Gold News

Gold Price +$20 Near All-Time Record as Dollar Weakens Amid Middle East Conflict

The GOLD PRICE rose almost $20 per ounce in London trade Friday, heading for a record-high weekly finish in US Dollar terms – if not a new all-time London benchmark high – as crude oil rallied and global stock markets struggled to extend this month's 4.0% gain amid fears of the Hamas-Israel conflict spreading across the Middle East.
New US data said durable goods orders in the world's largest economy leapt last month, reversing October's slump, but the pace of inflation on the Federal Reserve's preferred measure slowed to the weakest since March 2021 at 3.2% per year, boosting bets that the US central bank will cut interest rates early in 2024
Major sovereign gold reserves buyer Moscow meantime threatened to cut all diplomatic ties with Washington if the US uses Russian financial assets – already frozen by Western sanctions – to help fund Ukraine in defending itself against President Putin's invasion.
With the US Dollar falling sharply to new 5-month lows following yesterday's cut to Q3 GDP growth from 5.2% to 4.9% on the latest estimate, the price of gold touched $2069 per Troy ounce in spot market trading, almost $2 above the all-time London 3pm gold benchmark high set on 6 August 2020 during the first-wave Covid Crisis.
" US Dollar weakness has helped gold since the start of October, that's for sure," says market strategist John Reade at the mining industry's World Gold Council. 
"But the metal's strength over the past five years cannot be explained by USD weakness," with the precious metal's 2024 outlook set to be driven by moves in the US currency, cuts to US interest rates, and the level of central-bank demand.
Chart of gold priced in US Dollars and in the rest of the world's major currencies (via DXY index). Source: BullionVault
Gold bullion traded in Shanghai – wholesale center for the precious metal's No.1 mining, consumer and central-bank buying nation – had earlier ended Friday with its highest-ever weekly finish, coming within ¥2 of start-December's all-time record afternoon benchmark with a rise to ¥479.1 per gram.
The Euro gold price also rose sharply but lagged the Dollar-price move at 3-week highs near €1875 while the British Pounds price moved back above £1620 following worse-than-expected UK GDP data.
Crude oil retested this week's new December highs above $80 per barrel, driven by concerns over Houthi terrorist attacks on ships passing through the Red Sea according to Bloomberg, and recovering yesterday's $1.50 drop on new data showing that US production has reached a new all-time high.
The Baltic Dry Index, tracking the cost of shipping goods worldwide, fell for the 7th session running on Thursday, dropping further from start-December's 19-month high despite the continued Houthi attacks in the Red Sea linking Asia with Europe via the Suez Canal, used by 1/8th of global sea freight.
With those Yemeni-based and Iran-backed Houthi rebels now attacking over a dozen vessels since Israel invaded Gaza in retaliation for Hamas' October 7th atrocities, warships from European Union member states will start patrolling the Red Sea to protect shipping, joining the US-led Operation Prosperity Guardian.
But the Houthi attacks still risk driving "upward pressure on war insurance premiums" for cargo passing through the region, one consultancy says, and more than 100 container vessels have now diverted to round the Cape of Good Hope, adding almost 10 days to the Red Sea route's average 25-day journey time between Taiwan and the Netherlands, while some shipping lines have reportedly invoked 'force majeure' clauses so they can avoid the area without liability to cargo customers.
Trade through Israel's southern port of Eilat has sunk by 85% since the Houthi drone and missile attacks on Red Sea traffic began, with oil shipments through the Red Sea now down 40% from the recent weekly average.
Meantime in Argentina, now the world's 10th largest silver mining nation, crowds gathered yet again overnight to protest the 300-plus "shock" measures announced Wednesday by new President Javier Milei – including a 54% devaluation of the Peso's official Dollar exchange and praised by the country's $41.5bn creditor, the Washington-based International Monetary Fund, as "bold initial actions" – but this time without any banners or flags, now banned by Milei's security minister Patricia Bullrich.
Silver prices today lagged gold's latest jump, reaching early-December levels at $24.50 per Troy ounce and taking the Gold/Silver Ratio back above 84.

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.

See the full archive of Adrian Ash articles on GoldNews.

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