Gold News

Real Rates Rise But Gold and Silver Rally from Steep 1-Day Drop

GOLD and SILVER PRICES stemmed and reversed some of yesterday's steep drop in London trade Tuesday, rallying from near 3-week lows but leaving the 'safe haven' precious metal with its sharpest 1-day drop since May 2022.
With silver back above $27 per Troy ounce – a 33-month high when reached in mid-March – the price of gold recovered the $2300 level after falling 5.7% from Friday 12 April's new all-time gold top above $2400.
"Yes, it's been a pretty deep 1-day retraction but you've got to put things in perspective," says strategist Nicky Shiels of Swiss bullion refining and finance group MKS Pamp, speaking to CNBC overnight.
"Since the October 7th Hamas attacks gold has been up in a straight line $600...[And] gold went up as [expectations for] Fed rate cuts went down, from 7 cuts to two [as forecast across 2024 by the interest-rate market].
" Geopolitics put gold into overbought territory but this is about so much more. Real interest rates are sitting at this is a regime shift" for how the precious metal trades, shrugging off its historically strong inverse relationship with the cost of borrowing once you account for inflation.
Chart of gold priced in Dollars vs. 10-year US TIPS yield. Source: BullionVault
The real rate of interest implied by 10-year US Treasury inflation-protected bonds rose Tuesday close to last week's 5-month high of 2.24% per annum.
Gold prices meantime fell as low as $2291.78 in spot bullion trade as TIPS rates rose, before rallying $5 into London's 10:30 benchmarking auction and then trading $10 higher again to rise back through $2300 per Troy ounce.
Silver prices also fell further before rallying, dropping below $26.70 – down more than $3 per ounce from 12 April's three-year high – before rising more than 20 cents into London's midday auction, down 3.1% from Monday's benchmarking.
Silver has in the past 12 months seen 10 daily drops of 3% or more. But losing 4.9% in Dollar terms from 12 noon last Tuesday, silver today made its steepest 1-week loss since the New Year.
"India restocking silver is positive for fabrication demand," says the latest weekly market report from analysts SFA (Oxford) for German refining group Heraeus, noting how last year's 25% plunge from strong demand for silverware and jewellery in India has been followed by "trade data [which] suggests restocking is underway [and that] tends to be bullish for short-term demand."
That hasn't stopped silver landed in India trading more than $1 per ounce below the cost of bullion imported with duty and tax paid, according to data from specialist analysts Metals Focus.
For gold bullion and jewelry buying worldwide, "there appears to be little supportive action" outside of China, where household gold demand has continued even at this month's new record-high prices, says Heraeus.
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Elsewhere, so-called cryptocurrency Bitcoin today slipped 1.1% from 24 hours earlier, stabilizing around $66,000 amid what "self-styled" experts called "chaos" over transaction fees following the weekend's 'halving event'.
Global stock markets rallied for a 2nd session from Friday's 2-month low on the MSCI World Index, but Chinese equities fell for the 3rd day in a row, trading at less than half the CSI300 index's peak value of New Year 2021.
Preliminary economic activity reports for April meantime said manufacturing has continued to shrink in Japan, the Eurozone and UK, but services sector growth is proving stronger than expected on today's interim PMI surveys.
Thursday will bring US economic growth data for the January-to-March quarter, followed by key PCE inflation data for last month on Friday.

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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