Gold and Silver Markets Surge

On Friday, gold surged to new heights, closing above $2,700 per ounce and reaching $2,740 today, marking a new all-time high. Silver followed suit, breaking through $33 per ounce and extending to around $34.30, its highest level this year. These gains are driven by a combination of factors that include continued central bank buying, increased global liquidity, and ongoing geopolitical events.

One key driver is the Federal Reserve's easing of monetary policy, alongside strong U.S. economic data, which has created a favorable environment for gold and silver. Additionally, China has injected liquidity into its economy, and with the upcoming U.S. election, speculation around further economic stimulus and potential political changes are encouraging more investment in precious metals.

Notably, U.S. retail investors, who had been on the sidelines for much of this current rally, are reengaging with the market, potentially driven by fear of missing out or as a hedge against the uncertainty surrounding the election. Meanwhile, in China, the Shanghai Gold Exchange (SGE) discount has narrowed, signaling that domestic buyers may be losing confidence in their government's stimulus efforts as diminishing returns in the stock market become evident.

The fundamentals of the gold market remain strong. Sentiment is bullish, with price predictions from the recent London Bullion Market Association conference suggesting that gold could reach $2,920 next year. Central banks, particularly in emerging markets, continue to increase their gold holdings, and surprisingly, there has been little activity from producers in terms of hedging or selling physical scrap. Geopolitical risks, especially in the Middle East, have also intensified, providing further support for gold as investors seek protection against uncertainty.

Source: MKS PAMP

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