Market Updates

Click to see our weekly report that captures the technical outlook for precious metals using Point and Figure and Ichimoku Cloud charts, along with a brief commentary that addresses the changes in speculative positioning in US futures exchanges and global ETFs. We will also discuss economic and other news affecting precious metals.

Weekly Technical and Precious Metals Positioning Report

Starting this week, ABC Bullion will be distributing a weekly report that captures the technical outlook for precious metals using Point and Figure and Ichimoku Cloud charts, along with a brief commentary that addresses the changes in speculative positioning in US futures exchanges and global ETFs. We will also discuss economic and other news affecting precious metals.

After the decent break that took place on Tuesday the 19th, it looks worthwhile to have a quick visit to the Weekly Charts and ratio charts to see how the picture has moved on since the report written a fortnight ago.

“Why investors may need to lower their sights”, looks at the extraordinary performance of financial markets in the last thirty years, describing them as a ‘golden age’ for investors, before noting that those returns were significantly higher than the long-term average.

Platinum has had a strong start to 2016, with the market rallying from US$889.50 to a high of US$1,008.50 in early March, a 13.30% increase, before easing back slightly. The price has pretty much as good a run as gold and silver, and has outshone its sister metal, palladium. To read more about this intriguing precious metal please click the image below to view our in depth report.

Nicholas Frappell
General Manager

ABC Bullion

Precious metals continue to impress, with another impressive week for the gold and especially silver. In US Dollars, the gold price continues to consolidate around the $1250 per troy ounce level, whilst it is again sitting comfortably above AUD $1600 per troy ounce, despite the continued strength in the Australian dollar, which was pushing above USD $0.78 earlier in the week.

This week also saw the launch of the Shanghai Gold Fix, with the Shanghai Gold Exchange starting a twice daily fixing system, an unsurprising development considering the growth of the gold market in China. The first fix was set at 256.92 per gram (circa $USD $1233.85 per troy ounce), according to Bloomberg.

Despite the overnight weakness, it’s been another solid week for precious metal investors, with gold trading just below USD $1230 per troy ounce, whilst in local currency, it is sitting just below AUD $1600 per troy ounce, with the dollar pushing well above $0.76 vs. the USD.

The bigger news has been in silver, with the little cousin of the precious metal complex now trading closer to USD $16.20 per troy ounce, up nearly 9% since the start of the month, when it was trading closer to USD $15.

The outperformance of silver in the last few trading days is giving further encouragement to those who believe the next move in this precious metal cycle will be to the upside, building on the impressive gains seen in Q1 2016.

Gold and silver prices have had another solid week, with the precious metals trading above USD $1230 and USD $15 per troy ounce respectively.

In Australian dollar terms, the metals are also trading strongly, sitting above AUD $1630 and $20 per troy ounce, consolidating the impressive returns in Q1 that saw the metal rise 17% in USD terms.

Precious metals have closed out a very impressive Q1 2016, a welcome respite after what has been a tough three years for those who’ve been long in the sector. After starting the year trading at USD $1,060 and USD $13.85 per troy ounce for gold and silver respectively, the market has rallied strongly, with the two metals finishing the quarter up 16% (gold) and 11% (silver). That is based on closing prices of USD $1234 and USD $15.38 per troy ounce for the two metals.

Gold prices corrected sharply overnight, with the price of the yellow metal falling as low as USD $1214 per ounce, with silver following suit, trading as low as USD $15.13 per ounce before stabilizing somewhat.

Prices for Australian dollar investors have also pulled back, with the local currency still stubbornly sitting above $0.75 per ounce. AUD gold is currently trading at $1620 per ounce, whilst silver is sitting at AUD $20.40, an area that has proved very good buying for most of the last year.

The price decline we’ve seen overnight has not come as a huge surprise, with a pullback expected for much of the past two to three weeks. Speculative and commercial positioning in the futures markets had suggesting precious metals were short-term overbought, and this kind of weakness is often a good thing, setting the market up for another move higher.

We will take a more detailed technical look at where the market sits today, after this pullback, and where the key support lines are late on in this report.

