Gold Erases New Record Week as Asian Demand Sinks, Dollar Rallies
Friday, 7/19/2024 12:14
The PRICE of GOLD fell further on Friday, erasing this week's jump to new all-time Dollar highs as the US currency rallied on the forex market and signs grew that 2024's record bull run is badly denting demand in China and India, the precious metal's biggest consumer markets.
Silver plunged, losing 5.0% from last Friday to trade at its lowest week-end level so far in July.
Global equities meanwhile dropped again as a global tech outage hit major systems and corporations from banking to telecoms, media to airlines.
Trading back down to $2412 per Troy ounce – more than 2.8% below Wednesday's
new gold spot-market record peak – the price of gold was a little firmer from last Friday in Euro and Sterling terms.
But Shanghai gold prices sank overnight, falling to 1-week low at ¥562 per gram, after major Chinese jeweller Luk Fook Holdings (HKG: 0590)
reported a near 1/4 drop in April-to-June sales, blaming the slump on higher gold prices deterring demand.
"The surge in price has stifled the physical markets in south and south-east Asia," says bullion-market expert Rhona O'Connell at brokerage StoneX, "with buying evaporating and some selling coming back.
"[But] this is not unusual, and the buyers will return once they have acclimatised to the new range.
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"Professional investors [in contrast] have already adapted to the new paradigm," O'Connell goes on, with this week's jump to new all-time gold price highs "fuelled from that quarter" following would-be US President Donald Trump saying that the Dollar is over-valued on the currency market, hurting US exports and competitiveness.
"We have a big currency problem,"
Trump told Bloomberg in a lengthy interview – during which he also questioned US military support for Ukraine against Russia and Taiwan against China – calling the Dollar's current exchange rate against the Chinese Yuan and Japanese Yen "unbelievable".
"If Mr.Trump takes office and gets his way," says O'Connell at StoneX – noting that a retreat in the Dollar's FX value could be "tough to achieve" – "[that] would certainly be bolstering sentiment towards gold now, as investors hedge perceived (or real) risk."
UK consultancy Capital Economics – which in January predicted an annual gold price average of $2080 for 2024, in line with analysts' consensus forecasts but now 6.4% below gold's year-to-date level – says the gold price will fall towards $2200 by year-end as high prices hurt consumer demand in the key Asian markets, most especially China.
Gold bullion exports from Switzerland – the precious metal's No.1 refining centre – fell to a 2-year low in June, led by weaker demand from China and India.
Gold prices in India today held at a steep discount to prices in London – the metal's central trading and storage hub – suggesting weak demand in what is always a quiet summer period.
India's jewellery industry is
yet again calling for a cut to the country's heavy gold import duties and VAT sales tax – now adding 18% to consumer prices and widely seen as spurring continued and growing smuggling – ahead of the re-elected BJP Government of Narendra Modi.
Such calls have been repeatedly disappointed since Modi won power a decade ago, not least when the BJP administration's
2023 Budget hiked silver duty to match the 15% set for gold the previous summer.
Back in the USA, this week's call from Donald Trump for a weaker Dollar strategy came less than a month after he said that the Dollar risks losing its dominance as the world's No.1 reserve currency.
"We're losing a lot of countries on the Dollar," Trump
said in late-June. "I mean they're going like flies. If we ever lose [Dollar dominance] that's the equivalent of losing a war, that would be unbelievable."
As for Fed chairman Jerome Powell – appointed by Trump during his first term in the White House but then repeatedly lambasted by him for not cutting interest rates in 2017-2019, "I've had my own disputes with him," the 2024 Republican candidate told Bloomberg this week
"But no, I would [not fire him if elected]. I would let him serve it out, especially if I thought he was doing the right thing. Right now, you have to keep rates where they are."
Most Asian and European stock markets meantime fell Friday amid a crash in I.T. systems running on Microsoft's Windows software, pulling developed-economy equities down to 2-week lows on the MSCI World Index, almost 2.0% below Tuesday's fresh all-time high.
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