Gold Rebounds to $2700, Silver Also Halves 'Trump Trades' Slump
Thursday, 11/07/2024 15:40
GOLD and SILVER PRICES both rallied on Thursday, halving the US election's 'Trump trades' sell-off as the Dollar retreated along with the US Treasury's borrowing costs as weak jobs data preceded today's Federal Reserve interest-rate decision.
Chinese equities also rebounded despite President-elect Donald Trump's plan to impose 60% trade tariffs on the world's No.1 manufacturing nation.
"The long-term impact of the new administration's trade policies could lead to higher inflation, potentially forcing the Fed to maintain elevated interest rates for an extended period," Reuters quotes analyst Ricardo Evangelista at UK spread-betting brokerage ActivTrades.
"In such a scenario,
non-yielding assets like gold would likely come under additional pressure."
But "ending rate cuts on the Trump victory would be seen as overtly political," says US economist Tim Duy at consultancy SGH Macro Advisors – not least after Trump repeatedly attacked the Fed chair Jerome Powell for not being a "low rates guy" during his first term in the White House.
Bottoming overnight beneath $2645 per Troy ounce, the price of gold in Dollar terms rallied towards $2700 while silver regained almost $1 from its own 3-week low to hit $31.86 after new and continuing claims for US jobless benefits both showed a rise on last week's new data from the Department of Labor.
US bond prices also jumped on that poor jobs news, easing benchmark 10-year yields 0.1 percentage points below Wednesday's top of 4.48% per annum.
Yesterday's
Trump-election spike in bond yields peaked almost 0.9 percentage points above mid-September's 16-month low at the highest since 1st July.
Back then, gold prices were $350 lower than today.
"US bond yield spike sends warning to 'King of Debt' Trump," says a headline on Bloomberg.
"As it currently stands," says French bank Natixis, "we think that the gold market has largely factored in the Fed's 2025 rate cuts," forecasting only "marginal gains" for gold prices in 2026 "as the rate cut cycle ends."
What could drive gold prices "sustainably" above $3000 per Troy ounce?
"[Gold] would mainly need Western demand to be coupled with a strong return in Chinese consumers…[potentially] reached if China fails to introduce [an economic] stimulus package that would satisfy their local market.
"[But] for the time being Chinese investors, who were buying into gold amid concerns of local market turbulence and sharp drop in real estate prices, are holding back on buying into gold in order to weigh riding a potential equity market rally."
With the Dollar falling today from Wednesday's 4-month highs on the FX market, UK Pound gold prices rallied to £2070 per Troy ounce after the Bank of England surprised no-one by cutting UK interest rates but refusing to be drawn on how the new Labour Government's tax-borrow-and-spend Budget may affect inflation and growth.
Down 3.9% from Halloween's all-time record,
today's UK gold price in Pounds per ounce marked a new high when first reached 3 weeks ago.
Euro gold prices meantime rallied to €2485, down 3.6% from Halloween's all-time record but also a new high when first reached 3 weeks ago.
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