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Gold Price Rallies on Weak US Data, Ghana Hopeful Calls for Bullion-Backed Cedi

The GOLD PRICE rallied on Thursday from 3-week lows against the Dollar, rebounding as bonds also rallied together with Western stock markets on a raft of weaker US economic data – nudging interest rates lower – while early results in former world No.1 gold miner South Africa confirmed that the ANC is set to lose its controlling majority for the first time since the end of apartheid 3 decades ago.
Gold priced in the US currency regained almost $20 per Troy ounce to $2343, while the UK gold price in Pounds per ounce edged up to £1840 and Euro prices also showed a small gain for the week so far at €2161.
Over in Africa's current No.1 gold miner Ghana, "Ultimately, my goal is that we are going to back our currency with gold," says Mahamadu Bawumia – presidential candidate for the ruling New Patriotic Party (NPP) in December's upcoming elections – echoing but not naming Zimbabwe's new gold-backed ZiG currency amid a growing row over the relentless decline of the Cedi on the FX market.
Thursday's new US data said the world's largest economy saw its trade deficit in goods rise in April to nearly $100 billion and that claims for jobless benefits also rose last week.
First-quarter economic growth was meanwhile revised 0.3 percentage points lower to 1.3% annualized, but inflation on the core PCE measure was revised down by only 0.1 points to 3.6% per year for Q1.
April's core PCE inflation data is due for release on Friday, along with May's inflation rate for the 20-nation Eurozone.
Chart of core PCE inflation in the USA. Source: St.Louis Fed
"Investors are throwing in the towel on rate cuts everywhere," says Bloomberg columnist John Authers, because "Inflation just isn't falling fast enough toward the 2% level that most central banks target.
"While inflation on [the monthly US core PCE] measure is back below 3%, it remains higher than at any time in the two decades before the post-pandemic inflation spike."
Thursday's weaker US GDP data saw betting that the Federal Reserve will start to cut interest rates from today's 2-decade high in September rise to put the odds at a little better than 50-50.
Longer-term interest rates also eased in the bond market, nudging 10-year US Treasury yields 3 basis points lower from yesterday's 4-week high of 4.61% per annum.
Global stock markets steadied alongside bond prices following another sell-off in Asia overnight, edging the MSCI World Index of rich-economy bourses a little above yesterday's 2-week low to trade 1.4% below last Tuesday's all-time high.
But copper slipped further to new 2-week lows, down 10.5% from mid-May's new record, while crude oil gave back half of this week's earlier 5.0% rebound.
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With gold prices for US investors now flat for the week so far, silver again held firmer, showing a 2.7% gain in Dollar terms from Friday's London benchmark price, albeit $1 below last week's new 12-year high at $32.49 per Troy ounce.
With 1/5th of yesterday's votes counted so far in South Africa – the continent's most industrialized nation, the world No.1 platinum miner and now the 13th largest gold producer – turnout has slipped to 58.4% from the 2019 election figure of 66.0%, signalling widespread disillusionment with the ruling African National Congress according to pundits.
Likely forced to seek a coalition rather than trying to rule as a minority Government, the ANC has so far pulled 42.5% of the vote (down from 57.5% five years ago) with the pro-business Democratic Alliance (DA) rising to 25.8% (20.8%), the Marxist Economic Freedom Fighters (EFF) party slipping to 8.5% (10.8%) and the new uMkhonto we Sizwe party (MK) – named after the apartheid period's paramilitary wing of the ANC, and led by disgraced former ANC leader and President Jacob Zuma – reaching almost 8%.
Pretoria's borrowing costs rose Thursday back towards 11% per annum on 10-year bonds, close to last spring's 2-decade highs.
The Rand meanwhile rallied a little from new 1-month lows hit overnight, trading 1.5% lower for 2024-to-date against the US Dollar overnight at what were new all-time lows when first reached during the global commodities markets' Covid Crash of early 2020.
Bawumia's call for a gold-backed currency in Ghana comes as the Cedi has lost over 90% of its Dollar exchange-rate value since 2008's crash-phase of the global financial crisis, dropping to a new all-time low every day this May in what ruling NPP Deputy Minister for Finance Stephen Amoah this week controversially called a structural, "ritual" problem of currency weakness thanks to Ghana's balance of payments deficit.
With perhaps 1/3rd of Ghana's annual gold-mine output coming from informal, often illegal and dangerous 'artisanal' and small-scale gold mining (ASM), "increasingly backing" the Cedi with bullion "is where I want us to go," said Bawumia today.
"It is very easy for us to do so if you keep having the gold reserves."
Hoping to replace Nana Akufo-Addo as President – elected by a slim majority over National Democratic Congress (NDC) leader and former President John Dramani Mahama in 2020 – Bawumia currently lags Mahama in Ghana's most recent opinion polls.

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.

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