Weak US Data Sees Gold and Silver Fall with Bonds, Stocks, Oil
Wednesday, 10/23/2024 17:25
GOLD and SILVER sank from another record and new 12-year high respectively on Wednesday afternoon in London, falling together with Western stock markets – and erasing this week's prior jump – as the US Dollar extended its gains on the currency market and longer-term US interest rates rose again in the bond market despite weaker data from the world's largest economy.
Sales of existing US homes slowed more than analysts expected on September's figures from the National Association of Realtors.
The Energy Information Administration's weekly report showed stockpiles of crude oil ballooning despite imports falling and gasoline production slowing, signalling poor domestic industrial and driving demand.
Yet
longer-term borrowing costs in the bond market rose further, with the yield offered by 10-year US Treasury bonds reaching above 4.25% per annum – half-a-point higher for October so far – as the price of government debt fell for a 3rd session running to the lowest since this point in July.
With the MSCI World Index of developed-economy equities losing 0.8% to a 2-week low, gold lost 1.5% and silver prices sank by 3.2% from their earlier peaks in US Dollar terms.
Market forecasts for where the US Federal Reserve will cut its key overnight interest rate by the end of the year meanwhile held at 4.45% per annum, higher by 2/5ths of a percentage point from this time last month according to the CME derivatives exchange's
FedWatch tool.
Gold at today's 3pm London benchmarking had risen $90 per ounce since then.
"The Fed [is] easing into soft landing US data [alongside] China injecting [stimulus] and a US election [which is boosting] further stimmy trades," says a note from precious metals strategist Nicky Shiels at Swiss bullion refining and finance group MKS Pamp.
"[So] the underpinnings of the gold market remain [with] central banks on the bid...[mining] producer hedging & physical scrap surprisingly still absent...[and] geopolitics [which] has net escalated the past few weeks in the Middle East.
"Generalist interest is sidelined or underweight," says Shiels – leaving plenty of room for fresh inflows to the bullion market – "[but] sentiment is positive. It was out-of-favor to be bearish at [last week's] LBMA conference."
"Conference attendees seemed to be 100% bullish of gold and ultra-bullish of silver," agrees Rhona O'Connell of brokerage StoneX.
"This, to me at least, flashes warning signals. It did transpire though that there are potential investors on the sidelines waiting for a $200-$300 drop in gold before coming in. Those corrections are not happening [because] others are actively following buy-on-dips policy.
"So it may be that those on the sidelines have to capitulate, which could well embrace further upside."
Fixing above $2750 per Troy ounce this morning, the price of gold made its 6th new benchmark high in 6 days, the 4th such run of 2024 to date.
The
price of silver bullion then fixed above $34.50 per Troy ounce at midday, its highest London benchmark since early October 2012.
With gold in Dollars briefly dipping through $2710 – a new record high when reached Thursday last week – the UK gold price in Pounds per ounce spiked down through £2100 and Euro gold fell through €2520 before both recovered 1/4 of today's 1.8% plunge.
Crude oil prices also fell after the EIA stockpiles data, with WTI dropping below $71 per barrel.
That was a 9-month low when hit in early September.
"We were at
the LBMA conference last week," says analyst Michael Widmer at US finance giant Bank of America, and "from
talking to market participants and also central bankers, it's clear there's a lot of concern about the fiscal picture in the US.
"I think this is where the bid for gold from central banks is coming from."
"Record gold purchases by central banks are linked to
a loss of confidence in the US's ability to influence the world order," says an opinion column in French newspaper
Le Monde.
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