Gold Price Floor 'Holds' as AI Tech Slump Escalates

GOLD PRICES retested 8-month lows on Friday, rallying back above $4000 an ounce in spot-market trade as the global AI tech-stock slump escalated with the US-Iran war and crude oil prices.

"[This is] summer fatigue, not weakness," says a trading note from Swiss bullion refining and finance group MKS Pamp's strategist Nicky Shiels, adding that the market's price "floors [are] holding."

Silver prices today traded below $55 per troy ounce for the first time since end-November, dropping within 10% of the more industrially-useful precious metal's historic long-term tops at $50 − set in 1980 and again in 2011 − before rallying back above $56.

"Market needs to right-size the new bearish headwinds," says Shiels at MKS, listing the exit of retail investors, central banks "turning 2-way in gold" plus silver's latest solar-energy thrifting news as well as poor global jewellery demand.

But while world No.1 solar panel manufacturer Longi is now producing silver-free cells at its Xixian plant in Shaanxi province, north-west China, "The reality [is] that none of these are large enough to offset the dominant structural bid," says Shiels:

"Debasement-driven investment demand and strategic allocation flows."

Dominated by tech-makers SK Hynix and Samsung, South Korea's Kospi index today closed the week 9.7% lower, cutting its year-on-year gain below 115% after the Bank of Korea yesterday raised its key interest rate for the first time in more than 3 years.

With inflation last at 3.2%, the BoK's key rate is now 2.75%.

"The sell-off is partly driven by profit-taking on many AI stocks," Reuters quotes one tech-stock analyst, "coupled ⁠with the recurring doubts of an AI investment bubble.

"The fact that the SpaceX IPO has done so poorly makes many investors extra nervous."

Elon Musk's now $1.6 trillion SpaceX (Nasdaq: SPCX) lost 5.8% in value at the start of US trading today, taking its plunge since the post-IPO peak of 5 weeks ago to almost 2/5ths.

With Asia's AI-sector sell-off driving Japan's Topix index 3.2% lower for the week and China's CSI300 down 4.5%, New York's tech-heavy Nasdaq 100 headed for its third weekly drop of 4% in the past 7 weeks.

"Ample domestic supply" amid No.2 gold consumer India's seasonal summer lull in demand "has kept the local market at a discount" to global prices, says Kavita Chacko, Research Head, India for the mining industry's World Gold Council.

Wholesale bullion prices in India this week traded as much as $40 per ounce below the London Dollar equivalent after today's record-high import duty and sales tax is accounted for, twice the level of last week but markedly better than the $150 level seen when the Modi Government urged consumers not to buy gold in May.

The Rupee today steadied above this week's new record lows versus the Dollar, suggesting to FX analysts that the Reserve Bank is intervening in the market to try and support the currency.

Now reaching out to non-resident Indians through commercial banks, the RBI has reportedly attracted $10 billion of foreign currency from NRIs since start-June, and aims to raise nearer $30bn, by offering zero exchange fees, enabling the recipient banks to offer their depositors a higher rate of Rupee interest.

"I think that pressure [from the plunging Rupee] is going to push the central bank to fundamentally do what I think it should do, which is hike the policy rate," says French bank Natixis' Asia economist Trinh Nguyen.

"Headline inflation is rising. The latest producer price and wholesale price inflation in India is almost 10%."

The RBI last changed its key repo interest rate in December, cutting it to the lowest in 3.5 years at 5.25%.

Crude oil meanwhile hit a new 5-week high, rising for the 5th session this week to peak within 5 cents of $87 per barrel of Brent crude on the ICE derivatives exchange's September contract.

Losing 2.6% at London's 3pm auction today from last Friday's fix, the price of gold has now fallen in 10 of the past 13 weeks in US Dollar terms.