Silver and gold prices surge as precious metals finally make their move despite renewed USD strength

NEW YORK (September 2) Even in the face of a strengthening U.S. dollar and rising Treasury yields, gold is setting new all-time highs while silver is trading at levels not seen since 2011 – and this week’s breakout could mark the beginning of the next leg up for the broad precious metals rally, according to industry experts.

“Investors adding to gold allocations, especially as Fed rate cuts loom, are pushing prices higher,” wrote Joni Teves of UBS in a recent update. “Our base case is that gold continues to make new highs over the coming quarters.”

“A lower interest rate environment, softer economic data and continued elevated macro uncertainty and geopolitical risks boost gold's role as a portfolio diversifier,” she added.

Marc Chandler, managing director at Bannockburn Global Forex, said North American market participants came back to a broadly stronger U.S. dollar after the long holiday weekend on Tuesday, after the greenback rose by 0.7% or more against most of the G10 currencies.

“The pressure appears to be emanating from the bond market,” he said. “Benchmark 10-year yields are mostly 3-5 bp higher in Europe. The 10-year US yield, which has fallen by almost nine basis points over the past two weeks, is up around 5.5 bp to a little above 4.28%. The 30-year bond yields are also jumping 4-5 bp in Europe and the US.”

But renewed USD strength hasn’t restrained the precious metals complex or other key commodities. “Gold reached a record high (~$3508.75) in Asia Pacific turnover before pulling back to almost $3470 in early European activity,” Chandler noted. “October WTI rose by about 0.5% last week and soared by almost 3% today to nearly $66, its best level since August 4.”

He added that OPEC+ will meet this coming weekend, but most analysts expect the organization to hold production steady.

Rhona O’Connell, Head of Market Analysis for EMEA and Asia at StoneX, said this week’s price action in precious metals was actually catalyzed by silver this time.

“Silver has been proposed to be put onto the list of Critical Materials in the United States, which helped to fuel the surge through $40,” she told Kitco News. “Gold followed suit in Asia with no discernible trigger apart from piggybacking on silver. Momentum traders obviously also became involved.”

O’Connell noted that the U.S. dollar remains under pressure even as the yield curve steepens, while “continued concerns over the aggressive mood music from the White House towards the Fed is adding fuel to the fire.”

StoneX’s outlook for both metals remains unchanged – as it was already quite bullish – but O’Connell warned that the gray metal could see a near-term pullback.

“For the much longer term, silver has a robust fundamental outlook but for now, after the very strong performance at the end of last week and the start of this, it is overbought above $40 and needs to correct and consolidate,” she said. “The solar market remains oversupplied but still has a constructive future, while AI and vehicle electrification will also help to keep the market in a pre-investment deficit. Gold is fully pricing in concerns over Fed independence and the avalanche of comments from the C-Suite in the leading US banks is raising the stakes.”

Others pointed to political causes for the metals’ sudden surge. “The main factor driving gold and bond yields higher is the prospect of the Supreme Court destroying Fed independence,” wrote Peter Schiff, Chief Economist & Global Strategist at Europac and Chairman of SchiffGold, in an X post on Tuesday afternoon. “The Court may rule that FOMC members must serve at the pleasure of an elected President, who has the power to fire them at will, as long as he identifies a cause.”

Nick Cawley, contributing analyst for Solomon Global, told Kitco News that gold is set to test $3,750 per ounce before the end of the year – with plenty of volatility – while silver could break $44 per ounce this year.

“Gold has recorded a fresh all-time high, while silver currently trades at levels last seen nearly a decade and a half ago,” he wrote. “Foreign central bank demand – reflecting a broader shift away from traditional safe-haven US Treasuries – continues to drive gold ever higher. Meanwhile, silver is 40% higher on the year on a combination of strong industrial demand and continuing safe haven appeal. Ongoing rate cuts by major central banks are set to keep driving up gold and silver prices amid enduring geopolitical tensions and economic uncertainties.”

Cawley said that the fundamental drivers supporting both metals remain solid, with de-dollarization a big part of the equation. “In addition, persistent geopolitical uncertainties, accommodative monetary policy, and silver's role in the green energy space continue to drive prices ever higher,” he said. “This convergence of factors suggests both precious metals are set to print new highs in 2025 and beyond as buyers continue to control price action.”

Gold is continuing to set new highs above $3,500 per ounce on Tuesday afternoon, while silver prices are bumping up against resistance near $41 per ounce.

KitcoNews