Today we are seeing a reversal of yesterday’s price action, with crude lower and gold and silver higher. Yesterday, rising crude, a stronger USD and concerns over higher interest rates pressured precious metals. Overall, it has been another headline-driven week, with precious metals still stuck in a range. Not surprisingly, one-month ATM implied volatility is slightly lower again, with gold around 19% and silver 33%. A few things stood out this week:

Crude, the USD and interest rates remain the major short-term drivers. Higher crude adds to inflation concerns and expectations that the Fed may remain restrictive, supporting yields and the dollar.
EFPs remain an important indicator. Gold and silver implied EFP yields were elevated relative to OTC rates earlier in the week before moving lower along with prices. I continue to watch EFPs closely for indications of physical flows, bank positioning and liquidity.
Options volatility continues to decline. Gold one-month ATM vol is now around 19% and silver 33%, remarkable considering silver reached approximately 100% in January. Lower implied volatility, however, does not necessarily mean lower risk. The stronger dollar, higher yields and uncertainty surrounding Fed policy remain near-term headwinds, while geopolitical uncertainty, physical demand and investor interest continue to support the longer-term precious metals story. Patience remains important. Going into next week, I’ll continue watching crude, the USD, rates, physical demand, ETF flows, EFPs and options volatility for clues to the next meaningful move. Today’s reversal is encouraging, but one day does not make a trend. Have a great weekend. Educational purposes only. Not investment advice.