Gold and Silver Bounce Back On Geopolitical Risk

 

Precious Metals Bounce Back on Geopolitical Risk and Central Bank Buying

(Bullion News Network) – Heightened geopolitical risk factors in Europe propelled gold prices higher today. The precious metal jumped nearly $50 and crossed the $2,700 line, securing the highest spot price for gold since November 5th. Today’s gain comes on the heels of five consecutive winning days for gold, which has now gained over 6% since last Friday. Gold prices dropped in the aftermath of Donald Trump’s victory on Election Day as the stock market surged on a stronger U.S. Dollar and anticipated deregulation policies touted by the incoming presidential administration. The past week saw a reversal of gold’s early November trend, which saw gold fall to a one-month low at $2,562.10 on Friday. 

Silver gained to end the week, despite logging losses on both Wednesday and Thursday. The precious metal jumped $.60 to cross the $31/oz line and will settle at around $31.45 by market close. Silver prices dropped in the wake of Donald Trump’s win in the 2024 U.S. presidential election, although the metal’s trendline has remained bearish since the end of October, when silver dropped rapidly from nearly $34.50/oz to a recent low just above $30 per troy ounce. Today’s price action is a welcome reprieve for silver bulls, and the metal has now gained $.60 and secured a bit of breathing room above $31/oz. 

Two main factors are driving precious metal prices right now: 

1. Military escalation in the Russia-Ukraine conflict
2. Rate cut speculation

The ongoing Russia-Ukraine war has dominated news headlines this year, and recent developments in the conflict have injected a new layer of uncertainty into the geopolitical stability of the entire region. In early November, military officials in the U.S. and Ukraine conflict confirmed that North Korean soldiers were spotted working with Russia in the country’s offensive against Ukraine. This development spurred concerns that North Korea’s intervention would spark a larger regional conflict between North and South Korea. 

This week, tensions in Russia reached new heights after U.S. President Joe Biden authorized Ukraine to use United States weapons to conduct long-range strikes into Russia. Russia responded by reiterating their position that the use of American weapons to strike inside of Russia by Ukraine could potentially escalate international tensions and introduce the possibility of a nuclear offensive into the Russia-Ukraine war.

Yesterday, markets were jolted after Russia fired a medium-range ballistic missile with multiple warheads into Ukraine. Although the attack was not nuclear in nature, officials say that this may be the first time a weapon of its kind has ever been used in an armed conflict. The implications are clear, according to experts. Russia is likely signaling its capacity and willingness to further escalate the war with Ukraine – potentially to devastating nuclear ends. The development sent gold and silver prices higher as investors funneled funds into safe haven assets that tend to perform well during periods of war and geopolitical uncertainty. 

Like for most of 2024, rate cut speculation continues to play a role in price action for precious metals. Metals slumped last week after Federal Reserve Chair Jerome Powell suggested in a statement to Dallas business leaders that the FOMC is not “in a hurry” to cut rates. Austan Goolsbee, President of the Federal Reserve Bank of Chicago, echoed these sentiments, saying that rate cuts are likely to move “a fair bit lower” moving into the first quarter of 2025. 

Although the sliding odds of a December rate cut function as an anchor to metal prices, geopolitical stressors seemed to win the day. Gold and silver will both end the day in the green, with gold now within striking distance of its pre-election highs.