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Gold consolidates as Fed admits they’re wrong

03 December 2021

 

In this week's market report:
  • Back at 1760
  • Australian dollar falls but protects the Aussie gold price
  • Doves fly away as Hawks come out to hunt
  • Inflation hits gold miners
  • More central banks buy gold
  • Inside our office this week: Lunar coins are in!
  • Before you go…
Shae Russell
Shae Russell,
Group Communications Manager

Dear Investor,

US dollar gold price [XAUUSD] Daily chart

(Click to enlarge)
Source: Trading View
 
Back at 1760: But for how long? Last week’s gold price plunge appears to have abated, with the yellow metal looking for support at these levels. Gold has fallen US$20 per ounce this week, from US$1,788 to US$1,768 at the time of writing.

Precious metals dip: Gold wasn’t only the precious metal falling this week, with all four down:
  • Silver dropped over 5% to US$22.40.
  • Platinum has fallen 6.80% and is back under US$1,000 per ounce to US$930.  
  • Palladium looks to be nearing support, down 5% to US$1,768 per ounce.
Gold is consolidating, Bulls: With the big dip behind us, the yellow metal looks to be consolidating and touching past levels of support for reassurance. Gold is likely to nibble at the edges of US$1,750s ­­- an area of past support.   

Gold is down but not out Bears: The technical picture favours the Bulls. Drawing a trendline from the May 2019 low, we can see that it is supportive of an uptrend over the long term, and points to US$1,750 again as an area of support. Gold will give US$1,750s a nudge. Breaking below this uptrend, however, would signal bigger falls ahead.

Australian dollar falls but protects the Australian gold price: The Australian dollar gold price rose this week, up 0.4% to AU$2,499 at the time of writing. How? That’s the Australian dollar working for us, as the Aussie dollar is falling faster than spot gold price. Go here to learn more about how moves in the spot gold price and Australian dollar impact you.
  • The Australian dollar has fallen from 71.88 US cents to 70.85 US cents.
  • This is now a one year low in the Aussie dollar.
  • Australia’s gross domestic product (GDP) contracted 1.9% for the September quarter, which is much better than the expected 2.7% decline. This ‘good news’ stopped AUD falling further
 

Doves fly off as Hawks come out to hunt

 
Driving gold lower this week – and providing support to the US dollar – was the unexpected hawkish tone out of the Federal Reserve Bank as Fed Chair, Jerome Powell dropped the word ‘transitory’ when discussing inflation.

Bloomberg later expanded on this, writing:
‘More Federal Reserve officials laid out the case for speeding up the removal of policy support amid higher inflation, adding their voices to the message delivered by Chair Jerome Powell earlier this week.
‘“I certainly would be supportive of a committee decision to move the end of the taper forward from where people had been expecting it in June,” Governor Randal Quarles, who steps down from the Fed later this month, said Thursday in response to a moderator’s questions after a farewell speech.
‘Powell told lawmakers this week that officials should consider speeding up the taper of bond buying at their upcoming meeting to wrap it up a few months earlier than initially planned. He cautioned that a new variant of Covid-19 was a threat to the outlook for both employment and inflation, while noting that the risks of elevated price pressures have clearly risen.’
Markets are likely to be fairly muted over the next 12 days until the final Fed meeting for the year, which is being held on 14th-15th December.

Inflation hits gold miners

Global inflation has found its way into gold miners wrote Metals Focus this week. With costs rising to the highest level since 2013.

Their latest data shows that the all in sustaining cost (AISC) for gold miners across the globe increased 3.6% quarter on quarter to US$1,123 (AU$1,588) per ounce.

Metals Focus noted that while head grade is slightly higher to 0.5%, local currencies are coming under pressure from a stronger US dollar. Rising energy prices, staff shortages and higher salaries are starting to bite for miners. More from Kitco here.

More central banks buy gold…

Timing is everything. Just yesterday I interviewed Jim Rickards, and I asked him if central banks would continue to be net buyers of gold for the next decade. His answer? They may be net buyers indefinitely…

This morning I awoke to news the Central Bank of Ireland bought two tonnes of gold in the past few months. Their first gold purchase since 2009.

The Irish central bank’s governor Gabriel Makhlouf said last week that he was ‘worried about inflation’, later adding ‘I am very, very conscious that inflation today is impacting on households across the country.’

The Irish central bank is the latest in a long list of central banks surprise the market with gold purchases. The Monetary Authority of Singapore (MAS – Singapore’s central bank) upped their gold holdings by 20% a report revealed, the first time they’ve bought gold in twenty years.

Inside our office this week…

The Year of the Tiger is nearly upon us…

We’ve had some very exciting deliveries this week, with all our state offices receiving their Lunar New Year coins and tablets! We have the PAMP Lunar minted tablet, the Royal Australian Mint Lunar coins, as well as ABC Bullion’s stunningly detailed tiger bust gold and silver coins.
Our gold and silver Lunar coins tend to sell out before the start of the Georgian New Year, so get in quick before they’re all gone.  

Before you go…

Two weeks ago ABC Bullion’s Global General Manager Nick Frappell spoke at the Virtual Gold Conference. If you missed it, now’s your chance to watch it.

Nick explains why the US dollar is surprisingly strong as well sharing some key future targets for gold. Watch below now.  

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