Uncertainty Persists on Whether Precious Metals’ Rally Can Last

After several months of relatively lackluster performance, the precious metals market has rallied amid increased investor interest in gold and silver. These metals have traditionally attracted plenty of investor interest during times of political and economic turmoil because they do not depreciate and allow investors to preserve their wealth through economic events like inflation and recession.

However, even though the global economy has been in turmoil for the past few years and the world is wracked with geopolitical tensions from the ongoing Russia-Ukraine war, precious metal prices have not gone up. This is primarily because consecutive interest rate hikes by the U.S. Federal Reserve and other central banks pulled investors away from precious metals to asset classes that generate interest.

However, metal prices have rallied in the past three months amid increased demand from central banks, a weakening greenback, inflationary pressures, economic uncertainty and geopolitical tensions. Expectations that the Fed would halt its interest rate hikes also contributed to the increase in precious metal prices.

Despite the recent rally, investors remain apprehensive and uncertain due to the potential of further interest rate hikes and resistance zones pressuring precious metals prices. Silver prices started rising on July 12, 2023, before they lost their steam, but some pundits expect gold prices to keep rising to the end of the year.

Demand from central banks that bought a historic amount of gold in the past two years is sure to support gold prices in the near term, especially if central banks step up their gold purchases again. But with many expecting the U.S. Fed to increase interest rates again in an effort to curb runaway inflation, gold may lose some of the gains it has made in recent months.

The precious metals market as a whole has exhibited a lot of volatility, experiencing a drastic drop in prices through June and pulling the Precious Metals MMI (Monthly Metals Index) by 6.71% in June. However, the gains in the precious metals market didn’t seem to affect palladium, which has seen a constant decline in prices for most of the year save for a surge in July, while platinum, on the other hand, has seen price gains similar to silver, gold and other precious metals this month. Both platinum and palladium are currently enjoying bullish momentum, but it is unclear if the markets will continue with this momentum in the near term.

Further interest rate hikes by the Fed and a strengthening dollar may take away some of this momentum and cause precious metal prices to drop. Gold industry actors such as Royal Gold Inc. (NASDAQ: RGLD) are likely to keep their fingers crossed over the coming months as more stability returns to the gold market and the commodity regains its momentum.

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