Gold Price Rallies, Silver Doesn't as US PCE Inflation Slows Less Than Forecast
Friday, 7/26/2024 15:08
GOLD PRICES rallied but silver didn't on Friday, diverging as new US data confirmed that inflation in the world's largest economy is slowing less quickly than expected as the Communist government of No.2 China tries to boost consumer and business spending with new stimulus subsidies.
China's CSI300 stock index rallied 0.4% from yesterday's 5-month low, and Western bourses rose 0.7% from Thursday's 6-week low on the MSCI World Index as the 'Magnificent 7' mega-cap US tech stocks began reducing their 12.6% plunge from mid-July's fresh record peak.
"Gold and to a lesser degree silver require mild equity market volatility, an orderly devaluation of asset prices, to really show up as a haven," says a note from precious metals strategist Nicky Shiels at Swiss bullion refining and finance group MKS Pamp.
"This [week's] disorderly [move] just ensures gold & silver get thrown out with the bathwater...[remaining] perhaps more fragile in the short-term despite some bullish developments on the physical side, with India significantly lowering import duties from 15% to 6% helping jump-start local demand."
On a monthly basis, June saw core personal consumption expenditures – on which the Federal Reserve targets 2.0% annual inflation – rise 2.6% from a year earlier, matching May's pace and coming in 0.1 points above forecast.
Bond-market forecasts for the pace of inflation slipped to 1-week lows at 2.27% per annum on the so-called "break-even rate" implied by 10-year Treasury yields and 10-year TIPS rates, as the interest rate offered by those inflation-protected securities dipped to 1.95%, back beneath the 2024 average-to-date and well below last October's 15-year high of 2.52%.
The price of gold – which until early 2022 showed a long-term pattern of moving in the opposite direction to the real yield on 10-year TIPS – meantime rose almost $30 from Thursday's low to trade above $2380 per Troy ounce.
While no one expects the Fed to change interest rates in next Wednesday's July decision,
trading in the futures market still predicts more than 2 policy cuts before Christmas, forecasting a year-end rate of 4.69% per annum – the lowest market consensus since early April – against today's 2-decade high of 5.33%.
Yesterday's April-to-June data – which put US economic growth well above analysts' GDP expectations – said core PCE rose 2.7% from the 2nd quarter of last year, the weakest inflation since Q1 2021 but 0.2 points ahead of consensus forecasts.
Beijing's state planning authority meantime says it will use around 15% of the 1 trillion Yuan it's borrowing through sales of long-term bonds to
subsidize households replacing white goods and autos – including battery electric vehicles – with a similar sum (equal to around $20 billion)
subsidizing replacement corporate equipment such as elevators.
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Shanghai's benchmark gold price rallied 0.4% from yesterday's 3-week low, fixing just beneath ¥555 per gram for a 2nd consecutive weekly loss after spiking to a new all-time high last Thursday.
That saw gold in China rebound to a premium over international quotes, offering imports of bullion into gold's No.1 mining, importing, consumer and central-bank buying nation a gross incentive of more than $10 per Troy ounce after
the Shanghai gold premium flipped negative on Thursday for the 2nd time in a week, signalling poor demand and presaging the precious metal's hard price drop worldwide.
Industrial commodities led by copper, crude oil and aluminum steadied above the multi-month lows hit earlier this week after pundits and economists expressed disappointment that China's Third Plenum of Communist Party officials didn't announce or detail strong economic stimulus.
Silver prices also steadied but – unlike gold – failed to rebound from yesterday's plunge, trading close to 11-week lows at $27.73 per Troy ounce.
The
UK gold price in Pounds per ounce rallied to £1850, trimming this week's drop to 0.6%, while gold priced in Euros recovered to €2190, losing 0.9% from last Friday's finish in London.
Industrially-useful platinum failed like silver to rally from its sharp drop, dipping to a new 3-month low beneath $930 per ounce, while sister autocatalyst metal palladium held around $900, less than 5% above February's 5.5-year lows.
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