After one of its most eye-popping runs in recent memory, gold (CM:XAUUSD) has lost some of its luster this week amid a sharp bout of profit-taking. Silver (CM:XAGUSD), on the other hand, has fared better.
Gold Tumbles
The price of gold had surged from around $1,800 per ounce in October to nearly $2,437 per ounce last week. However, it has tumbled by nearly 2.6% over the past week as the latest FOMC minutes and comments from multiple Fed officials played spoilsport.
The FOMC minutes clearly indicated the Fed’s willingness to maintain higher rates and even raise them if inflation continues to elude the central bank’s 2% goal. Precious metals, not yielding any interest, consequently become less attractive in a higher-rate scenario.
But Silver Outperforms
Silver, on the other hand, has fared better than gold over the past week, with a gain of nearly 1.64%. In the last month, silver is up by a whopping 11.6%, while gold is up by a mere 0.75%. This divergence in performance is largely attributable to buoyant industrial demand for silver. Silver, gold’s cheaper cousin, is a key component in solar panels and consequently is in high demand.
Another factor weighing on gold is potentially softening demand from global central banks. According to Bloomberg, China’s gold imports have moderated over the past two months. Recently, the Shanghai Gold Exchange once again increased margin norms for some contracts to curb elevated speculation.
Will Gold Prices Increase or Decrease?
Still, gold’s run may not be completely over just yet. The yellow metal’s appeal as a haven of safety can quickly come to the fore if tensions rise in global geopolitical flashpoints including Ukraine, the Red Sea, the Middle East, and, going by China’s latest military drills, in Taiwan. Consequently, the TipRanks Technical Analysis tool is flashing a Buy signal for gold on a weekly timeframe. This indicates that the overall upward trend in gold prices could continue this year.
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