Gold Price Sinks as Shanghai Premium Vanishes, Copper Falls with Silver
Thursday, 7/25/2024 16:14
The PRICE of GOLD extended last night's steep drop in London on Thursday, trading near 3-week lows against the Dollar as stronger-than-expected US GDP data followed a collapse in the Shanghai gold premium, erasing the incentive for new bullion imports into China as the continued lack of government stimulus plans for gold's No.1 consumer market worsened the sell-off in industrial commodities and global stock markets.
Equities tracked by the MSCI World Index lost another 0.5% as a group, copper prices hit 4-month lows, and silver sank to $27.45 per Troy ounce, down more than $4 from just 2 weeks ago.
Gold bullion settled in London meantime fell to $2358 per Troy ounce, trading $125 below last Wednesday's fresh record peak for US Dollar investors and losing almost 2.5% from yesterday afternoon's global benchmarking price.
Gold landed in China had earlier fixed at Shanghai's afternoon benchmarking auction 2.4% down for the day at ¥552 per gram, the lowest in almost 3 weeks, amid
a slump in household demand most especially gold jewelry.
Erasing nearly all of July's previous 5.1% jump to
a new record gold high in Chinese Yuan, that small discount took the Shanghai price more than $2.50 per Troy ounce below London quotes and put the 5-day average for that spread at zero for the first time since May 2022.
Last September saw the Shanghai gold premium peak above $100 per ounce as a surge in private-sector demand took
gold prices in China above the equivalent of $2000 for the first time.
"Gold took a breather after hitting a new all-time high last week," says a commodities note from Swiss banking giant and London bullion clearing bank UBS, issued ahead of Thursday's plunge.
"But the drivers for the rally remain in place, including strong central bank buying, ongoing geopolitical uncertainty, and the likely Federal Reserve move to cut interest rates in the coming months."
US interest-rate forecasts in the futures market today dropped to 4.69% for year-end, the lowest such Fed Funds consensus since early April.
With the US central bank currently setting overnight rates at 5.33% per annum, that drop in December forecasts came despite US economic growth in April-to-June coming in at 2.8% annualized, far above analysts' forecasts.
Thursday's strong GDP data was then followed by softer jobless benefit claims figures for last week, plus a surprise drawdown in crude oil stockpiles on the EIA data, signalling stronger energy demand.
"Recent news has reaffirmed that the US economy is cooling, not collapsing," said
a note late last week from US banking giant J.P.Morgan's commodities team.
"With fears on economic growth fading, we believe the recent pullback in commodities is just that – a pullback. From current levels, we continue to see a 10% appreciation by year-end in the broader Bloomberg Commodity Index" – currently 1.4% lower for 2024 to date.
Copper prices sank for the 9th session running on Thursday, hitting 4-month lows 22.5% below mid-May's record high.
Aluminum also hit 4-month lows today, trading 17.8% below mid-May's 2-year high, while crude oil hit 1-month lows close to $80 per barrel of European benchmark Brent, down 6.7% from 2 weeks ago.
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Thursday's plunge in global stock markets came after
the so-called 'Magnificent Seven' group of US megacap tech stocks suffered their worst 1-day plunge since the launch of free-access AI tool ChatGPT in November 2022.
The MSCI World Index then fell further, down 4.0% from the latest record high set 2 weeks ago and falling to what was a new record high in mid-June, as Japan's stock market plunged amid a continuing rally in the Yen on the forex market, tearing up 'carry trade' bets whereby speculators borrow in a low interest-rate currency to invest in another, higher-rate one.
Tokyo's stock market today extended the past week's plunge to 5.2%, hitting 6-week lows more than 7.5% below the Topix index's all-time high of a fortnight ago.
The Yen has meantime rallied by 5.9% from the near 4-decade lows hit at the start of this month.
Mexico City's S&P/BMV IPC has now lost almost 10% from early February's new record high, while the Peso has lost more than 10% from the near 1-decade highs it reached against the Dollar this April.
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