Although financial markets have lost their fear of the coronavirus pandemic, there are currently no strong trends in the gold and silver markets. While we agree that there is some downside risk to the US dollar, it should be insufficient to revive last year’s record trajectory, especially as safe haven demand will weaken further.
This Rally Appears Positive For Gold And Silver Markets
According to the analysis of Carsten Menke, research director of Next Generation at Julius Baer, so far this year prices have remained within the range, but have shown significant changes sporadically. Earlier this week there was a sudden drop during President Biden's inauguration, prices rebounded after an initial drop. This rally appears to reflect renewed expectations that the new US president and his policies will be negative for the US dollar due to significantly higher spending and therefore positive for gold and silver markets.
We agree that there are some downside risks to the US dollar, but we would like to warn that this weakness is a reflection of the improved prospects for global growth and an improved mood in financial markets in general. In addition, it should be offset by a higher yield on real US bonds, said Carsten Menke, research director for Julius Baer's Next Generation.
Reflecting the improvement in the global growth context and a decrease in the demand for safe havens. Holdings of physically backed gold products have retreated from the record reached in October last year and have not registered significant increases in the last two weeks. Looking ahead, we expect a gradual decline in portfolio assets, which should push gold prices down a bit during the course of this year. The same applies to silver, which is unlikely to develop its own market dynamics and should continue to move in the wake of gold.