Gold News

Gold Price Trims Post-Fed Surge, New UK Record Despite European Rate Hikes

GOLD PRICES trimmed an overnight surge as New York opened for business on Thursday after breaking higher on a 'dovish' press conference from US Federal Reserve chairman Jerome Powell following the widely-expected 0.25-point rise to Dollar interest rates.
Both the Bank of England and the European Central Bank today raised their key interest rates by 0.5 percentage points, reaching 14- and 13-year highs respectively at 4.0% and 3.5% as both pundits and the markets had forecast.
Back in 2008 to 2009 however, inflation in both the UK and the 19-nation Eurozone was running below 4.0% per year against 10.5% and 8.5% respectively on the latest figures.
The UK gold price in Pounds per ounce today peaked at a new all-time high of £1592 – more than £10 above its Covid, Russia-Ukraine and then mini-budget peaks.
Euro gold prices briefly topped €1780 per ounce, a level seen on only 23 trading days before today.
"In a nutshell," says strategist Nicky Shiels at bullion refining and finance group MKS Pamp, "Powell's unconvincing presser [was] unable to push back on markets expectations of [second-half 2023 rate] cuts [and was] still supportive of the gold bull trend.
For now, Shiels added overnight, "It is still just 'All About Gold'...but if financial conditions continue to ease [with stock markets rising and bond yields falling further] as they already have overnight, the macro backdrop is improving for white metals to play catchup."
Silver prices today extended their bounce to challenge January's 9-month highs at $24.50 per ounce, but platinum's 4.1% jump to $1036 still left it lagging the monetary precious metals while palladium traded at what were 18-month lows in December around $1685.
Chart of gold priced in US Dollars, last 5 years. Source: BullionVault
After new US jobs data yesterday came in much weaker than analysts expected for January, the ISM's manufacturing survey said new orders sank last month at their worst pace since May 2020, depths of the first-wave Covid Crash.
Job openings however showed a sharp rebound for December, defying analyst consensus, as did vehicle sales for that month.
Washington's official estimate of January's non-farm payrolls is due out Friday.
"Although the pace of job gains has slowed over the course of the past year," said Powell in yesterday's press conference after the Fed raised its key interest rate to 4.75%, "the labor market continues to be out of balance...[and] inflation remains well above our longer-run goal of 2 percent.
"We continue to anticipate that ongoing [interest-rate] increases will be appropriate...I don't see us cutting rates this year."
But with CPI inflation slowing in December to 6.4% per year, almost 9-in-10 bets on December 2023 now see the Fed ending the year unchanged from today's new rate of 4.75% or below, with 1-in-3 betting on a cut of 0.25 points before Christmas.
Ten-year Treasury bond yields today fell to 3.34% per annum, down 0.2 percentage points for the week so far at the lowest in 5 months.
Global stock markets meantime extended yesterday's late jump on Wall Street, where the tech-heavy Nasdaq has now rallied more than 10% so far this year.
Little-noticed yesterday, the US Fed also reaffirmed its 'Statement on Longer-Run Goals and Monetary Policy Strategy', repeating exactly the version initially adopted on 27 August 2020.
That same day, and barely 2 weeks after gold set its current Dollar record of $2075 per ounce, Chairman Powell explained to the annual Jackson Hole central-banking symposium how that meant shifting to "average inflation targeting" across longer time frames, a switch widely seen as encouraging the Fed to leave its key policy rate at zero in 2021 despite the cost of living soaring the fastest pace in 4 decades at 7.0%, topped by inflation peaking at 9.0% in summer last year.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver, platinum and palladium 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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