While we think the #gold market has posted a moderately reliable low with the Wednesday washout, we also expect volatility to increase in both gold and #silver ahead and we expect both markets to retest and perhaps temporarily violate recent lows.
However, the gold market showed signs yesterday that it was receiving a flight to quality bid from renewed economic uncertainty and perhaps more importantly from escalating concerns of potential trouble in the financial markets from the debt ceiling situation.
In fact, a significant jump in credit default swap rates has surfaced and according to Reuters, those yields reached the highest levels in more than a decade, with some analysts suggesting the prospects of a technical default are no longer insignificant...[MORE]
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April 20 (Reuters) - Gold prices firmed above the $2,000 level again on Thursday as the dollar and Treasury yields pulled back after soft U.S. data pointed to the economic toll of the Federal Reserve's interest rate-hike cycle, strengthening the case for an imminent pause.
Spot gold climbed 0.6% to $2,004.59 per ounce by 10 a.m. EDT (1400 GMT), after hitting a two-week low of $1969.1 in the previous session. U.S. gold futures rose 0.4% to $2,016.00...[LINK]
While gold prices waffled around both sides of unchanged overnight the charts remain bearish and are accentuated by ongoing bearish macro psychology.
While gold and silver prices came under significant attack yesterday morning, the markets posted a very impressive rebound, which in turn should discourage some sellers today.
However, the threat of rising interest rates in the US and UK continues to create headwinds for all the markets especially as that theme has lifted the dollar this week and resulted in treasury bonds reaching the lowest level since March 15th yesterday...[MORE]
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While #gold and #silver should draft support from positive Chinese economic data released overnight, we leave the edge with the bear camp.
However, support at the $2000 level could be solidified by reports overnight that within the sharper-than-expected jump in Chinese retail sales were signs of increasing interest in gold jewelry.
Unfortunately for the bull camp investment outside of China was soft yesterday with gold ETF holdings falling by 66,464 ounces pushing the year-to-date decline to 0.4%...[MORE]
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Gold closed down 0.2% last week but not before a new 13-month high was attained at $2048.79. A corrective tone persisted early in the new week amid speculation that the Fed will hike rates again in May, even as inflation continues to slow.
Spot Gold Daily Chart through 4/17/23
Both CPI and PPI came in below expectations in March. PPI posted its biggest monthly decline since April 2020. With inflation concerns waning, so too does a significant bullish catalyst.
Nonetheless, there is a growing expectation that the Fed will hike interest rates at the May FOMC meeting. Based on the CME’s FedWatch tool, the probability of a 25-bps hike now stands at 91%, that’s up from 72.2% last week and 20.7% a month ago.
Assuming the Fed does indeed tighten in May to the 5.00-5.25% range, the market believes they will hold steady in June. There is however an 18% probability of another 25-bps high in June.
Keep an eye on EU and UK inflation data this week. Hot numbers would likely prompt the respective central banks to maintain their bias toward tighter policy with the potential to further narrow interest rate differentials.
Providing some additional weight on gold is the fact that the dollar held a significant support level. The low from February 2 in the dollar index at 100.82 was ever-so-slightly exceeded on Friday last week but may be considered technically intact.
Dollar Index Daily Chart through 4/17/23
While the subsequent rally hasn’t been terribly impressive, a case can be made for a potential double-bottom. The confirmation point for that pattern is the 105.88 high from March 8, which is not in any immediate jeopardy.
The dollar has pressured its 20-day SMA already and penetration would clear the way for additional gains toward the 103.50 zone, where the 100 and, 200-day SMAs converge with the 50% retracement level of the latest leg down.
Such gains in the greenback would likely keep the pressure on gold. Short-term potential is back to the $1959 level, but such a move would be seen as corrective. My sense is that there are quite a few interested buyers feeling the market got away from them.
While there are reports that the recent higher prices have tamped Asian demand, I still believe there is potential for a near-term challenge of the all-time high at $2075.14.
Global gold ETF inflows were 164,805 ounces last week. It was the fifth consecutive weekly inflow, but holdings are still 0.3% lower YTD. We’ll be watching closely to see if more buyers come in on the break or if the recent longs are weak.
Silver
Silver gained 1.6% last week, it was the fifth consecutive high weekly close for the white metal, which probed above $26 for the first time since April of last year.
Spot Silver Daily Chart through 4/17/23
A softer tone prevailed on Friday into Monday, taking out nearby trendline support. Scope is seen for additional short-term losses back to the 20-day SMA at $24.25. Secondary support is marked by the 38.2% retracement level of the recent leg higher at $23.72.
The IMF now forecasts global growth of 2.8% in 2023, down from 3.4% in 2022. They believe China and India will account for more than half of that growth.
The IMF then sees the global economy averaging around 3% growth over the next 5 years. That’s well below the 3.8% average that was achieved in the previous 20 years.
That outlook doesn’t bode terribly well for industrial metals, and yet I suspect much of the growth that is realized will be driven by technology and the strong trend toward electrification. Silver should fare well in such an environment, even if the overall pace of global growth is weak.
Last week the Biden administration announced a plan to significantly increase vehicle emission standards beginning with the 2027 model year, projecting that 2/3rds of all vehicles sold in the U.S. would be EVs by 2032. That’s less than 10 years from now!
Whether such lofty goals are even remotely feasible remains to be seen, but it does seem likely that EVs will continue to gain market share. On average, EVs contain about 44% more silver and 2.5 times more copper than conventional vehicles.
PGMs
Platinum posted a 4% gain last week, notching a fifth consecutive higher weekly close. While gold and silver were defensive to start the week, both platinum and palladium displayed some buoyancy on Monday.
Spot Platinum Daily Chart through 4/17/23
While platinum remains well within its range, the recent strength seems to defy the tepid global growth prospects and the Biden administration’s push to get rid of most vehicles powered by internal combustion engines.
Fewer ICE vehicles will ultimately result in diminished demand for auto catalysts. However, the market may have latched on to the expectation that emission standards will continue to be more stringent in the intervening years, requiring greater PGM loading.
Palladium has rallied about 18% since the $1329.18 low was set on March 9. A move above the 100-day SMA at $1612.66 would suggest potential back to $2000.
Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.
With a 3-day high in the dollar and signs of noted weakness in Italian consumer prices, outside market influences are negative for gold and silver to start the new trading week.
Therefore, we see gold and silver in corrective postures to start the new trading week. In fact, several bullish fundamentals have reversed course and we expect a mini downtrend to unfold.
Obviously, a dampening of inflationary expectations removed a primary pillar of the bull case. However, seeing a reversal of a downside breakout in the dollar combined with talk that the Fed will "go ahead" with a rate hike in May provides a lot of bearish ammunition...[MORE]
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April 17 (Reuters) - Gold reversed course to slip below the key $2,000 level on Monday, pressured by a stronger dollar and higher Treasury yields, while investors looked for cues on whether the market will see a 'one and done' rate hike by the U.S. Federal Reserve in May...[LINK]
