Interest rate cut expectations and safe-haven demand "ignite" precious metals: Gold approaches historical highs, silver breaks through the $40 mark

According to Zhitong Finance APP, as market optimism about the Federal Reserve's interest rate cut this month grows, silver prices have surpassed $40 per ounce for the first time since 2011, and gold prices are also approaching historical highs.

The spot silver price rose by as much as 2.1% to $40.5391 per ounce, breaking the $40 per ounce mark for the first time since 2011, with a cumulative increase of about 40% this year; gold prices rose by 1.1%, trading close to the historical record of over $3,500 per ounce set in April. Additionally, palladium and platinum prices have also climbed to their highest levels in a week.

The rise in precious metal prices is mainly attributed to market expectations that Federal Reserve officials will announce an interest rate cut at their next meeting scheduled for late September. The key U.S. employment report to be released this Friday is expected to further confirm the increasingly weak U.S. labor market, thereby providing more support for an interest rate cut.

Charu Chanana, a strategist at Saxo Capital Markets Pte., stated, "Current fundamental and technical factors are aligning, leading to a sudden surge in gold and silver prices." He also pointed out that concerns about the future direction of Federal Reserve policy have driven prices higher, "More importantly, the key resistance levels of $3,450 per ounce for gold and $40 per ounce for silver have been broken, triggering a wave of trend-following buying."

Expectations of declining borrowing costs have increased the attractiveness of "non-yielding" precious metals like gold and silver. Meanwhile, U.S. President Donald Trump has repeatedly criticized Federal Reserve officials, raising concerns about the Fed's independence and increasing safe-haven demand, which has also provided additional support for precious metal prices.

Previously, Trump attempted to fire Federal Reserve Governor Lisa Cook, and a related lawsuit has yet to be ruled upon as of last Friday, with a decision on whether Lisa Cook can continue to serve expected to be announced at least by this Tuesday. This ruling could have significant implications for global financial markets and investor confidence in the U.S. market.

Christopher Wong, a foreign exchange strategist at Oversea-Chinese Banking Corp., stated, "This Friday's non-farm payroll report is the focus of the market. If the data is weak, it could change the current market narrative, depress the dollar exchange rate, and further support precious metal prices. More critically, we will closely monitor whether there will be more discussions in the market about a 'significant' 50 basis point rate cut next month."

Additionally, the U.S. Court of Appeals ruled that Trump's imposition of tariffs on global goods under the National Emergency Act was illegal, upholding a ruling made by the U.S. International Trade Court in May. However, the judge allowed the relevant tariffs to remain in effect during the case, meaning that the scope of the ban may be narrowed in the future.

In April of this year, after Trump first announced the tariff plan, gold prices soared to a historical high of over $3,500 per ounce. Subsequently, as Trump withdrew some of the aggressive trade proposals, market safe-haven demand cooled, and gold prices have generally remained in a range-bound state In contrast, silver has outperformed gold in terms of price increase this year. This is partly due to investors flocking to silver exchange-traded funds (ETFs) — the holdings in silver ETFs have increased for the seventh consecutive month as of August; on the other hand, the increase in silver holdings has led to a reduction in the freely available silver inventory in the London market, keeping the market in a state of continued scarcity. Currently, the silver borrowing rate (which reflects the cost of borrowing silver in the short term) remains high at around 2%, far above the near-zero normal level.

Another factor supporting precious metal prices is market concerns that they may face the impact of U.S. tariffs. Last week, silver was included in the U.S. critical minerals list (palladium is already on the list), which has heightened market worries about related risks.

As of the time of writing, the spot gold price has risen by 1.15% to $3,487.76 per ounce, poised for a fifth consecutive trading day of gains; the Bloomberg Dollar Spot Index remains stable. During the same period, silver prices rose by 1.9%, palladium by 2.45%, and platinum by 2.02%