Gold Market Report – February 16, 2024

To keep Hard Assets Alliance customers up to date on everything influencing the precious metals markets, we're sharing this daily report that details price movements and technical and macro trends. We use it internally to keep our teams up to date.

Gold was very steady last night and traded in the narrow range of $2002 - $2008, but was able to consolidate above the key $2000 level it recaptured yday off of the weaker US Retail Sales reading. Gold faded some minor moves in the US dollar which was also very steady (DX between 104.25 104.44). Gold slipped to its $2002 low during Asian time, as the DX firmed to its 104.44 high. The DX was propped up by early weakness in the yen, which slipped through the key 150 level that has prompted BOJ intervention (actual and verbal) from 149.85 150.37. The yen was softened by:

• Dovish commentary from the BOJs Ueda (Japans monetary conditions will likely remain accomodative even afer ending negative rates)
• Which overcame a better reading on Japans Tertiary Industry Index: 0.7% vs -1.4% last

Gold moved up to its $2008 high during European time, as the DX retreated to its 104.25 low. The DX was pressed by a slight improvement in the euro ($1.0757 - $1.0718), which was helped by a by:

• Better German Wholesale Prices (0.1% vs -0.6% last),
• ECBs Schnabel (warns again that bank shouldnt lower rates too soon on fears inflation will rebound)

US bond yields were firmer and a modest headwind for gold with the 2yr up from 4.568% - 4.616%, and the 10yr up from 4.237% - 4.282%. Equities were higher and also weighed on gold, with S&P futures up 13 to 5059, just 7 points from an all-time high. Gains in Applied Materials and Trade Desk (both beat est and guided higher) aided the move.

However, continued geopolitical tensions continued to keep gold well bid:

• Russia:
• Russia announced death of opposition leader Alexey Navalny
• Announcement of threat of Russia seekign to deploy a nuclear weapon in Space
• France and Ukraine sign security agreement
• Russia and Ukraine exchange heavy air attacks following Ukraines sinking of Russian warship
  
  
• Middle East
• Netanyahu continues to reject cease fire terms, looking to fight until complete victory"
• IDF raided the Nasser Hospital, had intel that Hamas held hostages there
• Hezbollah condemns Israeli attacks in southern Lebanon after the IDF eliminated a senior commander of Hezbollahs Radwan Forces
• Houthis fired a missile toward a carrier in the Gulf of Aden, inflicting minor damage
• US conducted two strikes on Houthi controlled areas in Yemen

NY Trading:

Markets digested some moderately hawkish commentary from the Feds Barkin:

• US CPI data confirms why the Fed needs more confidence to cut

Along with some mixed US economic data:

• 830AM
• PPI MoM hotter (0.3% vs exp 0.15, -0.1% last)
• Core PPI MoM much hotter (0.5% vs exp 0.1%, -0.1%)
• PPI YoY hotter (0.9% vs exp 0.6%, 1% last)
• Core PPI YoY hotter (2% vs exp 1.6%, 1.8% last)
• Components:
• 0.6% increase in final demand services drove the index higher
• 2.2% rise in hospital outpatient care
• Goods prices actually decreased 0.2%
• 1.7% decline in final demand energy
• gasoline off 3.6%
• Building Permits softer (1.47M vs exp 1.509M, 1.4939M last)
• Housing Starts softer (1.331M vs exp 1.46M, 1.562M last)

Markets initially focused on the hotter PPI (chances of quick and deep FF rate cuts diminished) with equities selling off as S&P futures slipped to 5015 (off 32). Bond ylds surged with the US 2yr to 4.716%, and the US 10yr to 4.333% (11wk hi). The DX rallied to 104.67, and gold sold off. The yellow metal plunged back below $2000 to reach $1995, where it found support there at its 100-day MA.

• 10AM
• University of Michigan Consumer Sentiment mixed:
• Headline lower than exp, but higher than last
• 79.6 vs exp 80, 79 last
• Current Conditions lower (81.5 vs exp 82, 81.9 last)
• Expectations better (78.4 vs exp 76.5, 77.1 last)
• 1yr infl exp higher (3% vs exp 2.9%)
• 5yr infl exp unch (2.9% vs 2.9% last)

Stocks rebounded, helped by the University of Michigan suggesting the US Consumer was feeling more assured about the Eco (2/3 of eco is Consumer Spending), but that expectations werent overheating. The S&P rebounded, reaching 5038 (+9). Gains were led by Health Care, Consumer Staples, and Materials. Bond ylds softened with the US 2yr to 4.644%, and the US 10yr to 4.289%. The DX retreated to 104.28, and gold rebounded to $2011, taking out ydays high and the overnight high at $2008.

Into the afternoon, markets absorbed more slightly hawkish commentary from the Feds Mary Daly:

• Remarkable progress on U.S. inflation
• there is more work to do to ensure stable prices
• need to resist the temptation to act quickly when patience is needed and be prepared to respond agilely as the economy evolves
• we need more time and data to be sure that they will be realized."

