Marketupdate | 25/10/2023

“Gold falls on long liquidation but recovers to end barely lower, Mid-East remains in focus”.

Today’s Observations

Gold was steady in Asia on Tuesday, rising to a high for the day of $1980, but came under sustained long liquidation in Europe to reach a low of $1954 amid calls for a ceasefire in the Mid-East conflict and a firmer USD. However, the yellow metal recovered most of its losses to end another choppy session with a marginal 0.1% loss at $1971 and has held narrowly between $1971 and $1977 so far this morning with geo-political tension remaining the key focus for global markets. We expect less volatility today, unless there is fresh news from the Middle East, either good or bad, with gold likely to trade between $1960 and $1980. Silver eased 0.26% to $22.92 and looks set to hug the $23 level until gold makes its’ next move; platinum fell 1% to $887 with $900 proving to be a difficult technical hurdle to overcome; palladium continues to dance to its own tune, rising 0.53% to $1129.

Market Commentary

• Gold prices climbed on Wednesday on softer U.S. Treasury yields but lacked impetus to rise further as bullion’s safe-haven demand showed signs of fatigue after global leaders sought to prevent the Israel-Hamas war from spreading. Spot gold gained 0.3% to $1,975.61 by 0227 GMT, having declined in the previous two sessions, trading below five-month highs hit last week. S. gold futures were steady at $1,986.70.
• “Gold had a great run, having rallied over 10% in ten days towards that key resistance level at $2,000. But every move needs a pause, and we’ve reached that phase,” City Index’s senior analyst Matt Simpson said. “For now, intraday moves are less meaningful with U.S. GDP, Powell’s speech and a U.S. inflation report looming. But with the Middle East conflict looking like it might not escalate immediately, gold may struggle to break $2,000. Yet, gold bulls may be tempted to buy dips above $1,950.”
• Investors are keeping a close watch on the Middle East war as world leaders pushed for either a pause or ceasefire in fighting between Israel and Hamas in the Gaza Strip so that humanitarian aid could be delivered to besieged Palestinian civilians.
• Markets are also eagerly awaiting the release of the U.S. GDP numbers for the third quarter on Thursday and the PCE price index on Friday ahead of the Federal Reserve’s policy decision next week.
• The dollar index eased while benchmark U.S. 10-year Treasury yields inched lower as investors bought into a recent sell-off amid concerns about the economic impact of higher borrowing costs.
• Spot silver was flat at $22.94 per ounce, platinum added 0.3% to $886.54 and palladium advanced 0.9% to $1,129.18.
• South Africa’s Anglo-American Platinum said on Tuesday its refined platinum group metal (PGM) output declined 9% in the third quarter, due to disrupted water supplies to its processing facilities and lower concentrate production.

Economic Analysis

The S&P Global Manufacturing PMI for the US rose to 50 in October 2023 from 49.8 in September, beating forecasts of 49.5, preliminary estimates showed. It is the highest reading in six months, signalling a stabilization in operating conditions at manufacturing firms. A further improvement in supplier performance and still soft demand conditions led firms to cut their input buying for the fifteenth month running in October. The rate of decline was the slowest since April, but firms continued to highlight the rundown of safety stocks, with preproduction inventories falling at a faster pace. Stocks of finished goods also fell further. The rate of contraction softened, however, as some firms noted that cancelled orders were moved to inventories following a reduction in backlogs of work. Meanwhile, some reports of labor and material shortages at suppliers led to the least marked improvement in lead times since January. source: Markit Economics