Gold News

Gold Price Hits Another All-Time High as Powell Confirms 2024 Rate Cuts, Real Yields Fall

The GOLD PRICE set a new all-time Dollar record in London spot-market trade on Wednesday, matching yesterday's new London benchmark peak at 3pm after finally topping early December's peak of $2143 by $2 per Troy ounce as Federal Reserve chief Jerome Powell confirmed to Congress that the central bank plans to start cutting short-term interest rates in 2024.
"After significantly tightening the stance of monetary policy since early 2022," Powell told the US House of Representatives' Committee on Financial Services in semi-annual testimony, "we believe that our policy rate is likely at its peak for this tightening cycle.
"If the economy [like inflation] evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year...[R]educing policy restraint too late or too little could unduly weaken economic activity and employment."
The Dollar fell on the FX market to its lowest price in a month against the rest of the world's major currencies, while 10-year yields on US Treasury debt also hit 1-month lows both for conventional and inflation-protected bonds.
Trading at 1.79% per annum, however, that inflation-protected yield on 10-year TIPS – against which gold prices are negatively correlated on historical data – remained 0.1 percentage points above the level it hit in mid-December, when the Fed's most recent 'dot plot' forecasts announced that the US central bank expected to cut its overnight interest rate 3 times in 2024.
Gold priced in the Dollar was then trading at $2032 per Troy ounce, just over $100 beneath this afternoon's 3pm benchmark price in the London bullion market – heart of the precious metal's global storage and trading network.
Chart of gold priced in Dollars vs. 'real yield' rate on 10-year TIPS. Source: BullionVault
"Gold's inverse relationship to real yields has historically been weaker over Fed hiking cycles," said analysis earlier this year from US financial giant and London bullion clearing bank J.P.Morgan, "before strengthening again as yields fall over a transition into a cutting cycle.
"[Looking ahead] the Fed cutting cycle and falling US real yields will once again become the mono-driver behind gold's breakout rally later in 2024."
For now however, "We think [this week's gold] rally is fragile," reckons analysis from German financial institution Commerzbank.
"The gold price has run too far in the short term. US labor market data on Friday could put a damper on rate cut hopes."
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Consensus forecasts say that Friday's government estimate from the Bureau of Labor Statistics will report a rise of 200,000 in non-farm US payrolls across February, almost 1/5th below the past 12 months' average with the weakest February since 2019.
Today's estimate from ADP Payrolls says the world's largest economy added 140,000 jobs last month on a seasonally adjusted basis, down by 1/3rd from the prior 12-month average on its data series and 10,000 below analysts' consensus forecasts.
"The new gold rush is that we're in no rush" says former HSBC fund manager and now Bitcoin-gold fund manager Charlie Morris of investment advisory ByteTree.
"Slow and steady bull please," he says, looking at the continued profit-taking and weak gold demand among Western investors.
The UK gold price in Pounds per ounce today ticked above yesterday's fresh spot-market high, peaking close to £1689 as Sterling was left unmoved against the Euro and other non-US currencies after the UK's Conservative Government presented what will be its final Budget before a General Election it's currently priced 1/6 to lose.
Euro gold prices touched a record €1973 for the 2nd day running, while the Yen price came within ¥25 per gram of Tuesday's fresh high at ¥10,340.
The gold price in China – No.1 mining, importing, household consumer and central-bank gold buying nation – today fixed at a new record afternoon benchmark for the 3rd session running, coming in at ¥499 per gram.
More than 19.1% higher from this time last year, Shanghai gold has jumped along with Chinese investment and jewelry demand amid the country's worsening real-estate and stock-market slump.
Beijing's Communist dictactorship will "resist pressure to step up stimulus" at this week's National People's Congress, says Western media, after repeatedly using devaluation of the Yuan to cut the price of export goods while boosting excess investment in domestic real estate.
"President Xi sees China's current economic wobbles as the short-term pain necessary to achieve the long-term gain of his vision of 'high-quality development'," the Australian Financial Review quotes Neil Thomas of the Asia Society Policy Institute's Centre for China Analysis.
Gold imports into India, the precious metal's No.2 consumer market, have risen 86% over the past 11 months compared to the same period a year earlier, data from the Ahmedabad Air Cargo Complex says.
Powell's comments to Congress meantime saw so-called cryptocurrency Bitcoin rally Wednesday after falling more than 10% from yesterday's new record high, while the Nasdaq 100 index of US-listed tech stocks rose after falling for 2 sessions running since Friday's fresh all-time peak.
Silver again tracked and extended the move in gold prices, but peaking back above $24 per Troy ounce it slipped once more after making a 10-week high Tuesday.

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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