Gold and silver advanced as trading began in the new year, building on their best annual performances since 1979.
Bullion rose to US$4,375 an ounce, while silver gained more than 2 percent.
While traders have flagged that the metals could do well this year on further US interest rate cuts and US dollar weakness, there is near-term concern that broad index rebalancing could pressure prices.
Photo: AFP
Given that the metals have rallied, passive tracking funds could sell some contracts to match new weightings as they are confirmed.
“We expect a massive 13 percent of aggregate open interest in Comex silver markets will be sold over the coming two weeks, to result in a dramatic repricing lower,” TD Securities senior commodity strategist Daniel Ghali wrote in a note.
Lower post-holiday liquidity could amplify price moves, Ghali said.
Precious metals posted a ferocious run higher last year, although there was significant volatility late last month as some investors booked profits and trading metrics pointed to overbought conditions.
Gold notched a series of records last year, aided by central bank buying, easing US Federal Reserve policy and a weaker US dollar.
Demand for haven assets driven by geopolitical tensions and US-led trade frictions was also supportive.
Silver rallied even harder than gold last year, hitting records and blowing through levels that until recently had seemed unthinkable to all but the most enthusiastic of market watchers.
In addition to the factors that aided gold, silver has also been a beneficiary of sustained concerns that the US administration could eventually impose import tariffs on the refined metal.
Among leading banks, there is support for further rises in gold this year, especially with the Fed expected to deliver additional rate reductions and US President Donald Trump reshaping the central bank’s leadership.
Goldman Sachs Group Inc last month said that its base case was for a rally to US$4,900 an ounce, with risks to the upside.
Gold gained 1.3 percent to US$4,375.15 an ounce at 12:01pm in Singapore. The Bloomberg Dollar Spot Index was 0.1 percent lower.
Silver advanced 2.5 percent to US$73.4459. Palladium and platinum also surged.
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