Gold News

Gold Price 'Not Overbought' as Geopolitics Worsen, Fed Rate-Cut Hopes Rally

The GOLD PRICE fell back on Tuesday, down $10 from yesterday's 1-week high but holding 1.1% above last Friday's 5-week closing low as global stock markets rose despite worsening geopolitical tensions between the West and 'the rest' driving further central-bank gold buying at the precious metal's recent all-time high prices.
Crude oil ignored geopolitics and held near 2-month lows, while silver prices touched a 7-session high above $27.50 per Troy ounce before edging back 20 cents.
With the London bullion market closed Monday for the UK's May Bank Holiday, the price of wholesale bullion yesterday touched $2332 per Troy ounce – a level briefly reached but then lost following last Wednesday's promise of 'higher for longer' interest rates from the US Federal Reserve.
"The Fed [only] confirmed what the markets had already worked out," says the latest weekly note from analysts SFA (Oxford) for German bullion refiners Heraeus.
"Gold's recent price retreat also means that it is no longer overbought...[and] although speculative positioning [in Comex futures] has climbed with the price, it is still well short of levels seen from 2020 to 2022."
Chart of non-commercial traders' net bullish position in Comex gold futures. Source: Heraeus
June and July will leave US interest rates at the 2-decade highs set by the Fed last summer, according to market consensus.
But fewer than 1-in-3 bets on September's Fed meeting now see the US central bank failing to cut its key interest rate that month, down from more than 1-in-2 this time last week.
Longer-term borrowing costs also continued to retreat on Tuesday, with the yield on 10-year US Treasury bonds falling to the lowest in 4 weeks at 4.45% per annum, a quarter-point below late-April's 5-month highs.
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"With the major [monetary policymakers] out of the way," says a look ahead from Swiss bullion refining and finance group MKS Pamp, pointing to the recent 'no change' decisions from the US Fed, European Central Bank and Bank of Japan, "other central banks' divergence will be on full display this week."
Australia's RBA is "under pressure to hike" while the UK's Bank of England is expected "to hold and inform [on its likely] path". Mexico should "pause ahead of election" and Sweden's  Riksbank is expected to cut.
"US macro risk [also] goes quiet," MKS adds, with few major data points due from the world's largest economy after last week's shock 'stagflation' figures from the manufacturing and services sector or the shock slowdown in non-farm payrolls growth reported last Friday.
Back in gold bullion, official data today said that the People's Bank of China added another 2 tonnes of gold to its reserves in April – "the lowest monthly increase since they resumed reporting additions in November 2022" as analyst Krishan Gopaul of the mining industry's World Gold Council notes.
The National Bank of Poland bought more than that on Gopaul's analysis, adding 3.5 tonnes to the 1.2 tonnes already bought at then-record prices in March having previously suspended new purchases following November's election victory by Donald Tusk – opponent of the right-wing PiS party which appointed NBP Governor Adam Glapiński.
The neighboring Czech National Bank also bought gold amid April's fresh all-time price highs, adding 1 tonne in what is now a 14-month program.
With the central bank of world No.3 gold mining producer Russia not reporting its bullion reserves since the invasion of Ukraine in early 2022, Vladimir Putin was today sworn in for a 5th term as President in Moscow, while Kyiv's intelligence services claimed to have thwarted the latest attempt by the Kremlin to assassinate Volodymyr Zelensky.
World No.1 central-bank gold buyer Beijing today denied UK media claims it was behind the hacking of Britain's armed-forces payrolls database, while the government of India's Prime Minister Modi – accused of stirring up anti-Muslim sentiment while campaigning in this month's national elections – continued to refute Canada's claim that it ordered last year's murder of Sikh separatist Hardeep Singh Nijjar in Vancouver.
The Israeli Defense Force meanwhile launched a "limited operation" on the city of Rafah in southern Gaza – now home to perhaps 1.4 million refugeesdefying a call from US President Biden to focus on ceasefire talks in Cairo and "sabotaging global efforts" to end the conflict according to the terrorist Hamas group's backers in Tehran's dictatorship.

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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