Stocks Drop, Dollar Jumps, Gold Sinks to 5-Week Low as 2024 Rate-Cut Bets Fall from Record
Wednesday, 1/17/2024 15:00
The PRICE of GOLD fell to its lowest London benchmark price in 5 weeks on Wednesday as a rebound in UK inflation data and stronger-than-expected US retail sales figures saw speculators slash their record betting on the Federal Reserve cutting Dollar interest rates in 2024.
The US currency rose further on the FX market, reaching 1-month highs on its DXY index after jumping Tuesday when senior US Fed policymaker Christopher Waller reversed his
previous forecast of a rate cut before June 2024.
"Today, I view the risks to our employment and inflation mandates as being more closely balanced," said Governor Waller – formerly a renowned 'hawk' until saying 2 months ago that an economic slowdown warranted lower interest rates.
"I believe policy is set properly," Waller now thinks. "It is
restrictive and should continue to put downward pressure on demand."
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Gold prices fell to $2025 on Waller's comments – down $35 per Troy ounce from the weekend – before rallying overnight only to drop again, sinking towards $2011 at today's afternoon London bullion auction as New York's stock market opened sharply lower, with European bourses already 1.5% down for the session.
World No.2 economy China grew less quickly than analysts expected at the end of 2023, official data said today, expanding by 5.2% after slowing to 4.9% annual growth in the summer.
But
inflation in the world's 6th largest economy, the UK, held firm last month at 5.1% on the 'core' measure while retail sales in world No.1 the USA also beat analyst forecasts, expanding at the fastest monthly pace since September.
"Several bedrock factors will sustain the price of gold at what would still be a historically high level," says global bank and London bullion-market clearer HSBC in a new 2024 forecast, looking at geopolitical tensions and continued
central-bank gold bullion reserves demand.
"[But] should the US Dollar rebound, gold prices may face downward pressure."
With the Dollar rising further on Wednesday's strong retail sales data, the
UK gold price in Pounds per ounce had earlier curbed its fall but then lost almost £20 to £1580 going into the London PM fixing, while the Euro price of gold also broke down to 1-week lows, trading at €1850.
Government bond prices also fell again with gold and equities on Wednesday, driving 10-year US Treasury yields up to 4.10% per annum – the highest since the eve of December's 'dot plot' forecasts from Fed policymakers, widely taken to
signal the end of 'higher for longer'.
Yesterday saw the 10-year yield jump 0.11 points on Waller's comments, the steepest 1-day rise since early November, when Western
central banks led by the US Fed vowed 'higher for longer' on their interest-rate policies.
Coming into this week's data, "Bond traders start to hedge against half-point Fed cut in March," said a headline from Bloomberg overnight, pointing to what the news-wire calls a "
surge of activity seen in dovish [interest-rate] options wagers last week."
The market's forecast for end-2024 Fed rates ended Friday at a new series low on the CME derivatives exchange's CME FedWatch tool, dropping to 3.68% per annum before jumping back to 1-week highs on Wednesday at 3.93%.
That still signals 3 additional Fed rate cuts over the 3 forecast by the US central bank itself in December's economic projections.
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