Falling interest rates may be supportive of precious metal prices in the medium term, particularly if inflation holds up and real interest rates turn negative, global technology group Heraeus Precious Metals’ 'Heraeus Precious Appraisal' says.

Following the US Federal Reserve’s decision to cut interest rates last week for the first time this year, the group has considered the implications of this for gold, silver and other precious metals markets.

The gold price dipped after the Fed cut interest rates.

The gold price was overbought after climbing by more than 10% in the last five weeks. That raises the chance of a period of consolidation so the price could trade sideways to lower for a while, Heraeus notes in its appraisal.

Central bank gold purchases stalled in July, according to industry organisation the World Gold Council.

Although several central banks added gold to their reserves in July, a sale of 11 t by the Indonesian central bank meant the net change in holdings was essentially zero.

In the first half of the year, central banks added 415 t to their reserves, a considerable amount, although it was a slowdown from the record levels of the last three years when over 1 000 t were added yearly, the group points out.

Fiscal and monetary policies are said to also be having an impact on the silver price.

Meanwhile, South Africa’s platinum group metals output continued to recover in July from a poor first half. Although output dipped in July, it is typical seasonal behaviour, and it was higher year-on-year, according to Statistics South Africa.

Even with a return to normal production levels in the second half of the year, South African platinum supply is likely to be lower this year, falling to around 3.6-million ounces, from almost four-million ounces last year.

The platinum price is continuing its consolidation phase, holding near the $1 400/oz mark, the appraisal shows.

The palladium price dropped back last week, falling below $1 200/oz.

The ruthenium price pulled back from its record high to $960/oz and the rhodium price also eased, but the iridium price was steady last week.