Gold Trading 0.5% Below Latest High Ahead of the Fed's 'Late' Rate Cut
Tuesday, 9/17/2024 16:07
GOLD PRICES slipped in London on Tuesday, moving down $20 per ounce from yesterday's fresh all-time Dollar high before cutting that drop to 0.5% as trading in Comex futures and options cooled and new US data said retail sales in the world's largest economy were stronger than analysts expected last month.
That dented but didn't reverse futures-market expectations that the Federal Reserve will finally start cutting the cost of borrowing at tomorrow's September meeting with
a dramatic half-point cut to interest rates.
"Open interest in Comex gold futures
has jumped sharply," noted Daniel Hynes, senior commodity strategist at Australasian bank ANZ, after Friday's steep jump in gold prices at the end of last week –
a point also noted by Bruce Ikemizu of the Japan Bullion Market Association.
The number of Comex gold futures contracts now open grew on Monday above 546,000, swelling by 7.8% from one week earlier.
That took open interest in those US gold futures contracts up to the largest since late-July's spike to the highest since March 2022, immediate aftermath of Russia launching its attempted all-out invasion of Ukraine.
But trading volume in Comex gold futures yesterday fell back to its lowest in 3 weeks, down by almost 1/3rd from last week's daily average.
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Trading volume in
gold's more leveraged Comex options retreated even harder, more than halving from Friday's 5-month record when gold prices leapt to new all-time highs for the 2nd session running. But open interest in those monthly contracts did rise again Monday, ending yesterday 7.8% higher than this point in August.
"We see some tactical downside to gold prices under our economists' base case of a 25-basis-point Fed cut on Wednesday," says a gold trading note from US financial giant Goldman Sachs.
"[But] we expect a gradual boost to ETF holdings – and thus gold prices – from the Fed's easing cycle. This upside is not yet fully priced in."
Giant
gold-backed ETF the GLD product expanded by 0.2% on Monday to its largest size since the New Year, while No.2 gold ETF the IAU also grew, up 0.1% to its largest in a month.
"I think the Fed may be a meeting or so late," says former Dallas Fed president Robert Kaplan, echoing last week's comments from former New York Fed president Bill Dudley.
"If I were sitting at the table,
I would be advocating for 50 [basis points to be cut] in this meeting."
Betting on a 50bps cut at Wednesday's decision today edged back from 67% of trader positions to 63% after US data said retail sales rose 0.1% by value last month, defying consensus forecasts for a 0.2% monthly decline and "adding a further layer of uncertainty into the Federal Reserve's rate-cut debate" according to TheStreet.com
Gold prices dipped to $2568 per Troy ounce before regaining $5, but the precious metal slipped further for non-Dollar investors as the US currency held weak on the FX market ahead of tomorrow's Fed decision.
Setting fresh all-time record highs of £1969 and €2334 respectively on Monday morning, both
the UK gold price in Pounds per ounce and the Euro price of gold traded 1.0% lower Tuesday afternoon in London.
Silver meantime held firmer in Euros and Sterling than gold did, trading unchanged from Friday's 9-week high finish at €27.75 and £23.40, while the silver price in Dollars edged back up towards $31 per Troy ounce – an 11-year high when reached this spring.
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