Silver prices have hit a significant milestone, surpassing $50 per ounce for the first time in decades, driven by a growing supply shortage and favorable economic conditions for precious metals. On Thursday, the spot price briefly peaked over $51 before settling below $49 by the end of the day, marking the highest trading level since January 1980.
Meanwhile, gold prices experienced a 2% decline after reaching $4,000 for the first time earlier in the week. Investors in both silver and gold capitalized on their gains as prices adjusted following a ceasefire in the ongoing Israel-Hamas conflict, which added some stability to the region known for its volatility.
Tai Wong, an independent metals trader, noted that the ceasefire has prompted some investors to cash in on gold profits, as it lowers uncertainty in a historically tense area. He added that while both gold and silver may need to stabilize further, the underlying factors driving their prices—such as global debt and the need for reserve diversification—remain strong.
Demand for gold has surged this year due to geopolitical tensions, with central banks showing robust interest and expectations of future interest rate cuts contributing to the rally. The SPDR Gold ETF Trust, the largest gold-backed exchange-traded fund, has risen nearly 50% this year, and small-cap mining ETFs have seen even more impressive gains.
On the silver front, its impressive 69% rise this year can also be attributed to a similar mix of supply shortages and increased demand. With ETFs tied to silver also performing well, there is a notable movement of metal into the U.S. market, further tightening supply in London.
As the Federal Reserve prepares for potential interest rate cuts in the coming months, market participants are keeping a close eye on inflation rates, which appear to be climbing and straying from the Fed’s target. Even as signs of a weakening labor market emerge, the anticipation of decreased rates has solidified bullish sentiment for precious metals.
In summary, the increasing prices of silver and gold demonstrate a complex interplay of market forces, with longstanding economic uncertainties acting as a catalyst for investors seeking safe-haven assets.
