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Gold records fourth consecutive monthly gain
Gold had its fourth consecutive monthly gain in May and its supporters think it will gain again in the coming days, particularly during the first trading week of June. This follows from the final May inflation report, which was released on Friday and left us nothing informed about the course of price pressures, Fed interest rates and bond yields.
The so-called PCE spending, income and inflation data were not surprising on the price side (they were surprising on the consumer spending side, which was weaker).
The main core PCE inflation reading last month showed little change. Certainly, there was nothing to clarify the uncertainty of the timing of a Fed rate cut this year.
Thus, US Comex gold futures fell 0.8% on the day to $2,347.70 at the close, and were up half a percent for the week and 1.6% for the month. But it ended at US$107 an ounce, below the all-time high reached in early May of US$2,454 an ounce (Memorial Day holiday, Monday).
The monthly gain was due to “the central bank (buying) element and the residual geopolitical risk story,” Kyle Rodda, financial market analyst at Capital.com, told Reuters.
The downgrade of France’s credit rating by S&P Global had no impact on gold prices (decades ago France used to be a huge mythical influence on gold). S&P Global reduced France’s rating from AA to AA-, but with a stable outlook.
The downgrade means S&P ignored the French government’s efforts to get its public finances in order by cutting spending and controlling costs. The ratings agency said it saw growing deficits and continued political fragmentation.
(Ratings agencies will have fun with America’s rating later this year if convicted felon Donald Trump manages to win back the Presidency. Only Moody’s has AAA, but the outlook is negative. S&P is AA+ negative, Fitch is AA+ stable. )
On Friday, May employment data for the US will be released, which will be the next big test for gold, along with Thursday’s rate decision from the European Central Bank.
First-month Comex silver finished at $30.55 per ounce, up half a percent for the day, 3.1% for the week and a tasty 14% for the month, its biggest monthly gain since the height of the pandemic in July. 2020.
However, copper cooled, with Comex last month ending the week and month at $4.63 per pound, down 2.7% for the week but up 1.3% for the month. It rose 12% in mid-May.
The metal is now down more than 55 cents from May’s all-time peak of US$5.19 per pound. That represents a drop of more than 10% and a better indication of how quickly the copper story cooled.
What helped extinguish the copper boom was the failure of BHP’s bid for Anglo American (for now). This caused many other fanciful stories about copper “deals” and price records to disappear.
Iron ore, in turn, ended the week with another small drop, to just over US$115 per ton, compared to US$120.81 per ton in the previous week. That drop came after China said it would limit steel production capacity this year to reduce coal consumption and carbon emissions.
Port inventories remained stable at 148.6 million tonnes last week across China’s 45 major ports.