The price of silver has exceeded USD 19, which means that in just four months the price increased by 33 percent, reaching the highest level since September 2016. The price of gold, in turn, is consolidating near USD 1,550, i.e. the highest level since April 2013.
Interest in precious metals may still be fueled by increased demand for safe assets, as the US-China trade war is damaging global economic growth, prompting central banks, including the Fed, to take a dovish attitude.
In July, the US Federal Reserve lowered interest rates for the first time in more than a decade, and it's likely that we would see another cut on September 18. This in turn may cause an increase in bond prices and a decrease in their yields. As a result, US inflation is higher than the interest rate on popular 10-year bonds. Moreover, negative real interest rates may increase, which may favor precious metals even more.
It is also worth noting the decline of the ISM index for the US manufacturing below the 50 points. Yesterday's publication was at the level of 49.1 points. The latest reading indicated the first month of decline in the manufacturing sector since January 2016. New orders and employment have fallen due to fears of a trade dispute between the US and China.
These data raised concerns about the condition of the US economy and also gave investors hope for more Fed action in September to prevent a deeper slowdown. After worse data from the US, the dollar weakened, in which commodities are settled on global exchanges, which could also support the metals.
Today in the macroeconomic calendar, in addition to a series of speeches by representatives of central banks, the announcement of the Bank of Canada's decision on interest rates is also planned. The market consensus does not assume interest rate changes. Nevertheless, due to the global easing approach to monetary policy, the Bank of Canada may speak in a dovish tone, and with the slowdown in the US economy it may also be heading towards interest rate cuts over time.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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