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Gold treads familiar waters

10 June 2022

Friday 10 June 2022
In this week's market report:
  • Gold goes nowhere
  • Central banks favour gold
  • The end of Chinese lockdowns may lift jewellery purchases

Dear Investor,

US dollar gold price [XAUUSD]
Daily chart

Source: Trading View
(Click to enlarge)
Gold goes nowhere: Spot gold has closed the week 0.16% higher to US$1,846. There was a brief spike to US$1,874 Friday last week, but the precious metal couldn’t hold onto the gains.

Treading familiar waters: Spot gold remains at the familiar point of US$1,850 ahead of the June Federal Open Market Committee (FOMC) next week.
  • US retail investors remain bullish on gold as inflation grips the US
  • Stagflation may be positive for gold, as discussed here
  • US inflation data is due late Friday night our time, expected to be 8.2%
Silver jumps above US$22: Silver jumped above US$22 per ounce this week. Platinum and palladium were dragged lower. Refinitiv, however, points out that the energy transition relies on needing increasing amounts of Pt and Pd.  ECB keeps rates at -0.50%, ponders 25 bps increase in July: The European Central Bank has kept rates negative in Europe this week, though has stated a 25-basis-point increase is on the table for the July meeting, and then again in September as they attempt to normalise policy.

Bulls, it will be quiet this week: Unless there is a data shock, it will be quiet this week. Expect gold to hover around US$1,850. A breakout above US$1,867 would be bullish.

Bears, not much to excite you either: US$1,830 is supportive. Again, without a data or market shock to nudge gold in a direction, spot gold is likely to trade sideways in the short term.

Gold in Australian dollars does nothing: Gold priced in Australian dollars barely moved this week and remains at AU$2,573. Similarly, the yellow metal failed to get a boost from currency movements, with the Aussie dollar down a tiny 0.08% this week to 71.70 US cents.

Central banks favour gold

As noted by the World Gold Council, central banks continue to increase their position in gold because of its ‘historical position’, writing:
Historical position has now moved back up to the top spot after slipping in relevance in 2021, at which time central banks saw gold’s “performance during times of crisis” as most relevant. The latter, along with gold’s “long-term store of value”, now follows in importance with 74% of respondents marking it as highly or somewhat relevant.
Central banks increase exposure to gold because of ‘historical position’
Source: World Gold Council

The end of Chinese lockdowns may lift jewellery purchases

Rhona O’Connell, Head of Market Analysis at StoneX, writes for CoinInvest:
Gold remains caught between conflicting forces, with the near-daily changes in expectations for the Ukraine conflict, and with some signs of easing in the housing market in the United States. Headlines are proliferating about inflationary forces in an increasing number of countries and real interest rates are in some cases deeply negative, which is supportive for gold prices, but the market currently lacks sufficient impetus to break convincingly higher.
On the other hand, there is creeping confidence in the prospects for renewed Chinese economic activity (although it is widely seen as doubtful that this year’s GDP will even reach 4%, compared with earlier government targets of over 5%) and this, at the start of this week at least, is cascading into European equities markets. Restrictions were lifted in Shanghai last week and Beijing at the start of this week. Inhouse dining and office working is reviving, and residents are permitted to move freely provided they can show a negative test with 72 hours — this is itself a loosening from the previous 48-hour limit. There are still some clusters emerging, however, for example in Inner Mongolia and the city of Dandong in the north-east.
The easing of restrictions on movements may help to inject some life into the domestic Chinese jewellery market, which has been sluggish of late.
Read more here.
Source: Bloomberg; CoinInvest

Inside our office this week…

As platinum dips below US$1,000 again, investors have shown interest in increasing their exposure to this precious metal by buying ABC Bullion’s 100g Minted Platinum tablet.
Warm regards,
The ABC Bullion Team