Gold Price Rebounds as Euro Inflation Slows Hard, US Debt Deal Poses Short-Term 'Headwind'
Tuesday, 5/30/2023 14:28
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GOLD PRICE rallied from pre-SVB levels in London trade Tuesday, regaining $25 per ounce from an 11-week low versus the Dollar as longer-term borrowing costs fell hard in the bond market following weak inflation and money-supply data from the 19-nation Eurozone, the world's 3rd largest single-currency economy.
Private-sector borrowing across the 350-million citizen union
grew just 2.5% in the year-ending April, the European Central Bank said, matching the slowest pace since 2016 and continuing to plunge from last autumn's 13-year high of 5.8%.
The cost of living in No.4 Euro economy Spain has meantime fallen 0.2% in May from April, preliminary figures said, cutting the annual rate of inflation by almost 1 whole percentage point at 2.9% on the European Union's harmonized CPI measure.
With the Dollar gold price briefly topping $1960 per ounce after bottoming near $1930 overnight – the lowest since before the collapse of US regional bank Silicon Valley – that saw the Euro gold price rally 0.9% to €1825.
Euro government bond prices also rebounded on the news, driving Spanish, German and French 10-year yields 0.07 points lower while Italy's comparable borrowing costs dropped almost 0.1 points to 4.18% per annum after nearing 3-month highs at 4.30% last week.
US Treasury bond yields also retreated, dropping 7 basis points to 3.73% after touching 11-week highs last Thursday at 3.83%.
European stock markets were less excited by the data's deflationary outlook, but US equity futures rose as traders and investors digested the long holiday weekend's debt-ceiling deal between the Biden White House and its Republican opponents.
While the Biden-McCarthy deal is "Not a win for hard money types!" says strategist Nicky Shiels at Swiss refining and finance group MKS Pamp, "it's worrying for gold bulls in the short term" because the new borrowing mandate will see the US Treasury up to $1 trillion of new bills to replenish its cash holdings, "essentially draining liquidity from the markets" by taking that cash off banks and investors.
"In the longer-term [however]," says Shiels, "the US has not solved their debt problem and levels are skyrocketing, creating an underlying structural tailwind for gold buying, especially via central-bank gold purchases as they ramp up dedollarization policies."
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UK gold price in Pounds per ounce meantime bounced £10 from a near 3-month low of £1566, while silver priced in the US Dollar edged back above $23 per ounce after peaking higher than $26 barely 3 weeks ago.
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