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ABC Bullion

Australians, your moment to buy gold is here!

10 December 2021

Big money holds steady on gold

Friday 10 December 2021

In this week's market report:
  • Tight trading range
  • Gold hugs support
  • Long term uptrend is intact
  • Fed to raise rates five times in two years?
  • What does 2022 have instore for gold?
  • Inside the office this week
  • Before you go: Interview with Jim Rickards
Shae Russell
Shae Russell,
Group Communications Manager

Dear Investor,

Daily US dollar gold price [XAUUSD] 2017 - present

(Click to enlarge)
Source: Trading View
 
 
Tight trading range: Gold is up 0.4% for the week. The yellow metal is stuck in a tight trading range this week, barely moving US$26 per ounce in the past 7 days.

Gold hugs support: Gold is consolidating. After the November plunge it’s now hugging previous support. This is a positive sign. The yellow metal has stuck near US$1,790, which is becoming an increasingly important level, though it does mean the curse of 1790 returns.

Some go up, some go down: Precious metals had some winners and losers this week, with palladium have the strongest gains:
  • Silver is down 1.73% for the week to US$22 per ounce. As discussed over here, we are still bullish on silver if it holds above US$21.50 per ounce.  
  • Platinum is up a tiny 0.25% for the week. It’s found support around US$920s per ounce and is looking very cheap compared to gold.
  • Palladium has been the big winner for the week, up 1.89% to US$1,800. The rise may be because vehicle production was expected to return to normal this month. However, overnight Toyota announced they halted production at one facility due to the ongoing supply shortage. We expect palladium to be reactive to the stop-start news coming from auto makers.
Long term uptrend is intact, Bulls: Gold is consolidating, which is positive for the yellow metal.
  • To break out of this consolidation pattern, we need to see gold move above US$1,790s and run for the low US$1,810s.
  • The futures market also supports the bullish thesis. While there has been a reduction in long gold futures, these weren’t replaced with a large number of short positions. Telling us that big money isn’t bearish on gold overall, and more a case of long positions were stopped out.
  • Overall, the long term uptrend remains intact.
Bears benefit from the shadows? For the bears into technical analysis, this may be your moment.
  • There has been some long ‘upper shadows’ on a candlestick chart in the past fourteen days, which as I explained earlier in the week can be a bearish signal.
  • Gold may dip into the US$1,760s, albeit briefly.
(Click to enlarge)
Source: Trading View

Australians, your moment to buy gold is here: The Australian dollar’s volatility continues into December, creating buying opportunities for gold. The Aussie dollar moved up this week by 2%, brining our currency back into the low 70 US cent range. This rise in the Australian dollar was met with muted movement in the spot gold price, causing the Australian gold price to fall to AU$2,490 per ounce at the time of writing.

For those on the fence about buying gold, a rising Australian dollar and falling, or subdued spot gold is often the optimal time to increase your gold holdings. If you’ve been looking to buy more gold, go here.

Reserve Bank of Australia keeps rates at 0.1%

Surprising no one, the Reserve Bank of Australia (RBA) kept the cash rate at 0.10% at the December meeting.
  • The language from the RBA is still dovish. They remain steadfast in their view that inflation will need to persist and will not be spooked into raising rates.
  • Meaning Australians are likely to see consumer price numbers above 3% for inflation to remain in the RBA’s target 2-3% band.
  • In addition, Governor Philip Lowe noted during the December meeting that wage growth will need to lift before a rate hike is considered, saying: ‘This will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently. This is likely to take some time and the board is prepared to be patient.’

Fed to raise rates five times in two years?

That’s the view coming from Morgan Stanley this week, with the Australian Financial Review writing:
‘Fed chairman Jerome Powell’s recent remarks suggests the Fed is now placing a higher priority on price stability in order to support sustained strength in labour markets, Morgan Stanley said.
 ‘“We now expect the FOMC to begin raising interest rates in September next year, two quarters earlier than previously anticipated. After delivering two rate increases in 2022 (in September and December), we expect three hikes in 2023.”’

What does 2022 have in store for gold?

Here is a fantastic article from Charlie Morris of Atlas Pulse. This week he writes that going into he new year, gold’s performance will be linked to inflation, saying:
‘It’s hard to imagine gold being a laggard in 2022. There is so much excess, and inflation seems poised to show up our central bankers. Investors are lightly positioned, and sentiment is shot to pieces despite gold matching the S&P 500 since 2018. Who knew?
[…]
‘With rates so low, inflation is key for gold in 2022. If it keeps on rising, that will see gold perk up while equities cool off. Short-term inflation measures are already moving higher as the Omicron variant seems to be pretty mild. And even if it isn’t, we now know that lockdowns stoke inflation rather than solve it.’
It’s a great read, and I highly recommend you set some time aside to read his thoughts this weekend.

Inside our office this week…

You’d look this happy too if you had two kilos of gold your hands. Last week while in up in the Sydney office, we managed to snap a pick of Di from Client Services holding two 1kg ABC Bullion Gold Cast Bars.

While our 1kg gold bars remain extremely popular, our dispatch department tells us the 500g ABC Bullion Gold Cast Bars are equally in demand. So much so, that whenever the 500g gold bars land in the Melbourne office, they almost always sell out on the day they arrive!

Before you go…

The recent shift in central banking policy from the Federal Reserve has people asking if the Fed is losing credibility.

Well, as the legendary Jim Rickards points out today, they never had any.

I managed to catch Jim just before the festive break. Jim and I talk about Fed policy, how inflation isn’t the big concern, why the Fed will get policy wrong and make things worse.

This is the one interview you must see before you start your weekend. Click below to listen now.

Until next time,
Shae Russell
Group Communications Manager, 
For ABC Bullion

P.S. We invite you to join us at the International Mining and Resources Conference (IMARC) from 31 January to 2 February, online or in-person at the Melbourne Showgrounds.

IMARC is Australia's largest mining event, where global mining leaders connect with technology, finance and the future. The upcoming event will be a hybrid event, welcoming Australian attendees in-person to Melbourne, and international attendees from more than 130 countries via an online platform.

As part of the conference program, I will be interviewing Gold Fields CEO, Chris Griffiths on promoting technology and innovation that drives sustainability and accessibility. View the program.