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Gold stays calm under pressure from Fed

24 June 2022

Friday 24 June 2022
In this week's market report:
  • Gold holds its ground
  • Odds of a US recession increase
  • Commodities fall on recession fears
  • Swiss refiners face pressure on gold’s provenance

Dear Investor,

US dollar gold price

Source: Trading View
(Click to enlarge)
Gold holds its ground: Gold is down overall this week, lower by 0.66% to US$1,822. Despite falling, Au is holding its ground against the Federal Reserve Bank’s warnings of further aggressive rate hikes.
100 basis point hike ahead? Fed chair Jerome Powell refused to rule out a 100 basis point hike at future Fed meetings.
  • If there is a 1% increase at a FOMC, it’s highly likely it will be leaked to the market in days before as happened with the recent 0.75% jump.
  • Terminal rate expectations are still 4% in 2023. With inflation prints running above 8% it’s unlikely the Fed will control inflation if the terminal rate only reaches here.
Odds of a US recession increase: The Fed’s house view is a US recession is ‘possible, but not likely’, whereas one Fed insider, says it is closer to a 75% chance of a US recession.
Palladium up, but other precious metals fall: Palladium has eked out a small gain this week, with both silver and platinum falling more than 4%. Bulls, gold is close to support: Spot gold has held up well with threats of aggressive increases in the background. Nearby support around US$1,805-09 is likely to be tested over the next week.
Bears, below US$1,800 is possible: A fall below US$1,800 is increasingly likely. If support breaks, Au is likely to fall into the US$1,780-88 range.
Australian dollar gold price is steady: The Australian dollar gold price remains steady at AU$2,638 this week, with its falls buffered by bigger declines in the Australian dollar, down 2% to 68.94 US cents.

Commodities fall on recession fears

Iron ore, copper and silver dive on slowing growth: Base metals connected with economic growth have fallen this week, as central bankers signal more aggressive rate hikes are coming.  
  • Stockpiles in the base metal markets have inventory at near record lows.
  • Miners at Chile’s Codeclo copper mine are closing a smelter over environmental concerns, meaning copper production will be impacted.
  • China’s tin smelters continue to be on/off production, further reducing global supply.
  • Shrinking stockpiles and industrial action risk supply being slow to catch up to demand when sentiment turns.
  • Silver continues to move in line with copper as an industrial metal, but has the ability to perform as precious metal during market turbulence.

Swiss refiners face pressure on gold’s provenance

Swiss gold refiners are continuing to face pressure about how and where they source their gold. There is speculation that sanctioned Russian gold has found its way to Swiss refiners, with this article writing:
‘The industry association for Switzerland’s gold refiners said its members didn’t import gold from Russia last month, raising questions about who bought the country’s precious metals.
‘Over 3 tons of gold - worth about US$200 million - was shipped from Russia to Switzerland in May, almost all of which was marked as being for refining, according to data from the Swiss Federal Customs Administration. It was the first recorded shipment between the countries since February, when the war in Ukraine began.’
Total control over the entire supply chain coupled with market leading environmentally aware refining technology is a rare commodity in the global precious metals market.
Pallion Provenance™ begins with the responsible sourcing of primary refining inputs from conflict free areas, right through to the processing of them into investment grade gold and silver bullion.

It’s why we say ABC Bullion products are the world’s most Considerate Precious Metals®. So, when our clients buy precious metal products from us, we can say with absolute certainty where that metal came from.

Inside our office this week…

The latest Britannia gold coin range has been popular this week for those looking for a hedge in the currently inflationary environment. 
One of the longest established bullion coins in Europe, the Britannia gold coin was first added to The Royal Mint's bullion portfolio more than 30 years ago.  
The latest release in the Britannia bullion coin range is an instantly recognisable flagship coin which features Philip Nathan's definitive and classical Britannia design, with a speckled radial sunburst background. Click here to secure yours now.
Warm regards,
The ABC Bullion Team