Gold and Silver Market Update: What’s Moving Prices in September?

Interest rates back in focus

Gold benefitted from a number of factors in August, including concerns around government debt and continued central bank demand. However, it seems that interest rate expectations have once again become a focus as we move through September.

Comments made at the end of August by Federal Reserve Chair Kevin Warsh were followed by a change in market expectations around a possible September rate increase. US Treasury yields also pushed higher around the same time.

Interest rates can have an influence over the price of gold and silver because, unlike bonds or savings accounts, precious metals do not pay interest and when yields rise, investors often temporarily look to interest-bearing assets.

Inflation and oil add to uncertainty

The latest US inflation data appears to have added another element to the picture. August’s Producer Price Index (PPI) increased by 0.4%, while the annual rate rose to 5.4% - its highest level of the year.

However, much of the monthly increase came from energy prices, meaning the latest increase in inflation may be influenced by this, rather than a wider rise in prices across the whole economy.

Oil prices have also risen due to renewed tensions involving the US and Iran. Higher energy and fuel prices can feed into inflation, which could possibly influence expectations around future interest rate decisions.

Gold shows some resilience

Despite the recent rise in bond yields and a stronger US Dollar, gold appears to have been relatively resilient. Its price may have pulled back from the highs reached in August, but the move has been much less dramatic than some movements that have been seen elsewhere in financial markets.

The silver price has experienced some volatility so far this month, falling sharply at times of recent market pressure. However, this is not unusual as silver is influenced by both investment demand and its important role in industry.

What does this mean for gold and silver?

For now, interest rates, inflation, and the US Dollar continue to be important factors for precious metals prices. US inflation figures and the Federal Reserve’s September 16^th meeting will be closely watched for any indication of where interest rates could be heading.

Here in the UK, the next UK Consumer Price Index (CPI) report will also be worth watching. The latest figures are also due to be published this week, and the result may potentially have an effect on the price of gold and silver.

Markets may change quickly, but it is also worth noting that the longer-term factors supporting demand for precious metals continue in the background. Central banks are still buying gold, while concerns about government debt and the broader economic outlook have not gone away. For gold, these factors could continue to provide support as the markets respond to the latest economic data.