Stocks see-sawed either side of unch then broke at bit lower, while bond ylds held most of their prior gains (US 2yr to 4.654%, US 10yr to 4.297%. The DX edged lower to 104.17, but held its 100-day MA at 104.11. Gold crept higher in response and traded between $2012-$2015.

Support:

$2000 (options), $1995 (100-day MA, 2/16 low), $1990-1 (2/13, 2/15 lows), $1984-85 (2/14 low, up trendline from 11/13 $1932 low), $1973-80 (options, 11/21, 12/11, 12/12, 12/13 lows, 50% retracement of the up move from the 10/6 $1810 low to 12/4 all-time high at $2149), $1965 (11/20 low, 200-day MA), $1955-58 (11/15, 11/16, options), $1950 (options), $1940-43 (11/14 low, 61.8% Fib retracement level $1810 - $2149 move)

Resistance:

$2025 options, $2028-33 (2/12, 2/13 highs, up trendline from 11/13 $1932 low), ($2037-44 (2/5, 2/6, 2/7, 2/8, 2/9 highs), $2050 (options), $2056-66 (1/3, 1/5, 1/12, 1/15, 1/16, 1/31, 2/1, 2/2 highs, down trendline from 12/28 $2089 high), $2070-78 (12/1, 12/22, 12/29, 1/1 and 1/2 highs, options) $2085-89 (12/27, 12/28 highs), $2100 (options), $2149-50 (12/4 all-time high, options)

FedWatch:

Todays hotter CPI largely reversed ydays weak Retail Sales reading, and combined with other recent stronger US Eco data (Payrolls, University of Michigan) along with hawkish commentary from several different Fed Governors (sans Goolsbee) and Powell to eliminate any reasonable chance for the Fed cutting rates at its upcoming meeting on 3/20. Further, probabilities for cuts at meetings for the remainder of the year have also been significantly reduced. However, mkts are still pricing in more cuts (now only 4) than Fed Governors have been projecting / commenting on (2-3)

FF Probabilities:

Mch: 89.5% chance of hold, 10.5% prob of cut to 5%

May: 33.7% chance of a cut to 5% or below, 66.2% chance of hold at 5.25%

June: 73.5% prob of cut to 5% or below

July: 53.6% chance of cut to 4.75% or below

Sep: 43.4% prob of cut to 4.5% or lower

Dec 24: 52% chance of cut to 4.25% or under, reflecting expectations of four 25bp cuts by yr end.

Mkt positioning:

Todays CFTCs COT Report as of Feb 13 showed the large funds slashing 11.1k contracts of longs and adding 19.5k contracts of shorts to cut the Net Fund Long Position by a sizeable 30.6k contracts to 131.2k contracts. This was done on golds selloff from $2035 - $1992 from 2/6-2/13, and reflected a fair amount of long liquidation along with a good chunk of new shorts on the move. This position increased by over 136k contracts from 10/10 12/26 (71.4k 207.7k contracts, +423 ton equivalent). Since then, it has backed off by 76k contracts to current levels. Now back under 150k contracts, this position is moderately large, and a moderate bearish factor going forward.

GLD holdings:

GLD holdings jumped on 11/17 by 13 tonnes to 883 tonnes to its highest level since 9/12. However, since then, holdings have become surprisingly steady / lower, sliding to just 837 tonnes its lowest level since Aug 2019. This despite golds $100+ move since then - reflecting a fair amount of profit taking from GLD longs into the rally, along with some diversification of AI assets into bitcoin ETFs. This level remains toward the lower end of the 730 tonne low in mid-2018, and 1350 tonne high from 12/2012, and can be viewed as a modest bullish factor going fwd.

Q4 Earnings Season Continues

Mon: Japans Machinery Orders, Chinas Current Acct, PBOC 1yr MLF Rate Announcement

Tues: Eurozone Construction Output, US Leading Index

Wed: Japans Tankan Index, Bal of Trade, Eurozone New Car Registrations, Consumer Confidence, ECB Non-Monetary Policy Meeting, US Redbook Sales, FOMC Minutes, API Oil Inventory

Thurs: Japans Jibun Bank PMI, German HCOB Man PMI, Eurozone HCOB Man PMI, Inflation Rate, ECB Mon Policy Meeting Accts, UK S&P Man PMI, US Chi Fed National Activity Index, Jobless Claims, S&P Man PMI, Existing Home Sales, EIA Oil Inv, US 30yr TIPS Auction

Fri: Chinas House Px Index, German GDP, ifo Business Climate, Eurozone Inflation Exp, US COT

We hope you found this report informative and useful in understanding current market conditions. To check your holdings, activate auto-investment via MetalStream, or to start a new investment in physical gold or silver, log in to your account today.

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