Metal Rally Pauses For Air

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It’s been a breathtaking rally for precious metals so far this year. Gold peaked at USD $2431/oz, up 16%, while silver reached $29/oz, marking an impressive 26% increase for the year at its 2024 high. Both metals finally took a breather on Monday, declining by 3% and 5%, respectively.

Following a prolonged and nearly uninterrupted rally, Monday’s pullback was natural and expected, according to most market analysts. An apparent de-escalation in tensions between Israel and Iran, coupled with a resilient US Dollar (still above 106 on the DXY), put pressure on the metals. The DXY remains well above its four-year average of 99.

Despite the pullback, the fundamentals for the metals remain strong, especially for silver. Global industrial demand is on the rise, led by the electronics sector, while annual mining supply is slightly declining, and above-ground supplies are dwindling.

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China, a major driver of gold prices recently, saw its wholesale gold demand rise to the highest point since 2019 during Q1, with a total of 522 tonnes purchased from the Shanghai Gold Exchange. Chinese gold ETFs continued to attract inflows, adding USD $164 million in March. The People’s Bank of China, China's central bank, also reported a 17th consecutive monthly purchase in March, adding 5 tonnes to its gold holdings, which now stand at 2,262 tonnes or 4.6% of its total reserves. China's gold reserves increased by a total of 27 tonnes in Q1 2024.

Looking forward, investors should be prepared for more volatility in the metals market, as numerous geopolitical and macroeconomic events converge with a growing number of market participants. Pullbacks such as those we saw on Monday will make for good buying opportunities.

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Disclaimer: Strategic Wealth Preservation (SWP) is a fully-integrated precious metals dealer and vaulting facility located in the Cayman Islands. SWP specializes in the acquisition and secure storage ...

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