Gold Price Tests Record Dollar High After Powell Says the Fed's Beaten Inflation
Tuesday, 7/16/2024 15:22
The PRICE of GOLD just missed setting a new record London benchmark price in Dollar terms on Tuesday, shrugging off seemingly strong US retail sales data after Fed chairman Powell said the US central bank has brought inflation back down to target, clearing the path for a cut to interest rates.
Large-bar bullion fixed around $2444 per Troy ounce at London's 3pm auction – a new record for the afternoon benchmark, but 50 cents below the AM benchmark's
record high gold price of mid-May, as the Dollar held near the 5-week lows set on the FX market yesterday following Federal Reserve chairman Jerome Powell's dovish comments.
Chosen as Fed chair by Donald Trump – now secure as the Republican nominee for Election 2024, with
J.D.Vance as his running mate – Powell was then
repeatedly lambasted by the real-estate mogul and reality TV star for not slashing interest rates during his first term in the White House from 2017 to 2021.
Here in 2024, "We didn't think it would be appropriate to begin to loosen policy until we had greater confidence" that inflation is falling,
Powell told the Economic Club of Washington on Monday.
"[Now] we've had three better readings...Inflation is at 2.5% [yet] there is no slack in the labor market," the Fed chair went on, saying that this outcome of
higher-for-longer interest rates has worked "in defiance of a lot of conventional wisdom" about needing to push up unemployment.
US retail sales held unchanged in June from May's near-record figure,
the Census Bureau said today, with retail sales excluding autos rising 0.4% for the month against Wall Street's consensus forecast of 0.1%.
Adjusted by CPI consumer-price inflation, however, the total value of retail sales held near the lowest since New Year 2021, down 6.3% in real terms from that March's
spike to what remain all-time highs, when the incoming Biden administration issued
$1400 stimulus checks to most US adults as part of the $1.9 trillion American Rescue Plan Act.
US Treasury bond prices eased back after the stronger-than-expected retail sales data, raising the yield offered by 10-year debt from the past week's 3.5-month lows beneath 4.2% per annum.
US stock market futures also pointed higher, but other global bourses fell, edging the MSCI World Index down after setting its 8th new all-time high in 11 sessions so far in July on Monday following Powell's speech.
"Overall, US (and thus global) political uncertainty is rising but remains under-priced," says Swiss bullion refining and finance group MKS Pamp's strategist Nicky Shiels following
Saturday's failed assassination attempt on Trump, calling yesterday's late jump in gold prices and US equities "a delayed bullish reaction" to the Republican 2024 candidate surviving the shooting with much-improved poll ratings.
Betting on the Fed's July meeting – coming at the end of this month – continues to back "no change" from today's 2-decade high of 5.25% per annum
according to data from the CME derivatives exchange.
But yesterday's comments from Powell saw betting on "no change" at September's meeting collapse to zero, down from pricing a 1-in-4 chance this time last week having peaked at stronger than 1-in-2 as recently as end-May.
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With the
US government's debt-to-GDP ratio already running above 122%, a landslide victory for Trump and his lax budgetary plans in November's election will see Washington's borrowing costs rise from current bond-market levels according to 77% of fund managers surveyed by Bank of America.
"Rising bond yields seems to be a big consensus trade if the Republican's get a clean sweep," says Albert Edwards, global strategist and "uber bear" at French bank Societe Generale.
"While in general I agree that the secular trend is now for higher yields, might
falling yields on a clean sweep be the big surprise for 2025 as the delayed recession finally kicks in?"
Economic sentiment across the 20-nation Eurozone has fallen to the lowest since March, the ZEW research institute said today after surveying 300 experts at banks, insurance companies and financial departments, falling sharply from June's 3-year high as optimism in the currency union's largest economy Germany fell for the first time in 12 months.
Euro gold prices fixed around €2245 in London this afternoon, 1.8% below April's all-time high, while the UK Pound price fixed around £1886, still 3.6% below its record peak.
Silver meantime held unchanged for the week so far around $30.75 per Troy ounce, lagging the 1.6% rise since Friday's London finish in gold prices.
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