With a 10-day high in the dollar early today and a fresh new low for the move in August gold, the market briefly entered a gap left from early March starting at $1910.50 and ending at $1908.90.
Apparently, the gold and silver trade saw the hawkish dialogue from the US Federal Reserve chairman yesterday as more convincing than the hawkish dialogue from other major central bank leaders as money flowed toward the dollar after the conference ended for the day.
Nonetheless, the consensus among world central bankers was two or "more" interest rate hikes were likely ahead. With the word "more" included the US Fed President opened the door for something more than 2 minor interest rate hikes this year as previously indicated...[MORE]
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June 29 (Reuters) - Gold firmed into a tight range on Thursday, trading near a major support level of $1,900 as Federal Reserve officials reaffirmed their hawkish policy message ahead of key U.S. economic data.
Spot gold edged up 0.2% to $1,910.34 per ounce by 12:05 GMT, after hitting a fresh low since mid-March. U.S. gold futures fell 0.2% to $1,918.40...[LINK]
In addition to a lack of classic bullish fundamental themes, gold, and silver have seen sellers emerge off a rekindling of US rate hike prospects given yesterday's very positive sweep of US scheduled data in the form of durable goods and new-home sales.
Adding to the bearish tilt this morning is a wave of hawkish commentary from a European Central Bank forum in Portugal where a long list of central bank leaders have echoed the need to "fight inflation" with further rate hikes...[MORE]
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June 28 (Reuters) - Gold prices slipped to a more than three-month low on Wednesday after upbeat U.S. economic data cemented expectations of more rate hikes this year as investors positioned for a speech by Federal Reserve Chair Jerome Powell’s later in the day.
Spot gold fell 0.4% to $1,906.49 per ounce by 1148 GMT, hitting its lowest since mid-March earlier in the session. U.S. gold futures shed 0.4% to $1,915.50...[LINK]
With promises of Chinese stimulus from the Chinese premier overnight gold and silver prices are showing little in the way of positive action.
While gold, silver, platinum, and palladium appeared to see flight to quality lift yesterday from the uncertainty of the military turmoil in Russia, that potential has dissipated quickly.
Certainly, if the coup attempt had gained traction and not ended so quickly, there might have been destabilization in Russia...[MORE]
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June 27 (Reuters) - Gold prices held steady with support from a softer dollar on Tuesday after the metal registered two sessions of gains, though investors remained cautious after recent hawkish comments from U.S. central bank officials.
Spot gold held its ground at $1,923.09 per ounce by 1200 GMT while U.S. gold futures edged down 0.1% to $1,932.90...[LINK]
Gold is maintaining a corrective tone after dropping to a 14-week low of 1910.21 last week. The yellow metal has been weighed by mounting expectations that the Fed will hike the Fed funds rate by another 25 bps when they meet this week.
Spot Gold Daily Chart through 6/26/2023
Fed funds futures are currently showing that probability at 74.4%. That’s up from 52.2% a month ago and a very low probability right after the May FOMC meeting. While inflation has continued to moderate, it remains well above the Fed’s 2% target.
Meanwhile, the labor market and economic growth remain at least marginally resilient. The FOMC indicated in May that policy moves would be data-dependent moving forward.
Median expectations for Final Q1 GDP are +1.4%, although some trusted sources are predicting +2.0%. Initial forecasts for Q2 GDP are +1.3%.
This does indeed give the Fed room for at least one, and maybe two 25 bps hikes. If it’s two, that will take Fed funds to 5.5%-5.75%, the highest rate since January 2001.
On the other hand, global growth prospects have dimmed in recent weeks, largely due to concerns about China’s tepid recovery. While rising global growth risks do not bode well for the industrial metals, they may spark some haven interest in gold.
Additional safe haven interest is being supplied by political tensions in Russia. On June 23rd, the Russian paramilitary organization Wagner Group initiated what has been called a “rebellion” against the government and began advancing toward Moscow. A negotiated deal reportedly halted that march, but plenty of uncertainty remains.
Gold closed slightly higher on Monday, but scope remains for further tests of the downside. The next tier of support to watch is $1904.89/$1900.00.
A rebound above $1940.00 would ease short-term pressure on the downside and shift focus to more important resistance at $1983.51.
With the dollar still looking vulnerable, despite favorable interest rate differentials, I believe the underlying uptrend ultimately prevails and these setbacks are likely to be viewed as buying opportunities.
Silver
Silver has been hit harder by mounting global growth risks. The white metal dropped 7.3% last week. It was the second consecutive lower weekly close.
Spot Silver Daily Chart through 6/26/2023
Investors have been slow to accept the realities of the supply/demand dynamics in the physical market. Demand reached a record 1.24 billion ounces in 2022, resulting in a massive 237.7 Moz supply shortfall.
This came on the heels of a 51.1 Moz deficit in 2021. The Silver Institute is predicting another deficit this year of approximately 142.1 Moz.
While the Silver Institute sees industrial demand growing by 4% this year, they predict overall demand to contract by 6% due to weaker expectations for the silverware, jewelry, and bullion sectors.
Growth risks will continue to periodically spook investors in the paper market resulting in price retreats. However, such setbacks are likely to be viewed as buying opportunities.
Many believe that the industrial sector is largely recession-proof at this point with sweeping electrification initiatives being supported by government subsidies. I’m inclined to concur and would therefore consider this year’s low just below $20 to be well protected.
PGMs
Platinum remains on the defensive, dropping nearly 7% last week. It was the second consecutive lower weekly close.
Spot Platinum Daily Chart through 6/26/2023
Substitution for palladium has been helping to underpin the platinum market as the auto sector recovers post-COVID. While that is still happening, accelerating the adoption of electric vehicles may be becoming the more dominant storyline.
EVs accounted for 14% of global new car sales in 2022. That figure is expected to rise to 18% in 2023. Some are projecting that EVs will make up 35% of new car sales by 2030.
That bodes well for silver and copper, but not so much for the PGMs. Platinum has probed back below the midpoint of the COVID-era range, leaving this year’s low at $902.16 vulnerable to a retest.
Palladium slid to a 4½-year low of $1262.22 last week, keeping focus squarely on the downside.
Spot Palladium Daily Chart through 6/26/2023
Palladium is facing the double-whammy of substitution for still significantly cheaper platinum and the rising market share of EVs.
The next support to watch is $1243.20 based on a Fibonacci objective.
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.
