Gold News

Gold Falls for the Week Outside Dollar, US Silver Price Jumps Fastest Since Mid-2020

GOLD and SILVER PRICES dropped at Friday's finish to London physical bullion trading, cutting their sharp weekly gain against the fast-falling Dollar but still setting the highest weekend prices for more than a month after softer US inflation raised betting that the Federal Reserve will pause and then start reversing its interest-rate hikes sooner than later.
Bond prices also slipped back, edging longer-term interest rates higher from this week's slump on US consumer and producer-price inflation figures, while global stock markets extended their rally to 16-month highs on the MSCI World Index.
Fixing around $1952 per Troy ounce, the Dollar gold price rose $30 from last Friday's London PM benchmark auction, making the strongest week-to-week gain since late-March, when the failure of regional US bank Silicon Valley spurred a banking panic which would take gold to new record highs at the start of May.
But for Euro investors the gold price lost 1.1% for the week at €1742 and the UK gold price in Pounds per ounce fell 0.8% from last Friday, dropping for the 8th week in a row and setting its lowest weekend price since Christmas Eve at £1492.
Silver prices meantime saw their strongest week for Euro and UK traders since mid-March and rose 9.2% this week in US Dollar terms, the steepest jump since the summer of 2020.
In Dollar terms, that put silver bullion at the highest midday Friday fix in London's bullion market since early May at $24.80 per Troy ounce before edging higher in spot trade near $25.
Chart of silver priced in US Dollars, last 20 years. Source: BullionVault
"Yes, silver has done a lot of work the past 20 days," says strategist Nicky Shiels at Swiss bullion refining and finance group MKS Pamp, "up $2.50 [or] 12% since the June lows.
"But the monthly technical setup is running into [long term] downtrend line extending back to 2011's $50 highs.
"It's something to monitor especially if outsized [bets against] US Dollar & bonds continue to unwind," Shiels says, because silver is showing a strongly inverse correlation against the US Dollar's currency-market value, risking a steep fall if or when the Dollar bounces from its current plunge.
With the Dollar hitting 15-month lows on its trade-weighted currency index this week, more than 9-in-10 bets on CME futures today said the Fed will raise its target borrowing cost to a ceiling of 5.50% later this month – the highest since New Year 2001.
Betting on end-2023 Fed rates meanwhile held little changed from Wednesday's post-CPI re-pricing, with the consensus bet coming at 5.38% per annum.
Down 5 basis points from Friday last week, that's still 15bps above the market consensus this time last month, according to the CME's FedWatch tool.
Another Fed rate rise will be a "mistake" reckons Ian Shepherdson, chief economist at $90 billion asset managers Pantheon, because US jobless numbers "are now fraying at the edges [and the employment] trend is still slowing.
"The Fed ought to take the whole summer off, but the scares from the 'transitory' inflation fiasco [of 2021] means that they won't unfortunately."
Another rate rise at end-July also looks likely from the European Central Bank, with further rises then very possible according to minutes from the ECB's June meeting released Thursday.
Raising deposit rates by 0.25 points to 3.5% last month, the ECB committee debated a half-point hike, the minutes show, because "while [the] decline in core inflation [is] a positive signal, it was widely felt [among Eurozone central bankers] that there was as yet no sufficient or convincing evidence to confirm a turning point."
UK interest rates will also rise again next month, market consensus says, despite UK credit card borrowing rates already hitting the highest since 1995 while mortgage defaults leapt by 30% in the April-June quarter on the Bank of England's latest Credit Conditions Survey.
To reduce inflation in Australia, "it might [also] be much easier just to jack up interest rates," said incoming Reserve Bank governor Michele Bullock at a private event last month in comments released this week.
Weighing against the US Dollar, June's US federal government budget deficit yesterday came in over 150% larger than the same month last year at $228 billion, blowing past analyst forecasts.
That put Washington's total deficit for the first half of 2023 at $971 billion, down by almost 25% from the second-half of 2022 but 7 times the gap between revenue and spending of H1 last year and 17 times the size of H2 2019, eve of the Covid pandemic.
Separate data Friday said the value of Japan's industrial output shrank for a 2nd month running in May, down 2.2% from April, while wholesale prices in Germany were 2.9% lower last month than in June 2022.
The price of US commodity exports meanwhile sank 12.0% per year in June – down more than half as fast again as the previous steepest drop, July 2009 – with import prices down 6.1%, the steepest fall since the bottom of the Covid Crash in commodities costs.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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