Gold and silver markets have settled into a phase of consolidation despite previous surges, with analysts forecasting a bullish trajectory ahead.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, highlighted in a recent report that the precious metals sector has maintained robust performance, marked by a substantial rally earlier this year. From February lows to a peak surpassing $2450 per ounce last month, the market saw a notable upswing, buoyed by strong investor interest.
While acknowledging a slight moderation in momentum, Hansen emphasized the absence of significant bearish sentiment among investors and money managers. He noted that many hedge funds entered the market when gold was priced below $2,200 per ounce, a factor contributing to its current support around $2,300 per ounce.
“The rally in early 2023 was largely driven by substantial demand from managed money traders, particularly hedge funds,” Hansen explained. “Their early entry into the market has shielded them from the need to adjust positions during the ongoing correction phase.”
Hansen contrasted gold’s stability with the higher volatility observed in other metals such as silver, platinum, and copper, where speculators entered the market later and at higher price points. This divergence, he suggested, has left those markets more vulnerable to significant corrections.
Looking forward, Hansen underscored gold’s role as a safe-haven asset amidst global economic uncertainties and geopolitical tensions. Additionally, he pointed out that increasing sovereign debt has prompted central banks to diversify their reserves away from the U.S. dollar, further supporting demand for precious metals.
The duration of the ongoing consolidation phase, according to Hansen, hinges largely on signals from the Federal Reserve. He observed that while retail investors in Asia and central banks continue to provide foundational support, there remains a notable absence of robust demand from ETF investors. This sector has largely remained net sellers since 2022, impacted by the Federal Reserve’s aggressive rate-hiking measures which have increased the opportunity cost of holding non-coupon-paying metal investments.
“Gold and silver will likely continue to experience subdued interest from ETF investors until interest rates are reduced,” Hansen predicted.
In conclusion, while gold and silver navigate a period of consolidation, the outlook remains optimistic as market fundamentals, including safe-haven demand and sovereign actions, continue to underpin their long-term prospects.
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