Precious Metals StoneX Bullion weekly round-up; nonfarm may be misleading
Nonfam weakness boosts metals
Rhona O'Connell
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Precious Metals talking points 061223: the weekly gold and silver round-up for Coininvest
By: Rhona O'Connell, Head of Market Analysis
Precious Metals Talking Points: gold and silver weekly round-up for coininvest
12th june 2023
Rhona O'Connell
Head of Market Analysis, EMEA & Asia;
+44 203 580 6115; mobile +44 7384 833 897
rhona.oconnell@stonex.com
12 June 2023
Gold in narrow ranges, low volumes; silver livelier
- No-one prepared to commit before the FOMC meeting of this week
- Gold finding support at $1,940, but is essentially neutral
- Some improvement from silver, largely driven by improved chart constructions
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Ahead of this week’s Federal Open Marlet Committee (FOMC) meeting, which takes place on Tuesday and Wednesday, and with the receding impact of the debt ceiling issue, gold has traded in a narrow range in low volumes over the past week. Often a low volume market leads to price volatility, but in gold’s case over the past few days it has been more of a case of no-one wanting to take fresh positions in case of a surprise this Wednesday with the release of the Statement from the FOMC and Jay Powell’s subsequent Press Conference.
Gold June contract
Silver July contract
Source for both charts: Bloomberg
This month’s meeting is one of the four (March June September and December) that include the release of the “dot plot”, the chart showing where each member expects the fed funds target rate to be at the end of this year, next year, and the longer term. Here is that from March (and also March 2022 for comparison);
Source: Federal Reserve
These show how in March 2022 the peak rate was projected as between 3.50% and 3.75% for end-2023 and end-2024, before declining in 2025. This past March that peak was projected by the majority at 5.00 to 5.25%, with a top call of 5.75% to 6.00% at end 2023, and the majority then looking for 4.00-4.25% at end-2024 with the most hawkish call at 5.50-5.75%; then with a substantial fall during 2025.
The markets are expecting the FOMC to leave the target rate unchanged in this week’s meeting, although the mixed jobs data released last week (higher unemployment rate but also a jump in job openings) will keep the FOMC on alert. Any hike would be likely to put gold under pressure, albeit that most reactions are brief and rapidly reversed and the longer-term expectations are for at least one further hike this year. The dot plot is likely to be more influential than June’s rate decision. It looks as if temperatures may rise in this meeting as there does appear to be an increasing bifurcation among Committtee members.
Fed funds implied overnight rate; implying just a 27% chance of a hike this week but 55% for a July rise
Source: Bloomberg
Meanwhile the gold price bounced at the start of last week from just below $1,940, held around $1,960 for a couple of days, dropped again as bond yields rose in the wake of a jump in the U.S.’ trade deficit and also in response to a rate hike from Canada, but bounced quickly again on some bargain hunting, the rise in weekly jobless claims to an 18-month peak, and an associated drop in yields. In the markets themselves, gold open interest on COMEX has barely changed over the past week, while the latest CFTC figures, which relate to the close of business last Tuesday 6th June, show a continued fall in outright longs among the money managers, but also some sizeable short covering, which is likely to have been driven by, and also extended, the rallies on 30th May and 5th June.
Gold and the dollar; intraday moves over the past month
Source: Bloomberg, StoneX
Meanwhile silver has been outperforming gold in recent days and the ratio has slipped towards 80 accordingly, despite a weakening economic outlook, particularly on the back of recent disappointing numbers from China. The majority of the move looks to have been technically-driven, as spot pushed above the 10D and 20D moving averages on the same day as the shorter-term average crossed above the longer one. This saw the price take out previous resistance at $24.00, before stopping short in the face of resistnace offered by the 50-day average at $24.51.
On COMEX the Money Managers have reduced positions in both the long and short sectors, but with short covering outstripping the liquidation and taking the net long to 1,607t, compared with a twelve-month average of 816t.
Gold, silver, the ratio and the correlation
Source: Bloomberg, StoneX
Gold, technical indicators; the major shorter-term averages becoming supportive. RSI neutral, MACD turning
Silver, technical indicators; moving averages supportive;resistance from
Source for both charts: Bloomberg, StoneX
Gold and silver COMEX positions (tonnes)
Gold
Silver
Source: CFTC, Bloomberg, StoneX
Gold Exchange Traded Products have now posted nine consecutive days of losses, for a small drop of eleven tonnes to a total of 3,469t; world mine production was 3,628t in 2022, according to the latest annual study from Metals Focus. Silver has also been under pressure, with just ten days of gains since the start of May and net redemptions over the period of 176t to 23,206t compared with global mine production of 25,578t in 2022 (tonnage also sourced from Metals Focus).
12 June 2023 Previous week % change Year-to-date Range Jan 2022 onwards Range as % Min Max Gold (pm LBMA price) 1,960.30 1,963.25 -0.15% 6.35% 1,628.75 2,048.45 25.77% Silver (LBMA price) 24.32 23.89 1.80% -2.33% 17.77 26.03 46.45% Platinum (pm LBMA price) 1,001.00 1,007.00 -0.60% -7.49% 831.00 1,128.00 35.74% Palladium (pm LBMA price) 1,324.00 1,419.00 -6.69% -26.24% 1,324.00 2,315.00 74.85% S&P 500 4,298.86 4,282.37 0.39% 12.41% 3,577.03 4,305.20 20.36% $:€ 1.0749 1.0708 0.38% 0.77% 0.9594 1.1062 15.30% Source: Bloomberg StoneX
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