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In their latest precious metals research report, Heraeus analysts note that while gold prices are correcting nowadays, there are numerous positive factors ahead that could support new record highs for the precious metal.
Meanwhile, lower silver prices are helping to attract the interest of ETF investors, and the silver market has already seen its largest inflows since 2021, a piece of good news that silver investors have been waiting for.
Gold prices are currently supported by four positive factors, the report reads, starting with expectations that Trump could win the November election, and that heightened political uncertainty could be a positive driver for gold as a general hedge against geopolitical risk.
The second factor is the expected weakening of the US dollar under a Republican administration. Reflationary policies and tariffs, which are part of Trump’s goal to support U.S. exports, could support the price of risky assets such as gold and weaken the dollar’s dominance.
Analysts point out that a third factor is that the net long gold position has increased to 258,000 ounces in July, but is still below the 354,000 ounce high seen during the pandemic, suggesting that there is room for further accumulation of long positions in the second half of the year, which may help gold prices move higher.
Last but not the least, analysts believe that overall gold investment remains unsaturated. The report notes that although global gold ETF holdings have shown improvement, they are still 300,000 ounces below their 2020 peak. The prospect of a US interest rate cut in September could drive inflows, and a shift in momentum from the East to the West could be a strong driver of the gold price in H2’24.
Analysts see waning gold demand from China as a key risk to gold prices in the second half of the year. High gold prices, persistently low consumer confidence and uncertainty over the economic outlook are dampening demand for gold jewellery in China.
However, Heraeus analysts reminded investors that the fall in the price of silver below $29 an ounce prompted silver exchange-traded funds to buy more than 28 million ounces of silver over the past two weeks, with silver ETF holdings reaching 714.8 million ounces in the week ending 25 July, a new March high and the largest one-week inflow of holdings since 2021.
Analysts noted that silver faced heavy selling pressure last week as the spot price fell below $28 an ounce for the first time since May. The decline in U.S. stocks and base metals continued to spill over into the precious metals market.
As the EU Economic Sentiment Survey recorded its first decline in a year, this put additional pressure on the precious metals market. Silver prices continued to come under pressure on Monday (29 July), with spot silver trading at $27.548 per ounce by the close, down 1.37%.
