Precious Metals talking points 070323: weekly gold+silver round-up for Coininvest; Powell steadfast, CB's pressure gold

By: Rhona O'Connell, Head of Market Analysis

Mon, 03 Jul 2023, 13:11

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Precious Metals Talking Points: gold and silver weekly round-up for coininvest

3rd july 2023

Rhona O'Connell

Head of Market Analysis, EMEA & Asia;

+44 203 580 6115; mobile +44 7384 833 897

rhona.oconnell@stonex.com

Despite the return of China to the international markets last week following the Dragon Boat holiday, gold stayed under pressure in the face of Jay Powell’s anti-inflationary stance, when he noted at the ECB’s annual Central Bank conference in Sintra (Portugal) that the U.S.’ policy may still be on the easy side given the economic backdrop, arguing that the US economy is “resilient” and that most of the FOMC members are expecting two more hikes this year.

Market implied expectations for the fed funds rate

image-20230703141744-1

Source: Bloomberg

The economic numbers last week were mixed, with the Purchasing Managers’ Index still below 50 (the neutral level) in the manufacturing sector, but services remaining above 50; and the Conference Board numbers improved on the previous month, with the “current situation” posting 155.3 and “Expectations” at 79.3. The Core Personal Consumption Expenditure, which is an important parameter in shaping the Fed’s deliberations, came in slightly lower than expected, at 4.1% year-on-year, but this is clearly still well above the 2% target. The University of Michigan monthly survey, which normally also commands attention, saw an overall reading of 64, a slight improvement, while expectations were 61.5. The expectation for inflation one year hence was 3.3% and the 5-10Y-year expectation was 3.0%.

Bond yields were actually quite steady across the curve, while the Portugal conference saw ECB President Christine Lagarde remain firmly hawkish and clearly imply that we can expect rate hikes from Europe at both the July and September meetings. The Governor of the Bank of England underlined the need for data-dependence and, following a larger rate hike in June than the markets had been expecting, would not commit to a date for another hike, should there be one, noting that import prices are starting to ease.

This was all negative for gold, and spot dipped briefly below $1,900 before a minor recovery that has taken prices towards $1,910 at the start of this week.

The gold Exchange Traded Funds have continued to bleed gold, both reflecting weak sentiment and very likely also feeding that sentiment, given that the numbers are released daily and are a clear indicator of which way the wind is blowing. Since the start of June there have been 22 trading days, of which only one saw any inflows and the net change since then has been a drop of 48t to 3,430t (compare world mine production of 3,628t last year). Year to date the change has been a fall of 42t.

Spot gold, technical

image-20230703141744-2

Source: Bloomberg, StoneX

Silver has seen some intermittent buying but over that same period there have been just seven days of net purchase, for an overall drop of 79t, equivalent to just 0.3% of the end-May total, taking holdings now to 23,216t. Spot prices had dropped sharply at the end of the previous week and slipped towards $20 before finding some support, and has managed to recover above the 200-day and ten-day moving averages, which should therefore offer some support at or around $22.50. The gold:silver ratio is holding steady around 80.

On the bright side, precious metals refiner Heraeus is pointing out that European solar companies’ start-ups have raised US$6 billion this year so far, more than five tines the amount raised in the equivalent period of last year. Metals Focus, via the Silver Institute, reports that global installations may exceed 300GW this year for the first time. Depending on the type of cell involved, silver usage varies from 10 to 22mg per watt. So at the lighter level 300GW would need at least 3,000t.

On COMEX, the Managed Money positions saw more long liquidation and fresh shorts, although both were in small volume. Outright longs, at 337t, are at a 16-week low and shorts are at a 14-week high at 217t leaving the net position at a 15-week low of 217t against a 12-month average of 125t. Silver saw reductions on both sides, with long liquidation of 650t (11%) and short-covering of 754t (17%) to take the net long to 1,753t.

Spot silver, technical

image-20230703141744-3

Source: Bloomberg, StoneX

	3 July 2023	Previous week	% change	Year-to-date	Range Jan 2022 onwards		Range as %
					Min	Max
Gold (pm LBMA price)	1,912.25	1,930.70	-0.96%	3.74%	1,628.75	2,048.45	25.77%
Silver (LBMA price)	22.47	22.34	0.58%	-9.74%	17.77	26.03	46.45%
Platinum (pm LBMA price)	897.00	924.00	-2.92%	-17.10%	838.00	1,128.00	34.61%
Palladium (pm LBMA price)	1,254.00	1,279.00	-1.95%	-30.14%	1,223.00	2,315.00	89.29%
S&P 500	4,450.38	4,348.33	2.35%	16.38%	3,577.03	4,450.38	24.42%
$:€	1.0909	1.0894	0.14%	2.27%	0.9594	1.1062	15.30%

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