Gold Price Flat as 'Bond Vigilantes' Prepare for Trump's Return
Tuesday, 7/02/2024 15:54
The PRICE of GOLD held unchanged in a tight $10 range on Tuesday as stock markets slipped across Europe ahead of this week's UK and French elections, while 'dovish' comments about inflation from US Federal Reserve chair Jerome Powell contrasted with growing bond-market unease over the spending and debt outcomes of a second term as President for Donald Trump.
Crude oil rose to a 2-month high, as did the Baltic Dry Index of global shipping costs, while copper rallied further from last week's 2-month low alongside the price of wheat.
Gold fixed around $2325 per Troy ounce at London's 3pm benchmarking auction.
Silver bullion prices spiked to 1-week highs above $29.65.
"[While] the labor market is still strong," Powell said at the European Central Bank's policy forum in Sintra, Portugal, "the disinflation trend shows signs of resuming.
"[But] we need to be more confident before reducing policy rates."
Easing back 0.03 points to 4.45% per annum today, benchmark US yields had jumped by 0.12 points Monday as bond prices sank, putting the 10-year Treasury yield at 4.48% per annum, a 5-week high.
Yesterday's slump in Treasury bond prices sent the iShares TLT ETF of US government debt 1.7% lower for the day, dropping back towards last October's 16-year low.
"Wall Street strategists are
urging clients to position for sticky inflation and higher long-term bond yields" ahead of Trump's likely return to the White House, says
Fortune magazine following last week's disastrous debate for 81-year old US President Joe Biden.
"The bond vigilantes are coming out early," says one portfolio manager.
"Both candidates are looking to renew all or parts of the Tax Cuts and Jobs Act," adds an investment strategist.
With the US' debt-to-GDP ratio now above 120%, "I'm
not sure where the political will comes from to narrow the deficit."
The US national debt now stands above $34.8 trillion,
equal to more than $103,000 per person in the world's largest economy.
Net of interest received, the US federal government will be spending 4.1% of the nation's annual economic output on servicing its debts by 2034 on
the latest forecast from the Congressional Budget Office, the highest percentage in at least 6 decades.
"We see value in long gold positions as
an inflation hedge from geopolitical shock including tariffs, Fed subordination risk, and debt fears," said a note from analysts at investment bank Goldman Sachs last month.
"A second Trump administration...may drive global investors towards gold," says a note from analysts SFA Oxford for German bullion refiners Heraeus, because the Republican candidate "may introduce several economic policies that
could lead to significant market shocks, geopolitical risks and rising inflation.
"The US-China trade war between 2018 and 2020 [for instance] coincided with a rising gold price."
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Trump repeatedly called for the Fed to cut interest rates during his first term in the White House,
urging the "boneheads" led by Jerome Powell – picked by Trump himself to chair the US central bank – to cut the cost of borrowing below zero.
With Fed rates now at 2-decade highs of 5.25%, the latest Harvard CAPS/Harris poll puts
Trump on 47% against 41% for Biden.
USA Today/Suffolk University, also polling after Thursday's debate, has the Republican on
41% vs. 38% for today's Democrat President.
Paris's CAC40 index of French-listed stocks on Tuesday meantime gave back the last of Monday morning's
"relief rally" from 5-month lows following the weekend's first round voting in the snap election called by President Macron following his party's defeat by hard-right party National Rally in European elections.
The gold price in Euros held around €2167 per ounce, down €10 from last Friday's record-high monthly close, while the price of gold for UK investors lost £10 from June's record-high monthly finish of £1845.
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