Gold prices have consolidated this week, originally pulling back before the very dovish projections from the Fed put some wind under the sails of precious metal prices.

In USD, gold is currently trading at $1259 per ounce, essentially unchanged for the week, whilst silver is sitting at $16 per ounce, up nearly 3% for the week. Prices in Australian dollars have corrected, owing to the quite extraordinary rally in the local currency, which has pushed above 76 cents vs. the US dollar.

AUD gold and silver are now trading just below $1650 and $21 per ounce respectively, a pullback that is all currency related, rather than due to any actual precious metal price weakness.

If they closed the books on 2016 tomorrow – precious metal investors would be celebrating a very happy year indeed. After ending 2015 as the most hated asset class on the planet, gold has trumped all over the last several weeks, currently trading north of USD $1250 and AUD $1700 per ounce.

The price in Australian dollars, up nearly 20% for the year, is even more extraordinary when one considers where the local currency is, with the Australian dollar sitting at $0.74 vs. the US dollar, testament to better than expected GDP figures down under, a bounce in iron ore, and the realization the Fed’s forecasts for stronger growth and higher rates in the United States were as inaccurate heading into 2016 as they were heading into 2008.

The performance of gold over this period has seen huge inflows into gold ETFs, strong retail demand (ABC Bullion turnover is particularly brisk right now), and an incredible change in speculative activity in the precious metal market, with managed money now aggressively long, whilst shorts have all but disappeared.

Indeed so strong has gold been of late that we’ve even seen the more ‘entertaining’ end of the finance media endorse gold investment, with Jim Kramer coming out and stating that every portfolio should have an allocation to gold and silver. Obviously we agree – though on a short-term basis, too much bullishness towards the sector makes us nervous, and we are more inclined to believe a correction can’t be too far away.

First: the facts. Gold prices have been on a tear the past week, with the price of the yellow metal climbing above USD $1240 an ounce, now up an incredible 18% in USD terms since the start of the year. Silver has come along for the ride of late too, currently trading at USD $15.70 an ounce. YTD it is now up 14%, with precious metals comfortably the best performing asset class of the year.

In Australian dollar terms, the news is even better, with silver now trading above AUD $22 per ounce, whilst gold has just broken through AUD $1750 per ounce, up nearly 25% from the lows of late 2015, and within striking distance of its all time highs.

Precious metals continued their impressive rally this week, with gold and silver climbing above USD $1150 an ounce and within touching distance of USD $15 an ounce respectively, as weak data, continued market volatility and a shock move by the Bank of Japan to implement negative interest rates boosted demand for safe haven assets.

The move by the Bank of Japan (BoJ) follows increasingly dovish tones coming from the European Central Bank (ECB), with the market expecting more easing from Mario Draghi soon, whilst weak data out of the United States has called into question whether the Federal Reserve will be able to make any interest rate hikes at all in 2016, let alone the four they supposedly have planned.

It’s been another positive week for precious metal investors, with the gold price comfortably pushing through USD $1100 an ounce, whilst silver has also strengthened, currently trading near USD $14.50 an ounce, up a further 2% for the week.

If the metals can hold onto their gains for the entire week, it will cap a very strong January 2016 for the sector, with both gold and silver up 4-5% for the month, a performance that is even stronger on a relative basis, when one considers the substantial decline we’ve seen in equity markets, and the broader commodity complex so far this year.

After closing out 2015 as one of the least popular asset classes on the planet, precious metals have come ‘back to life’, holding their own and even advancing in value whilst financial markets and broader commodities endure the kind of volatility we’ve not seen for years.

ETF investors are buying again, coin demand the world over is robust, whilst interest from retail clients, institutional investors and SMSF trustees has noticeably picked up in Australia, something we expect to continue throughout 2016

In this weeks market update, we’ll be looking at some of the latest gold charts, what is happening in stock markets the world over (decreases in which are spurring precious metal demand), and why gold as an asset class reminds us of the latest Hollywood blockbuster; “The Revenant”.

