The recent rally in gold and silver prices has only gained pace, with last week in particular seeing some exceptional gains for both metals. The outbreak of the Israel-Hamas war has markets uncertain over how the conflict could unfold, if any other countries will be drawn into the war, and what effect this will have on inflation given oil and gas prices are rising.
After hitting $1,812 / £1,490 less than two weeks ago, gold has bounced back to trade at $1,938 / £1,590, a gain of 6.9% and 6.7% respectively in USD and GBP. The next key level to beat will be $1,950 / £1,600 per ounce. If this level can be breached with the kind of momentum seen last week then gold could easily test the all-time high in sterling.
Gold has come close to £1,600 twice in the past few days. On Friday evening, just before markets closed for the weekend, gold climbed to £1,597.65 per ounce, before the market closure took some of the energy out of the rally. Gold also hit £1,595.84 per ounce overnight as news of more violence from the region sparked further safe haven demand, and looks to be making further gains this morning.
Not to be outdone, silver saw even stronger gains in the same period, rising from £17.03 / $20.71 to trade at £18.96 / $23.11 at the time of writing, a gain of 11.3% and 11.5%. Silver has further to recover from its summer slump but is outperforming gold at its current pace.
All eyes remain on the Middle East, and escalation remains the chief concern. Iran have threatened to intervene in the conflict, and oil and gas prices are rising on supply disruption expectations. A summit of Arab leaders has already been cancelled following a blast at a Gaza hospital that has further raised tensions in the region overnight. US President Joe Biden is currently visiting Israel, but there are low expectations as to what can be achieved by the visit.
Outside of geopolitics, we are now two weeks away from the next interest rate decision from the Fed. Markets are unsure whether sticky inflation, and strong job and retail figures will prompt another hike, or if the risk of recession will give the Fed enough reason to hold.
In the UK, inflation figures for September were released this morning, and showed that price rises continue to plague the UK economy. Despite an expected drop, inflation came in at 6.7%, unchanged from August. With oil and gas prices continuing to rise this will likely feed through to further inflation in a few months’ time. Markets expect the BoE to leave rates unchanged at their next meeting, but there is a small chance of a further hike given the inflation remains far above the Bank’s 2% target.
With the geopolitical and economic outlook so uncertain, investors are turning once again to safe havens, and after building such a solid base price in the past three years, gold is well poised to test all-time highs as investors look to protect their wealth.