Precious Metals Weekly Market Update - Inflation Causing Uncertainty

It has been a challenging week for gold and silver as precious metals continued to trade defensively, influenced by adjusted interest rate cut expectations. US economic data remains robust, and a 'higher for longer' interest rate policy is now firmly back in play, exerting pressure on gold and silver. The metals had initially priced in an interest rate cut in March and possibly two or three more cuts in 2024. However, the scenario of 'lower faster,' which would have been positive for gold and silver, now appears to be in jeopardy.

US stock markets and the US Dollar strengthened last week, while gold fell by 1%, and silver dropped by 3%. Global inflation risks are on the rise due to surging shipping costs caused by conflict-driven events in the Red Sea and severe drought conditions in Panama. Water levels in the Panama Canal have decreased by a third, reducing the daily shipping cargo capacity through the canal. Coupled with uncertainties in Taiwan, one of the world’s largest exporters of goods, inflation remains stubbornly persistent.

The market's focus for the next two weeks will be on monetary policy commentary from the European Central Bank, the Bank of Japan, the Bank of Canada, and, of course, the Fed. It is widely expected that interest rates will be held steady during this round of meetings.

To end on a positive note, gold priced in Chinese RMB surged by 17% in 2023. Gold demand in the world’s second most populous nation was reported to be non-stop throughout the year and is expected to continue in 2024, providing upward support to the global gold price.

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Mark Yaxley, CEO of Strategic Wealth Preservation (SWP), began his journey in precious metals with Kitco Metals in 2006. Co-founding SWP in 2014, he now guides individual and commercial clients towards their investment goals. Renowned for his 'Inside the Vault' YouTube series, Mark has helped millions gain insights into gold and silver bullion ownership.