Large gains in silver and gold were a key highlight this week. In our Telegram channel, at the start of the week, we highlighted the strong technical and fundamental picture for silver. The fundamental picture is recognised by Goldman Sachs seeing a ‘near-perfect environment for silver’ and Citi being ‘very positive’ on silver noting the steady investment demand. Gold is also now within touching distance of the all-time highs at $1921 and both precious metals are showing heavy ETF demand with silver seeing inflows of over 1000 tons a month. The gains in silver and gold have not been a surprise, but the speed of these gains have.

Key events from the past week

  • EUR: European Recovery Fund, July 17-20. The second-longest ever Europe-an policymakers meeting saw the €750 billion Euro Recovery Fund agreed. This show of European solidarity saw the EURUSD push above the 1.1500 handle.
  • Silver soars: Recession buster, July 20/21. The longer-term bullish picture for gold and silver remains in place as central banks around the world cut interest rates and the world’s in a grip of a recession. Metals like gold and silver have historically done well in this environment and strong bids were noted this week.
  • USD: Stimulus delay drags on the USD. The USD risks weakening further in the near term if US stimulus negotiations drag into August when a senate recess is scheduled. Key elements of the $2 trillion Cares Act expire this month and investors are anxious for a rescue package to succeed it.

Key events for the coming week

  • USD: US Interest Rate Meeting, July 29. The FOMC meet next week and the OIS Fed Fund Futures contract prices point towards a 75% chance of no change to the interest rates. The future guidance from the Fed will be key with interest rates expecting to be unchanged at 0.125%.
  • CNY: Manufacturing PMI, July 31. Investors are betting on a china driven global recovery cycle and the key to that narrative is strong manufacturing data from China. A strong reading PMI here will reassure markets that the recovery is continuing.
  • US-China tensions to rise? This week saw tensions rise as China could consider shutting the US consulate in Wuhan in response to the US order for China to shut its Houston consulate.