We are also going to share some thoughts on an interesting report published earlier in the week by PWC, who interviewed CEO’s around the globe regarding their view on the economy, and future investment and hiring plans.

Calendar year 2016 has had a volatile start for investors in financial markets, with equities the world over under significant stress. Fears regarding a slow-down and potential hard landing in China, as well as broader concerns about tepid global growth, as well as rising geopolitical tensions in the Middle East and Korea have seen hundreds of billions in ‘wealth’ wiped out.

No region has escaped the rout, with the pain felt in Shanghai, London, New York and Sydney too, with the ASX falling below 4,900 points earlier this week, in what has proved to be the worst start for equity markets on record.

Fortunately, those of us with investments in precious metals have been sheltered from this storm, with the price of gold rising back above USD $1100 an ounce at point, though some profit taking and some commodity index rebalancing has since seen the price of the yellow metal ease back toward USD $1,080.

Silver has held its ground, currently sitting just below USD $14.00 an ounce, whilst prices in Australian dollars for both metals have surged, with the weakness in the local currency pushing gold and silver toward AUD $1550 and AUD $20 an ounce respectively.

Demand for physical metal has been robust over the holiday period, especially at the retail level, with US Mint silver coin sales apparently quadrupling. With a gold/silver ratio near 80:1, we were happy to personally take part in that buying activity, and topped up our own SMSF with some silver over the holiday period.

We’ve noted many of our clients have also done so over the past few weeks, with gold and silver sales off to a solid start to the year, evidence of the robust demand that exists for precious metals today.

Was it worth it?

That’s the question we think a lot of investors will be asking as they wrap Xmas presents this year. The hours spent reading blogs and research and balance sheets and company announcements, all trying to work out which asset class to invest in, which ones to avoid, or which sectors of the market to focus their capital in.

In truth, whether we look at Australian equities, at gold, at the bond market, or global stock exchanges, 2015 is not one most investors (unless they’re been great stock pickers or market timers) will look back at fondly, with quite a few swings in asset markets, but few that have appreciated meaningfully.

What follows below is a review of 2015, not so much looking at asset market returns themselves, but what some of the major drivers have been, as well as commenting on a few things that have caught the eye in the last 12 months, both in Australia and overseas.

We will also share some our favourite charts for the year.

Obviously we’ll also take a look at the precious metal market, summarising our thoughts on its current state based on the developments we’ve seen not only in the past year, but since the cyclical peak in gold back in 2011.

Gold prices have eased this week, with the price of the yellow metal now trading at USD $1,053 an ounce, down nearly 2% from last Friday’s London PM Fix. Silver has also eased too, with the precious metal complex digesting the highly anticipated Federal Reserve monetary policy decision, which saw the US central bank raise interest rates for the first time in nearly a decade.

In Australian dollars, gold and silver are trading just below $1480 and $19.50 an ounce respectively.

The uptick in interest rates, which was largely priced in by the markets by the time it arrived, didn’t perhaps have the initial reaction many were expecting, with equities, gold and even some commodity currencies rising directly after the Fed handed down their long awaited decision.

Much of this has been reversed in the past 24 hours, with gold and stocks weakening, whilst the USD has rallied. The swings in the market are seen nearly in the chart below, which shows the last 3 days gold trading, broken down into specific 24 hour trading windows.

Precious metal markets have traded in a relatively narrow range this week, with market participants waiting patiently on the impending Federal Reserve interest rate decision, which will be handed down next week in the United States.

Gold and silver are currently trading at USD $1,072.90 and USD $14.24 an ounce respectively, more or less unchanged from the previous Friday. In Australian dollar terms, the metals are still on sale, below AUD $1500 and AUD $20 an ounce respectively, areas that have proved good buying over the last year or so.

In this week’s market update, we are going to look at the technical outlook for the gold market right now, as well as the latest futures market positioning. We will also cover some of the main reasons to own gold, including the embedded “option value” in gold, should it be remonetized at some point in the coming years.

