Gold Hits New Euro Record But Fails 5th Time at $2530 on US Inflation Data
Wednesday, 9/11/2024 14:59
GOLD hit a new all-time high in terms of the Euro currency on Wednesday, but prices then fell back after touching the past month's new Dollar records for the 5th time after US inflation data gave a confused picture ahead of the Federal Reserve starting to cut Dollar interest rates next week.
Silver prices also dropped against the rising US Dollar after August's consumer price figures put headline inflation at a new 3-year low of 2.6% but the cost of living accelerated by 0.3% per month on the 'core' measure excluding fuel and food.
US stock markets fell sharply and European bourses flipped from green to red for the day as betting on a half-point cut from the US central bank at next Wednesday's meeting
fell from 1-in-3 to just 15% of positions in derivatives exchange the CME's September Fed interest-rate contracts.
With overnight rates currently at a 2-decade high of 5.33% per annum – and with next week's meeting also bringing new 'dot plot' forecasts for where policymakers think the economy, inflation and interest rates will head – market consensus for Fed rates at the end of 2024 also turned less dovish, jumping 10 basis points to 4.32%.
"Given the market's aggressive expectations for Fed rate cuts, a hotter [inflation] reading
should lead to downside volatility" in stocks and other assets, Bloomberg quoted US bank Wells Fargo's analyst Sameer Samana ahead of Wednesday's numbers.
Having already started to cut Euro interest rates in June, another rate cut from the European Central Bank at its meeting tomorrow "should be largely uncontroversial" reckons Holger Schmieding, chief economist at German private bank Berenberg.
"Virtually all recent ECB speakers have confirmed that they would like to lower rates" further.
Setting a new all-time high this morning, gold priced in the Euro peaked €3 per Troy ounce above mid-April's spot-market high, very nearly touching €2290 per Troy ounce.
The Dollar price meanwhile peaked within $3 of mid-August's record spot market top above $2530. But failing to hold that level for the 5th time in 4 weeks, gold then fell back to $2503, while silver dropped 40 cents from its highest since last Friday at $28.87.
"A break below the $2490/oz range can now catalyze selling activity," says Canadian brokerage TD Securities' commodity strategist Daniel Ghali –
warning of "downside" risk to gold since mid-July, when prices were almost 5% lower than today – calling the level of
bullish gold betting "extreme" among algo trading programs and other speculative players in Comex futures and options.
"The first to blink
could snowball subsequent liquidations from other cohorts."
London consultancy Capital Economics today become the latest
analysts raising their gold price forecast, predicting a rise of 10% to $2750 by the end of 2025 but not without first seeing the precious metal fall, "perhaps sharply, before rising again."
Capital Economics in January forecast an annual average gold price of $2080 for 2024 – in line
with other analysts' consensus but almost 10% below this year's outcome to date – because "interest rate cuts by the US Fed [were] mostly priced in [and] any further boosts to the gold price from investment demand [would] be limited."
Euro gold prices fell 0.6% from today's new record after the US inflation data, while the British Pound gold price held 1.7% below its April high, trading at £1920 per Troy ounce after new data said the UK economy failed to expand for a 2nd month running in July.
Like inflation, economic growth was a key topic in Tuesday night's US presidential debate between current vice-president Kamala Harris and former US President Donald Trump, topped by immigration and crime.
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