Gold Rallies, Silver Doesn't as Diesel Boosts the Dems' Mid-Terms Odds

GOLD PRICES rallied Thursday from yesterday's fresh 9-week lows, recovering above $4100 per troy ounce as the plunge in Western government bond prices steadied following a strong auction of new US debt at the highest borrowing cost since the year 2000.

The price of silver failed to rally alongside gold, with the more industrially useful precious metal fixing beneath $60 per ounce at London's midday 'benchmarking' auction for the 2nd day in a row.

Asian and then European stock markets fell hard as crude oil prices jumped after Iran-backed Houthi militia fired missiles at Saudi Arabia's capital Riyadh and the Dollar re-touched yesterday's fresh 17-month highs in the currency markets.

Prices at US gas stations meanwhile held firm, data from the American Automobile Association says, with diesel costing close to September's record high of $6.50 per gallon on average today.

This chart requires no comment, said Bloomberg columnist John Authers last week, comparing the price of diesel for US drivers with Polymarket's odds of the Democrat Party winning the US Senate in next month's mid-term elections.

It shows Donald Trump's Republican administration − which has failed to invite international observers to witness the 3rd November vote, widely reporting as a move only made by Belarus and Russia − "needlessly handing a great political weapon to their opponents."

Further Federal Reserve rate hikes after last month's rise "do not need to come at consecutive meetings," said Fed Governor Christopher Waller at the Central Bank of Turkey's forum in Istanbul today.

"But they should be in place in an acceptable period of time" to quell inflation, a point agreed by the Fed's policy-making committee in September according to minutes of the meeting released Wednesday.

Today the odds of a Fed raise at the October meeting rose back above 1-in-5, while consensus betting puts the Fed's year-end interest rate at 4.13% according to the CME derivatives exchange's FedWatch tool, in line with the US central bank's own consensus forecast.

That forecast for New Year's Eve read 3.4% and the market thought 2.99% at the end of February, the day before the US and Israel attacked Iran and the highest monthly close for gold bullion prices in history at $5222.

The US Treasury on Wednesday raised $39 billion in a sale of 10-year bonds, finding what fixed-income traders called "strong demand" but locking in the highest interest rate in more than a quarter-century at 5.30% per annum, with today's sale of $22bn in 30-year debt set to cost around 5.65%.

With the pressure from rising interesting now intensifying, "US large caps, once again, are making things look better [in the stock market] than they are under the surface," says UK investment analyst and ex-HSBC fund manager Charles Morris, noting that "very few stocks are going up and many more are going down."

Opening today just 0.4% below Tuesday's record high, New York's S&P500 index currently includes barely 1-in-5 stocks trading above their 200-day moving average, and only 13.0% above the 50-day MA.

Both those proportions are down from around 70% in mid-August according to StreetStats.

The global economy "would be in recession" if it weren't for AI hyperscalers' capital expenditure reckons $1.2 trillion asset manager Fidelity International's macro strategist Salman Ahmed, quoted by the UK's Investment Week.

"The third-quarter [US] earnings season gets going on Tuesday with the big banks," says Authers at Bloomberg. "With so much riding on [these] numbers, they might not be enough to keep the stock rally going."

France's partners in the European Union were meanwhile set today to join the European Central Bank in urging Paris to pass a 2027 budget now to try supporting its OATS bond prices, according to Reuters, thereby easing France's borrowing costs.

Now the highest since 2002, and with Paris already forecasting a 5% budget deficit ahead of next year's presidential election, yields on French government bonds are trading at the widest spread above comparable German debt since the Eurozone crisis of 2012.

Most schools in France re-opened Thursday after days of increasingly violent protest over poor facilities and teachers quitting the profession. But with right-wing presidential race leader Marine Le Pen vowing to slash spending if she wins the Élysée Palace next year, a further 'day of action' has been called for Tuesday says Le Figaro.