Keep up-to-date in the past week’s price action and the current geopolitical and economic factors driving the international and local precious metal markets.
Depending on how you look at it, given what’s happened to precious metal prices in the past five weeks, as a gold market commentator, I either picked the very best or very worst of times to take several weeks away from work.
Precious metals have had a volatile week with the gold price in USD breaking south of 1,200 per ounce and absolute chaos in Forex markets saw the AUD/USD plummet to around US 72.00c. Gold in USD is currently in capitulation mode and dropped as low as $1,165 during the week.
Gold remained heavily oversold this week with a favourite long-term indicator well and truly in the buy zone with gold in the $1630 range.
The longer-term chart in AUD is above, and there are only a few times each calendar year where the Williams% oscillator will hit an oversold level -80 or less, on a weekly chart (circled at very bottom of above chart). About as simple as technical analysis gets, but if you look back on previous years where this oscillator was in the oversold zone, it is quite reliable for providing good price points to buy, or top up ones portfolio.
Not a crystal ball for predicting the future in any way, but what it does highlight are times of excessive price weakness, which usually provide short to medium term lows for the calendar year and the best price points to average in. Signals occur only when the price rapidly deviates from a recent trading range, and the last time we were in this zone was back in July 2017 at $1,550AUD per ounce, and the best buying spot of the year.
Despite the Federal Reserve keeping interest rates on hold, Gold prices continued to ease this week, with further falls in our currency providing somewhat of a floor for AUD prices. The Federal Reserve indicated that the US would see two more rate hikes this year, with the most probable months being September and December. We saw some USD strength on the back of the announcement, which has the AUD/USD back at 0.7363.
In news this week the International Monetary Fund (IMF) has warned that the inflation rate in Venezuela could top 1,000,000% by the end of the year, as the country is in the midst of a hyperinflationary episode that trumps the Weimar republic episode post WW1.
Gold prices have fallen by over 1% this week, re-testing the USD $1240oz level, whilst silver has also declined, trading closer to USD $16oz, as renewed selling pressure hit the entire commodities complex this week.
Gold prices have rallied this week, with the precious metal complex possibly having completed its multi-month corrective period. The yellow metal, which had fallen by approximately USD $130oz since early 2018 (see chart below), found important support after trading as low as USD $1,238oz on the 3rd of July, and is now sitting closer to USD $1,260oz.
It’s been a difficult two weeks for precious metal bulls, with gold failing to hold support at the all important USD $1,300oz level late last week, before plunging to USD $1,275oz on June 15th, which you can see on the chart below.
The plunge, which took place about a day and a half after the Federal Reserve had gone ahead with a fully anticipated rate hike, erased any 2018 gains precious metal investors had been sitting on for the year, with both gold and silver now down in USD terms year to date.
David Stockman, director of the Office of Management of Budget under President Reagan and master of mazy budgetary arithmetic, joins Jim Grant for a scintillating discussion of fiscal and monetary matters, and a look at Central bank tightening in years to come.
Precious metal prices have consolidated this week, with gold still battling to decisively reclaim the USD $1,300oz level. Silver has had a better time of it, rising nearly 2.5% in the last week, with industrial metals showing some relative strength, whilst futures market participants have stepped up their long exposure, adding further upside pressure for silver.
Sentiment for the sector as a whole is still incredibly low (more on this later), even though there is plenty of news flow that will prove supportive for precious metals, including the continued shenanigans in Italy.
Incrementum AG this week released their 12th annual “In Gold We Trust” report, titled “Gold and the Turning of the Monetary Tides”, a must read report for any follower of the precious metal market.
In any discussion of the Australian housing market, it’s impossible to avoid discussion of a catalyst. “We see no immediate catalysts for a crash,” has become the cry of the perpetual housing bull. But Dr Philipp Hofflin from the Lazard Australian Equity Team believes a catalyst is unnecessary.
A surging US dollar and a capital flight from emerging markets may lead to another "major" financial crisis, investor George Soros said, warning the European Union that it's facing an imminent existential threat.
COMMENTS / HIGHLIGHTS:
After Wednesday’s release of the somewhat ‘dovish’ FOMC minutes from its most recent meeting in May, - with the US central bank’s monetary policy committee indicating that while it intends to stick to its rate hike trajectory, it is willing to allow some levity for inflation to overshoot, - the brakes were slammed on the Greenback and US 10 Yr Treasury yields, providing gold with some respite from recent downside momentum.
