Gold Price Sets New Month-End Record High at $1980 Amid Inflation and Banking Scare
Friday, 3/31/2023 15:05
GOLD PRICES rose against a falling US Dollar on Friday, heading for a $13 weekly drop but setting fresh month-end record highs in terms of all major currencies as new US data said inflation eased back in the world's No.1 economy ahead of
March's banking scare, boosting bets that the Federal Reserve will stop raising and start cutting interest rates.
Trading just below $1980 per ounce after the release of February's PCE inflation data, the price of gold in Dollar terms showed a rise of 8.4% across March, its strongest monthly gain since July 2020, depths of the first-wave Covid Crisis.
The
UK gold price in Pounds per ounce meantime edged back from another pop above £1600, down 3.2% from mid-March's new all-time high – hit as this month's
US banking scare spread to Europe – but 6.2% above the end of February with its strongest rise in 13 months.
Euro gold rose 5.9% for the month to €1816 per ounce, just €1 above last April's record monthly finish, as a new estimate for the 19-nation bloc said headline inflation slowed hard this month but the underlying 'core' reading – again excluding fuel and food prices – rose to
a new currency-union record of 7.5% per year.
Gold priced in Japanese Yen meantime touched a new all-time high in the spot market Friday morning, peaking just ¥3 shy of ¥8,500 per gram and rising 6.0% from the end of last month as London's PM benchmarking auction approached.
Friday's US inflation data said that the
core PCE index – meaning the cost of living excluding 'volatile' fuel and food prices – rose 4.6% in February from the same month last year.
The lowest reading since October 2021, that defied analyst forecasts for a repeat of January's 4.7% pace.
But with inflation still far above its 50-year average of 3.3% and well over twice the Fed's target of 2.0% – a level now exceeded for almost 24 months in a row – "Caution is required," says a research note from French bank Natixis, because "inflation rates remain high, particularly in core terms, and far from the levels desired by central banks."
Data from the CME derivatives exchange says that, in aggregate, traders playing the Fed Funds futures market today saw a better than evens chance that the US central bank will raise its key interest rate again in May, up from a 1-in-5 shot this time last week.
Long-term bond yields in the Treasury market held flat but 2-year yields rose for the 5th day running, cutting the month-on-month plunge – spurred by the collapse of Silicon Valley Bank and Signature, as well as the Swiss government-backed rescue of Credit Suisse – to less than 0.7 percentage points at 4.13% per annum.
Still showing the steepest drop since January 2008, eve of the Bear Stearns and then Lehman Brothers' crises, that's markedly below
the Fed Funds rate, raised despite fears of recession this month to a ceiling of 5.0% per annum.
"Amid turmoil in the banking sector, the subsequent flight to safety of US government bonds...along with ongoing high inflation and a weaker Dollar...is generally positive for gold and for the wealth preservation properties of the wider precious metals complex," says a note from Jonathan Butler, head of business development at Japanese conglomerate Mitsubishi's precious metals division.
"However, it does not bode well for industrial demand especially in the white metals."
Finding over half its demand from industrial and tech uses, the price of silver has rallied harder than gold in March, up 16.4% from the end of last month but still flat for 2023 to date with a pop above $24 per ounce Friday afternoon.
The price of platinum and palladium – both primarily used in fossil-fuel vehicle systems to reduce harmful emissions – meantime continued to struggle below $1000 and $1500 per ounce respectively.
Used mostly in gasoline engines with sanctions-hit Russia producing 2/5th of new mine output, palladium has rallied this March by just 3.6% from last month's finish of $1413 at the LPPM's benchmarking auction, the lowest month-end since May 2019.
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