Kieran Tompkins

The surge in the gold price in recent months has been spurred on by the fall in the US dollar. We are sceptical that the slide in the dollar has further to run over the next few months, though, with recessions on the horizon in several large developed market economies. In that case, there might be some weakness in the months ahead for the gold price. But, as those developed market economies exit recessions and growth accelerates, the US dollar might drop back once more. On top of that, we also think that it will become apparent that inflation is falling more quickly than many appreciate, with supply chain squeezes continuing to ease. That should allow the Fed to cut rates a bit quicker than many expect, providing a marked tailwind to gold prices in the latter half of the year.

We think that silver’s price will also suffer, and later gain, on the same investment backdrop that we forecast for gold prices. The reopening of China’s economy is clearly a big boost, given silver’s use in industry. That said, there is a note of caution to be sounded, given that industrial activity in China never suffered to the same degree as the wider economy and therefore doesn’t have as far to rebound. But either way, when manufacturing begins to rebound in other large economies and demand for China’s exports improves alongside a broader rebound in global economic activity, we expect the silver price to rise. The main risk, though, is that high interest rates in developed markets take a significant toll on demand for interest-sensitive consumer goods, such as electronics.