The precious metals market is witnessing an interesting shift as silver outperforms gold, driven by market rotation and rising industrial demand. Meanwhile, gold’s reaction to global risks appears to be fading, creating a divergence between the two metals. Rhona O’Connell, Head of Market Analysis for EMEA & Asia at StoneX, shared insights on these trends in a recent interview.
Gold’s Fading Sensitivity to Global Risks
O’Connell noted that gold, despite its long-standing reputation as a safe-haven asset, has shown weaker reactions to geopolitical and economic shocks in recent months. She explained that after a prolonged period of digesting global risks, gold now requires stronger catalysts to push prices higher. While some investors believe gold has lost momentum, O’Connell cautions against dismissing it entirely, suggesting the yellow metal is “curling up by the fire for a snooze” rather than entering a prolonged slumber.
Silver’s Rally Fueled by Rotation and Industrial Demand
In contrast, silver is attracting attention as investors rotate part of their gold holdings into undervalued metals like silver and platinum. This shift is partially due to crowded positions in gold and the perception of better value in silver. Additionally, silver’s strong industrial demand—covering 70% of its market—has supported prices despite global economic uncertainties. Structural factors such as the rise of AI technologies, solar energy, and electric vehicles are expected to further tighten silver’s supply-demand balance in the coming years.
Risks for the U.S. Financial System
O’Connell also warned about the potential risks to the U.S. financial system if central bank independence were undermined. She emphasized that steady and predictable monetary policy is critical for maintaining confidence in U.S. Treasuries, especially as inflows from major creditors like Japan and Europe show signs of slowing.
Conclusion
While gold takes a temporary pause, silver’s resurgence highlights the importance of market dynamics and industrial trends in shaping precious metal prices. Investors should watch these developments closely as both metals remain key players in the global financial landscape, albeit for different reasons.
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