Gold and copper prices have surged as traders speculate that the US Federal Reserve will need to adopt a more accommodative monetary policy to support the economy. In a notable development, silver has also seen significant gains.
With the US government poised to reopen following the longest shutdown in its history, investors anticipate that the forthcoming economic data will reflect weakness. This expectation may pressure the Fed to reduce interest rates as early as December.
“The market is anticipating weak economic data once the government opens up and starts to report,” stated Bart Melek, global head of commodity strategy at TD Securities. “This implies that the Fed is more likely to pursue easing monetary policy.”
Easing measures from the Federal Reserve typically bode well for commodities priced in dollars, such as copper. Additionally, gold and silver, which do not yield interest, generally thrive in low-interest environments. Recently, bullish sentiments around gold and silver options have also supported the rise in these precious metals.
Gold prices have retreated slightly from last month’s peak of over $4,380 but are still up more than 55% this year, on track to achieve its best annual performance since 1979, largely driven by robust central bank purchases.
Meanwhile, silver has surged to its highest level since October 17, when it reached an all-time high of $54.4796 an ounce. The marked volatility in the market at that time was driven by a significant squeeze, particularly in London, where prices climbed sharply due to tightness in metals stored in Shanghai and New York. This tight market condition has recently eased with substantial inflows into London’s vaults.
As of 3 p.m. in New York, gold increased by 1.7% to $4,197.43 an ounce, while the Bloomberg Dollar Spot Index remained largely unchanged. Silver saw a jump of up to 4.8%, with both palladium and platinum rising by over 2%. Copper on the London Metal Exchange also rose by 1.1%, settling at $10,944 a ton, with all other LME metals, except for nickel, experiencing gains.
The market’s positive momentum reflects a growing belief in the resilience of precious metals amid ongoing economic uncertainties, bringing optimism for investors looking for stability and potential appreciation in their portfolios.