Gold News

Gold Price Sinks to 1-Month Low as China Stops Buying

GOLD PRICES sank in all major currencies on Friday, dropping $80 an ounce in 6 hours and falling faster than global stock markets, bond prices, Bitcoin and copper after stronger-than-expected US jobs data worsened the steep plunge in the precious metal already made on news that the People's Bank of China didn't buy any bullion for its official reserves last month.
That snapped 18 months of continuous gold buying by Beijing as May set a new record-high gold price for the 3rd month running in US Dollar terms.
With the US Bureau of Labor Statistics saying that non-farm payrolls expanded by 272,000 on its first estimate for May – over 55% stronger than consensus forecasts – the odds of the US central bank cutting Dollar interest rates at its September meeting then shrank from 2-in-3 to barely 1-in-2 according to the futures market.
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Gold prices had already fallen 2.3% from a new 2-week high – hit at $2387 in late Asian trade overnight – following the PBoC news.
Prices to buy gold bullion then fell another 1.1% after the BLS' release of its NFP figures, dropping through Monday and Tuesday's 4-week lows before bouncing from $2305 per Troy ounce.
Chart of China's official gold reserves vs. official holdings of US Treasury debt. Source: Metals Focus
Noting the boom in China's private-sector gold demand so far in 2024, Beijing's official-sector gold purchases will have supported and encouraged households to buy the precious metal, said Neil Meader, director of gold and silver at specialist supply-and-demand analysts Metals Focus, launching the consultancy's Gold Focus 2024 last night in London.
The 18 months of People's Bank gold buying also went hand-in-hand with Beijing cutting its official holdings of US Treasury bonds, he added.
"A desire to reduce exposure to Dollar-denominated assets is not a new theme when it comes to China's reserve management in recent years," Metals Focus' new report says.
"[But] if anything, the upcoming 2024 US presidential election may result in additional geopolitical instability. Against this backdrop, interest in adding gold reserves is likely to remain high [among trade surplus nations] for the rest of the year...especially from countries whose current gold holdings account for a low share of their total international reserves."
US Treasury bond prices also sank Friday after the May jobs estimate, driving Washington's 10-year borrowing costs sharply higher from yesterday's 2-month lows of 4.28% to hit 4.42% per annum.
Together with modern records for central-bank gold buying, the "resilience" of gold prices to rising bond yields and interest-rate expectations over the past 2 years signals growing concerns about the US government's budget deficits and debt burden, Meader said Thursday, pencilling in another 1,000 tonnes of official sector accumulation for 2024 – the third 4-figure year in a row for central-bank gold buying on their estimates, which include unreported purchases.
No central banks buy or hold silver for their reserves any more, but the more industrially useful precious metal fell together with gold after the People's Bank update, dropping 3.9% from Friday morning's 1-week high at the start of London trade before losing another 1.6% on the US jobs and wages report to drop through $30 per Troy ounce.
China's stock market had fallen 0.5% overnight after new international trade data said exports leapt but imports were weak into the world's No.2 economy in May.
European bourses slipped after setting a fresh all-time high on the EuroStoxx 600 index yesterday, while New York's S&P500 flatlined and copper prices dropped to a 1-month.
Bitcoin in contrast reversed the immediate drop it made on the non-farm payrolls data, heading for a new all-time weekend level above $71,000.
Gold priced in Euros on Friday dropped hard to test 1-month lows at €2130, while the UK gold price tested its lowest since start-April at £1814 ahead of next week's US Fed and then the Bank of England's decision on 20th June, both expected to deliver 'no change' from the highest borrowing costs in 2 decades.
That contrasts with the European Central Bank and the Bank of Canada, who this week began cutting interest rates even though inflation remains above their mandated targets.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

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