Previously a commodities, currencies and portfolio manager at Deutsche Bank, Sean Kemery tracks many financial instruments including precious metals like gold and silver.
Precious metals prices have remained low in 2022 and continue to edge lower because of a strong US dollar. As of Oct. 31, 2022, gold was trading at $1,640 an ounce, while silver was $19.51 an ounce.
Part of the reason for this weak performance has been the strengthening of the US dollar following successive interest rate hikes by the Federal Reserve. Both gold and silver are priced in US dollars. Hence, foreign buyers have to convert their local currencies to dollars to buy the two metals. Therefore, when the dollar strengthens, it becomes more expensive for foreign buyers to buy either of the metals, hurting demand. When the dollar weakens, precious metals are more affordable to foreign buyers, raising demand.
The recent precious metals price movements are in line with historical data. For more than 50 years, precious metals prices have traded inversely to the US dollar, going up when the dollar is weak and down when the dollar is strong. In mid-2008, for example, when there were fears that the United States was going into a recession, the dollar weakened while precious metals prices spiked. In mid-2014, when the dollar was strengthening due to investors’ optimism on global growth, the price of most precious metals fell.
Sean Kemery 