Gold Bullion Nears Longest Bull Run Since $2075 Peak Ahead of PCE Inflation and the Fed
GOLD BULLION slipped but held on track for yet another weekly price rise in London trade on Friday, nearing its longest run of gains since the summer 2020 peak at $2075 per ounce ahead of key US data on inflation in the cost of living.
With the Federal Reserve set to announce its first interest-rate decision of 2023 next Wednesday, consensus forecasts from analysts at major banks expect a third monthly decline in the annual pace of core PCE inflation, which excludes 'volatile' food and fuel prices, slowing to 4.4% in December from November's 4.7% reading â€“ still more than twice the Fed's official 2.0% target.
A slowdown in domestic US price inflation over the final calendar quarter of 2023 helped yesterday's US GDP data show stronger-than-forecast growth, with the world's largest economy expanding by 2.9% on an annualized basis.
"The GDP report [offers] feed for any Fed hawks who would want to either hold rates higher for longer and/or see a higher peak rate," says a note from the trading desk of bullion refining and finance group MKS Pamp.
"[But] still the market isnâ€™t buying it...[and Thursday's] downward kneejerk reaction across gold & silver was extremely short-lived."
Chart of gold in US Dollar terms, last week. Source: BullionVault
Heading for its 6th consecutive weekly gain in US Dollar terms at $1929 per ounce, gold bullion hasn't seen a longer run of weekly gains since August 2020, when the first-wave Covid Crisis took the precious metal to its current all-time highs above $2060 at London's daily benchmarking auction with a peak in spot-market trade of $2075.
Silver today meantime held 10 cents lower at midday from noon last Friday, trading at $23.75 per ounce around its last London benchmarking of the week.
Betting on next week's Fed meeting now sees a near-100% chance that the US central bank will only raise rates by 0.25 percentage points, up from below 60% this time a month ago.
The likelihood of Fed rates then ending 2023 unchanged at 4.75% have slipped this week however, down from 86.1% according to speculative betting on the central bank's December meeting last Friday to 80.7% today.
"Gold is unwinding overbought conditions [but only] just," says precious-metals specialist Rhona O'Connell at brokerage StoneX, also noting that gold's usually strong, negative correlation with longer-term US interest rates â€“ rising when they fall and vice versa â€“ has retreated.
The drop in government bond prices ahead of Friday's US inflation data saw the yield offered by 10-year Treasury debt rise to 3.56% per annum, the highest in more than 2 weeks but almost 3/4 of a percentage point below last October's spike to the highest since mid-2008, driven by new inflation data then coming in at 4-decade highs.
Major US bullion-backed ETFs were left unchanged in size by Thursday's brief price volatility on the GDP data, leaving gold ETFs the GLD and IAU to head for their 2nd and 4th weekly inflows respectively while the silver-backed SLV trust fund sees its heaviest growth since the New Year 2021 #silversqueeze price ramp.
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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.