Silver continued its upward trajectory on Monday, building on significant gains from the previous week, while gold surged to a new record high. The early European trade session saw both metals ease slightly from their peaks, but silver’s notable breakout above $30 suggests further potential gains.
Recent Market Performance and Technical Breakout
Gold climbed more than 1% overnight to reach a historic high of $2,449.89 per ounce. Silver, which had been consolidating for over 3.5 years, broke out dramatically last Friday. The metal surged past the $30 mark, closing the week near its highs, which analysts believe indicates strong bullish momentum that could carry into this week.
Friday’s breakout was anticipated by many, as the metal had been poised for a move for days. The absence of bearish news helped trigger this breakout, prompting both buy stops from short-sellers and fresh buying from traders who had been waiting for a decisive move.
Fundamental Drivers Behind the Rally
Several fundamental factors are underpinning this rally. A weaker US dollar, spurred by disappointing economic data and the Federal Reserve’s balance sheet tapering, has contributed significantly. The April non-farm payroll report and other recent data releases suggest a slowing US economic recovery, which is likely to ease inflationary pressures and reduce the need for prolonged tight monetary policy.
Moreover, broader macroeconomic trends are at play. China’s stimulus measures to bolster its economy, particularly its property sector, have increased demand for commodities. Additionally, improvements in economic data from the Eurozone and the UK have also supported higher metal prices.
Central bank purchases and inflation-hedging demand are also driving gains in precious metals. This combination of technical and fundamental factors is creating a favorable environment for silver and gold.
