October crude futures are slightly higher, with oil continuing to trade in the $90s. Gold is down approximately 1% on the day, while silver is showing relative strength and remains slightly higher.

Over the past month, silver has modestly outperformed gold, while over the past three months, gold has held the edge.

Looking beneath the price action, implied EFPs out to December continue to yield above comparable OTC rates. At the same time, there is plenty of liquidity in the London OTC market and sufficient inventory available, so at least for now, this does not appear to be a physical availability issue. What could change the picture?

We need to see stronger physical and ETF demand to help propel prices higher. We also need a real solution to the Iran crisis. That could ease some of the inflationary pressure coming from higher crude and, in turn, take some pressure off the FOMC.

For now, sentiment appears to be shifting back toward “higher for longer” U.S. interest rates, which is providing support for the dollar and creating another headwind for gold.

Take a look at the WatchGold 1-day Gold/DXY chart, you can clearly see the impact of today’s stronger U.S. dollar on gold.

The fundamentals remain constructive, but this is still a headline-driven market. Patience remains the best trade on the board.

This commentary is provided for educational purposes only and should not be considered investment advice.