year, resulting in overstocked US warehouses and insufficient quantities currently reaching Asia.
Many analysts continue to cite the so-called “debasement trade” as the reason for the sustained strong demand for gold: many major investors’ intention of shifting part of the often very high proportion of US government bonds in their portfolios to other forms of investment and therefore keeping an eye on gold.
Gold trades above 4,600 US$ per ounce for the first time
While the gold price stood at 4,450 US$ per ounce on Wednesday evening, 7 January, it initially dropped to 4,408 on Thursday. Following an unexpectedly sharp decline in the US unemployment rate, reported on Friday afternoon, gold ended the week at 4,510 and rose above the 4,600 mark for the first time on Monday, reaching another record high yesterday, Wednesday, at 4,643.75. It had been boosted by data on US consumer prices reported on Tuesday, which in parts remained below expectations. At the time this report was written this morning, gold traded at around 4,605 US$ per ounce.
Xetra-Gold hits new record high
The Xetra-Gold price joined the record chase, rising sharply from 122.35 € per gram last Wednesday evening to 128.10 yesterday at noon, another record high. This morning, it was expected to kick off the trading day at around 127.20 € per gram.
Although the upward price jumps on the metal markets may have gone overboard and the markets appear overheated, no one seems willing to stand up to this trend. Geopolitical risks could continue to heavily impact market developments for the time being, as could concerns about spiraling government debt around the globe, which is currently causing a sharp rise in yields in Japan. These factors are likely to continue to support gold prices. Physical demand could see an intermittent drop over the Chinese New Year holidays in mid-February.
I wish all readers a great rest of the week.