Investments-Flash: DECLINING YIELDS DRIVE PRECIOUS METALS

In this article, Alain Freymond and Ahmad Saidali, our Group Chairman and Group CEO, share their views on our views on Gold and Silver in light of the recent gains posted by both metals.

The fall of the dollar clearly contributes to the positive momentum

The acceleration in the rise of dollar yields and, in particular, the brief rise in long rates above the 4% ten-year threshold at the end of September, has already partly deflated at the beginning of this week. In just a few days, the decline in yields has already been very sensitive.?

Five-year Treasury yields recorded on Monday one of the sharpest corrections since 2009. The drop in 10-year yields from 4.015% to 3.56% also penalizes the dollar and at the same time provides significant support to commodities and precious metals, in particular.

Silver reacted first with a +7% rise in one day, quickly moving back above $20. Platinum is also testing a reversal above $900 in a +5% gain, while gold prices are taking advantage of growing interest to climb back above $1,700 per ounce.

The gold mining sector has also embarked on a recovery attempt that may well prove to be sustainable after the long phase of a 46.5% decline over the last six months.

Observable investment demand for physical gold had fallen by -9.3% between April 2022 and the end of September during the accelerating interest rate phase and ended up at the lowest level since May 2020, which explains the 21% drop in prices. A similar observation was made for silver, where the drop in physical demand (-16.3%) precipitated a fall of -35% since March 2022 and of -40.5% since June 2020.

The first days of the last quarter of 2022 seem to benefit from a renewed optimism of investors tempted to consider that the rise in long-term rates may be over. A new "risk on" mode could also be more favorable for precious metals at the end of the year.