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They said that notwithstanding the difficulty in identifying the drivers behind the recent rally, “clearly gold has been able to find willing buyers.” They said the most obvious and impactful catalyst for a further bull-run for gold is the start of the Fed’s cutting cycle. “Last week, Jerome Powell’s comment that rate cuts are ‘likely’ this year indicate the Fed is open to cuts, but keen not to rush,” they said. “Nevertheless, the market expects three or more interest rate cuts this year, which should be gold price supportive.”
“Central banks have been skewed towards net purchases for more than 15 years,” they said. “Since 2010, emerging market economies have accumulated 4,937 tonnes of gold, while developed economies have accumulated just 452 tonnes.” Turning to silver, the analysts noted that while the gray metal also rallied last week, it continued to underperform gold. “By the end of the week, silver had broken above, and was holding above, $24/oz – a year-to-date high,” they said. “Nonetheless, with gold making new highs, sub-$25/oz for silver looks cheap versus its sister metal gold, at a gold:silver ratio of 89.6.”