The ounce price of gold and silver gained more than 20 percent in value in the first eight months of the year, becoming among the most profitable products in the commodity market.
The commodity market experienced a mixed course, with sharp fluctuations in the first eight months of the year.
Uncertainties over the US elections, concerns about the Chinese economy and concerns about reduced supply due to improving weather conditions had a negative impact on the commodity market.
On the other hand, positive pricing stemming from expectations that the US Federal Reserve (Fed) may cut interest rates, US sanctions decisions and steps taken by China to strengthen its economy, and predictions that the US may retaliate to sanctions decisions against China caused increases in the commodity market.
Gold and silver were among the most profitable products in the commodity market in the January-August period. During this period, the ounce price of gold and silver increased by 21.3 percent.
The price of an ounce of gold, which ended December at $2,063, rose to $2,503.4 in August. The ounce of gold also reached a record level for the year at $2,531.6.
The ounce price of silver, which finished last year at $23.8, closed August at $28.9. The ounce price of silver also tested the highest level since December 2012 at $32.5 throughout the year.
Central banks' demand for gold also came to the fore
Gold prices rose as investors turned to “safe havens” due to tensions in the Middle East. Central banks’ ongoing gold purchases also stood out as an important factor supporting the ounce price of gold.
According to the World Gold Council report, gold purchases by central banks reached a record level in the first half of the year with 483 tons. Gold purchases by central banks more than doubled compared to the previous month in July, rising to 37 tons.
Increasing expectations that the Fed may lower interest rates this month were also among the most important factors that positively affected the ounce price of gold.
Analysts said demand for gold has increased in Asia, especially in China, as a hedge against geopolitical and economic uncertainty. The region’s lack of confidence in other investment options such as real estate and stocks has also led to a preference for gold.
Rising physical demand from Chinese households also supported gold prices.
Gold remains a safe haven
Analysts said that the safe haven feature of gold, especially among precious metals, stands out and geopolitical risks play a major role in maintaining the strength of gold prices.
Macroeconomic data, particularly the US economy's continued strength, helped drive silver prices higher.
The price of this product has increased as silver production in mines around the world has slowed and industrial demand has increased.
Slowing production rates at mines and strong industrial demand have shown supply lagging behind demand, leading to concerns about a deficit in the silver market.
Silver is used industrially in the manufacture of cars, solar panels, jewelry and electronics. Analysts have warned that China could increase imports of silver, a key ingredient in solar panels that it continues to produce in large quantities.
The statements of former Bank of Japan (BOJ) Board Member Makoto Sakurai last month that the BOJ would not raise interest rates again also had a positive impact on precious metals.
Falling bond yields were also supportive for precious metals. The gold/silver ratio, which saw levels of 92 throughout the year due to increasing geopolitical risks and recession concerns, fell to levels of 88 as concerns about economic activity decreased and economies entered the recovery path.
Analysts noted that if the global economic recovery accelerates further, the gold/silver ratio could decline to 75 levels.
“Uncertainties over the US presidential election are supporting the price of gold and silver”
Saxo Capital Commodity Strategy Director Ole Hansen, in his assessment to AA correspondent, stated that geopolitical risks related to Russia, Ukraine and the Middle East and especially uncertainties regarding the US presidential elections in November support the prices of gold and silver.
Hansen stated that the demand from China, as investors deposited their cash in a more protected area against the difficult economic conditions and real estate sector problems in this country, caused a sharp increase in gold and silver. He said, “In an environment of geopolitical uncertainty and decreasing dollarization, the demand from central banks continues and most importantly, gold can offer a level of security and stability that other assets cannot provide.”
Hansen also added that the positive impact of the start of the interest rate cut cycle in the US is increasingly evident at a time when gold has historically performed well.
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