Gold, silver and copper rally has just taken a breather — new highs are not that far off, experts say

Gold prices have been rallying to record highs, with spot gold notching a new top of $2,449.89 per ounce on Monday. Silver too hit multi-year highs earlier last week, as did industrial metal copper.

While all three are off their perch currently, they are still trading hovering near record highs, with analysts expecting prices to strengthen over the next 12 months.

What will drive the rally in precious as well as industrial metals?

Spot gold is currently trading at $2,351.3.Prices of the yellow metal have sustained their upward momentum amid a renewed weakness in the U.S. dollar and retreating U.S. Treasury yields, ANZ said in a recent note. But that's not all.

"While geopolitical risks continued to bolster haven demand, an impressive rise in China's gold demand in Q1 2024 has largely fueled the price rally," ANZ's strategists wrote. 

China is currently the leading consumer demand for bullion, after the country overtook India in 2023 to become the world's largest buyer of gold jewelry.

Chinese consumers have also been at the forefront of gold purchases, buying 603 tons of gold jewelry last year, a 10% jump from 2022, data from the World Gold Council showed. The WGC expects Chinese jewelry demand to stay at elevated rates this year, or even higher compared to 2023.

UBS strategists in a note last week raised their forecasts for gold to $2,500 per ounce by the end of September, and $2,600 by year-end. The bank's bullish outlook is owed to stronger Chinese demand, on top of a series of soft U.S. data in April, which has driven some repricing of expectations for U.S. Federal Reserve rate cuts.

Higher rates tend to pressure gold as they make Treasuries — also a safe-haven asset — a more attractive option for investors.

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