Gold Price Slips as Comex Bulls Face September Curse, Fed Rate-Cut Uncertainty
Monday, 9/02/2024 13:41
GOLD slipped on Monday, starting September just below $2500 per Troy ounce as heavy betting in Comex futures and options contracts that the price will rise to new record highs was followed by growing uncertainty over the size of the US Fed's cut to interest rates due in 2 weeks' time.
Rising alongside the stock market last month, gold bullion set fresh spot-market price peaks at $2530 per Troy ounce in August, ending Friday in London with new month-end and month-average records in Dollars, Sterling and Euros as the bond market's
inverted yield curve 'recession warning' came to an end.
That marked gold's 6th new month-average record in US Dollar terms of 2024 so far, matching the year-to-August counts of 2011 and 1973 with the highest figure since 1972.
With
gold now correlated with US stocks more dramatically than almost any time in 2 decades, the S&P500 index of US corporations has fallen in every September since 2020 while gold priced in the Dollar has fallen in every September since 2017.
"Fall comes with falls," Bloomberg quotes economics and strategy head Vishnu Varathan at Japanese bank Mizuho's Singapore branch, "especially with
markets pricing in so much for Fed cuts and people chasing the 'Goldilocks' scenario."
Global stock markets ending August at a new all-time high on the MSCI World Index, while gold prices in London fixed at $2513 per Troy ounce, 3.6% higher from the end of July and 29.4% above its level this time last year.
Latest data show speculators in Comex
gold futures and options growing their bullish bets yet again last week, reaching the largest net long position since March 2020, when the Covid pandemic spurred social and economic lockdowns worldwide.
The rebound in gold derivatives betting is waving a "red flag" for a possible price drop, said commodity strategist Daniel Ghali at Canadian stock brokerage TDS last week, noting how "This set-up is the antithesis to...early-2024.
"Downside risks are now more potent [because] the ship is crowded. In fact, it has scarcely been as crowded as it is today."
"Indicators suggest a pullback may be imminent," agrees a note Monday from consultancy SFA Oxford for German bullion refining and technology group Heraeus.
"What could catalyse the gold price is the Federal Reserve rate cut...The question is whether there will be a 25 or 50 basis point cut [and whether] the market has sufficiently priced in this risk to the gold price already, having held around $2500/oz over the last fortnight."
Following last month's confirmation from the US Federal Reserve that it will start to cut Dollar interest rates from today's 2-decade high when it meets in 2 weeks' time, betting in the futures market
now puts a 1-in-3 chance on the Fed making a half-point cut, rather than the more widely expected 0.25-point reduction.
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While US markets stayed shut Monday to mark the end of summer with the Labor Day holiday, Chinese and European equities fell, as did Asian and European bond prices, edging longer-term borrowing costs upwards.
The Dollar meantime held firm on the currency market after rallying 1.1% from last week's 13-month low.
The
gold price in UK Pounds per ounce held around £1900, down 2.1% from mid-August's fresh London benchmark peak.
Euro gold prices slipped through 2260, also a record when first reached in April and 0.9% beneath last month's new London high.
More industrially-useful silver and platinum meantime fell to 2-week lows at $28.33 and $924 per Troy ounce respectively, but palladium held firmer after ending Friday with an 8-week high up 16.6% from early August's 7-year low.
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