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France's 'Premature Relief Rally' See Gold Price Fall in Euros

GOLD PRICES fell against a stronger Euro currency on Monday as the Paris stock market led European bourses higher on what analysts called "relief" that Marine Le Pen's far-right National Rally didn't win a more decisive victory in the weekend's first round of voting in France's snap parliamentary election, writes Atsuko Whitehouse at BullionVault.
While Le Pen's RN party made significant gains on Sunday, winning one-third of the vote on the highest turn-out since 1997, it won by a smaller margin than some opinion polls had suggested, drawing 34% against the left-wing New Popular Front (NFP) alliance's 28% to 29%.
That left President Emmanuel Macron's centrist party in third place with 20-22%.
France's blue-chip CAC40 index leapt 2.8% at the opening, giving back over a third of that jump in afternoon trade but still showing its strongest 1-day gain since late January.
The spread between French and German bond yields narrowed to 0.70 percentage points – suggesting better market confidence in Paris' government budgets – after hitting 7-year highs above 0.80 points following President Emmanual Macron's shock move to call French parliamentary elections in the wake of losing European Parliament elections at the start of June.
Chart of the bond-yield spread between French OATS and German Bunds. Source: Borsa Italiana
With the contest now coming down to France's most right- and left-wing parties, "Both camps' fiscal policies are disruptive for the French economy and the prospects for French debt," Bloomberg quotes a strategist at investment bank J.P.Morgan, calling the "relief" at Sunday's result "clearly premature" ahead of next weekend's 2nd and final round.
Gold prices for European investors meanwhile fell as much as 0.8%, dropping to €2155 per Troy ounce, as the 20-nation single currency rose near a 3-week high against the Dollar after testing 2-month lows last week.
"Overall geopolitical risk is up," says Nicky Shiels, head of metals strategy at Swiss bullion refining and finance group MKS Pamp in her latest update.
"No wonder gold has done what it's done [so far this year] with trust in...Western politics from France to US and UK and Germany all collectively [reaching] a low point" into the second half of 2024.
Euro gold prices have risen 15.3% so far this year, while the Euro has fallen 2.5% against the US Dollar and the CAC 40 has increased by just 0.5%.
Following his disastrous performance against Donald Trump on Thursday night, US President Joe Biden's debate showing "is the worst of any presidential candidate in modern history," Shiels adds, "and uncertainty over his replacement is up."
A poll from CBS News/YouGov released on Sunday says that 72% of registered US voters think the 81-year-old president should not be running for re-election, up from 63% in February.
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As the Dollar slipped Monday morning, spot gold prices in the US currency rose 0.3% to $2333 per Troy ounce after recording a 0.7% monthly decline across June.
However, the Dollar price of gold bullion rose 5.3% for the second quarter of 2024 and 12.4% for the year so far.
With the UK's General Election this Thursday widely expected to end 14 years of Conservative rule with a heavy victory for the left-wing Labour Party, the UK gold price in Pounds per Troy ounce today edged higher by 0.2% to £1843.
Anti-immigration party Reform UK is now polling just 2 points behind the Conservatives according to the latest poll on voter intentions from Techne, pulling 17% of the popular vote as Labour's projected share drops to its lowest since August at 41%.
London's international blue-chip FTSE100 index pushed upwards, while major equity indexes in the US also opened higher following Friday's release of softer than expected inflation on the PCE index, the Federal Reserve's preferred measure.
The price of silver, which finds nearly 60% of its annual demand from industrial uses, rose 0.4% to $29.26 per ounce, marking a 23.5% gain year-to-date.

Atsuko Whitehouse is the Head of the Japanese Market at BullionVault and the Editor of Japanese GoldNews.

See all articles by Atsuko Whitehouse here.

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