Gold and silver are continuing to enjoy a bounce back in their prices this week, both in the US and here in the UK.
Gold hit $1,885.40/£1,479.09 per ounce last week, a level not seen since March, prior to the banking crisis that sparked the latest rally. Some buying of the dip has helped push gold back up above $1,900 this morning, while in GBP it has increased more, and is now back above £1,500 after slipping below this level just over a week ago, up more than 1% in the past 24 hours.
Silver has enjoyed a stronger recovery, up more than 5% in the past week in GBP as shown in the chart above. Having fallen as low as £17.56 per ounce just over a week ago, silver is now trading at £18.77, and is well on the way to recovering from its recent losses.
The gains which had started on Monday have been boosted this morning in GBP by a falling pound. UK PMI figures released this morning painted a gloomy outlook for UK manufacturing. Both services and manufacturing activity tumbled into contraction territory. With UK interest rates so high, the intended effect is starting to feed through, reducing orders and output in the hopes of reducing demand and bringing prices down.
Similarly poor PMI figures were released for the Eurozone this morning. Both services and manufacturing activity saw similar contraction to the UK, with services in particular falling to their lowest since November 2020.
The release of the PMI figures has seen the pound fall by more than a cent against the dollar today. After hitting a high of $1.27989 yesterday, sterling has fallen to a low of $1.26419 so far this morning as markets weigh up the falling output and whether the UK can continue to avoid a recession towards the end of the year.
After nearly two years of rising interest rates, markets had been hopeful for a ‘soft landing’ in many countries. The past few months however have started to show cracks appearing in many economies. China is already facing deflation, a property bubble that is bursting, a debt crisis, weakening currency and high unemployment. The UK and EU were slower to hike rates than the US and appear to be paying the price, with recession on the horizon (or already here in the case of countries like Germany).
The final piece of the puzzle will be the US, which has so far proven resilient to higher rates. If the US achieves a soft landing it will be considered a success for the Fed. If the US starts to mirror other countries which are heading into a downturn however, then this will undoubtedly help support gold and silver as 2023 comes to a close.
