Gold News

Gold and Silver Prices Whacked by Data, Not Central Bank Hikes, as 'Summer Complacency' Hits ETFs

The PRICE of gold and silver erased this week's earlier gains versus a rising Dollar on Thursday, sinking to 2-week lows after interest-rate rises by both the US Fed and the Eurozone ECB to the highest since 2001, citing the strength of inflation, were followed by new US data which blew past analyst forecasts for the world's largest economy.
Second-quarter GDP grew 2.4% on an annualized basis – way ahead of consensus predictions of 1.8% – thanks to inflation in domestic US prices slowing hard, dropping over 1 whole point to 3.8% on the core PCE measure.
New orders for US durable goods also blew past consensus forecasts for June, up by 6.2% from May when defense goods are excluded.
Having risen overnight after the Federal Reserve raised its key rate and then risen again into the European Central Bank's latest rate rise, silver prices sank by $1 per ounce and gold fell nearly $40 following today's US data, which also said new claims for jobless benefits fell once again last week. 
With analysts and traders universally predicting Wednesday's quarter-point rate rise from the Fed, yesterday's "non-event extends the summer complacency" in precious metals, says a note from Swiss bullion refiners and finance group MKS Pamp.
"Data remain larger risk events than monetary policy" for gold and silver prices.
"Anaemic performance from gold and concerns over the economic outlook, especially in China, have weighed on silver," says Reuters, quoting analyst Rhona O'Connell at brokerage StoneX.
But for gold, a price of $2000 remains a "viable target" once this rate-rising cycle ends amid continuing geopolitical tensions, O'Connell believes.
Dollar price of silver and gold, last 7 days. Source: BullionVault
Rising 0.8% after the Fed's decision to touch 1-week highs at $1982 per Troy ounce this morning, the Dollar gold price then fell $25 within an hour of the GDP and durable goods figures, and the price of silver lost 50 cents, also trading back at last weekend's level around $24.65, before both metals then extended their drops in late-London hours.
The Euro gold price fell less steeply, down €10 per ounce from Thursday morning's new 5-week high at €1784 and bottoming just ahead of the ECB announcement before dropping again to erase this week's earlier gains at €1769.
With the UK Bank of England now widely expected to follow the Fed and ECB with another 0.25-point rate rise of its own at next week's meeting, the UK gold price in Pounds per ounce fell £15 to trade back around £1515.
"Whatever the short-term social costs of getting inflation under control," said Fed chairman Jerome Powell after yesterday's rate rise announcement and repeating his 2.0% target for core PCE, "the longer term social costs of failing to do so are greater.
"The historical record is very, very clear on that."
"Inflation continues to decline but is still expected to remain too high for too long," European Central Bank president Christine Lagarde then said after the 19-nation policy decision Thursday, also repeating that "we are determined" get inflation down to the ECB's 2.0% target "in a timely manner"
Further ahead, "We think gold ownership and long allocation to gold and silver is something that acts as both a late [economic] cycle diversifier and something that will perform as we look to the next sort of 12, 18 months," says giant US financial services provider J.P.Morgan's Greg Shearer, executive director of global commodities research, claiming that gold and silver look "quite agnostic" about whether the US Fed has engineered a "soft landing or hard landing" for the economy. 
But among gold-backed ETF investment trusts, the giant GLD yesterday reversed its largest 1-day inflow for 2 months, shrinking by 0.2% as the Fed raised its key interest rate to a ceiling of 5.50% per annum.
No.2 gold ETF the IAU meantime held unchanged in size at its smallest since early April.
Giant silver-backed ETF the SLV was also unchanged in size Wednesday, remaining the smallest since May 2020 with no daily investment inflows since the end of June.

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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