(Kitco Commentary) - Gold and silver posted substantial weekly gains, marking the fifth positive week out of the last seven for gold and the sixth for silver. The precious metals complex demonstrated remarkable strength, driven by a confluence of geopolitical instability and shifting expectations regarding Federal Reserve monetary policy.
The week opened with exceptional momentum, as gold surged $116, or 2.71%, on Monday alone. Silver outpaced its more expensive counterpart on a percentage basis, appreciating $3.81, or 5.24%. The rally was primarily attributed to heightened safe-haven demand stemming from escalating tensions surrounding the US-Venezuela conflict.
Uncertainty regarding the future governance of the oil-rich nation once American attention shifts elsewhere has sustained the safe-haven bid throughout the week, with both metals maintaining trading levels above Monday's closing prices and preserving their substantial gains.
Mid-week profit-taking emerged following the release of the ISM manufacturing report, which depicted robust economic conditions and temporarily dampened expectations for near-term Federal Reserve rate cuts. However, this bearish sentiment proved fleeting. Friday's employment report revealed significantly weaker-than-anticipated job creation, immediately rekindling speculation that the central bank would resume its easing cycle. The direction of this narrative will face a critical test on Tuesday with the release of December's Consumer Price Index (CPI) data, which could substantially influence market sentiment and determine gold's trajectory in the coming week. Gold concluded the period with cumulative gains of $177, representing a 4.09% weekly advance.
Silver's performance mirrored gold's directional movement but exhibited heightened volatility characteristic of the metal's smaller market capitalization. The white metal experienced more pronounced mid-week selling pressure in response to the manufacturing data mentioned previously. Despite silver's strong recent performance, analysts suggest the metal retains additional upside potential relative to gold.
The gold-to-silver ratio has compressed to 56.43, a level not observed since January 2013, as silver has progressively narrowed the performance gap with gold. Should this ratio continue its descent, historical support levels exist at 50 and subsequently at 46. Notably, the ratio reached its modern low of 31 during the precious metals bull market of 2011, though such extreme valuations remain far from current levels.
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