Precious Metals rally to multi-month highs on bullish fundamentals

Vrasidas Neofytou
Head of Investment Research

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The non-yielding precious metals continue their upward momentum into multi-month highs driven by a series of bullish fundamentals such as dollar weakness, coupled with supply disruptions, and inflationary fears.

The price of Gold broke through a major psychological level at 1,800 dollars per ounce, hitting a 10-weeks peak, while the price of Silver retested the key resistance of 28 dollars per ounce, marking the highest close since February 2021.

The weaker-than-expected non-farm payrolls for April have sent Treasury yields and the US dollar near a 2-month low, as the Federal Reserve will not start tapering its accommodative monetary policy any time soon. 

Lower yields, support gold’s appeal as an inflation hedge, as they reduce the opportunity cost of holding bullion while the falling greenback makes the dollar-denominated precious metals more attractive for holders of other currencies.

The inflation-hedged precious metals get support from the expected higher inflation due to the massive fiscal stimulus and the elevating sovereign debt.  

Surging above 3,000 dollars per ounce for the first time, the auto-catalyst, Palladium, continues trading at a deep deficit, driven by robust demand from automakers and supply disruptions in Russia.

Mimicking Palladium, Platinum surged to a 7-year high of 1,270 dollars per ounce, on consistent undersupply and strong demand from the growing hydrogen industry and jewellers. 

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