Marketupdate | 21/06/2023

Precious metals fell across the board as strong United States housing data points to more rate hikes.

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Today’s Observations

Gold dipped to $1946 in early Asian trading on Tuesday but then staged a smart rally to a high for the day of $1956 before falling 1.28% to a low of $1931 in New York amid good volume following the release of much stronger than expected United States housing data. This underlined the strength of the United States economy and reignited concerns over a resumption of the Federal Reserve’s rate hike program in July.

The yellow metal ended with a pared 0.72% loss at $1936 and has held narrowly between $1936 and $1939 so far this morning. However, we expect a volatile session with all eyes on Jerome Powell’s testimony to Congress as traders look for signals on the United States Central Bank’s monetary policy. The potential trading range today is $1925 to $1950.

Silver had a tough day, falling 3.34% to $23.16 on heavy volume; platinum fell 1.43% to $964, and palladium declined 1.64% to $1379.

Market Commentary

On June 21, 2023, Reuters reported that gold prices moved in a tight range on Wednesday after two-straight sessions of declines, as investors refrained from making large bets ahead of Federal Reserve Chairman Jerome Powell’s congressional testimony. Spot gold held its ground at $1,937.26 per ounce by 0248 Greenwich Mean Time. United States gold futures were almost unchanged at $1,948.40.

“The expected sustained Federal Reserve tightening bias is weighing on gold. In this light, Chairman Powell’s testimony could have a major short-term impact on the market,” said Clifford Bennett, chief economist at ACY Securities. While gold is considered a hedge against inflation, interest-rate hikes raise the opportunity cost of holding non-yielding bullion.

Powell delivers a semi-annual monetary policy testimony to the United States House Financial Affairs Committee at 1400 Greenwich Mean Time. Market participants will be looking out for the central bank’s thinking on the need for further interest rate increases amid hawkish remarks from policymakers.

Two Federal Reserve policymakers and an economist nominated to join them on the Federal Reserve’s Washington-based board on Tuesday said their focus is on bringing down too-high inflation so that the United States economy can get back to sustainable growth. United States Treasury yields, meanwhile, hovered near Tuesday’s close as investors priced in market expectations that the Federal Reserve is near the end of its rate-hiking cycle.

Economic Analysis

Housing starts in the United States unexpectedly jumped 21.7% month-over-month to a seasonally adjusted annualized rate of 1.631 million in May of 2023, the highest level since April of 2022 and way above forecasts of 1.4 million. The reading suggested the housing market is stabilizing after a loss of momentum that started early last year, prompted by elevated mortgage rates, high prices, and tighter lending.

Single-family housing starts, which account for the bulk of homebuilding, jumped 18.5% to 997K, the highest reading since June last year. Starts in buildings with five units or more surged by 28.1% to 624K. Starts rose in the West (16.4% to 341K), the South (20.3% to 908K) and the Midwest (66.9% to 282K) but fell in the Northeast (-18.7% to 100K).

Data for April 2023 was revised lower to 1.34 million from 1.401 million. Building permits in the United States rose by 5.2 percent to a seasonally adjusted annual rate of 1.491 million in May 2023, according to a preliminary estimate from the United States Census Bureau.

Gold Chart ($/oz)

Silver Chart ($/oz)

Platinum Chart ($/oz)

Palladium Chart ($/oz)

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