Gold News

Gold Price Rallies, Silver Doesn't, as Fed Debates Ending QT, Middle East Hits Continue

The GOLD PRICE rallied in London trade Thursday, regaining 0.8% from yesterday's 2-week low as global bond and equity markets steadied from their sell-off after minutes from the Federal Reserve's latest interest-rate meeting confirmed the US central bank's 'dovish' switch for 2024.
Rising back to $2046 per Troy ounce, the Dollar gold price outperformed the other precious metals, with platinum at a 2-week low of $966, silver still below $23, and palladium also at a 3-week low of $1056.
The Middle East's widening political violence meantime saw US military assassinate the leader of a radical Shi'ite militia in Baghdad, Iraq, while Israel – still prosecuting its war against the Hamas terrorist and political group in Gaza – struck Iran-backed Hezbollah targets in neighboring Lebanon.
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"Most of us forecasted rate normalization to begin sometime this year," said Tom Barkin, President of the Federal Reserve Bank of Richmond and a voting member of the US central bank's policy committee in 2024, in a speech last night.
But while "a soft landing is increasingly conceivable [it's] in no way inevitable," he went on, warning of recession risks even while saying that "the US economy continues to defy expectations.
Besides forecasting 3 interest-rate cuts for 2024, however, the FOMC in December also debated when to stop reducing the Fed's holdings of government bonds – a process widely known as 'quantitative tightening' (QT) and something which hasn't yet coincided with the US central bank cutting its key interest rate since the global financial crisis triggered the start of massive quantitative easing (QE) 15 years ago this week.
US Fed total assets vs. target Fed Funds interest rate. Source: St.Louis Fed
"As usual the bond markets have been too enthusiastic about the outlook," says a note from bullion-market analyst Rhona O'Connell at brokerage StoneX, reviewing this week's retreat in debt prices and resulting rebound in longer-term borrowing costs.
"Details in the [Fed] Minutes suggest the target rate being held [at today's 2-decade highs] for longer than anticipated [and are] not ruling out further firming if the data demand it."
"The stock and bond rallies since late October might have discounted an easier monetary policy this year than Fed officials are likely to deliver," agrees former Fed and US Treasury official Ed Yardeni. 
"As long as the unemployment rate remains below 4.0%, they are likely to hold off on easing, in our opinion. That’s because their worst nightmare would be a rebound in inflation."
After new US data said Wednesday that job openings in the world's largest economy (Jolts) sank in November to the lowest since March 2021, down by more than a quarter from spring 2022's peak, private-sector payrolls providers ADP today said that US employment last month grew at the fastest pace since August, beating analysts' forecasts by over 40%.
Separate figures then put jobless benefit claims lower than analysts expected for the final week of 2023, but the US manufacturing sector remains in contraction on both the S&P Global and ISM's PMI surveys, marking the 14th month of lower activity on December's data – the longest such stretch since the Tech Stock Bubble burst in 2000-2001.
With the Dollar slipping back Thursday from the past week's strong rally, the UK gold price in Pounds per ounce held little changed at yesterday's 2-week lows around £1610, while the Euro gold price edged up towards last Friday's finish to 2023 at €1866.
The US government's official December jobs and wages estimates are due out Friday.

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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