Ankara: Gold climbed 7.4% over the past week, marking its fastest increase since January 19, reaching $4,342 per ounce amid weak US employment data and the expectation that the Federal Reserve will maintain less restrictive interest rates than previously anticipated. Silver also experienced a surge, gaining 10.2% last week to $65.34 per ounce, demonstrating its strongest weekly performance over the same period.
According to Anadolu Agency, gold started the week trading flat at $4,340 per ounce, while silver began with a 0.8% increase to $64. The trend for gold and silver had been positive at the beginning of the year due to optimism that the Federal Reserve would adopt a more dovish stance. However, the trend shifted on February 28 when geopolitical tensions escalated with joint US-Israel attacks on Iran, sparking inflationary pressures and prompting central banks to hike rates.
Zafer Ergezen, a futures and commodity markets specialist, noted that while gold demand initially declined due to interest rate sensitivity and rising liquidity needs, it found support as tensions in the Middle East eased and the US labor market cooled. These factors tempered hawkish expectations regarding the Federal Reserve's monetary policy.
Ergezen emphasized the impact of geopolitical risks, high oil prices, and potential rate hikes on gold prices. Despite these risks, gold remained resilient above $3,400 per ounce. He highlighted expectations of a Middle East ceasefire influencing prices positively, with rising capital inflows from institutional investors and central banks also playing a role.
Monitoring the US dollar has become crucial for gold and silver, as movements parallel to the US Dollar Index show a high correlation. Gold prices tend to increase when the dollar declines and vice versa. Ergezen explained that continued conflict in the Middle East, disruption in the Strait of Hormuz, and high oil prices contribute to inflation concerns, keeping bond yields elevated and prompting central banks to raise rates.
He noted that persistently high interest rates and oil dependency are key factors influencing the market. As oil prices potentially pull back, gold and silver purchases are likely to increase. The US Dollar Index remains a risk factor, and a decline in the index and oil prices is necessary for further upward movements in precious metals.
Ergezen pointed out that silver is expected to show a stronger trend than gold, with high interest rates impacting its prices. Silver's sensitivity to industrial developments and growth concerns may give it an advantage over gold if an agreement is reached in the Middle East, potentially affecting the gold-silver ratio.
In conclusion, if the geopolitical situation stabilizes and rate hike expectations do not increase, silver may outperform gold over the next one to two months.