Gold News

Gold Flat, Silver Up 1.8% in US Dollars Ahead of Fed Rate Decision

Both GOLD and SILVER PRICES slipped Friday afternoon in London, edging back as financial markets focused on next week's interest-rate decision from the US Federal Reserve.
Betting on next week's Fed decision now sees a 3-in-4 chance that the US central bank will pause or 'skip' making another rise according the FedWatch tool from derivatives exchange the CME.
The gold price in Dollars traded almost unchanged from last Friday's London PM benchmarking at £1965 per Troy ounce, down by 4.1% from April and May's near-record highs.
Silver meantime extended yesterday's pop to 4-week highs following the surprise rise in US jobless benefit claims, adding 1.8% from last Friday to set a 5-week high of $24.35 per Troy ounce at London's midday benchmarking auction.
Silver prices also showed a 1.9% rise in Euro terms at €22.60 and a 1.7% weekly gain in Sterling above £19.35 per ounce.
That came as the Dollar Index, tracking the world's No.1 trade and reserve currency against a basket of other major currencies, showed its steepest weekly drop since mid-March's mini-crisis in the regional US banking sector.
"With uncertainty around the US debt ceiling removed," says Jonathan Butler, head of business development at the precious metals division of Japanese conglomerate Mitsubishi, "attention now returns to monetary policy" as well as the GDP, inflation and interest-rate predictions due in next Wednesday's 'dot plot' forecasts from the Fed.
"A more aggressive anti-inflation stance would of course see higher yields and likely a stronger Dollar, which could damage gold and its sister metals. If the Fed stays its hand on rate hikes until July or even September, then bullion could benefit from a relief rally."
Market forecasts for end-2023 Fed rates edged higher however on Friday, with the consensus reaching 5.07% to add 0.02 points from last week and nearing Tuesday's peak at the highest such prediction since before March's collapse of tech-sector bank Silicon Valley.

Chart of gold priced in Dollars vs. market forecast for end-2023 Fed Funds rate. Source: BullionVault via CME FedWatch tool

The British Pound meantime rose within 1 cent of early May's 13-month highs against the Dollar near $1.2680 and came close to 6-month highs versus the Euro at €1.1660
That put the UK gold price in Pounds per ounce on track for a 0.2% weekly drop at its lowest Friday finish in 13 weeks around £1565, while the price of buying gold for Euro investors also slipped 0.2% to €1864.
Government bond prices rallied but showed a small drop for the week, edging 10-year US Treasury borrowing costs 0.02 points higher to 3.73% per annum
Asian stock markets rose but European bourses slipped, holding the MSCI World Index 0.3% higher for the week ahead of Friday's US open.
"Stocks drop 20% if bonds have inflation right in J.P.Morgan model," says one headline at Bloomberg, reporting analysis from the USA's largest bank.
"BNP warns central bank tightening will sap cash from markets and sink stocks," says another, citing French investment bank BNP Paribas.
After Thursday's data said the 19-nation Eurozone entered recession in the January-March quarter, Italy today reported a 7.2% year-on-year plunge in its industrial output for April.
Canada meantime reported a surprise rise in its unemployment rate to 5.2% even before this week's surprise rise to Reserve Bank interest rates, while world No.2 economy China said its cost of living fell for a 2nd month in May as the drop in factory-gate prices accelerated to 4.6% per year.
China's economic growth will be "relatively high" for the April to June quarter, said  People's Bank governor Yi Gang this week, vowing to keep monetary policy steady rather than adding stimulus and forecasting that GDP will meet the Communist regime's 5% annual target across 2023. 

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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