Precious Metals Surge Amid Geopolitical Uncertainty: Gold Nears All-Time High

Precious Metals Surge Amid Geopolitical Uncertainty

On Monday, gold prices hovered around $3480, nearing their all-time high. Silver prices, meanwhile, broke above $40 per ounce for the first time since 2011. Precious metals are benefiting from heightened investor interest in safe-haven assets amid escalating geopolitical tensions and uncertainty regarding financial conditions. One contributing factor is President Trump's repeated attacks on the Federal Reserve, raising concerns about the central bank's independence.

Dispute Over Fed Independence

The emergency hearing regarding Trump's dismissal of Federal Reserve Governor Lisa Cook concluded last Friday without a decision. A ruling on her ability to continue in her position is expected no earlier than Tuesday. The judge has not revealed any preference for either side. This decision could potentially shape the future of the Federal Reserve. The erosion of monetary authority independence could erode investor confidence in the United States, potentially boosting demand for safe-haven assets like gold.

Trade Disputes and Tariffs

A federal appeals court ruled that Trump's global tariffs were illegally imposed under an emergency law, upholding a May ruling by the Court of International Trade. However, the judges allowed these levies to remain in place during the appeals process, suggesting that any injunction may be narrow in scope. Such rulings raise concerns about the stability of trade policies and their impact on the global economy.

Metals Performance: Gold, Silver, and Copper

Last April, after Trump announced his initial tariff plans, gold prices surged to an all-time high of around $3500 per ounce. Since then, safe-haven demand has cooled after Trump walked back some of his most aggressive trade proposals. Nevertheless, inflows into exchange-traded funds (ETFs) have helped underpin long-term support for these precious metals. Silver, for its part, is also valued for its industrial uses in clean energy technologies like solar panels. According to industry organization the Silver Institute, the market is poised for a fifth straight year of supply shortfalls. Investors have also poured into silver ETFs. In August, silver holdings increased for the seventh consecutive month, the longest inflow streak since 2020. This has led to declining silver inventories in London and continued market tightness. In addition to gold and silver, LME copper prices are also nearing the key $10,000-per-ton level, the last time copper prices breached $10,000 was in July.

Economic Data: Focus on Jobs

This week, investors will focus on a key jobs report that will either confirm or upend market bets that the Federal Reserve will resume monetary policy easing this month. Economists expect Friday's data to show the U.S. economy added 75,000 jobs in August, with the unemployment rate ticking slightly higher to 4.3%, adding to the view of a weaker labor market. Data released last Friday showed U.S. inflation remained sticky, with the U.S. personal consumption expenditures (PCE) price index rising 0.2% month-over-month and 2.6% year-over-year, in line with market expectations.

Interest Rate Expectations and Monetary Policy

In a social media post last Friday, San Francisco Fed President Mary Daly suggested that policymakers would soon be ready to lower interest rates, adding that tariff-induced inflation may prove transitory. Traders see a high probability of a rate cut in September. Lower borrowing costs are typically beneficial for non-yielding gold. According to CME Group’s “FedWatch” tool, traders are currently pricing in an 87% probability that the Federal Reserve will cut interest rates by 25 basis points later this month.

Trade Negotiations

On trade, U.S. Trade Representative Greil said last Sunday that although a U.S. appeals court ruled that most of Trump’s tariffs were illegal, the Trump administration continues to negotiate with trade partners. City Index senior analyst Matt Simpson said, “Daly’s dovish comments helped traders overlook Friday’s higher core PCE data and opened the door for a 25-bp rate cut this month. Furthermore, a U.S. appeals court also ruled that most of Trump’s tariffs were illegal, further weighing on the dollar today and driving gold to a four-month high.”