Gold News

Gold Price Jumps Only in Dollars as 'Low-Rate Yellen' Gets Trump's Backing

GOLD PRICE gains continued for Dollar investors on Thursday but held flat for other traders as the US currency touched its lowest Euro value since January 2015 following yesterday's "no change" decision from the Federal Reserve.
 
"The actual path of the federal funds rate will depend on the economic outlook as informed by incoming data," said the Fed's July statement, seemingly delaying a move to start reducing its $4.6 trillion holdings of QE-bought Treasury and mortgage-backed bonds.
 
Asian stock markets rose – as did most commodities and major government bond prices – but European equities then slipped as the Dollar bounced from its new 30-month lows versus the 19-nation single currency.
 
Gold priced in Dollars today set its highest London benchmarking since 14 June at $1262 per ounce.
 
But priced in Euros, gold fixed at only a 3-session high. The UK gold price in Pounds per ounce reached only a 2-session high.
 
Thursday morning's Dollar price stood 2.0% above the 2017 average to date.
 
For Euro and Sterling investors it came 5.1% and 1.9% below respectively.
 
"The Dollar's biggest problem is it can't expect help from the Fed for a long time," Reuters quotes FX head Alan Ruskin at German investment and commercial bank Deutsche.
 
"[So] we are still in a risk-favorable loop, whereby subdued goods and services inflation supports a well-behaved bond market and asset inflation.
 
"It's just another day in paradise."
 
"Nothing in [Wednesday's] statement changes Pimco's view that a third rate hike this year is far from a done deal," the Financial Times meantime quotes global strategist Richard Clarida at the California-based bond fund giant.
 
"If there is no rebound in core inflation between now and December, the next rate hike may be a decision for the next Fed chair, if Janet Yellen is not reappointed."
 
Yellen's current term as head of the US central bank ends in February 2018.
 
"I like her; I like her demeanor. I think she's done a good job," US President Donald Trump told the Wall Street Journal yesterday.
 
"I have a lot of respect for her," the real estate mogul and reality TV star added.
 
"She is a low-interest-rate person."
 
Chart of gold priced in Dollars (blue) and also adjusted by trade-weighted Dollar index (major currencies, red, rebased to 1 Sept 2011). Source: St.Louis Fed
 
Despite the Dollar's 2017 drop on the forex market, the gold price for US savers and investors remains further below its all-time peak of 6 years ago than it does against other currencies. 
 
Priced in the Dollar, gold today traded 30% below its level of September 2011.
 
Adjusted for the Dollar's trade-weighted index against major currencies, the metal's spot bullion price has lost just 12% for non-US consumers, miners and investors.
 
Overnight action in Asia and then London saw spot gold prices rise sharply versus the Japanese Yen and Swiss Franc, hitting new July highs as those two 'safe haven' currencies retreated with the Dollar on the FX market.
 
With US GDP data for April to June due Friday, "we might [find out] whether there’s a reason Janet Yellen is acting concerned," says financial writer John Crudele in the New York Post.
 
"Rate hikes are already coming at a glacial speed. Why is Yellen slowing them down even more?"

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.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn

 

 

Market Fundamentals