Gold News

Gold Bullion in Dollars Whacked by US Inflation Beat, Sets New CNY, EUR and UK Highs

GOLD BULLION set fresh Euro, UK Pound and Chinese Yuan records on Wednesday, but sank against a surging Dollar – erasing half of this week's previous 3% surge to new all-time highs – after US inflation data came in ahead of analyst forecasts, crushing expectations that the Federal Reserve will cut Dollar interest rates in 2024.
Gold priced in the Dollar then reversed that drop, trading back up to $2346 per Troy ounce shortly after the London bullion benchmarking auction, only to fall back again to its fixing price around $2333.
The silver price had also fallen hard versus the Dollar, down 2.1% from Tuesday's near 3-year high versus the US currency as the Consumer Price Index showed a stronger than expected jump in the cost of living for March, before rebounding only to drop back again beneath $28 per Troy ounce.
Both the Euro and the British Pound sank against the Dollar as well, along with all other currencies, losing 1 cent each on the US inflation data to hit 1-week lows on the FX market.
That saw the UK gold price in Pounds per ounce and the gold price in Euros set yet another new all-time high at London's 3pm benchmark, rising above £1856 and €2169 respectively.
With the Fed Funds interest rate now at 2-decade highs of 5.33%, the chances of a delay beyond June for the US central bank to make its first rate cut almost doubled on today's inflation data, reaching 4-in-5 according to trading on the CME derivatives exchange.
Chart of gold priced in Dollars (inverted, right) against Fed Fund end-2024 rate expectations. Source: BullionVault via CME FedWatch
Betting on where the Fed will then end 2024 leapt to a consensus of 4.93%, more than 0.2 points above yesterday's market-based forecast and sharply above the FOMC policy committee's own prediction of 4.60%, repeated only last month.
That jump also predicts 5 fewer cuts of 0.25 points each than the interest-rate market expected in mid-January, when gold bullion was trading $300 per ounce lower than today.
"The move [to new record gold prices] has been quite staggering, catching many of us by surprise," said specialist bullion-market consultancy Metals Focus' managing director Philip Newman overnight to India's CNBC-TV18.
"In the near term, sometime this quarter, there will be a correction, and that will be ultimately healthy [but] it could be quite steep.
"We may also see some investors selling into that weakness, looking to book the profits they've achieved at these heights," Newman went on, "and that could also really add to the downward pressure...even perhaps down as far as the $2000s.
"But we think [such a drop] will be relatively short lived, and once the Fed starts to reduce rates, we believe that will encourage investors back into the market even if those rate cuts are less dovish than we were expecting just a short while ago for this year."
Consensus forecasts for Wednesday's US cost-of-living data had yesterday converged with inflation swap rates in the money markets as well as with the Cleveland Fed's NowCast prediction of 3.4% per year.
But the Bureau of Labor Statistics said CPI rose 3.5% last month from March last year, with 'core' inflation – excluding fuel and food – also beating analyst forecasts at 3.8%, up from February's 34-month low and defying expectations for a further slowdown.
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Gold prices had earlier set a fresh all-time record at the Shanghai Gold Exchange's benchmark auction – the 9th new high in a row for the precious metal's No.1 mining, importing, central-bank buying and consumer nation – even as the city's SHFE futures exchange moved to curb speculative betting on China's gold price by imposing new limits on the size of trader positions.
" Chinese retail gold demand has been quite instrumental" in the recent price surge, says Newman of Metals Focus. "That buying has been relatively upbeat at a time of these eye-watering prices."

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.

See the full archive of Adrian Ash articles on GoldNews.

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