Gold prices rallied overnight, erasing some of the losses from earlier in the week, which had at one point pushed the yellow metal below USD $1,050 an ounce. Silver, which at one point dropped below USD $14.00 an ounce has also staged a mini-comeback.

It’s been another soft week for precious metals, with the price of gold trading just above USD $1072oz, down USD $10oz on last Friday’s London PM Fix. Silver has fared slightly better, essentially flat over the week.

Local investors have had a tougher time of it, with the Australian dollar climbing above 72 US cents, and pushing the AUD gold price back below $1500 an ounce. Silver has also pulled back in local currency terms, with the spot price back below $20 an ounce.

The strength in the Australian dollar has been unexpected, especially in light of the ongoing carnage in commodity markets, with iron ore, copper and the like all under continued pressure. Indeed commodity indexes continue to hit new lows, whilst the recently released private capital expenditure survey for Australia showed a 9% drop in the last quarter, and a 20% drop year on year.

Note this is with a car manufacturing industry set to close, housing construction set to peak, and a significant unwind in mining related investment yet to fully play out.

Bottom line, this recent rally in the AUD will prove ephemeral, and we are using it as an opportunity, and adding to our own metal holdings recently.

After starting the week on the back foot, precious metals prices have staged a minor recovery, with gold currently trading at USD $1082 an ounce, unchanged from last Friday.

Silver has also treaded water this week, currently trading at USD $14.40 an ounce, after a three week period that saw the metal lose 10% of its value in USD terms.

In Australian dollars, both metals are still sitting above key levels, with gold sitting at AUD $1505 an ounce, whilst silver is sitting just above AUD $20 an ounce.

The stabilisation in the market was to be expected, after the relentless downward pressure that the precious metal sector has been facing in the past few weeks, which have seen the metals trade at their lows for calendar year 2015.

The stabilisation in the market was to be expected, after the relentless downward pressure that the precious metal sector has been facing in the past few weeks, which have seen the metals trade at their lows for calendar year 2015.

We think the market is potentially due for a bounce over the next week or so, and wouldn’t be surprised to see gold trade back toward USD $1100 an ounce, though whether it’s the start of a imminent and meaningful move higher remains to be seen.

It’s been another tough week for precious metal investors, with gold in both USD and AUD easing further. The catalyst was last Friday’s non-farm payroll report, which smashed expectations, and further increased the likelihood of an interest rate hike by the Federal Reserve in December.

Gold in USD is currently trading at USD $1,084oz, whilst silver is sitting at USD $14.42oz. Silver has shed close to 10% since late October, when it was trading above USD $16oz.

In Australian dollars, it has been a challenging week for metals investors too. After falling toward USD $0.70 late last week, the local currency has picked up, with yesterday’s unbelievable (literally unbelievable) jobs report in Australia ending any hope of a pre-Xmas rate cut in Australia.

AUD Gold is currently sitting at $1521oz, whilst silver is still holding just above $20oz, an area that proved good buying in May, August and September of this year.

Gold and silver prices have been in free fall this week, as increased odds of an interest rate hike by the Federal Reserve next month have battered sentiment toward precious metals.

At present, gold is trading at USD $1106 an ounce, down USD $80 per ounce, or some 7% from the highs it had reached in later October 2015. Silver has suffered a similar fall in USD terms, currently trading at USD $15 an ounce.

Local investors have not been spared this week either, with gold in AUD easing the better part of AUD $100oz, with the AUD still holding above USD $0.70.

The Reserve Bank decision to hold interest rates helped support the local currency, though most forecasters still see further downside in the cash rate over the next few months.

And part of the reason for that is the RBA still seem far too optimistic regarding the outlook for the local economy, with their latest statement of monetary policy predicting a stabilisation in our terms of trade, and growth heading back towards 4% by the end of 2017

With the mining capex boom not even half way through unwinding, residential housing construction slowing, a complete dearth of business investment in the country, negative real wage growth, and declining growth in immigration, this is never going to happen, unless the government turns on the stimulus tap in a way that would have made even the previous Labor government blush.

Further rate cuts should nudge the AUD lower, which will help boost local precious metal prices.