Gold and silver prices continue to trade at similar levels seen throughout June so far, but market volatility remains with a whole host of factors driving uncertainty.

Since pulling back from record highs at the end of May, gold has been trading in a fairly tight range of $2,300 - $2,350 or £1,820 - £1,840. Market volatility has driven some swings above and below these levels, but gold is currently waiting for the next push to get it back above $2,400/£1,900 and onto further all-time highs.

Silver has seen its price fall slightly during the same period but has stabilised at $29/£23. Fears of a slowdown in the global economy are weighing on silver, which will be impacted more than gold thanks to its greater demand from industrial sectors.

June Summary

This week saw the World Gold Council release its latest Gold Reserve Survey, which saw a record number of central banks expecting to increase gold reserves in the next 12 months. 29% of respondents said they expected their institution to increase their reserves. Alongside gold’s normal appeals of long-term value and lack of default risk, concerns about sanctions and political risk were also mentioned as a reason for central banks to buy gold.

After China’s buying pause last month, their next report is eagerly awaited, and if they return to buying this could help prompt some further short-term gains for gold.

Japan’s financial struggles also continue, with Norinchukin Bank revealing they will be selling $63 billion worth of US and European bonds to make up for huge losses from bad bets on foreign bonds. The sale of such large amounts of bonds by March 2025 could have a significant impact on an already difficult bond market and is a stark reminder of the vast unrealised losses many banks around the world are sitting on.

French politics has also been in the news, with markets unsettled by the snap election called by President Macron. Polls suggest a hung parliament, which will hamstring policies going forward. Concerns over a potential majority for the right-wing National Rally however have seen the French CAC 40 stock index fall over 7% in the past month. France’s national debt, and their borrowing compared to GDP have been highlighted as a key issue as well, and further volatility is expected as we head towards the election at the end of the month and into July.

UK inflation hit a key milestone with figures released this morning coming in at 2%. This is the lowest inflation has been since 2021 and meets the Bank of England’s target. Inflation is expected to tick back up however, and UK interest rates are expected to remain unchanged when the BoE meet tomorrow. Rate cuts are now expected by September however, with a second cut by December. Between the UK election in just over two weeks, and rate cuts on the way, there is plenty of opportunity for sterling volatility ahead.

With Russian President Putin visiting North Korea, geopolitics is also on the minds of investors. Kim Jong Un’s support for the invasion of Ukraine, and a signed pact for ‘mutual help’ in the event of aggression, leaves the war in Europe far from conclusion. Escalation in the Middle East is also still possible, with reports that Israel is planning an offensive in Lebanon.

Such volatility is undoubtedly already helping to support gold prices at such historically high prices but could easily help spark the next rally. The summer months would typically be quieter, but with so much going on in the world it seems unlikely that this will be the case for summer 2024.