Record Gold Price Unchanged by Trump Shooting as US Yield Curve Un-Inverts
Monday, 7/15/2024 15:01
GOLD PRICES rebounded from an early drop on Monday, rising back above the London bullion market's new record-high weekly closing price, as the US Dollar rose and long-dated bond prices fell, flipping one US yield curve out of an inversion, as analysts forecast a decisive victory in November's White House election for former president Donald Trump following the weekend's failed assassination attempt on the Republican candidate at a political rally,
writes Atsuko Whitehouse at BullionVault.
Spot gold prices recovered a 0.4% dip from last week's New York close to rise an additional 0.4%, reaching $2419 per ounce after
gold set a new Friday benchmark high of $2406 at London's 3pm auction amid speculation that the US Federal Reserve will soon start cutting interest rates following softer US inflation data.
Current US President Joe Biden has called on Americans to "lower the temperature in our politics" in the wake of Saturday's sniper assassination attempt on Trump, which killed one supporter of his Republican rival and injured 2 more.
Trump meanwhile also issued his own call for national unity while traveling to Milwaukee, Wisconsin, for the Republican National Convention.
"This is a horrific event," says one investment strategist. But "from purely a market perspective, we don't view this event as having a dramatic near-term impact."
So-called 'digital currency' Bitcoin on Monday rose another 3.1% to reach a 2-week high of $62,830 with pundits noting that Trump is seen as pro-crypto, criticizing Democrat attempts to regulate the sector while accepting cryptocurrency payments from political donors, a first for a major US party.
"I think it's clear that [if returned] as President,
Trump would push for lower rates right away," says one asset management investment officer to Reuters, recalling Trump's repeated demands for the Fed to cut interest rates during his first term.
"[So] perhaps we see the market begin projecting longer-term rates higher" – reflecting expectations for higher inflation – "and anticipating lower short-term rates."
The yield on the 30-year Treasury bond today rose around 7 basis points to 4.47% per annum, while the yield on the 2-year Treasury steadied just below 4.47%.
This steepening of the yield curve saw the rate offered by 30-year bonds rising above the two-year equivalents for the first time since January, snapping an 'inverted yield curve' where longer-dated rates trade below shorter-term rates, often
seen as a signal of economic recession ahead.
"For us, the news [of the shooting] does reinforce that Trump's the frontrunner," says Mark McCormick, global head of foreign-exchange and emerging-market strategy at Canada's Toronto Dominion Bank.
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With the yields offered by US government debt set to remain firm on a Trump victory, "We
remain US Dollar bulls for the second half and early 2025."
The Dollar initially rose on Monday, but the Dollar Index – a measure of the US currency's value versus its major peers – then slipped back to Friday's near 6-week low.
Trump's second term is expected to come with tax cuts, higher import tariffs and looser fiscal policy as
'Project 2025' – created by the Heritage Foundation think-tank – is expected to be approved at the party's national convention next week.
During Trump's first tenure in the Oval Office between January 2017 and January 2021, the US Dollar index lost 10.6% of its foreign-exchange value, while 10-year bond yields – the benchmark for many commercial borrowing rates – more than halved as the Federal Reserve slashed its overnight policy rate to support the world's largest economy during the Covid crisis.
The Greenback has risen 2.7% so far this year, while 10-year yields have risen by almost 1/10th, based on market expectations that the Federal Reserve would keep its policy rate
higher for longer.
European stock markets fell, with the pan-European Stoxx 600 down 0.4% by London lunchtime, as all major bourses and the majority of sectors traded in the red.
Asian markets had also fallen overnight after new gross domestic product data from China – targeted for yet more import tariffs by Trump if he wins in November – said the world's second-largest economy only grew 4.7% in the second quarter, missing expectations of a 5.1% expansion and lower than the 5.3% rise seen in the first quarter.
Coming as top officials from China's ruling Communist Party gather in Beijing for the third plenum – which takes place every five years – today's disappointing economic data also said new home prices fell last month at the fastest pace in nine years, sliding 4.5% from a year earlier according to Reuters calculations based on National Bureau of Statistics (NBS) figures, while retail sales rose at the slowest pace since December 2022.
Gold prices on the Shanghai Gold Exchange today edged lower to ¥564 per gram, and while that continued to show a premium to London, it offered importers an incentive of only $11 per ounce after the weekly average fell to $17, the weakest in a year.
The average Shanghai premium this year stands at $35, reflecting a surge in Chinese demand that pushed the incentive for new bullion imports as high as $49 in January.
Gold priced in Euros meanwhile edged higher by 0.2% to €2216 per ounce on Monday, reaching a three-week high, while
the UK gold price in Pounds per ounce rose by 0.4% to £1863.
Prices for silver, which finds nearly 60% of its annual demand from industrial uses, fell 0.4% to $30.69 per ounce.
Prices of platinum fell further by 1.3% to $991.45 per ounce, while sister-metal palladium – which finds even more of its current end-use demand from autocatalysts to reduce harmful emissions from fossil-fuel engine systems – edged lower by 0.1% to $955 per ounce.
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