Gold News

Gold and Silver Tread Water Ahead of '75 Bips' Fed Hike

GOLD and SILVER prices moved sideways in a tight range Wednesday ahead of the US Federal Reserve's July interest-rate hike.
With gold prices continuing to tread water around $1717 per ounce ahead of the Fed – some 2.1% above last week's new 16-month low – the price of silver held above $18.60, up by 2.5% from mid-July's 2-year low.
Positions in the CME derivatives exchange's interest-rate futures now put a 1-in-4 chance on the Fed hiking by one whole percentage point today – the sharpest increase since at least the early 1990s – with the rest of the market all backing another 75-basis point move instead. 
Betting on a full 1 percent hike had shot to a 4-in-5 chance 2 weeks ago today after US inflation data said the cost of living rose 1.3% in a month and 9.1% over the year to June, the fastest annual pace in 4 decades.
The global economy now faces a serious risk of recession said the International Monetary Fund on Tuesday, with GDP growth slowing amid "a gloomy outlook" for energy prices and geopolitical strife led by Russia's invasion of Ukraine.
"Most are [now] expecting a 75 basis point increase tonight and I think that has already been priced in [to gold]," Reuters quotes one gold dealer in Singapore.
Either way, says an institutional sales director in Australia, "[these] gold rallies aren't entirely convincing, and traders are awaiting the Fed meeting for further guidance."
Gold prices in China – the precious metal's No.1 mining and consumer nation – today cut their premium over London quotes from a 2-week high of $11.50 per ounce to $8.80, more in line with the long-term average incentive for new bullion imports.
China's private gold demand fell 12.8% in the first half of 2022 compared to the same period last year, the state-mandated China Gold Association said today, hit by "frequent outbreaks" of  Covid-19 and ensuing lockdowns imposed by Beijing's 'Zero Covid' policy.
With H1 2021 having seen a strong rebound in China's gold demand after the Covid collapse of 2020, jewelry buying this year has so far fallen back by 8.0% while bar and coins purchases fell 25.6% on the CGA's data.
Figures for global Q2 gold demand are due out from the Western mining-industry's World Gold Council this week.
Gold priced in Yuan has fallen sharply since mid-June, noted state-media source the Global Times last week, driving a 20% rebound in sales volumes and "nearly doubling" the volume of enquiries about buying gold bars according to CCTV.
Shares in giant jewelry company Chow Tai Fook (HKG: 1929) today retreated by 3.2% but remained more than 25% above end-May's 12-month low in Hong Kong Dollar terms.
Meantime in India, "The silver market is currently very strong," says precious-metals expert Rhona O'Connell at brokerage StoneX, "with local prices commanding a premium to loco London.
"The weakness of the Rupee" – now at fresh record lows to the US Dollar – "will be deterring gold purchases for now, but they will return when the market has got used to its new local price levels.  Silver, as the cheaper option, is taking up the slack."
Prime Minister Narendra Modi is meantime set to open India's new international bullion exchange in Gujarat's GIFT City on Friday, 10 months after first being invited to launch this new route for gold and silver to enter their No.2 consumer market via duty-free storage, triggering import tax – now back up at a 3-decade high of 12.5% on gold – only when the metal is released to the buyer.

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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