Gold Slips as GLD ETF Again Sees No Inflows Ahead of US Inflation Data
Wednesday, 1/10/2024 15:53
The PRICE of GOLD ticked lower on Wednesday, dropping towards Monday's 3-week lows after major bullion-backed ETFs again saw no net change in size while the US Dollar was unchanged alongside global stock markets ahead of tomorrow's US inflation data, seen as a key 'risk event' for betting on when the Federal Reserve will begin cutting interest rates from their current 2-decade high.
Erasing an earlier pop to $2040 per Troy ounce, the Dollar price of bullion fell back to bottom at $2025 around the 3pm London benchmarking auction, down more than $50 from Christmas Week's
new all-time gold price peak.
"2023 saw the breakdown in correlations between the price of gold and physically backed ETFs, central-bank balance sheets and US [bond] yields," says a New Year outlook from analyst Bernard Dahdah at French investment bank Natixis.
The first 2 of those factors alone would have signalled a $400 per Troy ounce drop on Natixis' maths, against gold's actual $250 rise to a new all-time year-end record at $2062.
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After
gold ETFs shrank as a group for the 3rd year running in 2023, neither the giant GLD gold ETF nor No.2 competitor the IAU trust fund have shown any net inflows or outflows of investor money so far this week.
That held the world's largest such exchange-traded gold investment products near their smallest size since early 2020, eve of the global Covid pandemic.
Looking at central bank balance-sheets – often seen tracking the gold price higher or lower as a source of financial liquidity – "The 'big 6' contracted 5% in 2023," says investment advisory RiskBridge, looking at the combined assets of the US Fed, European Central Bank, People's Bank of China, Bank of Japan, Bank of England and the Swiss National Bank.
RiskBridge now predicts that
further 'quantitative tightening' back towards pre-Covid levels of central-bank balance sheets will keep interest rates higher and hit stock-market valuations in 2024.
The so-called 'neutral' rate of interest – meaning a level which keeps inflation in check without hurting growth – may well be
"higher than before the pandemic" said European Central Bank policymaker Isabel Schnabel today, because of "the need for higher private and public investments due to the green transition, as well as digitalisation and geopolitical shifts."
With protesters calling for an immediate Israeli ceasefire in Gaza
interrupting a speech by US President Biden on Tuesday, but then drowned out by calls for 'four more years!' for the Democrat leader, the British and US Navies said they last night
repelled the largest-yet attack on Red Sea shipping by Iran-backed Houthis based in war-torn Yemen.
Longer-term interest rates were little changed Wednesday, with 10-year US Treasury yields briefly dipping below 4.00% per annum – a 15-year high when reached in late-2022 but almost 1 percentage point below last October's peak – while German, French and UK bond yields
continued to rise from end-2023's multi-month lows, adding almost half-a-point inside 2 weeks.
"Tomorrow's CPI will be closely watched," says a trading note from Swiss bullion refiners and finance group MKS Pamp of Thursday's US Consumer Price Index and inflation data.
"But with the dovish froth [marking late-December] largely unwound there is much less risk to the downside in rate sensitive asset classes [such as gold and equities] vs. a few weeks ago."
Betting that the US Fed will make its first cut to Dollar interest rates in March rallied on Wednesday,
reaching 2-in-3 positions according to the CME derivatives exchange.
Global stock markets meantime saw a rise in Japanese equities offset by further falls in China and flat price action on European bourses, holding the MSCI World Index 1.0% below late-December's 2-year high.
The US Dollar's exchange rate was also unmoved against the rest of the world's major currencies, and its trade-weighted DXY index also showed no change from this time last week.
That saw
the UK gold price in Pounds per ounce drop below £1600 for the 2nd time this week, while the Euro price of gold held €10 above Monday's 4-week low of €1840.
Silver prices also fell, failing to hold a pop above $23 per Troy ounce as fellow industrial precious metal platinum hit a new 4-week low at $923 and palladium erased a sudden $35 spike to $1010.
So-called 'crypto currency' Bitcoin also fell again, dropping towards 1-week lows after US financial regulator
the SEC refuted an earlier statement on X to say its account had been hacked and that it "has not approved the listing and trading of spot bitcoin exchange-traded products" as widely expected.
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