Market Updates

“Bull Markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria.” – Sir John Templeton

Gold prices are treading water this week, currently trading at USD $1,316oz, whilst silver is just below USD $16.50oz. For local investors, prices are sitting at AUD $1,692oz for gold and AUD $21.16 for silver, with the currency sitting just below USD $0.78.

After hitting the US$1361 target, gold tested the US$1301 support at the Weekly Standard line on the Ichimoku/the base of the Daily cloud, and recovers.

Targets: medium term look for US$1372. Short term the market is vulnerable to weaken off to US$1300 again.

Support comes in at US$1301 from the weekly Ichimoku Standard Line. Resistance lies at US$1332-34 and US$1366.

CME positioning reveals another decline in gross Managed Money length of almost 0.50 million Ftozs. Shorts reduced by 0.57 million. Trading in the week of the 27th February to the 6th of March took place at a VWAP of US$1321.64, and since the 6th, open interest in the April and June contracts has contracted by about 1.85 million FTozs, suggesting more long liquidation took place.

Precious metal prices are on track to end this week largely unchanged, having pulled back from mid-week highs. Gold is currently trading at USD $1318oz, where silver is at USD $16.52 and in Australian dollars, gold is at AUD $1693 whilst silver is trading just above AUD $21oz.

Hello everyone,
 
Where to begin?
 
Markets have been roiled over the past few days by a handful of events but arguably the one causing the most consternation amongst investors being the announcement last Friday by President Trump of his intention to apply across the board tariffs of 25% on imported steel and 10% on imported aluminium on the grounds of ‘national security’.  Appeals from US allies and from some members within his Administration to desist, as well as threats of retaliation from some trading partners (the EU) and the attendant hue and cry of “Trade Wars” from the usual suspects in the media, somewhat belie the fact that US interests are already subject to tariffs in various jurisdictions (e.g. the European Union applies a 10% tariff to US vehicles vs the 2.5% tariff applied to European automobiles imported into the USA). All this notwithstanding, the “Trade Wars / Tariffs” issue claimed its first scalp today with the announcement this morning at the commencement of trading in the Far East that President Trump’s senior economic adviser, Gary Cohn has handed in his resignation and is to leave the White House (Mr Cohn unable to reconcile his avowedly anti-protectionist views with the US President’s ‘America First’ agenda).

Gold and silver continued their pullback this week, with the price of the metals declining to USD $1315oz (gold), and USD $16.50oz (silver). Overnight, the yellow metal fell as low as USD $1305oz, though it found solid support at this level, and essentially finished unchanged for the day.

A decline in the AUD has supported prices in Australian dollar terms, with the AUD price of gold, currently sitting just below AUD $1700oz, essentially flat for the week. Silver is also steady, currently trading at AUD $21.30oz, with the gold to silver ratio (GSR) still sitting at around 80:1.

Hello everyone.
 
The markets’ verdict on the prepared Testimony and subsequent Q&A of US Federal Reserve Chairman Jerome Powell before the House Financial Services Committee, came down on the side of “hawkish”.

​Hello everyone.
 
Precious metals commenced the week with price action driven by the US dollar which itself was hoofed around like a football, initially on comments from Bank of Japan Governor Kuroda during early Far Eastern trading that the: “BOJ will persistently continue powerful monetary easing” and “Japan's economy needs persistent monetary easing” and then by comments during European trading from European Central Bank President Draghi that "there's no currency wars".

Gold prices have corrected slightly this week, with the price of the yellow metal falling 1.5% to the USD $1330oz level. Silver has been affected too, with a similar fall bringing prices back toward USD $16.50oz.

A slight rally in the USD is partly to blame for the decline, though there is no shortage of supportive factors for gold, with asset managers including Blackrock increasing their exposure, whilst ETF holdings for both gold and silver have risen, suggesting this minor pullback has been treated as a buying opportunity.

​Chinese New Year and US Presidents Day holidays have impacted market liquidity during the early part of this week.

The return of US investors on Tuesday saw the precious metals driven lower and in the absence of anything significant of note to canvas, I’ll let the pictures tell the tale as follows:

1. Stronger US Dollar Index as the Greenback rallied against its major pairs

2. Firm US 10 Year Treasury yields

3. Stronger US Dollar / Weaker Euro

4. Stronger US Dollar / Weaker JPY

5. Lower DJIA

6. Lower XAU in USD
   & 7) Lower XAU in AUD

Precious metal prices have rallied this week, with both gold and silver up by close to 3% in USD terms, trading at USD $1354oz (gold), and USD $16.96oz (silver). In local currency terms, the yellow metal has again pushed back above AUD $1700oz, whilst silver is now trading at AUD $21.35oz.

The catalyst for the move was a US inflation print which came in higher than expected (more on this below). This figure came out on the same day we also saw a very soft retail sales figure, which came in at -0.3% for the month, with gold rallying , and the dollar weakening substantially in the aftermath.

Hello everyone.
 
Since the last missive a week ago, extremely choppy ‘rinse and spin’ price action has been seen across the precious metals complex (particularly gold), as investors were driven hither and yon by volatility across US equity markets.
 
