Gold and silver prices have encountered some resistance at their recent peaks, but a market analyst noted that this is part of the precious metals’ consolidation phase, and prices are set to climb significantly higher.
On Thursday night, in response to subdued inflation pressures, gold prices tested the resistance at $2,400 per ounce, while silver reached $30 per ounce. However, investors are still locking in profits as the Federal Reserve remains hesitant to lower interest rates this year.
In a conversation with Kitco News, Michele Schneider, Director of Trading Education and Research at MarketGauge, stated that despite the Fed’s reluctance to initiate a new easing cycle soon, it is evident that interest rates won’t increase further. She highlighted that this scenario provides robust support for precious metals.
However, Schneider emphasized that the discussion around U.S. monetary policy is merely a distraction for gold, silver, and mining stocks. She pointed out that geopolitical uncertainties are fostering higher inflation and reduced economic activity.
While markets are relieved after the U.S. core CPI dropped to 3.6%, marking the first decline in six months, Schneider mentioned that numerous factors will continue to elevate consumer prices and impede economic growth, fostering a stagflationary environment.
Economists are still missing the mark on inflation,” she noted. “The inflation we’re experiencing is incredibly complex, making it difficult for traditional indicators to capture the full picture.”
Schneider highlighted that the primary inflation threat comes from the evolving geopolitical landscape, which is strongly supporting gold and silver. Her comments followed U.S. President Joe Biden’s decision to impose 100% tariffs on imported electric vehicles from China, along with higher tariffs on battery technology, solar panels, semiconductor microchips, and other critical minerals.
Schneider remarked that while the U.S. aims to assert its independence with these measures, this strategy may not be sustainable for long-term growth.
“This independent path hasn’t proven beneficial. The U.S. is isolating itself, endangering the dollar and the bond market,” she explained. “We see countries unaligned with the U.S. selling their treasuries and accumulating gold to protect themselves.”
Additionally, Schneider mentioned that Biden’s plan to boost domestic manufacturing will increase consumer prices as companies face higher wages from increased domestic production.
She predicted that higher costs will eventually slow consumer activity, leading to economic downturns.
“We’re rapidly approaching stagflation, making it crucial to hold assets like gold and silver,” she advised.
Regarding future gold prices, Schneider observed that the metal’s price action is forming an inverted head-and-shoulders pattern. She suggested that breaking $2,400 could drive prices to $2,600.
For silver, Schneider indicated that its strong momentum could push prices beyond $35, potentially reaching $40.
When advising on building a precious metals safe-haven position, she recommended an equal allocation in gold, silver, and miners, making up about 15% of her portfolio.
“If investors are looking to enter the metals market now, I would favor silver and miners for their growth potential,” she said.
Schneider also advised diversifying commodity exposure to include essential energy assets like uranium, copper, and natural gas.
“People are starting to realize the energy demands of the AI revolution, so it’s wise to monitor these commodities,” she concluded.
