Bullion analyst Sanjiv Arole reports the precious metals market has been a rollercoaster ride, worthy of a Bollywood blockbuster. From geopolitical tensions to economic uncertainties, every plot twist has influenced gold and silver prices. With a dramatic climax approaching, the US Fed’s interest rate decision could be the final act, determining whether these precious metals will shine or fade.
A typical ‘Bollywood’ potboiler (masala) movie has several ingredients mixed together in varied proportions. An action thriller with plenty VFX has blaring music along with song & dance, romance, drama, emotions, peace & harmony, item numbers, sorrow, sex and even comedy. There is nothing left to chance! The precious metals markets, gold and silver in particular, are experiencing a full range of emotions, so typical in Bollywood movies. Firstly, there was the truce between Israel and Hezbollah, but the fight in Gaza continues unabated. Then, bitcoins crossed $100,000 on 4th December. There was regime change in Syria as the Syrian president Assad was forced to flee the country by the rebels who overran the regime in just a matter of days. Moreover, the French PM did not survive a no-confidence motion and the South Korean president’s decision to impose martial law in South Korea backfired on him as the parliament there ousted him and even arrested the defense minister. Canada announced a 0.50 basis rate cut a couple of days ago and even The SNB (Swiss Central Bank) followed suit with a 0.50 basis points rate cut on 12th December, 2024. Finally, armed with the latest inflation numbers the US Fed is all set to announce at least a 0.25% rate cut early next week (17th December or so).
As a result of all the turmoil in international markets both gold and silver had a roller-coaster ride in the last few weeks. Gold that had declined to around $2,622 per ounce not so long ago bounced back to around $2,729 per ounce on 10th December 2024 (intra-day). Silver, too, was as volatile as it vacillated between $29.99 per ounce around a month ago to a trifle over $32 per ounce in recent days.
Tracing back gold’s journey, the yellow metal opened 2024 at $2,074.90 per ounce on 2nd January, 2024. On 14th February 2024, gold fell to its lowest level of the year at $1985.10 per ounce, a decline of 4.52%. Thereafter, after a few highs and dips, gold scaled its all-time high of $2,790.07 per ounce on 31st October, 2024, a range of over 40% for the year so far and up 34% from the beginning of the year. The yellow metal also increased by over 31.5% to $2,729 per ounce on 10th December, 2024 (intra-day) from its 2nd January opening of $2,074.90 per ounce. For the first time since 2007 gold has shown a 31% plus increase in the gold price in the year till 10th December of 2024. Silver has been more volatile with a range over 56% and rise of over 33% from the start of the year to $31.88 per ounce on 13th December). It also rose by around 45% from the beginning of the year till its highest level for the year on 31st October 2024 of $34.67 per ounce .
However, the better than expected US PPI data on 12th December 2024 saw the US dollar strengthen and bond yields improve. As a result, both gold and silver nose-dived from their recent highs. Gold, that was over $2,720 per ounce and seemingly poised to take advantage of any US interest rate cuts next week, crashed much below $2,700 per ounce around $2,680 per ounce and searching for support levels. Silver too faced a similar predicament as it dived below $31 per ounce from well above $32 per ounce levels. The precious metals are likely to be seen if gold ends nearer to its all-time high levels or is left hanging on to support levels. Silver is very much in the same boat.
Trump’s enthusiastic response to Bitcoins scaling $100,000 and asking its holders to boost the American economy during his presidency must have sent alarm bells all over the world. Gold bugs could fear a sell-off in gold to buy Cryptos. The fluid geo-political scenario with fragile peace in west Asia and the raging wars over Gaza and Ukraine can impact the precious metals prices either way. As more countries announce interest rate cuts by the day, the US Fed’s decision next week could be make or break for gold and silver prices. It could also show the pathway for the precious metals in 2025.
Meanwhile, a recent World Gold Council (WGC) report on Central Bank purchases showed that India’s RBI purchased 27 tonnes out of 60 tonnes purchased in October 2024 by Central Banks all over the world. It was also reported that China’s PBOC had resumed gold purchases in November that were halted in May. Reports also indicate Central Banks would have another year of high gold purchases. Then, as gold prices fluctuated, ETFs saw a return of gold inflows.
Finally, prominent banks and industry houses predicted gold to be in the $2,900-$2,950 per ounce region by December 2025. Some even see gold over $3,000 and $3,100 per ounce levels and silver nearer $40 per ounce than $32 per ounce levels. Whatever the scenario, the precious metals are in for a roller-coaster ride!