Jump in Gold and Silver Prices Slips Back with Stocks and Copper as Fed Rate Forecasts Rise
Thursday, 3/14/2024 14:34
GOLD and SILVER prices edged lower in London trade Thursday, dropping back from the past week's new all-time and 3-month highs respectively as copper also cut its gains, as did the stock market, amid growing expectations that the Federal Reserve won't cut Dollar interest rates as soon or as deep as hoped in 2024.
Trading back down to $2161 per Troy ounce – a little over $30 below last Friday's fresh all time peak – spot gold bullion prices held firmer in Euros and UK Pounds as the Dollar rose on the FX market.
Silver prices meantime fell back below $25 per Troy ounce at the London midday benchmarking auction after surging alongside copper in Wednesday's spot-market action.
"Copper and silver have
both been trading the 'here and now' [meaning] China growth and rest-of-world recession fears," says precious metals strategist Nicky Shiels at Swiss bullion refining and finance group MKS Pamp, "and not forward looking, factoring in future fundamental deficits" of supply to meet demand for the industrially useful metals.
Bids for 3-month copper contracts on the London Metal Exchange earlier reached an 11-month high in Dollar terms, as did US derivatives exchange the CME's copper futures, after Shanghai contracts hit 2-year highs in Yuan terms on yesterday's news that Chinese smelters – between them processing half the world's newly mined copper –
agreed on joint production cuts in the face of supply shortages.
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The China smelting news "jump started [Wednesday's] repricing" of silver, says Shiels, and with copper now rising 5.1% so far this month, the price of silver has jumped by 11.8%, its fastest 2-week pace since late-November with a move that comes within the top 3% of all 10-session changes over the past 5 years.
Together with gold flattening this week below Monday's fresh all-time high, that has pushed
the Gold/Silver Ratio – a simple measure of the 'safe haven' precious metal's price in terms of its more industrially useful cousin – down to the lowest since the global bullion market's first trading day of 2024, just beneath 87.
That's still prices gold more than 28% above its average value in terms of silver across the 21st Century so far, itself almost 1/5th higher than the average Gold/Silver Ratio across the prior 25 years.
Outside China, new smelter projects due to come online in 2024 will expand the world's existing total capacity by nearly 8% according to copper analyst Brian Peng at specialist consultancy CRU, "which will [only] put more pressure on global concentrate supply" for individual plants.
"Who will admit they are the first to turn unprofitable?" Reuters quotes one base metals trader.
"If gold is in a new price regime (which it is)," continues Shiels at MKS, then "other forgotten metals (which are also inflation and Dollar hedges) should continue to fly."
"We believe that gold $2500 is a possibility," says Natasha Kaneva – head of global commodities strategy at US finance, investment and bullion-bank giant J.P.Morgan – "because the
market tends to get overexcited."
To get gold there, she adds, "We need a confirmation from continued moderation in inflation and in the jobs numbers, as well as confirmation that the Fed indeed is cutting rates."
"[But] the Fed surely cannot be too comfortable cutting rates" right now, says Shiels at MKS, because of the fresh all-time record highs in the S&P500 index of US stocks as well as in gold and also crypto-currency Bitcoin.
The Federal Reserve is unanimously expected to leave US interest rates unchanged at next week's March meeting – formerly odds-on favourite for the start of rate cuts as recently as mid-January.
But betting on year-end Fed rates today put the consensus forecast at 4.61% per annum – the highest in almost 3 weeks and
in line with the Fed's own prediction from its most recent "dot plot" forecasts, due to be updated alongside next week's March policy announcement after the US central bank said last December it would abandon 'higher for longer' sometime in 2024.
Global stock markets today slipped for the 5th session in 9 so far in March on the MSCI World Index, edging back again from Tuesday's new record high.
But crude oil pushed up to new 4-month highs above $85 per barrel of Brent crude after the International Energy Agency forecast tighter global supplies thanks to the Opec producer cartel's continued production curbs.
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