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Gold nestles in before the Fed speaks

26 April 2022

Friday 22 April 2022
In this week's market report:
  • Resistance ahead for Au
  • Fed hikes may be more aggressive than expected
  • Q1: Gold ETFs consumed 29% of newly mined gold
  • Investment in silver jumps
Dear Investor,

US dollar gold price [XAUUSD] Daily chart

Source: Trading View
(Click to enlarge)

Gold retreats from US$2,000: Gold failed to move above US$2,000 per ounce last week and has fallen 1.55% to US$1,946.

Resistance ahead for Au: Rising real yields and a strong US dollar are a headwind for gold at present. The US dollar — as measured by the DXY — currently sits at 100, with talk of it reaching 101 again shortly. The next target is 102.

Fed hikes may be more aggressive than expected: Markets are currently pricing in a 50-basis-point increase at the May Federal Open Markets Committee (FOMC). However, the president of the St Louis Fed, James Bullard, has said he believes the US central bank will need to move quickly to get rates to 3.5% this year and that the market should be prepared for a 75-basis-point increase at one meeting.

Palladium rebounded this week: Silver, platinum, and gold all fell this week, however, palladium rebounded 7.075% to US$2,469 per ounce. Bulls, a quiet week ahead: After rejecting US$2,000 per ounce last week, look for gold to consolidate between US$1,940–60 in the lead up to the May Fed meeting. The yellow metal remains suppressed — persistent and high inflation in the US along with geopolitical tensions are providing support for gold.

Bears, no major falls expected: A sell-off is unlikely. Should it happen, gold will find support around US$1,920.

Australian dollar strong, suppressing local gold price: The Australian dollar remains steady at 74.50 US cents this week, keeping a lid on the Australian dollar gold price, which sits at AU$2,613.

Q1: Gold ETFs consumed 29% of newly mined gold

From Rhona O’Connell of StoneX:
The gold ETFs have added 277t so far this year and now stand at 3,848t, which is roughly 200t more than global production in 2021 (as estimated by Metals Focus). The rate of absorption in the first quarter of the year is equivalent to roughly 29% of world gold mine production over the year.’ 
Read more here.

Investment in silver jumps

The latest annual report from The Silver Institute is out:
Outperforming the growth in jewelry, silverware fabrication rose by a robust 32% y/y in 2021, but output remained a third below 2019 levels. Much of the growth last year was driven by India (+40% y/y) thanks to economic recovery, pent-up wedding/festive demand and the ongoing gains for sterling silver. Excluding India, the rise in global fabrication was still a noteworthy 15%.
Yet greater gains were seen for net physical investment as this jumped by 36% to 278.7Moz (8,668t), its highest since 2015’s record level. With a backdrop of economic growth and inflation uncertainties, plus persistently negative real rates and still positive price expectations, retail investors in North America and Europe took advantage of low prices to purchase silver coins and bars, pushing combined sales in these two regions to the highest total in Metals Focus’ series.

Supply/Demand Fundamentals: A Return to Pre-COVID Levels?

Source: Metals Focus; The Silver Institute
(Click to enlarge)

Crude may lift gold

Crude and gold don’t always have a neat correlation. Since the Russian invasion of Ukraine, gold and Brent crude have started to move together again. In the latest episode of The Pod of Gold, Nick Frappell discusses how higher crude prices may soon lift the price of gold.

Spot gold versus Brent crude

Source: Trading View
(Click to enlarge)

Inside our office this week…

The ABC Bullion offices will be closed on:

ANZAC Day - April 25th 2022

Our website continues to trade 24/7, lock in an order online at any time.

ABC Bullion is proudly supporting the work of Soldier On, a group that works side by side with contemporary veterans who serve and protect Australia.

Soldier On’s purpose is to aid returning soldiers to reintegrate into society. They offer support for veterans and families by providing a holistic model of support, by focusing on mental health, social connections as well support further education and employment opportunities.

Here at ABC Bullion we recognise the importance of assisting veterans as they settle into civilian life, and we are honoured to contribute to this cause.   
Warm regards,
The ABC Bullion Team