With many institutions recently adjusting their prognosis for gold and easing back slightly on their estimates between now and the end of the year, we have seen gold fall off its highs from early May this year. The July CPI ignited a gold surge, but what are the next steps for 2023?
This shift is based on expectations that the FED will raise U.S. interest rates by a quarter point at its meeting in late July, as seen by the robust comeback in the gold and silver markets. However, there may only be one or two modest FED rate hikes left before this tightening cycle is through, depending on the latest data on inflation in the US economy in the upcoming weeks. This indicates improved demand for raw materials, such as different , which is great news for the US economy and, by extension, the global economy. It also puts pressure on the US dollar index.
The U.S. dollar index hitting a two-month low is good news for commodity market bulls since those who watch the gold and silver markets know that the dollar index and the precious metals trade oppositely on any given day. Investor demand for silver and has been robust over the past year, with market participants acutely aware of central banks’ large buying activities of gold.
Due to the potential loss of part of its recession bid and the fact that inflation is being controlled, gold may lose some of its velocity. Based on this scenario, where is gold going?
The haven bid observed due to a slowing global economy has long since disappeared from the market, reflecting a stubborn gold price. The market is now more intently focused on improved global economic growth in the major economies, driving up demand for gold and silver. The only caution to be mentioned is the weak import and export data from China, which indicates that the Chinese economy is still struggling to grow and needs to be watched. However, when writing this article, the market is optimistic about stronger U.S. and global economic growth in the upcoming weeks and months.
The demand for silver from the solar sector is expected to be high, with no significant new supply to meet that demand. All the forecasts for silver’s yearly demand from the solar sector have been revised upward in recent days. Is this Silver’s long-awaited breakout?
It’s entirely possible that the underlying information about the rising demand has been in the market for some time and is nothing new. The apparent Federal Reserve pivot or the end of the tightening cycle has recently emerged in the gold bar and coin markets, as well as retail and wholesale silver bullion markets. In a sense, silver is the poor man’s gold, and what is happening in the market is that it is catching up to some better demand because it is less expensive to buy than gold. Late this week (mid-July 2023), silver reached a two-month high, and the technical indicators have shifted in favor of bullishness, suggesting further price growth shortly.
Silver frequently experiences a delayed rise; as a result, it can sometimes outperform gold in terms of upward movement. What can we anticipate if markets continue in this direction in the upcoming months if the FED announces its final rate hike at its meeting in late July?
The commodities markets are very cyclical, and silver has recently had a down cycle that is beginning to turn. All seasoned market observers won’t be shocked to see those cycles change direction and some price uptrends in the raw commodities market. The price of crude oil needs to be properly monitored as it appeared to start to recover this week, reaching a two-month high. For the remainder of the raw material sector, including metals, it would be concerning if crude oil’s downward trend were to resume. The growing global demand for basic commodities, such as metals and crude oil, will be able to move crude at least sideways and upward in the new term.
As was already noted, the U.S. dollar naturally drives much of commodity price movement. The U.S. dollar index is one factor that helps push down commodity prices. However, there are talks of a gold-backed solid currency when looking at the U.S. dollar. Although this has been rumored for years, there may finally be a declaration during the BRICS Summit in August. As we’ve repeatedly seen with Bitcoin, cryptocurrencies, and any other purported challengers to the king dollar’s dominance, they’ve never been more than a challenge.
The U.S. dollar will continue to serve as the international benchmark for currencies for the foreseeable future. People favor buying dollars or U.S. Treasury bonds during uncertain geopolitical times but must pay dollars to do so. The currency markets will thus evaluate these new developments, cryptocurrencies, and assets. The US dollar’s general status in the global currency markets has not altered, and it is unlikely to anytime soon, even though the US dollar index has been drifting lower.
There are talks about this brick’s currency being backed by gold, but we are unsure when this will happen or how much influence it will have. Analysts strongly suspect that it will just be another factor that the market will consider. They claim they have little to no faith that it will affect the price of gold or the US currency. The currency markets, which include the gold market and the U.S. dollar, are the biggest marketplaces in the world. Currency markets are larger than stock markets on a global scale. Therefore, it will take a very large development to alter the course of the currency markets, and analysts do not believe that introducing any new currency backed by assets will significantly alter how things stand for the currency markets as a whole.
Could equities start to take off as markets begin to digest the possibility of no recession?
Indeed, the US market indices hit new multi-month highs this week, so we will begin to see this. Late this week, the markets rose, owing to expectations of a less hawkish Federal Reserve, which would increase demand for paper assets such as equities. There is additional upside in the US equity markets, the technicals are optimistic, and the fundamentals have turned more favorable, given that it appears we will not have a major recession if one occurs at all.