New Record Gold Price Driven by Comex and GLD ETF Options Trading
Wednesday, 7/17/2024 16:12
GOLD hit fresh all-time Dollar highs on Wednesday, rising for the 6th session in a row to a new record after US gold-backed ETFs expanded and Comex options trading leapt on further speculation that the Federal Reserve is finally preparing to cut US interest rates.
Global stock markets meantime fell from their own new all-time highs after former US president Donald Trump raised big question marks over America's support for Taiwan against China should he win a return to the White House in November's election.
"S&P500's $18 trillion rally is 'broadening out'," said a Bloomberg headline overnight of the US stock market's latest record high.
"Stocks get hit amid selloff in global chipmakers," says its latest update today.
Gold bullion in contrast set a new London benchmark record above $2470 per Troy ounce at Wednesday's 10.30 auction before rising another $10 by the City's 3pm fixing.
Gold prices in China – the precious metal's No.1 mining, importing, consumer and central-bank buying nation – also set a new benchmark high at Shanghai's morning auction today, fixing at ¥581 per gram with spot trading prices peaking ¥1 below 12th April's spike to ¥582 on the T+D contract.
Tuesday's jump in the gold price saw a small net inflow to gold-backed ETF investment trusts contrast with a surge in options trading, used by speculators to leverage their potential gains at the risk of leveraged losses.
Volumes in Comex
gold futures rose only 2.5% from the prior 5-session average, reaching the highest since last Thursday, trading volumes in options contracts leapt by 48.5% from its previous average, reaching the highest in 5 weeks.
With gold prices averaging $2219 per ounce so far in 2024 – almost 15.0% above the metal's January-to-mid-July average last year – trading volumes in Comex futures have risen by 6.8% from the same period in 2023 but options volumes have grown by 26.5%.
Gold ETFs in contrast have shrunk 3.3% in size since New Year's Eve,
according to data published by the mining industry's World Gold Council. That's almost twice the 1.8% pace of net outflows from those bullion-backed trust funds over the first 28 weeks of 2023.
But like Comex options volumes, total trading volume in the giant GLD gold ETF also hit a 5-week high on Tuesday, more than doubling from Monday and leaping by 86.3% from its prior 5-session average.
The GLD gold ETF itself grew 0.6% in size to its largest in 5 months, needing 842 tonnes of bullion to back its shares in issue.
That was a 5-year low for the world's largest gold ETF when first reached in February.
No.2 gold ETF the iShares IAU product meanwhile expanded by less than 0.1%, growing 1.0 tonnes from early July's 53-month low to need 378 tonnes of backing.
Options contracts on the GLD set to expire before the end of July now outweigh all 2024 option contracts on the IAU by more than 5 times in current value.
New York's No.3 gold ETF, the SPDR 'mini GLD' – against which traders cannot write option contracts – also saw only 0.1% growth in Tuesday's action, now needing 100 tonnes of backing for the first time since mid-April's then record highs in the price of gold.
Shares in the next largest such North American product – the closed-end Sprott "physical" gold ETF – have now traded at a discount to the value of the bullion it holds without pause since April Fool's Day 2022, ending Tuesday 1.6% below its NAV and suggesting weak investor sentiment.
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"While I don't believe we have reached our final destination [on inflation], I do
believe we are getting closer to the time when a cut in the policy rate is warranted," said Fed governor Christopher Waller on Wednesday, echoing comments from Fed chair Jerome Powell pointing to a September cut from today's 2-decade high in the overnight cost of borrowing.
The Dollar slipped again, helping cap the gold price for UK investors below its spring records, trading back down through £1900 per Troy ounce.
But like the USD and Chinese Yuan price, gold set new benchmark records in terms of the Euro currency, fixing around €2265.
Silver meantime failed to follow gold prices higher before tracking and extending its retreat, falling to 1-week lows beneath $30.40 per ounce in late London physical trade.
"Taiwan doesn't give us anything...It
should pay us for defense," said Trump to Bloomberg in a lengthy interview published today, signalling weaker support against China for the island nation, home to the world's biggest chip industry.
"Expect no peace initiative from Trump [in Russia's invasion of Ukraine] until the elections," says a letter from Hungary's Prime Minister Viktor Orban to fellow European Union leaders, claiming that the would-be US President has told him he "will be
ready to act as a peace broker immediately" on winning November's vote – a vow widely seen as meaning an end to Washington's financial and military aid to Kyiv, as proposed by Trump's running mate J.D.Vance.
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