New gains for gold and silver with the beginning of Trump’s second term

An economic report said: Gold and silver prices witnessed an increase driven by the increasing uncertainty caused by statements after he took office, including the imposition of customs duties, as investors evaluate their inflationary repercussions and their repercussions on monetary policies.
The report added that Trump’s initiative to impose tariffs on some major trading partners, such as Canada, Mexico, Europe, and China, stimulated the recent wave of price increases.

The highest level of gold

Gold approached its highest level in 11 weeks, in line with its record levels recorded last year, while silver headed towards the resistance level around $31.
In addition, the prospect of tariffs on imports of major metals traded on the New York Futures Exchange has sparked market volatility, disrupting the normal relationships between spot market prices and futures prices in the short term.

Under normal circumstances, this difference reflects the cost of financing, transportation and storage. However, the threat of tariffs raised premiums on futures contracts deliverable in New York, adding an additional support factor on top of the general support generated by uncertainty and a weak dollar.

Dollar futures

Dollar index futures, which reflects the performance of six major currencies against the dollar, saw a strong upward trend in late October, but are currently showing signs of pausing.
This development provided some support for gold and silver, two metals that, despite this opposing trend, witnessed a strong rise during this period, which led to recording record prices for gold against many currencies.

Gold rise

Gold rose strongly this week, with the pace of ascension accelerating after breaching the resistance level – which has now turned into a support level – at $2,725, which opens the way to retest the highest record level recorded last year at $2,790.
The report expected demand for investment metals to continue to increase as a result of the turbulent geopolitical landscape, as global tensions and economic transformations prompted investors to search for safe havens.
As the Trump 2.0 era begins, these developments show no signs of abating, in light of the potential risks of imposing tariffs that could lead to higher inflation rates and an eventual weakening of the dollar, removing an obstacle to further gains.

Central banks

The report expected the continuation of central bank purchases, which will provide a strong support base for the market, as these banks seek to diversify their reserves away from the US dollar and dollar-denominated assets, such as bonds. In addition to concerns about the increasing amount of global debt, especially in the United States, investors continue to look for hedging tools against economic fluctuations by turning to precious metals, including gold and silver.
The report added: “While investment drivers continue to play an important supporting role for silver, its price dynamics are also closely linked to its industrial uses, which account for more than 50% of the total demand for it.”
In 2024, increased industrial demand contributed to creating a scarcity in the actual supply of silver, while sectors such as electronics and renewable energy, especially photovoltaic (solar) cell technologies, contributed significantly to this rise.

Industrial demand

According to the report, the expectation of continued industrial demand for silver is likely to keep the market in a state of supply deficit until 2025, which may worsen with the increase in “paper” demand through exchange-traded funds. This dual role, balancing investment and industrial demand, may enable silver to outperform gold in the coming year.

Low silver

Silver continues to recover from the sharp correction it witnessed at the end of the year, which led to the white metal falling by 17% from its highest level in 12 years at $34.87 to its lowest level in December at $28.74.
In addition to renewed demand from short sellers who were wrong in their forecasts in the futures market at the beginning of the year, prices were supported by factors pushing gold higher, as well as fundamental expectations for a fifth year in a row annual supply deficit.

The report said that breaching the $31.08 level – which is the 0.382 Fibonacci retracement level – is likely to push the metal to target the $31.80 level later, while breaching the $32.53 level requires sending a technical signal that prices are returning to their highest levels last year.

Gold and silver prices

The report issued by Saxo Bank predicted a possible decline in the gold-to-silver ratio, which is currently trading above 89, and may move towards 75, a level seen in early 2024.
He added: “If this happens, and with gold reaching our current forecast of $2,900 per ounce, silver could trade above $38 per ounce, both well above the cost of storage and financing.”