Sim Moh Siong and Christopher Wong of OCBC Bank explain why the recent increase in oil prices has put fresh pressure on the precious-metals complex. Since oil, inflation, and rates are the primary channels through which geopolitics operate, gold has dropped by almost 2% and silver by more than 4% so far this week. Gold and silver rallies may be difficult in the near future unless oil stabilizes or concerns about the Federal Reserve and rates lessen.
Metals under strain from macro
"After the recent surge in oil prices, the precious-metals complex has come under renewed pressure."
"The most recent advance has worked more through the oil, inflation, and rates channel, even if geopolitics would generally offer some support for gold."
"That has dragged on non-yielding assets, with silver plunging more than 4% and gold down about 2% so far this week."
Given its greater beta profile, Silver's poor result is not shocking. In the near future, gold and silver rallies might still be difficult to sustain unless oil stabilizes or Fed/rate fears lessen."
Metals under strain from macro
"After the recent surge in oil prices, the precious-metals complex has come under renewed pressure."
"The most recent advance has worked more through the oil, inflation, and rates channel, even if geopolitics would generally offer some support for gold."
"That has dragged on non-yielding assets, with silver plunging more than 4% and gold down about 2% so far this week."
Given its greater beta profile, Silver's poor result is not shocking. In the near future, gold and silver rallies might still be difficult to sustain unless oil stabilizes or Fed/rate fears lessen."
