Gold update: stronger dollar puts pressure on gold prices

This week, the US 10-year yield rose to its highest point since 2007. At the same time, the Dollar Index rose to its highest point since November 2022. Both factors represent headwinds for investing in gold and silver.

Inflation in the US and in the eurozone is falling. In the US, core inflation fell to 3.9% in August. Regular inflation rose slightly to 3.5%. In the eurozone, inflation in September, based on the provisional figure, was 4.3%. Core inflation stood at 4.5% in September.

This means that interest rate increases will probably no longer be necessary in the short term. Interest rates will remain higher than expected for longer than expected, according to comments from various members of the FED and the ECB. The euro has benefited from the ECB’s interest rate increases in recent months. Now that the series of increases appears to be coming to an end, there is immediate pressure on the euro.

The euro lost 2.5% of its value against the US dollar in September. Since the beginning of July this year, the euro has fallen about 5.6%. In Italy, the 10-year interest rate rose further to the highest point since 2013. If Italy starts to have more problems with its national debt, the euro will come under further pressure and the ECB will probably have to intervene.

The higher interest rates are gaining more and more grip on the economy. Banks have a relatively large number of government bonds on their balance sheets and higher interest rates mean that the value of these bonds is depreciated. This effect caused considerable unrest at smaller American banks in March of this year.

Gold price drops to €56,000 per kg

The gold price fell by 3.1% in euros this week. This year, an investment in gold represents a gain of 2.7%. Gold prices have risen this year in the 9 most traded currencies. The highest increase is in the Japanese yen with 16.5%.

Silver has been quite volatile this week. The highest point was €712 and the lowest point was €673 per kg. This year the silver price is down 6.1%. The gold-silver ratio is 1/83.

Agenda

The latest figures for the purchasing managers’ index of industry in the eurozone and the US will be published on Monday. The figures of the purchasing managers index in the services sector will follow on Wednesday. Both indexes have been declining in recent months. The US jobs and unemployment figures will be released on Friday.