Gold News

Gold and Silver Drop to Pre-SVB Prices as Tech Stocks Shrug Off Fed Rates, Debt Ceiling

GOLD and SILVER PRICES bounced Friday as the Dollar paused its strong rise on the currency market, but both precious metals headed for their lowest weekly close since the collapse of Silicon Valley Bank in mid-March as global stock markets extended their gains despite the outlook for Federal Reserve interest-rate hikes and the USA's ongoing debt-ceiling debacle.
Rallying over $10 from yesterday's spot-market dip through $1940 against the Dollar, the price of gold in Euro terms was little changed from last Friday at €1818 while the UK gold price in Pounds per ounce was also flat for the week at £1577.
Silver prices meantime rallied 50 cents from Thursday's new 9-week low, trading at $23.13 around the industrially-useful precious metal's benchmark London auction at midday.
"Higher interest rates AND the market pricing in further Fed HIKES into a debt ceiling debacle is just insanity," says Swiss bullion refining and finance group MKS Pamp's strategist Nicky Shiels.
"But the Fed will continue to hike until they break what they want to break – unemployment [so as to reduce inflation] – [and] they hiked into [late-March's US regional] banking crisis, so what's different to hiking into a debt ceiling crisis?
After credit ratings agency S&P downgraded the USA from triple-A amid the summer 2011 debt-ceiling crisis, both Fitch and Moody's now say they are eyeing a possible downgrade as this year's negotiations unfold between Republican politicians and the Biden White House.
"It all should be great for gold," says Shiels, "but appetite just isn't here at the moment."
Chart of gold priced in US Dollars. Source: BullionVault
With US tech stocks flying on Thursday, led by a strong earnings report from software firm Nvidia (Nasdaq: NVDA) sending its shares 25% higher towards a $1 trillion market cap, Asian and European bourses also continued to rebound Friday morning.
Together, that cut the MSCI World Index's loss for the week to 1.5%, still on track for its lowest Friday finish since mid-April.
Betting that the Fed will raise US interest rates yet again at its mid-June meeting eased back overnight, putting the market-priced odds a little above 1-in-3 against a more likely 'pause' at the current ceiling of 5.25% – the highest overnight US interest rate since mid-2007, eve of the global financial crisis.
But betting on the Fed cutting rates by year-end retreated once more, putting the consensus forecast for December's Fed meeting at 4.96%, suggesting only 1 small reduction from the US central bank's current stance according to the CME derivatives exchange's FedWatch took.
That contrasts with a market consensus of less than 3.90% for end-2023 Fed rates at the depths of March's US regional banking crisis.
With newly-mined gold from Russia – the metal's No.2 producer nation – now diverted away from global trading center London to the giant consumer markets of China as well as India, Turkey and the UAE amid US-EU-UK sanctions, gold priced in local currencies across Asia and the Middle East fell less steeply this week than London quotes in Dollar terms.
That saw the Shanghai premium rise to $11 per ounce over London on Friday, near the highest incentive for new bullion imports into China since end-March, while India's domestic Rupee price flipped from last week's $5 discount to a $2 premium after accounting for import duty and sales tax.
"It's the season of discounts and promotions," says Gulfnews in Dubai, adding that "UAE's gold and jewellery retailers are joining in" with cuts to making charges amid the retail sector's wider 3-day "megasale" this weekend.

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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