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MTrading Team • 2024-02-05

Gold and Silver Continue to Define the Odds

Gold and Silver Continue to Define the Odds

Once again, this week demonstrated the ability of gold and silver to outperform the market. Despite the global turbulence and economic uncertainty, precious metals continue to define the odds.

Starting in 2023, the price trend managed to push both assets to their all-time high. The uptrend is also maintained by the current price action.

The trend in prices that started in 2023 and drove them to all-time highs is being maintained by the current price action. With the Fed Funds rate at its highest point in almost 20 years, the Federal Reserve is sticking to its tight monetary policy. However, gold has stabilized inside a broad-based rally, holding crucial support levels.

The Federal Reserve made it apparent to investors this week that, while they are getting ready to cut interest rates this year, they are not in a rush. The U.S. economy added a staggering 353,000 jobs last month, greatly exceeding expectations, according to figures released on Friday. This puts the final nail in the coffin of a rate increase next month. Wages grew by 0.6% and have climbed by 4.5% concurrently.

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The markets have lowered their expectations for a rate drop in May and now estimate only a 20% possibility of one in March going into the weekend.

The Dow Jones Industrial Average and S&P 500 are reaching fresh all-time highs as market participants keep pouring money into stocks.

April gold futures are finishing the week with a roughly 1% increase despite all obstacles, with prices hitting resistance at $2,050 per ounce.

The research claims that in 2023, demand for gold reached a record 4,899 tonnes, primarily due to bullish central banks and activity in over-the-counter markets. The demand for gold actually decreased to 4,448 tonnes, which is 5% less compared to 2022 levels, when the opaque OTC markets were excluded.

Meanwhile, central banks bought 1,037 tonnes of gold last year, 45 tonnes short of the record set in 2022. Demand from central banks has almost doubled over the last two years compared to the average over the previous decade.

The WGC anticipates that demand will remain consistent with the 10-year average. Experts do not expect central banks to purchase more than 1,000 tons of gold for a third year in a row. The analysts point out that the rationale behind central banks' diversification into gold has not altered and is not likely to do so in the near future.

May the trading luck be with you!