Gold Price 1% Off Record as Fed Rate-Cut Bets Slip, Inflation Seen Rebounding
Tuesday, 8/27/2024 14:45
The PRICE of GOLD slipped on Tuesday, trading 1.0% below last week's new all-time Dollar high as betting eased back that the US Fed will make a sharp cut to interest rates at its September meeting and New York's stock market edged lower again ahead of tomorrow's quarterly earnings report from AI chipmaking giant Nvidia.
Now accounting for more than 6% of the S&P500 index after adding $3 trillion to its market capitalization since ChapGPT launched 20 months ago, Nvidia (Nasdaq: NVDA) has become "a critical market driver" says the Financial Times, with its results "treated
almost as a macro event."
Betting on a half-point cut at next month's Federal Reserve meeting meanwhile fell back to 28% of trader positions according to derivatives exchange the CME's FedWatch tool, dramatically below the 85% odds seen at the start of this month
after bad US jobs data was followed by a slump in global stock markets
led by a crash in Tokyo equities.
Peaking at $2531 per Troy ounce last Tuesday, gold bullion traded in global hub London today edged back to $2505.
"The time has come for policy to adjust," said Fed chairman Jerome Powell in
his speech to the annual Jackson Hole central-banking symposium on Friday.
"The direction of travel is clear, and...we will do everything we can to support a strong labor market as we make further progress toward price stability."
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Between now and the Fed's 18th September interest-rate decision, US inflation data on the Fed's preferred PCE measure for July is due out this Friday, a day after revised Q2 GDP growth, with August's jobs figures then coming on Friday next week.
But while inflation has dropped towards the Fed's official 2.0% per year target, "the elephant in the room at Jackson Hole [was] of course what the highly contested US election [and what it] will mean for rates and the global economy more widely," notes the latest analysis from Jonathan Butler, head of business development and strategy at Japanese conglomerate Mitsubishi's precious metals division.
"Both candidates, Harris and Trump, are likely to favour lower interest rates and a weaker Dollar, and both are likely to continue the fiscal largesse of recent years (albeit focused on different outcomes).
"These are essentially positive factors for precious metal prices: low interest rates, a weaker dollar, with inflation continuing to support gold and its sister metals."
"Both Trump & Harris are net inflationary," agrees precious metals strategist Nicky Shiels at Swiss bullion refining and finance group MKS Pamp, "and sticky and structural issues remain [including] de-globalization, resource nationalism, populist politics, labor + other procurement costs.
"[Yet] Jackson Hole confirmed Powell has pivoted away from his usual hawkish approach, and geopolitics [are also] back with the Mideast on edge."
With Gaza reporting a further 20 deaths from Israeli attacks this morning, the United Nations' secretary general António Guterres yesterday urged calm after Israeli jets made "pre-emptive" strikes against Hezbollah sites in southern Lebanon at the weekend as the Iran-backed militia launched rockets and drones at civilian targets across the border.
Moscow meantime continued drone and air strikes on Kyiv, Lviv and Zaporizhzhia as
Ukraine claimed to have control of 100 towns and villages in western Russia in its counter-offensive against the Kremlin's invasion starting in February 2022.
Current US President Joe
Biden's national security adviser today met China's top diplomat Wang Yi to discuss worsening tensions in the eastern Pacific after Japan yesterday scrambled fighter jets after a Chinese spyplane entered its airspace and the Philippine's defense secretary accused Beijing of being the "biggest disruptor of peace" in south-east Asia amid fresh naval blockades and stand-offs around disputed islands in the region.
Unlike gold bullion,
silver prices held flat around last weekend's level, trading 40 cents below yesterday's 6-week Dollar high of $30.19 per Troy ounce.
Crude oil meantime edged back from Monday's spike to 2-week highs above $81 per barrel of Brent crude, made after the governing forces in eastern Libya threatened to shut down local oilfields in a worsening dispute with the more widely-recognized government in Tripoli over who should run the country's central bank.
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