Gold Tops $2700 on China 'Weakening the Yuan', Fed Rate-Cut Certainty
Wednesday, 12/11/2024 16:19
The PRICE of GOLD topped $2700 per Troy ounce in London bullion trading on Wednesday, jumping within 3% of Halloween's all-time spot market high as rumours that Beijing is preparing to weaken the Chinese Yuan were followed by G7 economy Canada slashing cash interest rates while US inflation data matched analyst forecasts, sealing the deal on a quarter-point cut from the US Fed at its December meeting next week.
China's Yuan weakened slightly on the FX market but held firmer than Monday's 13-month low
after Reuters said 3 people "with knowledge of the matter" believe the Communist dictatorship wants to let the currency fall in 2025 to boost export competitiveness in the face of US President-Elect
Donald Trump's vow of punitive trade tariffs.
Shanghai bullion prices rose 0.9% but their discount to London quotes widened to $15 per ounce – almost twice the more typical premium – signalling
weaker demand in gold's No.1 consumer nation.
The Bank of Canada then cut its key interest rate by half-a-percentage point to 3.25% per annum, citing
slower inflation and weak economic growth.
Consumer prices in the USA rose 3.3% on the 'core' CPI measure last month, the Bureau of Labor Statistics said,
sending market forecasts that the Federal Reserve will cut its key interest rate by 0.25 points to 4.33% a week from today up to almost a 100% certainty.
"Further interest rate cuts and the prospect of a weaker Dollar [mean] the gold price will continue its recent record in the coming year,"
reckons a new forecast from German bullion refiners Heraeus, predicting a range of $2450 to $2950 for 2025.
One of the more bullish forecasters for 2024, Heraeus predicted that gold prices would move in a range from $1880 to $2250 this year, a low and a high beaten 5.9% and 23.7% respectively by the outcome.
"It's been
a spectacular year for gold," says Max Layton, global head of commodities research at US financial services giant Citi.
"You zoom out on a 50-year chart and you can see this bull market. We're expecting it to continue, driven by central banks plus wealthier investors concerned by high debt levels in the US."
"Strong central bank gold buying in 2024 aligns with a broader trend,"
says a commodities blog from international development lender the World Bank in Washington, noting how this year's heavy demand by India, Turkey and Poland "partly reflects reserve management strategies...concerns over geopolitical risks."
Israel today continued to pound military installations and stockpiles in neighboring Syria as the new interim Government in Damascus called
Claiming to have destroyed 70-80% of the former Assad regime's military capabilities, Israel is ensuring "they won’t fall into the hands of the jihadists," said Prime Minister Benjamin Netanyahu,
currently in court on corruption charges.
South Korea's former defence minister meantime attempted suicide whilst in detention over his role in the failed coup d'etat for which President Yoon also faces criminal trial.
Overnight in Tbilisi, protesters waving European Union and Georgian flags rallied for the 13th time in a row after Georgia's Prime Minister Irakli Kobakhidze suspended EU accession talks.
Under Poland's forthcoming EU presidency, "Peace negotiations" between Ukraine and Russia "could begin this winter, though there are still question marks," said Prime Minister Donald Tusk today.
"As a safe-haven asset, gold has benefited from geopolitical uncertainties throughout the year," says the World Bank's blog.
"With the return of Donald Trump as US President, there is likely to be more uncertainty regarding trade and tariffs, which should also support the gold price," says Heraeus.
Euro gold prices today leapt within €20 per ounce of late-November's all-time high at €2607, while
the UK gold price in Pounds per ounce hit £2130, just 1.7% beneath its peak of 2 weeks ago.
Silver also rose, edging back above $32 per Troy ounce after hitting that 1-month high last week.
Global stock markets were muted, however, with New York and Europe trading flat overall after China's main indices slipped lower despite the Yuan rumours and
new stimulus promised by Beijing only on Monday.
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