Gold Hits 3-Week USD Low as China Discount Leaps, Hezbollah 'Backs Truce' with Israel
Tuesday, 10/08/2024 16:25
The PRICE of GOLD fell to 1-week lows in Shanghai and sank to 3-week lows in London on Tuesday, falling alongside crude oil as Iran-backed militia Hezbollah backed calls for a truce in its war with Israel while China's politburo failed to announce new stimulus plans for the world's 2nd largest economy.
The Dollar in contrast rose on the FX market, as did longer-term interest rates in the bond market – edging up the opportunity cost of owning bullion or betting on higher gold prices – following fresh "no hurry" comments from US Fed officials on cutting Dollar interest rates.
Gold in the London bullion market fixed beneath $2640 per Troy ounce at the City's 3pm benchmarking auction before plunging towards $2613, down 2.6% from late-September's fresh all-time high.
Returning after China's week-long National Day holidays, traders on the Shanghai Gold Exchange had earlier edged prices back below ¥594 per gram, down 0.9% from last month's latest record high.
That put wholesale gold bullion landed in the precious metal's No.1 consumer market at a $29 per ounce discount to London quotes, signalling poor demand with the steepest disincentive to new imports since
China's record Covid-pandemic gold discounts of 2020.
"The fact that the gold price has not corrected more sharply is probably due to the conflict between Israel and Iran," reckoned German lender Commerzbank's commodity analyst Carsten Fritsch in a note this morning, commenting on the 'hawkish' turn for US interest rate-cut expectations following last Friday's strong jobs report.
"Gold is currently being pulled in different directions by opposing factors. The US inflation data to be released on Thursday is likely to show a further decline in price pressure, but is unlikely to trigger renewed speculation of stronger Fed rate cuts.
"Therefore, higher gold prices are likely to be primarily driven by geopolitical risks."
The Government of Russia – whose troops are
now entering the strategic target of Toretsk in eastern Ukraine – wants to
create "sustained mayhem on British and European streets" claimed the head of UK intelligence service MI5 today.
Iran-backed militia
Hezbollah has been "battered and broken" by Israel's bombardment of Lebanon and the assassination of its leader Hassan Nasrallah, said Israel's defence minister Yoav Gallant on Tuesday.
But while "Hezbollah is back" vowed its deputy secretary-general Naim Qassem as it fired the heaviest-yet barrage of rockets at the Israeli port of Haifa,
"We support the political efforts...of achieving a ceasefire" he added.
Market forecasts for US Federal Reserve interest rates meantime continued to signal only a half-point reduction between now and Christmas, according to the CME derivatives exchange's FedWatch tool, now barely below
the US central bank's own 'dot plot' projection of 4.4% for December's decision.
"I personally expect that it will be appropriate again to bring interest rates down over time," says New York Fed president John Williams in a new interview with the Financial Times, repeating the "no hurry" tone used last week by Fed chair Jerome Powell right before the release of September's strong jobs data.
"Right now, I think monetary policy is well positioned for the outlook."
But "while I believe the focus should remain on continuing to bring inflation to 2%," said Fed governor and voting member Adriana Kugler in a speech today, "I support shifting attention to the maximum-employment side of the FOMC's dual mandate as well."
In contrast, "I view
the costs of easing too much too soon as greater than the costs of easing too little too late," says St.Louis Fed president Alberto Musalem – set to be a voting member of the Federal Open Market Committee in 2025 – "because sticky or higher inflation would pose a threat to the Fed's credibility."
Meantime in China, the CSI300 index of Shanghai and Shenzhen traded shares ended its first day back from the National Day holidays with a rise of 5.9%, taking its rebound over the past month to more than 1/3rd.
But the CSI in fact slipped from Tuesday's opening surge, and the Hang Seng index in Hong Kong sank by nearly 1/10th – its steepest 1-day drop since the global financial crisis of late 2008 – after the politburo's economic planning chairman
Zheng Shanjie told reporters that Beijing is "fully confident" of reaching the economic targets they previously set for 2024 and failed to detail any new or specific stimulus measures.
Having spiked to 6-week highs above
$80 per barrel of Brent on yesterday's 1st anniversary of Hamas' atrocities across southern Israel, crude oil today sank by 5.1% after the China disappointment and Hezbollah's call for a Middle East truce.
The rising Dollar meantime curbed the drop in gold prices for UK and Euro investors at 1-week low, stemming the drop in bullion at £2000 and €2385 per ounce respectively.
Silver prices also sank to 3-week lows in the Dollar, dropping over $1 inside 3 hours to hit $30.30 per Troy ounce.
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