Gold News

Gold Price Rallies, Silver Rebounds as Commodities Add 'Geopolitical Appeal' to Inflation Hedges

GOLD PRICES rose Tuesday as London and New York returned from long holiday weekends, regaining $25 of the $60 per Troy ounce lost last week as industrial commodities also rallied but global stock and bond markets slipped, edging longer-term interest rates higher.
With the Dollar holding near 2-week lows on the currency market despite weakening expectations for a cut to Federal Reserve interest rates anytime soon, the price of gold reached $2360 with a gain for US investors of 1.1%.
But the UK gold price in Pounds per ounce rallied only 0.8% to £1847 while the price of wholesale bullion in Euro terms added 0.9% to €2170.
Silver meantime rebounded alongside copper and crude oil, rising back above $32 per Troy ounce – less than 50 cents off last week's new 12-year highs – after trading volumes in China's silver markets leapt overnight, more than doubling from Monday's level on the Shanghai Gold Exchange and rising by almost 2/3rds on the Shanghai Futures Exchange.
"Commodities such as oil and gold remain potentially helpful geopolitical hedges," says a note from Swiss bank and London bullion clearing member UBS, noting fresh Middle East violence and tensions.
While the broad commodity complex has already gained over 10% in 2024, "we retain a positive outlook...based on fundamentals as well. Overall, likely lower US interest rates this year and a modest restocking cycle bode well for a more sustained upturn in global industrial activity."
Reviewing the Federal Reserve's pandemic stimulus policy today, "The FOMC would likely have benefited from [choosing] to begin tapering and subsequently end asset purchases in 2021 given the signs of emerging inflationary pressures," said Fed governor Michelle Bowman at a conference on monetary policy hosted by the Bank of Japan in Tokyo.
Quantitative easing following the Covid pandemic didn't end until April 2022, by which point US inflation on the core PCE measure – expected to have held last month at an annual pace of 2.8% in new data due Friday – had already edged back from that January's 4-decade peak.
Chart of Federal Reserve's total assets vs. core PCE inflation. Source: St.Louis Fed
"The use of 'transitory' to describe inflation stayed in the FOMC statement far too long, given economic conditions," added Bowman's fellow 'hawk' and 2024 voting member Loretta Mester, President and CEO of the Cleveland Fed, speaking at the same event Tuesday morning.
The word 'transitory' wasn't fully "retired" from Fed statements until December 2021, when the US central bank began moves to start tapering the size of its monthly QE bond purchases.
Ahead of the Fed's next policy meeting in 2 weeks' time, betting on US interest rates now puts a near 1% chance on the central bank raising its key policy rate from today's 2-decade high of 5.33%.
The odds of Fed rate cuts beginning in September have fallen below 50-50. The futures' market forecast for Christmas is now 5.03%, suggesting just 1 cut between now and year-end rather than the 3 cuts forecast by the Fed itself in March or the 6 rate cuts predicted by traders last December.
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Apparently out-voted over quantitative tightening at the Fed's latest policy meeting 4 weeks ago, "I would have supported either waiting to slow the pace of balance sheet runoff, " Bowman added in her Tokyo speech today, "or implementing a more tapered slowing in the pace of runoff" than the near-halving in the pace of run off agreed to start in June. 
"In my view, it is important to continue to reduce the size of the balance sheet...while the economy is still strong. Doing so will allow the Federal Reserve to more effectively and credibly use its balance sheet to respond to future economic and financial shocks."
Copper rose sharply Tuesday, gaining 3.2% from Friday's near 2-week low but still trading over 5% below mid-May's new record highs.
The price of crude oil rallied from 4-month lows, trading $10 higher from May last year at $83 per barrel of Brent, as speculation grew that the Opec+ group of producer nations will agree to retain output limits at the cartel's meeting next week, now to be held online rather than in person following the death of Iran's President Raisi and the poor health of Saudi Arabia's King Salman.
Trading at barely half of last November's 18-month high, the Baltic Dry Index of global shipping costs today stabilized at 3-week lows but held more than 35% higher from this time last year.
Airfares in Europe are set to drop, Reuters says, as the "prolonged post-Covid travel boom is waning" in the face of today's higher cost of living.
Over in the USA, in contrast, the long Memorial Day weekend set a new record for air travel, the Transportation Security Administration said, with 5 of the top 10 busiest-ever days coming since the start of this month. 
Over 38 million people also drove more than 50 miles this holiday, the American Automobile Association estimates, a record figure for Memorial Day weekend on the AAA's quarter-century data.
US house prices extended annual inflation of 6.5% in March, the S&P CoreLogic Case-Shiller Index said Tuesday.

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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