This news increased the dollar index to a 2-month high and the yield on 10-year US Treasuries, but at the same time negatively affected the quotes of precious metals.
For example, palladium lost nearly 2% to $ 2,451 an ounce, the largest weekly correction since March 2020. Silver fell more than 7% to $ 25.8 an ounce, while platinum fell 1.7% to $ 1,040 an ounce. Gold was the most unlucky, as it fell 5%, hitting an annual low of $ 1,776 an ounce. The opportunity cost of owning precious metals has risen on the back of an upcoming increase in interest rates as risky assets with interest or dividend income have become more attractive to investors. Silver also dropped in price due to the correction of base metals prices, including copper.
What will happen to precious metals next? The German Commerzbank still predicts a rise in gold prices to $ 2,000 per troy ounce by the end of 2021. Karsten Fritsch, an analyst at the bank, believes that interest rate hikes will take a long time, so the yellow metal will not suffer much, given the lagging of Treasury yields from the forecast level of inflation. In addition, Fritsch said the Fed will continue to expand its balance sheet by buying $ 120 billion in bonds a month, which will boost the money supply.
Ole Hansen, an analyst at Danish Saxo Bank, predicts further declines in gold and silver prices as investors and traders believe the Fed is serious. However, the yellow precious metal is favored not only by an increase in inflation, an increase in the Fed's balance sheet, but also by the budget deficit in the United States, as well as a pandemic with new, more dangerous mutations of the coronavirus. The global economy keeps afloat while trillions of dollars are injected into it. The financial bubble in debt markets may soon burst. Considering these factors, the forecast from The Market Oracle (USA) analysts, who believe that in 2021-2025, seems to be quite realistic. the gold rate will rise from 1895 to 3000 dollars per ounce, pulling the quotes of other precious metals.