Gold 3,525.67/oz
Silver 44.66/oz
Platinum 1,455.21/oz
Palladium 1,351.75/oz
Price Update

Gold Prices Soar in Light of the Bad Economy and the Unpredictable Election

Gold Prices Soar

In a year marked by economic weakness and election uncertainty, gold prices are expected to rise, while silver faces downside risks to its demand. Analysts predict that these precious metals will be influenced by various factors, including historical trends, economic policies, and global demand.

Gold, known for its safe-haven appeal, has historically experienced an upward trend leading up to U.S. elections. According to quantitative analysis, gold prices have historically moved 3.14% higher in the three months preceding the elections. This trend is attributed to the economic policy uncertainty index, which tends to fall as gold prices rise.

Global silver demand, on the other hand, faced a decline of 10% in 2023. This decline is seen as a result of various factors, including decreased industrial demand and limited growth in jewellery demand. The largest sectors for silver demand are currently experiencing challenges, which have affected the performance of silver compared to gold.

Heraeus analysts highlight the bullish outlook for gold, stating that “the baseline economic outlook is generally bullish for gold.” They also emphasize the importance of the 2024 U.S. elections, as it represent approximately 40% of global consumer gold demand. The analysts further note that gold tends to make gains ahead of U.S. elections, aligning with the historical trends.

Regarding silver, the analysts believe that many of the bullish drivers for gold also apply to silver. However, the Au: Ag ratio, which represents the ratio of gold to silver prices, has risen to 89, the highest since March 2023. This indicates that silver is currently underperforming compared to gold.

In terms of specific details, the potential recession in the United States is expected to lead to rate cuts and a weaker dollar, which would benefit gold prices. The U.S. presidential election is seen as a crucial event for gold, as a change in leadership and government policy direction can impact the dollar and global macroeconomics. These factors contribute to the expectation of rising gold prices.

On the other hand, silver faces challenges in its demand. Industrial demand for silver is expected to be lower this year, and the jewellery sector is unlikely to see significant growth. There is a potential bright spot for silver jewellery demand in India’s economic performance, but price sensitivity may limit demand if silver prices remain elevated.

Recent market performance reflects these dynamics, with silver prices losing nearly 3% last week, compared to a 1% loss in gold prices.

As the year unfolds, investors and market participants will closely monitor the economic landscape, political developments, and global demand patterns to gauge the future trajectory of gold and silver prices.