Gold & Silver Market Analysis for Monday 17th January

Kinesis Macroeconomic Analysis

China is the main talking point as a new week of trading gets underway in Europe with the People’s Bank of China unexpectedly cutting the interest rate on some of its medium-term loans. This surprising move, as the country seeks to tackle an economy that is now slowing after initially rebounding so impressively from COVID-induced lockdowns, is likely to herald further loosening of policy in the world’s second-largest economy. 

China’s more accommodative stance marks it out in contrast to the direction most other central banks are taking. The UK is among the first to increase interest rates recently with others set to follow after a decade-long period of quantitative easing.  

Tuesday will see the Bank of Japan announce its latest interest rate decision and while the bank is highly unlikely to move from its current rate of -0.1%, the announcement will be followed ever more closely after China’s unforecast shift. 

Expectations are that the Bank of Japan won’t change for some time yet but the rhetoric is slowly changing after a long period of ultra-accommodative monetary policy. The central bank is reported to be instigating talks on when interest rates will rise now that inflation is inching higher.

Talking of inflation, the UK and Canada will publish their inflation figures for December on Wednesday with both countries expected to report prints of about 5%. With gold considered a hedge against inflation, signs of consumer costs continuing to rise are likely to be supportive for gold prices. 

Markets are lacking a clear direction so far, with no significant moves either way. Trading volumes are likely to be lower today, with the potential for higher volatility as a result. The New York Stock Exchange, Nasdaq and US bond markets all closed as the US celebrates Martin Luther King Jr Day.

Kinesis Gold Price Analysis

This inflationary environment should be positive for gold with the price now holding comfortably above the psychologically important level of $1,800 an ounce.

With no clear moves yet on currency markets and with reduced volumes for anything US-related today as a result of the public holiday, gold is likely to spend another day shuffling around the $1,820 level that has been its home for the last few days.

From a dollar per gram perspective, that position translates into gold holding station at $58 per gram with today’s initial gains seeing it nudge towards $59.

Kinesis Silver Price Analysis

Silver’s outlook is looking promising after it climbed above $23 an ounce to trade near its highest level in two weeks.

A slight weakening in the dollar coupled with the backdrop of inflation concerns paints an optimistic picture for silver and with the metal having broken through $23, further gains are likely.

It’s worth noting that the gold/silver ratio is about 79, a level that is towards the lower band of its historic range, suggesting that there is scope for silver to outpace gold in the coming months.

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Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience in writing about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News. 

As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewable energy and the challenges of avoiding greenwash while investing sustainably.