Gold News

Gold Down, Stocks Up for the Week as Powell Vows Rate Hikes Despite 'Possible' Recession

GOLD BULLION slipped in price today, heading for the lowest Friday finish in US currency terms for 6 weeks in London as major government bond prices slipped back after this week's big rebound, edging longer-term borrowing costs higher, after US Fed chairman Jerome Powell said he will push ahead with steep interest-rate hikes to try curbing inflation despite recession becoming "certainly a possibility".
Large gold bullion bars traded in London – heart of the global wholesale market – slipped to $1825 per ounce as the Dollar rallied back towards last week's 20-year highs against the rest of the world's major currencies.
With benchmark US bond yields still 1/3rd of a percent below last week's 11-year high, global stock markets extended their rally from 18-month lows, rising for the first week in five.
"This week's stock gains stem from a shift to defensives rather than a full risk-on rally," says Bloomberg, pointing to an index of "megacap tech and healthcare names [reaching] an 18-month high relative to the MSCI World Index.
"Were it not for the fear of a global recession then gold would likely be lower than it already is," says Reuters, quoting a spread-betting bookmaker's analyst."
Chart of gold bullion priced in US Dollars. Source: BullionVault
Thanks to Russia suspending supplies of gas to Germany meantime, "the whole market is in danger of collapsing at some point," said Germany's economic affairs minister yesterday, warning of a "Lehman Brothers" contagion amid what he called "a crisis" for Europe's energy security.
Germany's government bond prices edged back Friday after surging yesterday, driving 10-year borrowing costs down by more than half-a-per-cent from this week's new 2015 peaks near 2.00% per annum.
Natural gas prices in Western Europe slipped almost 1% on Friday, but held nearly 7-times higher from this point last June as Russia's invasion of Ukraine – now invited to become a member of the European Union, despite apparent misgivings from French President Macron – sees it hit with economic sanctions.
Crude oil meantime rallied but headed for its 2nd weekly price drop, trading at $110 per barrel of European benchmark Brent.
Gold bullion prices for Euro and UK investors today slipped to 2-week lows, trading below €1735 and £1490 per ounce respectively.
Silver meantime hit 6-week lows, trading back beneath $21 per ounce.
"You know what's worse than high inflation and low unemployment?" asked Democrat senator Elizabeth Warren of Jerome Powell this week as the Federal Reserve chief gave semi-annual testimony to lawmakers on monetary policy.
"It's high inflation and a recession with millions of people out of work. I hope you will reconsider that before you drive this economy off a cliff."
The mystery over Russian gold bullion imports to Switzerland – effectively banned by Western sanctions but spotted in the latest trade data by Bloomberg – meantime deepened further on Friday, as the Swiss Association of Manufacturers and Traders of Precious Metals (ASFCMP) denied that any refineries in its membership were responsible for April's 3-tonne inflow, and Swiss Customs officials said the metal actually came from the UK but with Russia highlighted as the original source of export.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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