Rally on! Digging into the gold and silver ‘precious metal rush’
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Investors are telling a story in the latest adaptation of Treasure Island, where one doesn’t have to be a buccaneer to turn a profit. The quest for precious metals has led to new heights in 2024, with gold nearly reaching $2,700/oz for the first time ever. Other shiny objects are close behind, benefiting from a Federal Reserve that has returned its cutlass to its scabbard after calling time on higher interest rates.
Long Investor Silver: Outperforming its cousin in recent weeks, spot silver (XAGUSD:CUR) has officially topped spot gold’s (XAUUSD:CUR) year-to-date return after hitting its highest level since December 2012. Silver is also used for industrial purposes, like solar panel cells and EV batteries, and is relatively cheap in ounces when compared to pricey gold. However, the YTD rally of both of the metals has been impressive – silver (+34%) and gold (+29%) – outperforming the 20% gain of the benchmark S&P 500 Index (SP500).
Other reasons for the precious metal boom have been central bank buying and safe-haven demand. Geopolitical and economic uncertainty have increased in the post-COVID era amid heavy debt loads seen across the globe, as well as wars and sanctions that have made many nations wary of the U.S. dollar. The greenback and bond yields are also big factors in the equation, while institutional and the retail crowd have not wanted to miss out on one of the year’s best momentum trades (don’t forget gold bars from Costco).
Shiver me timbers! “According to Bank of America, gold has surpassed the euro to become the second-largest reserve asset after the U.S. dollar,” wrote SA analyst Dave Kranzler, adding that demand is being boosted by the BRIC/eastern hemisphere alliance of countries. “Gold now represents 16% of global bank reserves. The dollar represents roughly 58% of central bank reserves, down from over 70% since 2002.”