New Record Gold Price Shrugs Off Rising Real Rates on US Jobs Slump, Trade Deficit Surge
Tuesday, 10/29/2024 15:26
The GOLD PRICE leapt to fresh record highs in all currencies on Tuesday, defying a rise in real interest rates and jumping while Western stock markets fell as new data ahead of next week's US presidential election showed America running a near-record trade deficit in goods while job openings in the world's largest economy have sunk.
Instead of rising last month as analysts forecast, the number of US job vacancies fell by 5.3% from August to 7.4 million on the Jolts measure.
That was the
worst figure since New Year 2021 amid ongoing Covid pandemic lockdowns.
September's US trade deficit in goods meanwhile yawned to $108 billion on the Census Bureau's advance estimate, second only to March 2022's all-time record of America importing $121bn more stuff than it exported.
Gold priced in the Dollar jumped to $2765 per Troy ounce, topping yesterday's fresh London 3pm benchmark high by over $20 even as the Dollar strengthened further on the currency market and the real rate of interest on US government debt also rose, regaining the 2.00% level on 10-year TIPS yields.
That level marked a near decade-and-a-half record when first reached in August last year.
Coinciding with yet another new all-time high in the price of gold today – the 37th of 2024 to date – that also continued to break
the long-standing negative relationship between gold prices and inflation-adjusted bond yields, a connexion which broke down as Washington and its
Western allies hit Russia with financial sanctions over the invasion of Ukraine starting in February 2022, a conflict blamed for accelerating the post-pandemic inflation and therefore rate-hiking cycle from Western central banks led by the US Fed.
The Bank of Russia today put its reference price for refined gold bullion at 8,538 Rubles per gram, more than 42.4% higher for 2024 to date and more than 1,200 Rubles above Moscow's Ukraine-invasion spike of early 2022.
Already rising 0.8% overnight to a new high of almost ¥630 per gram for buyers in China – the No.1 gold consumer – the
UK gold price in Pounds per ounce jumped to £2130 and Euro gold hit €2655 on the US jobs and trade deficit data.
The Aussie Dollar price burst through A$4200, Canadian investors saw gold hit C$3850, Swiss Franc prices added 38.3% for the year-to-date above CHF2400, and the Japanese Yen price broke to ¥13,670 per gram.
That's 83.1% higher from last New Year's Eve.
"Gold
should continue to benefit from declining real rates," says a note from Swiss bank and London bullion market-maker UBS, ignoring both the past 4 weeks' near half-point rise in 10-year TIPS yields and gold's continued immunity to those higher rates, adding over $150 per Troy ounce in that time.
"I'm worried about what risk we're underpricing in the gold rally. Maybe it's
the [chance] that bond yields really jump after the election," says Bloomberg journalist Mark Cudmore, also missing the current breakdown in gold's long-term relationship with real rates.
"When I consider that gold is a non-yielding asset," says asset-management BlackRock's European investment strategy head Karim Chedid, "yields are
indeed coming down, even if they're not coming down as quickly as in previous rate cutting cycles.
"That also reduces the opportunity cost of holding gold," he says, even though the actual action is opposite.
With the MSCI World Index of major equity bourses falling Tuesday for the 5th session since the start of last week, longer-term borrowing costs continued to rise across Western bond markets, taking 10-year yields to new multi-month highs for the UK, Germany and Japan even as the gold price in Sterling, Euros and Yen hit new all-time records.
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