Gold and silver prices have surged to record highs in a broad-based metals rally. This surge comes as the US Justice Department’s threat of a criminal indictment against the Federal Reserve revives concerns about the central bank’s independence. Gold spiked above $US4600 an ounce, while silver surpassed $US86 after Fed Chair Jerome Powell cited “threats and ongoing pressure” from the administration to influence interest-rate decisions. The US dollar weakened, and US 10-year Treasury yields edged higher amid the uncertainty.
Shares of mining companies experienced a boost, with Hochschild Mining rising as much as 9.6 per cent and silver miner Industrias Penoles SAB de CV jumping as much as 12 per cent. According to strategists at Wells Fargo, a potentially bigger risk to the Fed looms on January 21 when the Supreme Court hears oral arguments in the case against Fed Governor Lisa Cook. Julius Baer Group Ltd.’s Carsten Menke noted that increased interference with the Fed is a key bullish wildcard for precious metals.
Precious metals are being propelled higher by various factors, including falling US rates, heightened geopolitical tensions, and a perception that the US will slacken its efforts to manage inflation. Deadly protests in Iran have reintroduced a fresh layer of uncertainty, raising the prospect of renewed US involvement in the region, according to City Index market analyst Fawad Razaqzada.
Silver jumped as much as 8 per cent to $US86.2498 an ounce, a fresh record. Gold was up 2.1 per cent at $US4603.01 an ounce. The silver market, smaller in size, is more sensitive to moves in rates and the dollar and is “likely to react more strongly to such concerns,” added Menke. This all comes as more than a dozen money managers said they’ve opted not to take too much money off the table in gold, holding conviction in its long-term appeal.
