Gold Price Flat Ahead of 'No Change' Fed as Copper, Steel Fall on China's Slowdown
Tuesday, 7/30/2024 16:34
GOLD PRICES traded little changed for the week so far against a rising US Dollar on Tuesday as bond prices rose with Western stock markets ahead of tomorrow's key central-bank decisions from Japan and the US Federal Reserve – now both expected to deliver no change to interest policy – but industrial commodities fell yet again on worsening demand in China.
With the first Fed rate cut now almost universally expected in September, betting in the futures market today put a 95% certainty on the Fed sticking with the highest Dollar interest rates in 2 decades at Wednesday's July meeting.
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The Bank of Japan may also sit tight, analysts believe, holding overnight Yen rates at zero rather than raising the cost of borrowing as previously expected because after 3 decades of extraordinary monetary stimulus,
"consumption is still weak, and real wage growth is still negative" according to one Tokyo economist.
The Dollar rose again on the foreign exchange market, hitting a 2-week high against the rest of the world's major currencies, after
new US "jolts" data said job openings in the world's largest economy slipped less than analysts expected in June, holding 3.3% above April's 3-year low at 8.1 million.
First estimates for Eurozone economic growth and Germany's inflation also both came in stronger than analysts' consensus forecasts, with the currency union's 20-nation GDP expanding by 0.3% in April-to-June from the previous calendar quarter while Germany's cost of living rose 2.6% per annum in July, holding 0.3 points ahead of last winter and spring's 2.5-year lows.
Shares in China's giant jewellers Chow Tai Fook fell hard again meantime, wiping more than 35% off the US$9 billion stock since the start of the year after it reported a drop of 1/5th in same-store sales for April-to-June – marking a sharp contrast with
China's strong household demand for gold coins and retail investment bars.
Copper prices sank to new 4-month lows near $4 per pound in US trade – down nearly 25% from May's all-time highs.
Chinese prices for steel rebar, used in reinforced concrete and other civil engineering structures, flirted with 4-year lows as weaker demand amid China's real estate slump was worsened by factory shutdowns and localized evacuations after Typhoon Gaemi hit eastern Hunan Province, adding to the domestic metals industry's woes as its
costs rise ahead of new national standards to be implemented from September.
"Any commodity that relies on China – from agricultural to iron ore & base metals – continues to trade horridly as demand is sluggish," says precious metals strategist Nicky Shiels at Swiss bullion refining and finance group MKS Pamp.
As for the USA, last week's PCE inflation data "is only supportive of a September not July cut" to Federal Reserve interest rates, Shiels says. So growing talk that the Fed should start cutting sooner to avoid causing an economic recession "is simply indicative of worried [speculative] length still in the favored 2024 trades of Big Tech, gold, copper."
US consumer confidence improved in July, the Conference Board's survey said Tuesday ahead of the Fed's decision. But while the Expectations Index rose sharply from June, it was "still below 80 – the threshold which usually signals a recession ahead."
US jobs data on Friday "may show the unemployment rate flirting with a key recession signal" during July, Shiels adds.
"Payrolls data is likely to show a slowdown in added jobs," agrees analyst Giovanni Staunovo at Swiss bank and London bullion clearing member UBS, looking ahead to Wednesday's private-sector ADP estimate for July and then Friday's Bureau of Labor Statistics'
non-farm payrolls report.
"Any signal from [Wednesday's Fed announcement] that a rate cut is near [will be] the next catalyst," he says, "supporting further investment demand for gold."
Gold prices today held around $2390 per Troy ounce, on track for a new record-high monthly close some 2.5% higher from the end of June.
That saw
the UK gold price in Pounds per ounce rise £10 from Friday's level at £1864, while the Euro price of gold neared a 1-week high at €2216.
Silver also held unchanged for the week so far in Dollar terms, rallying on Tuesday back to the $28 level but still $1.35 per ounce lower for July to date.
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