Gold 'Demand Destruction' Worsens as NYLON Arb Rebounds
Thursday, 2/13/2025 16:33
The PRICE of GOLD rose yet again Thursday against a falling US Dollar, making its 9th new record high in 11 trading days as US stocks and bond prices also gained despite stronger US inflation data and growing evidence of physical "demand destruction" in gold's key consumer nations thanks to the New York-London price gap.
With President Trump announcing a press conference on "reciprocal tariffs" after pushback from foreign partners over his import duty threats, the
arbitrage between London bullion and New York's most active futures contract widened towards $30 per Troy ounce after dipping beneath $20 on Wednesday.
Inflows to Comex warehouses – delivered to exploit that arb – saw gold stockpiles rise another 0.9% on Tuesday, data from the CME says, reaching 1,133 tonnes.
That's the most since the Covid Crisis surge in New York gold stockpiles retreated in early 2021, and the NYLON flow of metal has pulled lease rates – the cost of borrowing gold – sharply higher.
"If you look at the options market," said James Steel, precious metals analyst at global bank and London bullion clearer HSBC, on
a webinar for members of the LBMA on Monday, "there is now an element of the financial market which is looking for even higher prices.
"But if that does happen, we'll just see more underlying demand destruction."
India's spring wedding season has failed to boost demand in gold's No.2 consumer market, Reuters reports, as domestic prices race to new all-time highs above 86,000 Rupees per 10 grams even as wholesale dealers offer discounts worth $30 per Troy ounce to London quotes plus New Delhi's 9% import duty and sales tax.
"Right now, jewellery demand has taken a big hit," says Surendra Mehta, secretary at the India Bullion and Jewellers Association – "it's down by 70-80%. Jewellers all over the country are seeing slow sales."
Prices in No.1 gold consumer China today cut their premium to London quotes by $10 per ounce to just $1.50 as Shanghai's benchmark Yuan price rose back towards Monday's new record high at ¥684 per gram.
After yesterday's US data on
consumer price inflation beat analyst forecasts for January, producer price inflation also came in stronger than expected today, with the 'core' reading slowing only 1 tick to 3.6% per year while energy and food costs pushed the headline rate up to 3.5%.
That's the fastest pace since February 2023.
Despite President Trump now calling on the US Federal Reserve to keep cutting interest rates, consensus betting in the futures market still sees no change before September, although the odds of a possible cut at July's meeting jumped Thursday from 41.9% to 48.2% despite the PPI inflation beat.
Gold priced in the Dollar today fixed at $2016 per Troy ounce at London's 10:30am benchmarking auction, a new all-time high, but it missed a fresh record in most other currencies, with the UK Pound price trading at £2330 and the Euro price dipping back below €2800.
Silver bullion meantime held above $32 per Troy ounce, an 11-year high when reached last spring.
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