Gold News

Gold Falls 1.3% for Week as China 'Encircles' Taiwan, IMF Welcomes ZiG Currency

The PRICE of GOLD headed for its first weekly drop in 3 on Friday as hopes for US interest-rate cuts fell further while China 'tested' its ability to invade Taiwan and the International Monetary Fund backtracked on 46 years of anti-gold policy by welcoming Zimbabwe's introduction of a gold-backed currency.
Harare's introduction last month of Zimbabwe Gold (ZiG) notes – the 6th new currency tried in 15 years since the African nation's economic collapse and hyperinflation – "represents an important policy action accompanied by several complementary policy changes," said an IMF spokesperson in an email to Bloomberg News, "including monetary, exchange rate, and fiscal policy measures."
Backing a currency with gold or using the precious metal to measure monetary value has been effectively banned for the 190 member nations of the IMF since the United Nations-linked finance agency and lender's Second Agreement of 1978.
"Push in! Encircle! Lock!" said a video posted meantime by the People's Liberation Army from the 2nd day of its army, navy, air force and rocket drills to the north, south and east of 'breakaway' island Taiwan.
The exercises test the "capability of joint seizure of power, joint strikes and control of key territories," said Colonel Li Xi, spokesperson for the PLA's Eastern Theatre Command, widely quoted by Chinese state media.
Chart of gold priced in US Dollars, marking start-month gains in March, April, May, from MKS Pamp
"There's been no major news development to substantiate the drop in prices," says a technical analysis of gold prices from metals strategist Nicky Shiels at Swiss bullion refining and finance group MKS Pamp.
Posting this chart showing a series of 1-2 week trending channels in the beginning of each month across March, April and May – "which [then] gives way to some consolidation for a week or two" – "the higher prices get, the harder the work" for gold to continue pushing upwards, Shiels says.
Gold prices now "need to find support from the traditional Eastern and physical buyers in the $2300-$2350 range for the remainder of May, for this pattern [of an] early month buying reignite."
Bottoming $125 per Troy ounce last night beneath Monday's new spot-market high of $2450, the cost of bullion in US Dollars today edged back up to $2342 – the end-2024 gold price forecast made by users of BullionVault last New Year.
Following this week's Federal Reserve meeting notes and 'hawkish' Fed speeches, year-end US interest rates are now forecast at 5.04% by the CME futures market, marking barely 1 cut from today's 2-decade high of 5.33%.
Silver bullion meantime fixed above $30 per Troy ounce for the 5th session running at London's midday benchmarking auction – the industrially-useful precious metal's strongest weekly price since mid-February 2013, but still 4.1% below Wednesday lunchtime's fresh 12-year high.
Base metal copper also struggled to rally from yesterday's steep drop, trading 8.1% below Monday's new all-time high for US CME futures contracts with the premium over London LME contracts shrinking to just $50 per tonne after surging to $1,000.
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"We are delighted to see the overwhelming acceptance of the ZiG currency by schools nationwide," says Zimbabwe's education ministry director of communications Taungana Ndoro, refuting media claims that the new gold-linked currency – backed by 2.5 tonnes of bullion held at the central bank, currently worth some US$187 million – has been finding poor acceptance thanks to mistrust of the government's commitment to the valuation.
"Pharmacies are accepting ZiG and using the official rate," adds an anonymous Harare store worker, saying that "those peddling falsehoods [to the contrary] are bent on creating animosities" after the Government of President Emmerson Mnangagwa – hit earlier this spring by further US sanctions over corruption and humans right abuses – said it may compel businesses to accept ZiGs and forced them to use the gold currency's official exchange rate when pricing their products.
The United Nations' top court today fell short of demanding a full cease-fire in Gaza, but ordered Israel to halt immediately its military operations in the southern city of Rafah as the International Criminal Court continued to consider a call to issue arrest warrants for both senior Hamas leaders as well as Israeli figures including Prime Minister Benjamin Netanyahu.
Ukraine's military meantime said it has halted the advance of Russian troops in the Kharkiv region.
"The situation is under control, we are carrying out counterattacks," said a spokesperson.

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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