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Gold +2.3% for Week in Euros as Paris Stock Market Sinks, Commodities Volatile

The PRICE of GOLD rebounded again in China and London trading on Friday, showing a small increase from last weekend's 1-month low as commodity prices stayed volatile on mixed forecasts for future demand and Western stock markets fell hard amid the deepening political turmoil in France.
After calling snap elections in France following his party's big losses in last weekend's European Parliament ballot, President Emmanuel Macron today joined other G7 rich-world leaders in Fasano, southern Italy to agree $50 billion of loans for Ukraine, funded by the interest paid on Russian investments frozen by sanctions over its continued invasion of its western neighbor – widely seen as a key factor in the wider surge of central-bank gold buying and holdings.
"This theft will not go unpunished," said Kremlin boss President Vladimir Putin of today's move.
Paris' stock market today hit a 5-month low on the CAC40 index, while Western equities more broadly hit 1-week lows, down 1.1% from Wednesday's new all-time high on the MSCI World Index.
France's government borrowing costs meanwhile edged back less than other Eurozone debt rates, widening the gap between German Bund and French OATS bond yields to the widest spread since 2017.
"The French political class is tearing itself apart with feuding and backbiting ahead of this month's [sudden] vote," says the Politico website, with both centrists and France's far right groupings split over policy, personalities and accusations of "betrayal".
Gold priced in the Euro fixed at €2184 per Troy ounce, adding 2.3% from last Friday's 2-month low, while the price of gold for investors in the UK – where the ruling Conservative Party risks "wipeout" at next month's General Election – reversed last week's drop to trade back at £1840.
Priced in US Dollars, gold showed a 0.8% gain from last Friday's 3pm benchmarking auction in London, rallying from its lowest weekend level in five to reach $2330.
Silver in contrast struggled around $29.20, down more than $1 per ounce from last Friday's London benchmarking with its 2nd weekly drop of over 3% in a row.
Copper meantime fell to new 1-month lows but crude oil rallied to a 2-week high in Europe above $83 per barrel of Brent.
"Why are the sentiment swings so big in commodities right now?" asks former Goldman Sachs analyst and now chief strategy officer at the $425 billion Carlyle investment firm Jeff Currie.
It's because – after this week's Federal Reserve statement and interest-rate forecasts – "the market doesn't know how to handicap the macro backdrop," Currie says.
"Is it one rate cut this year? Zero? Two?"
Chart of copper, silver, gold and crude oil prices so far in 2024. Source: Google Finance
Betting in the futures market today said the Fed Funds rate will end 2024 at 4.88% per annum, needing 2 rate cuts from today's 2-decade high of 5.33%.
The Fed itself, however, has now trimmed its rate-cut forecast to just one move before year's end.
Looking ahead, and "whether it's copper, oil or gold, the fundamental picture looks very solid," reckons Currie at Carlyle.
"Peak oil demand is not on the horizon," says Opec General Secretary Haitham Al Ghais, refuting this week's forecast from the International Energy Agency that the cartel of producer nations faces "a major, major of the highest in history" as US output grows but global demand declines.
"The IEA's narratives for oil are dangerous, especially for consumers, and could lead to unprecedented volatility."
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But crude oil imports to China – the No.1 driver of energy demand-growth this century – fell "massively" in May from the same month last year, Reuters reports, and while imports of copper have risen 8.8% year-to-date, the base metal is "similar to iron ore [because] it's inventory builds that are accounting" for the growth.
Copper stockpiles in China are now almost 3 times the typical mid-year level since 2007.
Chinese banks lent almost 27% less in May than analysts expected, with new loans only rallying weakly from April's 9-month low and "suggesting that deleveraging in the household sector continues," according to one economist.
As for gold, in contrast, "The trend in the market has been that if the consumer wants to buy gold, they will. The price doesn't matter," says Albert Cheng, CEO of the Singapore Bullion Market Association, speaking earlier this week to Reuters at the Asia Pacific Precious Metals Conference.
China's booming private investment gold demand so far in 2024 "is not just a reaction to [the rising] price," says brokerage StoneX's bullion-market specialist Rhona O'Connell.
"It's a reaction to what has driven the price in the first place, which is uncertainty and the concept of risk."
The gap between Shanghai and London gold prices today widened to a 1-week high above $31.75 per Troy ounce, but on its weekly average, that premium – effectively the incentive for new bullion imports into gold's No.1 consumer market – slipped below $28.50, the lowest since end-April.
High gold prices present a challenge to Chinese jewelry demand, giant manufacturer and retailer Chow Tai Fook Jewellery (HKG:1929) said today, reporting a rise of 20.7% in its net profits across the 12 months to March.
Shanghai gold prices in the Yuan today edged up to ¥546 per gram, just ¥4 above Monday's 2-month low and 4.9% below mid-May's fresh peak.
"Retail buying is not picking up" in India meanwhile, says one Mumbai dealer.
Wholesale buyers are also " hoping prices will fall further and are delaying purchases" as the spring's Hindu wedding season nears its end, with no auspicious dates now on the calendar until the approach of the key Diwali festival in October.
The Bank of Japan meantime held Yen borrowing costs unchanged again on Friday after finally ending Tokyo's negative interest rate policy in March, but said it may start reducing its massive QE bond buying scheme as soon as next month.

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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