Marktupdate | 16/06/2023

Gold recorded a new 3-month low, but recovered due to a weaker USD and a drop in US 10-year government bond yields.

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Insights

On Thursday, gold started a relentless decline in Asia and Europe, which extended selling after US inflation data and the FOMC meeting to reach a new 3-month low of $1926 in early trading in New York. However, despite a stronger-than-expected US retail sales report, willing buyers were found for this weakness (central banks again?). This was followed by a sustained recovery of 1.77% to a high of $1960 on high trading volume, as the USD fell, US government bond yields declined and global equity markets rose. The yellow metal closed 0.82% higher at $1958 and has held closely between $1956 and $1962 so far this morning. In the absence of key US economic data, the end of an interesting week could be quiet, with gold likely to trade sideways between support provided by the 100-day MA set at $1942 and resistance from the crucial $1960 level. Silver recovered from a drop to $23.25 to close with a reduced loss of 0.17% at $23.89, platinum rose 1.22% to $992 and palladium rose 0.72% to $1391.

Market comment

June 16, 2023 (Reuters) – Gold prices remained within a narrow range on Friday as traders weighed recent US economic data and hawkish signals from the Federal Reserve, while a relatively weaker dollar provided some support for the precious metal. Spot gold remained unchanged at $1,957.84 per ounce at 0238 GMT. US gold futures also remained stagnant at $1,970.30.

Gold dipped to a three-month low on Thursday before changing course to finish higher as US economic data provided some relief from the Fed’s “hawkish pause” on interest rate hikes. “Gold is struggling to move higher because the Fed’s message on inflation and interest rates is still hawkish. So it removes the incentive to buy gold as more interest rate hikes are on the horizon,” said Edward Meir, a metals analyst at Marex.

Although gold is considered a safe haven during economic uncertainties, higher interest rates make the zero-yield precious metal less attractive. Traders are now pricing in a 72% chance of a 25-basis-point rate hike in July, after the Fed indicated in new projections that borrowing costs may still need to rise by up to half a percentage point by the end of the year. The dollar index remained near a one-month low, making gold less expensive for buyers with other currencies.Over the next two weeks, gold could trade in the range of $1,931 to $2,000, with strong resistance at the upside, Meir added.

In contrast, the Bank of Japan maintained its ultra-easy monetary policy despite higher-than-expected inflation, as it focuses on supporting a fragile economic recovery amid a sharp slowdown in global growth.

Spot silver rose 0.2% to $23.9098 per ounce and platinum ticked 0.1% higher to $986.86. But both metals were poised to record weekly losses. Palladium fell slightly by 0.1% to $1,397.90 but was on track for its best week since April.

Economic Analysis

US retail sales unexpectedly rose 0.3% month-on-month in May 2023, following a 0.4% rise in April, beating expectations of a 0.1% decline. The data indicated that consumer spending remains resilient despite higher inflation and interest rates. The biggest increases were seen in sales of building materials and garden equipment (2.2%) and motor vehicles and parts (1.4%).

Purchases were also higher at food services and drinking establishments (0.4%); general merchandise shops (0.4%); furniture shops (0.4%); food and beverage shops (0.3%); sporting goods, hobby, musical instrument, & book shops (0.3%); and electronics and appliances (0.2%).

On the other hand, sales were flat at health, personal care, and clothing shops and fell 2.6% at petrol stations and 1% at miscellaneous retailers. So-called core retail sales, which exclude cars, petrol, building materials and food services, rose 0.2%, following a 0.6% gain in April. Source: U.S. Census Bureau

Gold Chart ($/oz)

Silver Chart ($/oz)

Platinum Chart ($/oz)

Palladium Chart ($/oz)

This document is published by Value Trading BV. While every reasonable care has been taken in the preparation of this document, no responsibility or liability is accepted for factual errors or for any opinions expressed herein. Opinions, projections and estimates are subject to change without notice. This document is for informational purposes only and for private circulation. It does not constitute an offer, recommendation or invitation to any person to enter into any transaction or adopt any hedging, trading or investment strategy, nor does it constitute a forecast of likely future movements in rates or prices or any representation that such future movements will not exceed those shown in any illustration..