Gold News

Gold Price Touches Chinese Record as Comex Bulls Bet on Fed Rate Cuts

The PRICE of GOLD reversed an early gain on Tuesday in London, starting 2024 back where it ended last year with a record-high weekly, monthly, quarterly and annual finish in terms of the US Dollar.
Closing 2023 on Friday at $2062.40 per Troy ounce – 13.7% higher from last New Year – the price of gold for London settlement today rose almost $17 during Asian trade as gold prices in China, the precious metal's No.1 mining, importing, consumer and central-bank buying nation, rose to re-touch last year's new all-time highs at ¥482 per gram in terms of the Chinese Yuan.
But the global gold price then fell back as Shanghai closed for the day, the Dollar rallied on the FX market, and Western equities fell with government bond prices, driving longer-term borrowing costs higher, despite a raft of poor manufacturing data on December's PMI surveys from China, the Eurozone and the UK.
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"The first week of 2024 brings some elevated event risk," says a trading note from strategist Nicky Shiels at Swiss bullion refining and finance group MKS Pamp, pointing to the Eurozone inflation and US jobs and wages data due Friday, plus Wednesday release of minutes from December's US Fed meeting, when the US central bank held its key interest rate unchanged at 2-decade highs but forecast deeper rate cuts for 2024.
Those notes will "shed light on Powell's game-changing dovish pivot" says Shiels.
Chart of Managed Money's net speculative position in Comex futures and options contracts. Source: BullionVault via CFTC
Following December's about-turn in US Fed forecasts, speculative betting on the direction of gold prices rose again last week, reaching the most bullish since end-November's 6-month peak in the net long position held by hedge funds and other 'Managed Money' players tracked US regulator the CFTC's weekly reports.
Equal to a notional total of 421.5 tonnes in gold bullion, that was larger by almost one-half from 2023's average net spec' position in Comex gold futures and options, itself 60% larger than the 2022 average.
Physical bullion, in contrast, saw private investment demand fall to the weakest since the gold price crash of 2013, with small bar and coin purchases dropping as the size of gold-backed ETF trust funds shrank for the 3rd year in a row.
A small net inflow to US-listed ETF products in December was more than offset by further profit-taking by European shareholders.
Central banks meantime continued to buy the most gold in 6 decades, led by China and with reported reserves widely thought to be smaller than the actual figure.
Jewelry demand also held firm, with gold imports into No.2 consumer India through the Ahmedabad Air Cargo Complex (AACC) rising by more than 1/3rd from 2022, while sales in the United Arab Emirates have continued to run strong despite the steep rise in gold prices to new all-time highs.
Back in Tuesday's action, betting that the Fed will cut interest rates at its first meeting of 2024 on the last day of January dropped back, easing from 17.6% of current positions in interest-rate futures to 12.9% according to derivatives exchange the CME's FedWatch tool.
Betting that the Fed's first cut will then come at its March meeting also retreated, down to 2-in-3 after ending last week at nearly 4-in-5.
"S&P500 bulls drive longest weekly win since 2004," says a headline on Bloomberg.
"AI mania driving Nasdaq 100's best run since 1999," says another, recalling the Tech Stock Bubble which then burst, plunging by 4/5ths, over the following 3 years.
The S&P opened Tuesday 0.5% lower from the last day of 2023, while the tech-heavy Nasdaq 100 lost 1.6%.
The stronger Dollar also saw the UK gold price in Pounds per ounce rise sharply, hitting 5-week highs above £1638 while gold priced in the Euro hit its highest in 4 weeks at €1890.
Silver meantime slipped back through $24, down 30 cents per Troy ounce from the start of 2023.

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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