Higher Interest Rates for Longer…

June 23, 2023

by Alasdair MacLeod Gold Money

Gold and silver fell sharply this week as a number of central banks increased their interest rates, spooking traders who look for short-term profits. In Europe this morning, gold traded at $1917, down $40 from last Friday’s close, and silver at $22.30, down $1.88 over the same timescale. Volume and Open Interest declined in both Comex contracts.

The Bank of England raised its bank rate more than expected by 50 basis points to 5%. The realisation that price inflation is not coming down easily has caused the Bank to be blamed for mismanagement, and it is becoming the scapegoat for increasing distress among homeowners faced with soaring mortgage costs. So far, sterling has tended to rise as forex traders have been attracted by higher rates. However, this is unlikely to last and the risks of holding sterling will then come to the fore. This is reflected in the chart for the sterling-dollar exchange rate.