Gold News

Shanghai Arb Gives Dollar Gold Price 'More Room to Rise' as Yen Gold Hits Record

The GOLD PRICE in London's bullion market rose to new 2-week highs against the US Dollar on Tuesday, trading above $1935 per Troy ounce as global stock markets slipped and government bond yields rose ahead of tomorrow's September interest-rate decision from the Federal Reserve.
Crude oil rose again, hitting fresh 2023 highs above $95 per barrel of European benchmark Brent.
The bullion price in Yen meanwhile rose to a yet another new all-time JPY gold high, very nearly touching ¥9,200 per gram as the Japanese currency sank yet again ahead of Wednesday's Fed announcement – expected to leave Dollar interest rates unchanged at the current 16-year high of 5.5% per annum, but with new GDP and inflation forecasts expected to accompany a prediction of one more rate-rise by Christmas.
"The Yuan and Yen need the Fed's help," says an opinion column in the Wall Street Journal, pointing to tomorrow's US interest-rate decision as the 2 giant Asian currencies extend their summer 2023 slide, dropping to the lowest since 2007 and re-testing last fall's 3-decade lows respectively.  
With most major economies continuing to hike borrowing costs, "Being a loose monetary policy outlier is an uncomfortable place [for Beijing and Tokyo] to be these days," the WSJ says.
Gold in China also rose overnight, setting its highest-ever Shanghai afternoon benchmark price outside of last Thursday's Chinese gold price record, with a rise of 22.4% from this time last year.
"Banks who have now been issued with import licenses are buying gold in London and selling in Shanghai," says Bruce Ikemizu of the Japan Bullion Market Association, analyzing the "import arbitrage" which the People's Bank of China has finally enabled after weeks of restricting new import quotas in the No.1 gold consumer market. 
"The recent spike in gold premiums versus London prices has been accompanied by Shanghai trading volumes also skyrocketing...A large amount of gold was actually being bought."
Chart of Shanghai Gold Exchange price and trading volume (bottom, purple). Source: JBMA via Bloomberg
Looking ahead, "The fact that the premium is still over $60 per ounce means London buying and Shanghai selling will continue," Ikemizu says. "So there is still room for Dollar-denominated gold to be bought on that basis."
Gold prices for Eurozone investors today touched the highest since mid-June at €1811 per ounce after new data said consumer-price inflation across the 20-nation currency area slowed for the 4th month running in August, dropping to 5.2% per year – the weakest since January 2022.
Back then, deposit interest rates at the European Central Bank were held at minus 0.5% per annum.
Last week the ECB raised its deposit rate to a Eurozone-union record of 4.0%.
"Governments should maintain restrictive monetary policy to combat inflation," says the Paris-based OECD think tank today, echoing last week's comments from the Washington-based IMF while raising its global economic growth forecast for 2023 from 2.7% to 3.0% per year, led by India and with the forecast for the USA revised up from 1.6% to 2.2%.
Euro-area GDP growth will slow however on the OECD's new analysis, dropping to 0.6% from the 0.9% forecast for the 340-million citizen single currency zone in June, led by a 0.2% annual decline in Germany.
"German economic output is likely to shrink slightly in the third quarter of 2023," says the Bundesbank – national central bank of the Eurozone's largest economy – in its latest monthly report.
"Despite slowing inflation, strong wage growth and a good labor market, German households are still holding back on spending [while] continuing weakness in the industrial sector also puts pressure on economic performance."
Germany's manufacturing activity shrank last month at the worst pace since the Covid Crisis according to the HCOB PMI survey. Its preliminary reading for September will be published Friday. 
Today's new OECD outlook also cuts half-a-point off its 2023 and 2024 growth forecasts for China, with GDP in the world's No.2 economy set to expand by 5.1%, the slowest pace since 1990.
Across the entire G20 group of leading economies, real GDP growth will slow next year to 2.7% from 3.1%, the OECD predicts, while inflation slows over 1 percentage point from 2023's pace of 6.0% per annum.
With the OECD leaving its 2023 GDP growth forecast for the United Kingdom unchanged at just 0.3% while cutting its 2024 forecast below Germany's at 0.8%, the UK gold price in Pounds per ounce today hit 3-month highs above £1560 ahead of tomorrow's Bank of England decision, widely expected to bring another interest-rate rise, up to a 15-year high of 5.5% per annum.

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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