After the typical lull of the summer weeks, September is often a volatile month for money markets, and the past few days suggest this will be the same in 2023.

Nearly a fortnight of solid gains for both gold and silver came to an abrupt halt on Friday, as stronger-than-expected job and manufacturing figures from the US were released. The ongoing strength of the US economy continues to drive speculation on interest rate hikes ahead of a big month for the Federal Reserve.

Peaking at $1,953 per ounce on Friday, gold is now down more than 1.8% at $1,918. Silver briefly hit $25.37 before the jobs numbers saw it fall 9% to trade at $23.08 today. Further volatility is likely however over the next few weeks based on the September outlook and could present buying opportunities ahead of the forecast next leg up in metal prices.

060923 USD Chart

Friday saw the recent rally for gold halted, with prices pulling back as the dollar strengthens.

Below then are some of the key things investors are watching in the weeks ahead, with each of them alone able to move financial markets and the precious metal prices. Combined they could result in significant price volatility in September.

- The US Dollar Index hit a six-month high this week as markets anticipate a long period of high rates, or further rate hikes from the Federal Reserve when they meet on Wednesday 20th September. Between the stronger dollar and rising US bond yields, gold has come under pressure. When the pivot comes however and the Fed signal rate cuts are imminent a pullback in the value of the dollar is expected, helping to propel gold higher.

- The UK's economic picture is even worse, but persistently high inflation means markets expect another rate hike from the Bank of England. The BoE meets on Thursday 21st September, which means two big days for gold and silver prices back-to-back in two weeks’ time. With the latest figures showing that UK house prices have fallen 4.6% y-o-y, GDP growth is at just 0.2% following 0.1% last month, and inflation is still at 6.8%, the BoE face hiking into a failing economy. This grim outlook has seen GBP fall to a 3-month low versus USD. With Andrew Bailey signalling that UK rates may be close to peaking, the BoE could be forced into a quicker pivot than the Fed, and the pound could face more pain towards the end of the year in particular.

- Inflation fears remain despite the reduced figures of recent months. Crude oil prices hit a 10-month high this week as Saudi Arabia and Russia continue to restrict supply. Both WTI and Brent oil indexes have gained more than 20% since June, and this will inevitably feed through to consumer prices, potentially ending the recent trend of falling inflation. Petrol prices have already increased, and could climb higher if oil prices don’t stop rising soon.

- China's ongoing economic woes also remain a key market mover in September. Despite relief that struggling property giant Country Garden made a key interest payment on its debt, a lower-than-expected service sector PMI figure means Beijing may yet need to do more to support China's post-Covid recovery as it shows signs of flatlining.