Is This The Start Of Gold And Silver’s Next Leg Higher?

Gold and silver are starting the new week on firm footing, extending a recovery that has built for the better part of two weeks.

Gold is pushing back toward the psychologically important $4,400 level this morning, while silver is trading near $66 per ounce.

Both metals are benefiting from a weaker Federal Reserve-note dollar and a shift in expectations about the Fed's next move.

The big change has been the economic data.

Last week's inflation numbers came in relatively tame, with annual consumer price inflation supposedly easing to 3.4%. Then came Friday's surprisingly weak retail sales report. Consumer spending fell 0.6% in July, the largest decline in more than a year and a significant miss versus expectations.

Combining that with the weak employment report from the previous week makes the case for another Fed rate hike considerably harder to support.

Markets now put the probability of a September rate increase at only about 31%, down from roughly 50% a month ago. Goldman Sachs economists are among those now expecting the Fed to remain on hold in September.

That's good news for precious metals. The Federal Reserve note has weakened substantially, reaching its lowest level since June, and gold has responded accordingly.

Silver has been even stronger recently. This outperformance is significant because silver tends to respond more aggressively when monetary conditions move in its favor.

Geopolitics are providing another tailwind, although it's a complicated one. U.S.-Iran negotiations have failed to produce a breakthrough, tanker traffic through the Strait of Hormuz has slowed, and Brent crude remains around $88 a barrel.

That uncertainty supports gold's safe-haven appeal. But sharply higher oil prices can also reignite inflation fears and keep Treasury yields elevated—factors that would ultimately work against precious metals.

The key question now isn't simply whether the Fed hikes in September. It's whether weakening economic data finally pushes real interest rates and the dollar meaningfully lower. If that happens, this two-week precious-metals rebound could have considerably further to run.