The recent fall in gold and silver prices has shown no signs of stopping this week as the dollar continues to strengthen. Both metals have fallen to near seven-month lows today in USD and lower prices are sparking some opportunity buying from investors.

031023 USD Chart

Gold prices have now fallen back to levels last seen in March.

The dollar has experienced a period of strength recently as high interest rates continue to drive appeal for the global currency. This weekend saw an eleventh-hour deal agreed between Republicans and Democrats for government spending, but interest rates remain the key driver for the dollar. Recent manufacturing and employment figures in the US show that America’s economy is still proving resilient to rate hikes.

Markets remain confident that the Federal Reserve will hike rates again on November 1st, and until the US economy shows any significant signs of contraction rates could remain high for much of 2024, helping to support the dollar.

A more worrying sign for the US however comes from its bond market. US treasury yields have been rising as investors increasingly sell the bonds in favour of safer bets. 30-year treasury yields hit a 16-year high of 4.856% today. This puts the bond yield at its highest since 2007, similar to 10-year yields which hit the same multi-year record last week.

The strength of the dollar also continues to punish the pound here in the UK, which hit a fresh six-month low this morning of $1.20556. UK gilt yields have also been rising, climbing back towards levels seen this time last year amidst the fallout of the ill-fated Liz Truss mini-budget that resulted in intervention from the Bank of England.

For gold and silver, a stronger dollar has seen prices slump, particularly in the past week. In just less than two weeks gold has fallen from $1,946 to a low of $1,815.71 so far this morning, a drop of 6.7%. Despite some volatility, and a false rally last Friday, silver has fallen from $23.77 to a low of $20.71 per ounce this morning, for a more extreme 12.8% drop in just nine days. The drop in silver particular seems overblown given a lack of any clear key mover in the market and could suggest the metal is due to bottom out and start rebounding.

The weaker pound has reduced some of these losses in the UK, but the dips remain with gold and silver falling 4.6% and 11.6% respectively. This leaves gold holding slightly above £1,500 and silver £17.50 per ounce. As mentioned last week, alarm bells are starting to ring over the world’s economy, and we have seen a marked increase in demand across the past week in particular as investors take advantage of the recent price drop to add more gold and silver to their portfolios.