PRECIOUS METALS RANGES - Trade Date: May 11th
COMMENTS / HIGHLIGHTS:
A mixed bag on Friday as the week drew to a close. Europe took XAU/USD up to technical resistance at the USD 1325/1327 region before the market rolled over when US investors arrived who erased all of Europe’s gains in what was routine intraday, speculative trade. The overall trend for the US Dollar on Friday was lower with losses pared into the close. Crude oil markets also retreated from last week’s 3½-year highs and US equity markets after drifting lower early, closed on a firm note.
PRECIOUS METALS RANGES - Trade Date: May 10th
COMMENTS / HIGHLIGHTS:
A mixed day’s trade saw the US dollar weaken, US equities strengthen, crude oil prices dip before recovering, US Treasury yields soften and the entire precious metals complex (XAU/AUD excepted) registering respectable gains.
Geopolitics remained at the forefront as Israel and Syria exchanged salvos albeit with muted market reaction. Consternation also remained surrounding the Trump Administration’s withdrawal from the ‘Iran Nuclear Deal’ earlier in the week.
Long dubbed ‘Woodstock for Capitalists’, or the Stockmarket Superbowl as we prefer, last weekends Berkshire Hathaway Annual Meeting offered plenty of insights for investors big and small.
My personal favourite came from Buffett's offsider Charlie Munger, who, when asked what Berkshire’s formula was to incorporate qualitative factors into their valuations, replied that none exist, and that if the questioner wanted such a formula; “you should go back to graduate school. They’ll give you lots of formulas that won’t work.
PRECIOUS METALS RANGES - Trade Date: May 9th
COMMENTS / HIGHLIGHTS:
The fallout continued yesterday from Tuesday’s decision by US President Trump to abandon the Joint Comprehensive Plan of Action (JCPOA) aka ‘The Iran Nuclear Deal’ and to reimpose even tougher sanctions than had existed previously, ostensibly to punish Iran for alleged transgressions and to force the country into renegotiating the deal.
PRECIOUS METALS RANGES - Trade Date: May 7th
COMMENTS / HIGHLIGHTS:
A quiet start to the week with a UK Bank holiday impacting liquidity and markets holding station within ranges.
Overnight the US President Tweeted “I will be announcing my decision on the Iran Deal tomorrow (Tuesday) from the White House at 2:00pm.” (this comes ahead of the May 12th deadline for the renewal of sanctions waivers in relation to the Joint Comprehensive Plan of Action (JCPOA) agreed with Iran that was signed in 2015). President Trump is widely anticipated to abandon the deal and to reimpose sanctions upon the Islamic Republic of Iran.
PRECIOUS METALS RANGES - Trade Date: May 4th
COMMENTS / HIGHLIGHTS:
Gold stayed away from its week’s lows on Friday after the eagerly awaited US Bureau of Labor Statistics April employment data came in softer than anticipated by the market at +164K jobs for the headline Non-Farm Payrolls figure (vs +192K expected) with the Unemployment Rate registering 3.9% (vs 4.0% expected). With February’s data being revised down marginally and the March data being revised higher, the BLS report noted that ”job gains have averaged 208,000 over the last 3 months,”.
Gold prices have largely stabilised around USD $1310oz this week, arresting a slide that has seen the yellow metal pull back from the USD $1360oz region over the past three weeks.
Dollar strength has of course been the primary driver of recent moves in the yellow metal, with the USD dollar index, which has been on an almost relentless move higher since the middle of April, pausing over the last couple of days.
Softer US Treasury yields, a softer US Dollar and weaker US equities on concerns surrounding the ongoing trade negotiations between the United States and China, assisted early precious metals bargain hunters in keeping support under gold at a crucial technical level.
Precious metals firmed on modest shortcovering ahead of the anticipated US Federal Reserve monetary policy announcement. Prior to its release however, was the release of the private ADP national employment report (April) which came in +204K (vs +190K expected), to which the precious metals markets reacted with a yawn.
PRECIOUS METALS RANGES - Trade Date: May 1st
COMMENTS / HIGHLIGHTS:
Thin, illiquid markets resulting from May Day / Labour Day holidays spanning China and most of Europe, saw XAU/USD trade to its lowest level since Jan 2nd this year as the metal rendezvoused with the technically all-important 200 Day moving average at USD 1305.