Precious metals continue to lose ground

The FTSE 100 has started to reverse back from record highs, after a fresh PMI survey that saw the services sector reading jump into the highest level since May 2023. Crucially, traders are showing signs of concern that this rebound in UK growth could come at a cost, with economy-wide input price inflation rising at the highest level in 11-months. Between strong services sector wage growth, and rising material and transportation costs in the manufacturing sector, we are seeing fears grow over the potential for a more cautious approach from the Bank of England. With markets essentially viewing the June rate decision as a coin-toss, today’s data raises fears that the BoE will instead hold off until August.

European markets are on the rise once again this morning, with traders reacting to a raft of PMI surveys that have seen the services sector lead hope of a eurozone recovery. Euro strength seen in early trade came off the back of a sharp increase in the French and German services sector PMI surveys, helping to drive the composite figure sharply higher. With eurozone output rising at the highest rate since May 2023, euro traders are clearly cautious given the potential that any stronger data will ease pressure on the ECB to cut rates in June. With pricing pressures easing in the eurozone, European markets look set to benefit from simultaneous rate cuts and economic improvements.

Precious metals are on the back foot once again this morning, building on yesterday’s session that saw gold slump to its worst daily decline in over two years. Gold and silver had enjoyed a protracted bull-run in anticipation of a fresh bout of monetary easing, but we have seen inflation pressures reemerge to dampen hopes for the time being. With US stocks having lost traction of late, we have seen the S&P 500 to gold ratio fall to the lowest level since October 2023. However, the rise for the US dollar has finally taken its toll on the price of gold and silver, with the slump taking place this week serving to take the heat out of the precious metals space after a historic run.