Yesterday proved no exception.

To bastardise Hemingway, Jacob Zuma’s political demise appears to have come about “slowly, then all at once”. Years of the ANC governing as the party of liberation, and then the party of failed promise tainted with corruption and little to offer the South African in the street, have forced change at the top.

Given South Africa’s dominance of world platinum supplies, mining an estimated 4.38 million Tozs in 2017, or around 70 pct of world mine supply, how do we think that these political developments will affect platinum and palladium and are there other factors that compete with the South African situation that need to be considered?

Precious metal prices have held their ground this week, with the price of gold in AUD again challenging $1700oz, whilst silver in AUD is trading above $21oz.

Australian investors in the metals space have been buoyed by a decline in the value of the AUD, which has fallen to USD $0.78, as stabilisation in the greenback, and a continued run of soft economic data in Australia dampens market enthusiasm for a rate hike in 2018.

Hello everyone.
 
Precious metals remained under the cosh on Wednesday as the Dow Jones Industrial Average recouped 1,500 of the (approximately) 2,200 points it had shed since last Friday and as the US Dollar continued to find its feet against the “majors” (Euro, JPY and AUD).

Hello everyone.
 
“Ladders and snakes. Ladders give, snakes take.”
 
The ongoing carnage in US equity markets (and associated volatility indexes like the VIX and the XIV) on Tuesday, roiled precious metals markets. Gold and silver surged higher during Far Eastern and early European trade on the back of the algorithmically driven abyss into which equities had precipitously plunged since Friday, only to “turn turtle” and surrender gains made since the commencement of trading this week in their entirety, as stocks surged back when US investors arrived.

​U.S. stocks plunged the most in 6 1/2 years, with the Dow Jones Industrial Average sinking more than 1,100 points, and the S&P 500 down more than 4% overnight, amid rising concern that inflation will force interest rates higher. Treasuries rallied and gold rose on safe haven demand. The AUD suffered too, pushing spot gold in AUD back above $1,700 per ounce.

Hello everyone.
 
Violent moves were seen across the gamut of financial markets spanning stocks, interest rates, currencies and commodities, as the week commenced.
 
Yesterday’s Far Eastern session was one of the choppiest I can recall in recent memory.

Gold and silver had a steady end to January 2018, closing out the month with an increase of 4% (gold) and 2% (silver) in USD terms. For local investors, returns were constrained, owing to a rally in the AUD, which closed the month comfortably above USD $0.80.

Other asset classes have hogged the headlines though, with equity markets rallying strongly, so much so that a now record number of Americans expect to see rising stock prices over the next 12 months. Whilst risk is flying higher, bonds, Bitcoin and the US dollar have all sold off violently to start the year.

Hello everyone.
 
Gold and silver ripped higher on Thursday as the US Dollar was given the baby seal treatment by investors after US Treasury Secretary Steven Mnuchin commented at the World Economic Forum in Davos that; "Obviously a weaker dollar is good for us as it relates to trade and opportunities,” - thereby departing from the widely followed public script by US officials that a strong Greenback is always desirable.
 
The brakes were also slammed on the Dow Jones Index’s untrammelled ascent to record highs, after US Commerce Secretary Wilbur Ross commented at the WEF that China's 2025 Technology Plan was a "direct threat" to the US, sparking fears of an escalation in the (perceived) trade war being waged by the US presently, as well as fears of increased protectionism from the world’s largest economy. Fears exacerbated by the freshly announced US tariffs on solar panels and washing machines less than 24 hours prior.

Gold prices have continued their march higher overnight, currently trading near USD $1355oz. Silver has also rallied, continuing the impressive run in precious metal prices which dates back to mid December, with gold and silver up 9% and 12% respectively in this current rally.

Australian dollar returns continue to be impacted by the strength in local currency, which continues to hold above USD $0.80, with gold and silver in AUD pushing up toward (but not yet reaching) $1700oz and $22oz respectively.

Hello everyone,
 
The three day US government “shutdown” concluded prior to the commencement of Far Eastern trading yesterday, after the US Senate voted (81-18) to pass funding measures through until February 8th in exchange for a promise from Republican leaders to address the DACA (Deferred Action for Childhood Arrivals) issue.

Hello everyone.
 
Precious metals closed out last week on a firm footing, most likely resulting from end-of-week booksquaring / profit-taking / shortcovering.
 
Over the weekend, headlines were dominated by news that the Democrats failure to extract concessions from President Trump’s Administration in relation to the granting of amnesty to illegal immigrants, had torpedoed the 60 Senate votes required to continue funding the “spending gap” of the US government, thereby leading to the closure of components of the US Government as of midnight Saturday.

It’s not yet three weeks old, but 2018 is already shaping up as an interesting year in financial markets. Stocks have flown out of the gate, and bond yields are rising, with Bill Gross claiming we’ve seen the end of the bull market in fixed income.

Bitcoin and cryptocurrencies have crashed hard, whilst precious metals have continued their solid move higher, which began in mid December 2017, with gold comfortably trading back above USD $1320oz, and silver closing in on USD $17oz.