Market Update | 27/06/2023

Gold started quietly but we can expect increased volatility with the United States economy and Russia in focus

Indications only | Closing prices are bids | Prices & Charts  : Trading View | Market Research Refinitiv | See disclaimer below

Today’s Observations

On the opening bell in Asia on Monday, gold posted its low for the day at $1922. The price then rose to $1928 due to physical bargain hunting but quickly gave up the early gains by the European opening. It then staged a more significant rally to reach a high of $1933 following a strong AM benchmark in London that suggested further Central Bank buying.

However, the yellow metal fell back in New York on modest volume to end with a marginal 0.16% gain at $1923, after a stronger than expected Dallas Federal Reserve Manufacturing report. So far this morning, gold has traded between $1922 and $1930.

We expect a more active and volatile session with the geopolitical issues in Russia in focus. Also in focus are a raft of important United States economic reports due to be published today; we predict a trading range of $1920 to $1940. The industrial precious metals had a good start to the week, with silver gaining 1.88% to $22.79, platinum increasing by 0.65% to $928, and palladium rising by 2.04% to $1302.

Market Commentary

June 27, 2023 (Reuters) – Gold prices were flat on Tuesday, hovering slightly above their three-month lows, while the United States dollar strengthened. This was as traders looked to hedge against political turmoil in Russia and the Federal Reserve’s hawkish outlook. Spot gold held its ground at $1,923.94 per ounce by 0114 Greenwich Mean Time (GMT), while United States gold futures were also listless at $1,933.90.

The dollar index edged up 0.1%, making greenback-priced bullion less attractive for overseas buyers. Investors clung to safe-haven assets such as the dollar and gold in light of an aborted mutiny over the weekend in Russia. Russian President Vladimir Putin paid tribute to pilots killed over the weekend, confirming for the first time that Russian aviators had been lost in battle as the Wagner mercenary group marched on Moscow.

This week, we can expect a slew of economic data including a key inflation gauge, durable goods, and the University of Michigan’s consumer sentiment index. Additionally, a speech from Federal Reserve Chair Jerome Powell could throw light on the United States central bank’s rate-hike trajectory.

In comments made public on Monday, Federal Reserve Bank of New York President John Williams highlighted the importance of restoring price stability. However, he also warned that using rate policy to tame bubbles can bring unwanted economic pain. Investors now expect a 74% chance of a rate hike in July, with rate cuts seen from 2024 onwards. High-interest rates discourage investing in non-yielding gold, which is a safe investment during economic uncertainties. Traders are also watching JPMorgan’s nearly $16 billion Hedged Equity Fund’s quarterly refresh of its options positions and quarter-end rebalancing as the first half of the year winds down.

Elsewhere, markets expect stimulus policies to be unveiled by the top gold consumer, China, after a regular meeting of the Communist Party’s political bureau in July. Spot silver gained 0.3% to $22.84 per ounce, platinum was flat at $924.93, while palladium rose 0.5% to $1,311.50.

Economic Analysis

The Federal Reserve Bank of Dallas’ general business activity index for manufacturing in Texas rose to – 23.2 in June of 2023. This is the highest in three months and better than forecasts of -26.5. However, the reading continued to point to worsening business conditions, with contractions seen for production (-4.2 versus -1.3), new orders (-16.6 versus -16.1), shipments (-17 versus -3) and capacity utilization (-6 versus -4.9).

At the same time, labor market measures suggest weaker employment growth (2.2 versus 9.6) and declining work hours (-4.3 versus -0.9). On the price front, the raw materials prices index dropped 12 points to 1.4, indicative of little change in input costs while wage pressures remained elevated (25.3 versus 25).

Expectations regarding future manufacturing activity were mixed, with the future production index rising 12 points to 24.2 while the future general business activity index remained negative (-4.5 from -12.7). This information is sourced from the Federal Reserve Bank of Dallas.

Gold Chart ($/oz)

Silver Chart ($/oz)

Platinum Chart ($/oz)

Palladium Chart ($/oz)

This document is issued by Value Trading BV. While all reasonable care has been taken in preparing this document; no responsibility or liability is accepted for errors of fact or for any opinion expressed herein. Opinions, projections and estimates are subject to change without notice. This document is for information purposes only and for private circulation. It does not constitute any offer, recommendation or solicitation to any person to enter into transaction or adopt any hedging, trading or investment strategy, nor does it constitute any prediction of likely future movements in rates or prices or any representation that any such future movements will not exceed those shown in any illustration.