Hedge funds slash bullish wagers on gold over Trump election win
The precious metal has fallen about 8% from a record high on Oct. 31, with losses accelerating after Trump’s election victory last week.
Silver reached its highest level since 2012, driven by expectations of additional interest rate cuts from the Federal Reserve, boosting demand for precious metals.
The white metal climbed as much as 2.8% to $32.71 an ounce on Thursday, extending its gain for the year to 37%.
This surge follows a broad rally in precious metals, with gold hitting another all-time high.
Silver has become one of the year’s best-performing major commodities, benefiting from the Fed’s pivot toward easier monetary policy last week and the prospect of further rate cuts, which support non-yielding metals like silver.
“Silver is going to continue to rally over the coming quarters because of the consecutive rate cuts and as China’s stimulus could continue for some time,” said Amelia Xiao Fu, head of commodity markets at BOCI, adding that she sees the price moving towards $37 level.
“Silver is viewed as the relatively cheap sibling to gold, and as gold continues to reach fresh record highs and copper hits a 2 1/2 month high, traders pushed silver through resistance at $32.50,” Ole Hansen, head of commodities strategy at Saxo Bank A/S told Bloomberg.
“However, the break didn’t hold, and once prices fell back below that level, stop-loss selling was triggered.”
The possibility of increased industrial use has also supported gains, as China moves to stimulate its economy. Additionally, flows into silver-backed exchange-traded funds have shown signs of picking up.
According to Sprott, silver is second only to oil as one of the most widely used commodities, with over 10,000 applications worldwide, including in clean energy technologies.
Silver is a key component in photovoltaic cells used in solar power. The average solar panel requires 20 grams of silver, and electric vehicles use between 25 and 50 grams of silver.
In 2023, the silver market experienced a 15% supply deficit, and between 2020 and 2024, the market is expected to face a cumulative deficit of 1,093.4 million ounces.
Despite recent gains, prices remain well below the all-time peak of nearly $50, set in 2011.
(With files from Reuters and Bloomberg)
