Marketupdate | 20/06/2023

Gold has ultra-quiet start to the week with the United States markets closed, focus is on the Federal Reserve

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

Today’s Observations

Gold had an ultra-quiet start to the new week on Monday. The United States markets were closed for the Juneteenth Emancipation Day holiday. The price of gold eased from an early high of 1958 dollars posted in Asia to a low of 1948 dollars in Europe before ending down 0.41% at 1950 dollars amid light trading volume.

The yellow metal has been more active this morning, trading between 1954 dollars and 1946 dollars. Market participants are expecting a more volatile session today, as traders are looking ahead to Jerome Powell’s midweek testimony to Congress for signals of Federal Reserve monetary policy.

In our weekly review and outlook, we predicted a week of sideways trading within technical parameters set by the 50-day moving average pegged at 1983 dollars and the 100-day moving average at 1943 dollars. We see no reason to change that view with today’s trading range expected to be 1945 dollars to 1965 dollars.

Other precious metals also showed movement. Silver fell 0.95% to 23.96 dollars but has a solid feel to it. Platinum ended on the lows and down 0.81% at 978 dollars, and palladium eased 0.5% to 1402 dollars.

Market Commentary

On June 20, 2023, gold prices held steady on Tuesday, after moving in a tight range in holiday-thinned trading, as market participants awaited further direction from Capitol Hill testimony by United States Federal Reserve Chair Jerome Powell this week. Spot gold held its ground at 1949.59 dollars per ounce by 0248 Greenwich Mean Time, while United States gold futures fell 0.5% to 1961.20 dollars.

“Gold prices seem exhausted lately, as intermittent bounces over the past month have failed to find much follow-through … This comes on the back of firmer Treasury yields, which have kept a lid on the non-yielding yellow metal’s upside,” IG market analyst Yeap Jun Rong said. Investors are now focusing on Powell’s congressional testimony on Wednesday and Thursday for further guidance on interest rates following the Federal Reserve’s hawkish pause on monetary policy tightening last week.

Although gold is considered a hedge against inflation, interest rate hikes raise the opportunity cost of holding non-yielding bullion. “With expectations previously pricing for a more dovish outcome from the Federal Reserve, the recent push back by the central bank has been disappointing to some, which translates to some offloading in place,” IG’s Jun Rong added.

The United States dollar, meanwhile, rose broadly on Tuesday and notched a seven-month high against the yen, while the yuan slipped after China cut two benchmark lending interest rates for the first time in 10 months. Additionally, the European Central Bank should raise interest rates again in July as inflation risks are skewed towards higher outcomes, Slovakia’s central bank chief said on Monday, while the Bank of England is expected to raise rates by another 25 basis points on Thursday.

Among other precious metals, spot silver eased 0.1% to 23.911 dollars per ounce and palladium fell 1.2% to 1390.15 dollars. Platinum was down 0.5% at 970.72 dollars, set for a third consecutive session of losses.

Economic Analysis

The National Association of Home Builders/Wells Fargo Housing Market Index in the United States rose by another 5 points to 55 in June 2023, the highest reading since July last year, and easily beating forecasts of 51.

Also, the index showed builders’ confidence came to positive territory for the first time in 11 months, due to solid demand, a lack of existing inventory and improving supply chain efficiency. “However, access for builder and developer loans has become more difficult to obtain over the last year, which will ultimately result in lower lot supplies as the industry tries to expand off cycle lows”, National Association of Home Builders Chairman Alicia Huey said.

In June, the gauge for current single-family home sales jumped to 61 from 56, while the home sales over next six months sub-index increased 6 points to 62. In addition, the gauge for prospective buyers rose 4 points to 37. Source: National Association of Home Builders.

Gold Chart

Silver Chart

Platinum Chart

Palladium Chart

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