Market News

The safe-haven trade in precious metals is showing little sign of cooling, with gold, silver, and platinum extending gains into Friday’s session. Gold futures climbed ~1.6% to trade above the $4,500 level, while silver jumped more than 3% amid tight physical markets and strong industrial demand. Platinum also traded near the upper end of its recent range as supply constraints continued to support prices.

Precious metals are rallying due to a "perfect storm" of heightened geopolitical uncertainty, expectations of U.S. interest rate cuts, a weaker U.S. dollar, continued central bank buying, and strong industrial demand (especially for silver and platinum). These factors are driving investors and institutions toward safe-haven and hard assets.

Ongoing global instability, including conflicts in the Middle East, the Russia-Ukraine war, and international trade frictions, drives investors to seek traditional safe-haven assets like gold and silver. Expectations of the U.S. Federal Reserve interest rate cuts make non-yielding assets like precious metals more attractive compared to bonds and other interest-bearing investments.

Advertisement

A decline in the U.S. dollar's value makes dollar-denominated commodities cheaper for holders of other currencies, further increasing international demand. Central banks are diversifying their reserves away from the U.S. dollar and have been buying gold at record rates for several years. Investment inflows into gold and silver exchange-traded funds (ETFs) have also been substantial, if uneven.

Meanwhile, silver is experiencing its fifth consecutive year of supply deficits, where demand consistently outpaces supply. Industrial demand, particularly from the solar panel industry, electronics, and the building of AI data centers, has surged due to silver's superior electrical conductivity. Similarly, platinum production has dropped to multi-year lows, leading to tight market conditions. While automotive use remains a primary demand driver, industrial and jewelry demand is also contributing to the supply shortages.

In essence, the precious metals rally is a reflection of a complex global economic landscape characterized by uncertainty, concerns about currency debasement, and strong physical demand driven by the energy transition as well as the ongoing AI boom.

By Alex Kimani for Oilprice.com