Gold Rallies from 'Trump Slump' But Central Banks 'Buying Less'
Friday, 11/15/2024 15:39
GOLD and SILVER PRICES rallied from their post-US election plunge on Friday while crude oil fell with global stock markets after 'hawkish' comments on interest rates from Federal Reserve chief Jerome Powell pushed the Dollar up to new 13-month highs, potentially denting emerging-market central bank demand for gold bullion.
"The economy is not sending any signals that we need to be in a hurry to lower rates," the US central bank chairman said in a speech last night.
The Dollar leapt to a new 13-month high on the FX market, while betting that the Fed will cut rates again next month sank from 4-in-5 of all open positions to barely 1-in-2 according to data from the CME derivatives exchange's FedWatch tool.
"Demand for
gold reserves among central banks is going down," reckons George Saravelos, head of FX research at German financial giant Deutsche Bank.
"Trump policy is likely to put weakening pressure on many emerging market currencies, most notably China's Yuan.
"By extension, many central banks now need to spend Dollar reserves to defend their FX from capital outflows and prevent excessive weakening."
"Central banks are relatively price insensitive" when buying gold, agrees UK fund manager Ben Seager-Scott at Forvis Mazar, "but I don't think they are entirely price insensitive.
"Gold has had a very strong run," he adds
after taking profits on the gold position in his $3.5 billion fund. "If you look at who the key buyers are, we are not convinced they will continue buying."
Rising to $2571 per Troy ounce today ahead of London's 3pm benchmarking auction, gold still recorded its steepest weekly drop since June 2021, losing 4.5% from last Friday to set its lowest week-end price in 10 against the US Dollar.
Silver fell less sharply across the week, losing 2.9% in Dollars to its lowest Friday lunchtime Fix in London in 9 at $30.64 per Troy ounce.
That translated to only a 5-week Friday low for European investors, down 0.8% in Sterling to £24.14 and 1.0% in Euros to €28.97.
"Trump stands by the US as a reserve currency," the
Financial Times quotes hedge-fund manager Scott Bessent, widely tipped to be the President-Elect's pick for Treasury Secretary.
Despite Trump's first-term attacks on the Fed for not cutting rates and leaving the Dollar "too strong", Bessent now says that "if you have good economic policies, you're naturally going to have a strong Dollar."
Trump yesterday continued shocking
pundits and Democrat
politicians with his picks for other key White House roles.
The CSI300 stock index in China – targeted with 60% trade tariffs by the incoming Trump administration – closed Friday at a 2-week low, down by 1.7% for the 2nd session running, after new data said the world's 2nd largest national economy saw fixed-asset investment and industrial output slower than analysts forecast in October while the drop in house prices accelerated.
Chinese retail sales leapt, however, rising the fastest since February amid the mid-autumn festival holidays.
New US data today said the world's largest economy saw its retail sales jump 0.4% in October from the month before, while industrial output fell 0.3%.
With the Dollar surging on the FX market,
UK gold prices still made their steepest weekly drop since May, down 2.5% to £2035, while Euro gold prices made their steepest weekly drop since November 2021, down 2.9% to €2442.
"Central bank demand
remains healthy," said the mining industry's World Gold Council in its widely-followed quarterly report, "but it was
likely impacted by higher gold prices in Q3."
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