Gold at a new high

On Wednesday, October 30, 2024, gold futures for December delivery reached a high of more than $2,789 per ounce. Spot gold had a similar trajectory, rising to an all-time high of $2,777. Both contracts extended gains from the previous day, gaining more than 38 percent compared to the same period last year.*

Price performance of gold futures for December delivery over the past 5 years (source: Investing.com)*

Spot gold price development over the last 5 years (source: Investing.com)*

Silver at a 12-year high

The price of silver is also rising. The metal gained more than 3 percent on October 21, pushing its futures for December delivery to $34.40 an ounce, a level last seen in 2012. On a year-on-year basis, the silver price added 48 per cent to its value.* In late October, the silver price was slightly lower at over US$33 per ounce, and the spot price was also at around the same level, namely over US$33.

The evolution of silver futures prices for December delivery over the last 5 years (source: Investing.com)*

Evolution of the silver spot price over the last 5 years (source: Investing.com)*

Politics and war as the main growth factors

With precious metals being safe havens in a period of uncertainty in the capital markets, the intensification of tensions in the Middle East and uncertainty ahead of the presidential election is further supporting this trend. Polls ahead of the US presidential election, due as early as 5 November 2024, suggest a very close contest. According to Real Clear Politics and their average of polls as of October 19, Kamala Harris was leading by 1.2 points. The opposite prediction was seen for the betting average, which had Trump leading by 17 points. However, coupled with the starkly different policies of the two candidates, any predictions of developments are very difficult, creating even more unease in the market.

At the same time, tensions in the Middle East are escalating. Israel is reportedly planning to retaliate against Iran following its recent attack, while continuing to shell Lebanon and Gaza. In addition, another ECB rate cut in mid-October and an expected move in a similar direction by the Fed have also suppressed the rise in the gold price. According to USB forecasts, the gold price could rise to $2,900 by September 2025. Personally, however, I am inclined to believe that the value of the king of precious metals will break the USD 3,000 per ounce mark next year. [1]

The unconventional movement of the dollar

Interestingly, along with gold, the dollar also rose in the penultimate week of October. Usually when the US currency strengthens, the yellow metal tends to fall, due to its price in dollars, which makes it more expensive for international buyers. Despite this, the fact that the dollar index was at 2-month highs on the penultimate Monday of October did not deter gold from rising.* The dollar's rise was supported by good local labor market data, higher retail sales and a rate cut. The dollar is also helped by higher poll numbers pointing to a potential Trump victory, especially against currencies that may be affected by his tough tariff policies.

Dollar Index price action over the past 5 years (source: Investing.com)*

The gold rally continues

When we add to the factors mentioned above the buying appetite of central banks that are increasing their foreign exchange gold reserves and the risk of an inflationary wave, the gold rally is likely to continue.Gold has added more than a third to its value since the beginning of the year, and unless there is a significant change in the fundamental factors influencing the current price trend, I see no reason to change the current bullish trend.

Olivia Lacenova, chief analyst at Wonderinterest Trading Ltd.

* Past performance is no guarantee of future results.

[1][2] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which may change. Such statements are not guarantees of future performance.They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.