Gold and Silver Expected to Continue Appreciating

Investing.com – Following another day of gains in gold and silver futures, the Swiss financial group Julius Baer has upgraded its outlook on commodities to positive. They now see potential for further increases in both metals, as noted in a client and market update released on Friday morning.

The group emphasized that, alongside U.S. monetary policy, the gold market continues to be heavily influenced by Asia. Carsten Menke, head of next-generation research at Julius Baer, remarked, "We must acknowledge that the region’s demand for gold as a safeguard against economic and geopolitical uncertainties is stronger than we anticipated."

Weaker-than-expected economic data from the U.S. have rekindled expectations for potential interest rate cuts by the Federal Reserve, which has subsequently boosted the prices of gold and silver. Menke noted that this could serve as a crucial incentive for safe-haven investors in the West to re-enter the market.

Central Bank Purchases in Focus

Julius Baer highlights that central bank purchases of gold have been driven more by geopolitical considerations than economic factors. For instance, in China, there is a clear objective to lessen reliance on the U.S. dollar, an effort aimed at mitigating the risk of sanctions.

It is estimated that the People’s Bank of China has accounted for 30% to 50% of all central bank gold purchases over the past two years. While it has shown signs of price sensitivity, "its willingness to pay has grown as gold prices have risen," according to Julius Baer. Other central banks are expected to follow suit, reducing their dependence on the U.S. dollar as well.

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