Precious metals are on the bounce once again with gold and silver gaining grounds amid a softening of the US dollar.
Gold prices snapped a six-day losing streak on Monday as the dollar weakened from its last week’s highs.
Safe-haven demand for bullion was also seen as a factor, supporting prices.
A weaker dollar makes commodities priced in the greenback cheaper for overseas buyers, boosting demand.
Meanwhile, escalating tensions between Russia and Ukraine have also supported safe-haven demand for the precious metals.
At the time of writing, the December gold contract on COMEX was $2,623.30 per ounce, up 0.3% from the previous close.
The same-month silver contract on COMEX was also 0.3% higher at $31.32 per ounce.
Goldman Sachs forecast $3,000 gold price
The gold market received a considerable boost after Goldman Sachs’ ambitious forecast about the yellow metal as reported by Bloomberg News.
Goldman Sachs forecasts gold prices to climb to $3,000 per ounce in the coming year.
Gold prices on COMEX had climbed more than 30% this year with the yellow metal hitting a series of new highs in the past few months.
“Supporting this bullish outlook, Treasury yields showed weakness across the board, with the two-year note yield declining 3.4 basis points to 4.297% and the 10-year yield dropping 2.5 basis points to 4.419%,” Kitco.com said in a report.
The precious metal’s sharp rise reflects broader macroeconomic concerns, including potential trade war escalations under a possible Trump administration and ongoing geopolitical tensions in Ukraine and the Middle East.
These factors had boosted prices to breach $2,800 per ounce for the first time ever in October.
Bullion benefits from safe-haven inflow
Both gold and silver prices have benefited from safe-haven inflows during the past two sessions.
The increased tensions between Russia and Ukraine have renewed concerns among financial investors.
“Meanwhile, safe-haven Silver is gaining traction amid rising geopolitical tensions,” Akhtar Faruqui, editor at Fxstreet, said in a note.
Incumbent US President Joe Biden had reportedly authorised Ukraine to use US-made weapons for strikes deep within Russia.
In response, the Kremlin issued a warning on Monday, vowing to retaliate against what it called a reckless decision by the Biden administration.
Russia had earlier cautioned that such actions could significantly increase the risk of confrontation with NATO.
Over the weekend, Russia had launched its biggest air strike on Ukraine in almost three months.
Any further escalations could see increased safe-haven demand for both gold and silver in the coming weeks.
China’s economy in focus
Earlier this month, China unveiled a stimulus package worth $1.4 trillion to finance local government debts.
The package was met with disappointment by investors for the lack of focused spending to lift the country’s struggling economy.
Investors will be following China’s upcoming loan prime rate (LPR) decision on Wednesday.
The market expects further stimulus measures to boost the economy.
“As one of the world’s largest manufacturing hubs for electronics, solar panels, and automotive components, China’s industrial demand for silver remains a key factor influencing its prices,” Faruqui said.
Copper prices, which are sensitive to China demand, have recovered from sharp losses last week.
However, the red-metal was still nursing steep losses from the previous month.
The copper market will look for any positive cues from China’s decision on Wednesday.
At the time of writing, the three-month copper contract on the London Metal Exchange was $9,121.50 per ton, up 0.3% from the previous close.
Fed policy bets
The appreciation of the dollar after President-elect Donald Trump won the 2024 elections, coupled with sticky inflation prompted traders to reduce their bets for a December rate cut by the Federal Reserve.
According to the CME FedWatch tool, traders have priced in a 58.4% probability of the Fed cutting rates by 25 basis points in December. Bets were as high as 80% last week.
Meanwhile, traders expect a 41.6% chance of the US central bank keeping rates unchanged.
The reduced bets have hurt the prices of precious metals, especially gold.
However, analysts at Kitco believes that the recent price correction was healthy, and signals the end of the current downward phase.
“Market technicians anticipate a relief rally potentially taking gold to between $2,670 and $2,725 in the short term,” Gary Wagner, market analyst, Kitco, said in a report.
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