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Gold Rallies, Silver Stalls as Canada Makes G7's First Rate Cut

GOLD PRICES rallied but silver bullion stalled near multi-week lows against most major currencies on Wednesday as new US data kept painted a mixed picture of the world's largest economy ahead of next week's Federal Reserve meeting and forecasts but Canada became the first G7 and major Western economy to start cutting interest rates from today's post-Covid inflation spike highs.
The gold price in Canadian Dollars per Troy ounce shot above C$3220 as the Loonie fell on the foreign exchange market, trading 2.0% above Monday's 4-week low.
No.4 gold mining nation worldwide, Canada grew output above 210 tonnes in 2023.
Chart of gold price in Canada's Dollar, last 20 years. Source: BullionVault
With the European Central Bank almost universally expected to cut its Euro deposit rates on Thursday from today's ECB currency-union record of 4.00%, the gold price in Euros jumped close to 1-week highs at €2167 while the price of gold for UK investors and savers also rose 1.6% from yesterday's 5-week low to trade at £1844.
Gold priced in the US Dollar meantime rose to $2349 per Troy ounce – some 1.5% above Monday and Tuesday's 4-week lows – even as the US currency rallied after falling back towards Monday's sudden 11-week bottom on the FX market, hit after weaker-than-expected manufacturing survey data for May.
Silver prices in contrast managed only a 1.1% rise from yesterday's 3-week low, trading 30 cents per ounce higher at $29.68.
"We've come a long way in the fight against inflation," said Bank of Canada Governor Tiff Macklem after his policy team cut overnight rates by 0.25 points from a 23-year high of 5.00% per annum.
Inflation in the world's 10th largest economy slowed this spring to 2.7% from the 4-decade peak of 8.1% hit 2 years ago this month.
"Monetary policy no longer needs to be as restrictive," Macklem said. "But we are taking our interest rate decisions one meeting at a time."
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While no one expects a change to the highest US policy rates in 2 decades at next week's Fed meeting, the central bank in Washington "should cut in July but it won't" says Mohamed El-Erian, former CEO of fund management giant Pimco and now chief economic advisor to German financial services conglomerate Allianz.
That's because the Fed "is so traumatised by the big mistake they made in 2021, where they took a strategic view of the economy [and declared inflation to be merely 'transitory'] that now they only look at past data. They have become excessively data dependent." 
New data Tuesday said job openings in the world's largest economy fell to the fewest vacancies since February 2021 – the month before President Biden signed his $1.9 trillion Covid relief bill into law, launching a third round of 'stimmy checks' worth $1,400 to most Americans earning less than $75,000 per year – but still more than 25% greater than the pre-pandemic 5-year average.
Today then saw the ISM index of services sector activity blow past expectations, showing strong expansion after April's dip with prices paid in the sector holding firm.
But net job creation on the ADP Payrolls report for May missed analyst forecasts by almost 1/8th, slowing to the weakest since January.
Friday's non-farm payrolls estimate from the Bureau of Labor Statistics is expected to show jobs growth of 185,000 for last month, 10,000 above April's 6-month low.
The stock market in world No.2 gold consumer India meantime rallied 3.2% from yesterday's 2.5-month low as Prime Minister Narendra Modi was chosen to lead the National Democratic Alliance of political parties once again, forming a coalition Government after his BJP party lost its outright majority in this spring's elections.
State-run banks stepped in Tuesday to buy Rupees in the FX market, Reuters reports, to stem the currency's worst 1-day drop since early 2023.
The Mexican Peso also rallied Wednesday from this week's election-shock plunge, bouncing from the 7-month low hit after ruling Morena Party candidate Claudia Sheinbaum became the No.1 silver mining nation's first female President with a landslide victory.
European and Western stock markets also gained Wednesday as longer-term interest rates slipped further in the bond market despite stronger Eurozone services sector PMI data.

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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