Tuesday brought the seventh consecutive day of growth and consolidation in the gold price above $5,000 per ounce.
The dollar is under pressure ahead of the Fed’s January meeting, and the quarterly business results of technology giants are coming to the fore on the stock exchanges.
While one would expect a major downward correction in precious metals after such a strong rally, this is not happening. On Monday, silver was already 13 percent more expensive compared to Friday. Such growth is already high in a year, let alone in one day.
Geopolitical tensions, buying by central banks and high inflows of retail investors into ETF funds (the FOMO effect is obvious, as many do not want to miss out on this growth) ensure new records for precious metals. Inflows into the largest silver ETF (iShares Silver Trust) are similar to inflows into UI shares, and the daily turnover in this ETF is eleven times higher than usual.
The Fed is unlikely to change interest rates
The largest European asset manager Amundi says that precious metals still have room for growth, especially if the outflow of dollar investments continues, which is the result of the high US budget deficit and the increasingly unstable independence of the US central bank (the Fed will decide on interest rates again today, the interest rate will almost certainly remain at 3.50 percent, the only question is what future moves will be announced by Governor Jerome Powell), reports SEEbiz. Amundi warns of constant threats and US blackmail of all foreign trading partners, who are now frantically looking for ways to reduce their exposure to the US. This year alone, Trump has already threatened trade partners of Iran, and supporters of Greenland, Canada and South Korea.
One of the convenient solutions for the “rebellion” against the US is (along with the conclusion of new partnerships, such as the EU-India agreement) the sale of dollar investments, such as US bonds, and the purchase of gold and silver. An ounce of 31.1 grams costs $5,140, and silver costs about $110. Analysts are revising their estimates of where gold will be by the end of the year, SEEbiz reports. Societe Generale says it will conservatively be at $6,000. Meanwhile, the US currency is losing value, with the euro now worth almost $1.20 (highest since June 2021), after many predicted an imminent parity with the dollar last February, when the euro was worth $1.0211! The dollar is also negatively affected by American domestic political events, especially the violence caused by the ICE unit in Minneapolis.
What will be the profits of Meta, Microsoft and Tesla?
But if investors are looking for a safe haven in gold in these extremely uncertain times, why are stock markets breaking records? New York’s S&P 500 hit a new all-time high on Tuesday, as did the MSCI All Country index of global shares. Goldman Sachs said its venture capital appetite index last week hit its highest level since 2021. Markets will be tested again when three of the Magnificent Seven (Meta, Microsoft and Tesla) report their results for the final quarter of last year. This will be a major test of the enthusiasm for artificial intelligence that has driven the stocks of the biggest tech firms since the “birth” of Chat GPT. It is true that this year the companies from Mag 7 did not follow the entire market. Compared to the S&P 500 index, Mag 7 stocks even started the year worst since 2010.
