Gold News

Gold Price -$100 from Record as Politics Trumped by Fed Rate Forecasts

The PRICE of GOLD fell further on Thursday, dropping to 1-week lows against the Dollar and Euro while hitting 2-week lows in UK Pounds as betting that the US Federal Reserve will keep interest rates 'higher for longer' trumped a wave of uncertain and tense politics, capped by China encircling the 'breakaway' island of Taiwan with 2 days of military drills.
Western stock markets struggled to extend last night's rise in AI chip giant Nvidia, while copper prices sank to 7-session lows – down 8.9% from last Friday's new record – and silver prices dropped to $30.17 per Troy ounce, down 7.2% from Monday's 12-year peak. 
"While inflation had eased over the past year," said minutes from the Fed's start-May policy meeting released late Wednesday, "in recent months there had been a lack of further progress toward the Committee's 2% objective.
"Various participants mentioned a willingness to tighten policy further should risks to inflation materialize..."
With US politics set to get hotter as the first Biden-Trump debate of the 2024 election draws near in June, long-term borrowing costs today extended Wednesday's rise as betting on the Fed's first rate cut from today's 2-decade high pushed September out to a 50-50 chance.
March was priced as a dead-cert up until the middle of January. Year-end Fed rates are now forecast at 5.03% by trading in interest-rate futures, signalling barely 1 cut between now and Christmas rather than the 6 cuts expected at the start of 2024.
Chart of gold priced in the US Dollar. Source: BullionVault
Dollar-priced bullion today dropped to $2342 per Troy ounce – the end-2024 gold price forecast made by users of BullionVault last New Year.
Down just over $100 from Monday's new spot-market peak, today's low still puts the gold price average-to-date at $2171 in 2024, more than $110 above the full-year average forecast by this year's LBMA Survey of professional analysts.
China this morning announced 2 days of army, navy, air force and rocket drills to the north, south and east of Taiwan, calling this show of force " strong punishment...and a stern warning against interference and provocation by external forces."
The move comes 3 days after Taiwan's newly elected President, William Lai-Ching, took office by asking Beijing to stop its "intimidation" of the island.
While Ireland, Norway and Spain yesterday announced they will recognise Palestine as an independent state – a move "Israel will not go silence," said Tel Aviv, warning "there will be other serious consequences" as it continues its war in Gaza – none of them recognize Taiwan as separate from the People's Republic of China, leaving diplomatic relations between Taipei and only 11 nations plus the Holy See in Rome, none of whom can therefore have any formal contact with Beijing.
"Lethal aid is now, or will be, flowing from China to Russia and into Ukraine," says Grant Shapps, Defence Secretary of the UK – which made $40 billion of exports to China last year with $75bn of imports – citing "evidence" from British intelligence.
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Russia's defence ministry yesterday deleted a proposal to move its maritime border with neighboring Finland unilaterally. But with the Kremlin's war on Ukraine continuing to draw cross-border fire onto the Russian town of Belgorod, a decree allowing the seizure of US-owned property was signed today by President Vladimir Putin in retaliation for the US-EU freezing and sanctioning of Russia-owned property abroad.
The UK gold price in Pounds per ounce meantime sank to more than  2-week lows at £1843, down 4.2% from Monday's peak and 5.7% below the record of 12th April, even as Sterling snapped its rise to 2-month highs on the FX market following yesterday's stronger-than-expected CPI inflation data plus the announcement of a General Election on 4th July by the deeply unpopular Conservative Government.
Euro gold prices meantime hit their lowest since Monday last week at €2162 per ounce, some €90 below Monday's high and almost €125 off April 12th's record, 
Big gains in next month's European Parliament elections are unlikely to see Marine Le Pen's National Rally in France and the Alternative für Deutschland in Germany join forces as a far-right bloc in Brussels, the Politico website says, after this week's comments from AfD lead candidate Maximilian Krah excusing members of Nazi Germany's WW2 Waffen SS from "automatically being criminals" widened a rift between the groups.
German Bundestag and AfD member Petr Bystron, under investigation for money-laundering and corruption, this week denied receiving bribes from pro-Russian internet platform 'Voice of Europe', claiming that cash and documents relating to gold bullion bars and also foreign bank accounts belong to his mother.

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.

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