According to Heraeus’ latest precious metals report, both gold and silver are poised to benefit from several factors in Q4 2024. Gold is expected to gain from the Federal Reserve’s anticipated rate cuts, ongoing central bank purchases, and a resurgence in Chinese demand, while silver will see a boost from strong Indian demand and a weaker U.S. dollar.
Gold’s Outlook: Fed Rate Cuts and Central Bank Purchases
Gold stands to benefit from the Fed’s expected rate cut on Wednesday, with most analysts predicting a 25-basis point (bps) reduction. While the likelihood of a more aggressive 50-bps cut has diminished, any reduction in interest rates should favor gold by weakening the U.S. dollar and lowering the opportunity cost of holding non-yielding assets like gold. A more significant cut could amplify gold’s upside potential in the coming months.
Heraeus analysts also highlight the potential impact of the upcoming U.S. presidential election on gold prices. Both political parties are expected to maintain high government spending, which could increase inflation risks and further support gold prices as a hedge.
Additionally, sovereign demand remains robust despite record-high gold prices, with central banks continuing to add to their reserves. In June, net global additions reached 37 tonnes, and central banks’ price-agnostic buying is expected to continue as part of asset diversification strategies.
In China, gold demand is anticipated to rebound in Q4 as jewellers typically stock up ahead of the October national holiday, a strong period for gold purchases. Despite a subdued summer, seasonal demand could support higher prices, though weak consumer sentiment poses a downside risk.
Silver’s Surge: Indian Demand and Seasonal Boost
Silver is experiencing strong demand from India, which has seen a 715% increase in silver imports year-to-date compared to 2023. By July, India had imported 4,554 tonnes of silver, driven by domestic consumption, with investment demand playing a significant role. This surge follows last year’s weaker demand when the silverware and jewellery industries were destocking.
Investment demand, boosted by a reduction in silver import duties from 15% to 6%, has significantly increased imports of silver bars. The approaching winter wedding season in India is also expected to provide a seasonal boost to demand, especially if silver prices remain strong relative to gold.
Silver has performed exceptionally well, recently closing above $30 per ounce and converting this prior resistance into new support. Analysts at Heraeus suggest that a weaker U.S. dollar and rising gold prices could further support silver’s position in the $30 range, with the potential for additional gains.
Conclusion: Positive Q4 for Precious Metals
Both gold and silver are set for a strong Q4, driven by lower interest rates, strong demand from central banks and India, and favorable market conditions. Gold is expected to benefit from central bank buying, a potential rebound in Chinese demand, and the Fed’s rate-cutting cycle, while silver looks to Indian demand and a weaker dollar to sustain its recent price surge.
