Gold Prices Jump into March Despite ETF Outflows, Coin and Retail Bar Selling
Friday, 3/01/2024 14:57
GOLD PRICES rose again Friday, extending this week's jump to reach fresh multi-week highs in US Dollars and nearing all-time highs in Euros and UK Pounds by shrugging off further coin and small-bar selling by retail investors, plus fresh outflows from gold-backed ETFs.
Global stock markets also rose further on a rebound in hopes that the US Federal Reserve and other Western central banks will start to cut interest rates sooner than later.
Following yesterday's news of
slower US inflation on the core PCE measure, today's global manufacturing activity PMI surveys said China's factory sector stabilized in February while the Eurozone's slump eased more than analysts forecast.
Over 85% of betting on July's US Fed decision now sees Jerome Powell's team making its first cut that month – pushed out from the market's consensus on March as recently as 6 weeks ago –with end-2024 forecasts edging back further on Friday to 4.54% from this week's jump above 4.60%, the level already predicted by the Fed itself.
"Next week's major event will undoubtedly be the European Central Bank's meeting on [Thursday] March 7," says French bank Natixis.
Despite inflation across the 20-nation currency union slowing less than expected in February, down from 3.3% per year to 3.1% on today's 'core' estimate, "the ECB will probably revise its own inflation projections downwards," says Natixis. "Moreover, unlike the Fed, a genuine consensus seems to be forming within the Governing Council around a first cut in June."
Breaching €1900 per Troy ounce for the first time in a month Friday morning, the wholesale gold bullion price in London also set 4-week highs in US Dollar terms at $2056 and touched 9-week highs for UK investors above £1628.
Amid the continuing wars in Ukraine and Gaza, "Gold still shines on safe haven demand,"
says an article from Dutch bank ING. Yet "ETF holdings continue to fall," it goes on.
"Investment demand for gold is yet to rebound [because] with the bets on early rate cuts from major central banks being pushed back...investors [are] seeking returns in other assets."
Despite Thursday's rise in the gold price on the retreat in US inflation and Fed-rate forecasts, the giant GLD
gold-backed ETF shrank yet again, suffering another 0.3% liquidation as investors sold more shares than they bought as a group, heading for its 9th consecutive weekly outflow at the smallest size since July 2019 while the smaller IAU gold ETF also headed for another week of contraction.
Silver's largest ETF – the SLV product – shrank Thursday as well, but it remained on track for its first weekly expansion in three, growing 0.5% from last Friday's finish.
Silver prices today failed again to follow gold higher, erasing only half of last week's drop in Dollar terms to trade at $22.65 per Troy ounce.
In retail gold products, "Coin premiums have been driven lower [alongside] disappointing sales from the US Mint," says one US shop online, noting both weak demand for newly-minted coins and strong selling by existing coin owners.
Gold Eagle coin sales from the US Mint to retail distributors have fallen by more than 1/3rd so far this year versus the first 2 months of 2023, down 36.0% by weight as the price of gold bullion has held 8.1% higher.
Silver bullion Eagle sales, in contrast, have risen 36.1% by weight as the more industrially-useful precious metal's wholesale bullion price has held almost unchanged.
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Households in Germany – the Western world's heaviest gold coin and small bar buyers for 13 years running until 2023 saw rising interest rates on cash
spur a crash in gold investment demand – meantime remain "cautious" according to one local retailer, "taking a wait-and-see approach" as gold prices rise back towards late-2023's all-time Euro highs.
"Very hesitant behavior," says another German coin shop, "still
characterized by profit-taking...and extremely price-dependent."
Over in China in contrast – gold's No.1 consumer market and central-bank buying nation – last month's Lunar New Year celebrations proved "a robust holiday for gold retailers" says the mining-industry's World Gold Council, noting government data showing a 24% year-on-year rise in gold and jewelry sales over the period.
"We believe gold's popularity was driven by the ongoing pursuit by consumers for
value preservation amid economic uncertainties and local asset volatility," says the WGC. "As a result, sales of gold bars surged."
London-listed bank and bullion market maker Standard Chartered this week said its Chinese division has
stopped selling access to offshore investment products, citing "commercial reasons" amid
Beijing's continued push against short-selling and liquidation of domestic equities by institutional investors.
Alongside gold prices, Friday saw bond prices rise further, pushing down longer-term interest rates again after the PCE and Eurozone inflation data, while New York's Nasdaq Composite index set a new all-time high, closing above its previous record peak of November 2021.
Gold bullion prices have risen 10.0% since then, even as 10-year US Treasury bond yields – a benchmark rate for government and commercial borrowing costs – have risen by 2.7 percentage points.
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