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Why is the Gold Rally Leaving Silver Behind?

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Gold and Silver Bars

Gold and Silver Bars

Erik Norland, CME Group


  • Gold is responding atypically to interest rate expectations, with prices rallying even as the number of expected rate cuts decreased
  • Slower growth in China and tighter central bank policy may be preventing silver from rallying higher

Gold has soared to new record highs in April. Meanwhile, silver has rallied but it’s far from its all time high.

Gold’s Rally is Unusual

Normally, gold prices do the opposite of what interest rate expectations do. When bond traders expect more rate cuts, gold typically rallies. When they expect fewer rate cuts, or more rate hikes, gold usually falls. In the past couple of months however, gold has rallied despite Fed Funds futures depricing many of the cuts that traders had previously expected for 2024.


Why is gold rallying when investors have gone from expecting six cuts to only two or three? It appears that one or more large investors has taken a long position in out of the money call options on gold, sometimes with strike prices as high as $3,000 per ounce, perhaps positioning themselves either for large rate cuts that are not currently anticipated by bond traders or for increased geopolitical instability.

Silver Playing Catch Up

The fact that the rally has not fully translated to silver may be an indication that either the gold rally is overextended or that silver has substantial catching up to do on the upside.


Silver could potentially gain versus gold. As of early April, one ounce of gold buys about 84 ounces of silver. In 2011, one ounce of gold bought as few as 30 ounces of silver. In other words, silver was once more than twice as expensive in gold terms than it is today.


That said, silver has far more industrial uses than gold and has probably been held back by soft growth in China, and it may also be more threatened than gold by the potential for a global slowdown in the face of tighter central bank policy.

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