Weaker Dollar and Geopolitics Boost Gold, Silver Prices Ahead of PPI
The price of gold and silver is expected to remain strong due to a weaker US dollar and geopolitical tensions. The US Treasury yields have reached their highest levels for 2023, fueled by escalating energy costs and inflation concerns. This has created a supportive environment for gold, which also benefits from demand driven by fiscal sustainability concerns in the US. With the federal debt surpassing $40 trillion for the first time last month, there is doubt about the government's ability to service its debts.
Geopolitical tensions are also supporting gold prices as Iran attacked 10 ships in the Strait of Hormuz, following a previous attack by the US on five Iranian oil tankers. This disruption in Middle Eastern oil supplies is creating a safe-haven demand for gold. For silver, a strong monetary environment and tight physical market are driving up prices, despite an anticipated slowdown in industrial demand.
The Silver Institute forecasts a sixth consecutive annual deficit in 2026, with stocks drawing down by 762 million ounces since 2021. However, investment demand is expected to increase by 18% in the form of bars and coins, which may help offset the decline in industrial demand.