Marketupdate | 23/06/2023

Gold extends its losing streak to a fresh three-month low on hawkish Federal Reserve, $1900 in focus

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

Today’s Observations

Gold embarked on a sustained decline from an early high of $1935 posted in Asia to a low of $1913 in late New York trading amid reasonable volume. This occurred as Federal Reserve Chairman Powell completed his semi-annual testimony to Congress by maintaining the United States Central Bank’s hawkish approach to monetary policy. Powell suggested that further interest rate hikes could be required in the fight against inflation.

The yellow metal ended just off the lows and down 0.98% at $1914 and has traded between $1911 and $1916 so far this morning. The pivotal $1900 are looming on technical radar screens, and there is little by way of United States economic data due today to change gold’s bearish outlook. The projected range today is $1905 to $1925.

Silver extended its decline into a fourth straight session to end down 1.77% at $22.26, platinum fell 2.43% to end on the lows at $924, and palladium slumped 5.06% to $1276.

Market Commentary

June 23, 2023 (Reuters) – Gold prices on Friday were on track for their biggest weekly loss since February. This happened as prospects of additional interest rate hikes by the United States Federal Reserve this year supported the dollar, pushing zero-yield bullion to an over three- month low.

Spot gold ticked down 0.1% to $1911.32 per ounce by 0246 GMT and was down 2.4% for the week. United States gold futures edged lower 0.1% to $1921.20. The dollar index held firm, set for a weekly gain, making gold less attractive for overseas investors.

“Gold has extended lower out of the range that it was occupying for a few weeks, suggesting there is more weakness ahead. The decline matches up with the upshift in yields, reflecting hawkish comments from Powell & Federal Reserve officials more generally,” said Ilya Spivak, head of global macro at Tastylive.

Federal Reserve Chair Jerome Powell in his second day of testimony said the United States central bank would move interest rates at a “careful pace” from here as policymakers’ edge towards a stopping point for their historic round of monetary policy tightening.

Separately, Federal Reserve Governor Michelle Bowman said at an event that “additional policy rate increases” will be needed to control inflation. Higher interest rates dull bullion’s appeal and investors now expect the Federal Reserve to resume its monetary tightening policy in July, after holding rates steady at the June meeting.

United States jobless claims, meanwhile, held steady at a 20-month high last week, potentially signaling a softening labour market in the face of the Federal Reserve’s aggressive rate hikes. Spot silver fell 0.5% to $22.1238 per ounce, platinum shed 0.4% to $919.23. Palladium was down 0.3% at $1280.14 after hitting its lowest since May 2019 in the previous session.

“Palladium seems to be following along with broader trends. It has a little bit more of an industrial profile than gold so expectations for a global downturn engineered by hawkish central banks might add to downside pressure,” Spivak added.

Economic Analysis

Nearly Existing home sales in the United States, which include completed transactions of single-family homes, town homes, condominiums, and co-ops, edged 2.3% higher from the previous month to a seasonally adjusted annual rate of 4.3 million in May of 2023, surpassing market estimates of 4.25 million.

Total inventory of unsold existing homes rose by 3.8% from the previous month to 1.08 million, reflecting 3 months of supply at the current pace of sales. Also, the median existing-home price for all housing types fell by 3.1% compared to the corresponding month of the previous year to $396,100.

“Mortgage rates heavily influence the direction of home sales,” said National Association of Realtors Chief Economist Lawrence Yun. “Relatively steady rates have led to several consecutive months of consistent home sales.” Source: National Association of Realtors.

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.