Gold Market Report – June 12, 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 quietly steady with other markets last night, awaiting the double whammy of todays US CPI Report this morning, followed by the FOMC announcement / Powell Presser in the afternoon. The yellow metal was confined to a very narrow $7 range between $2311 - $2318, with a slightly down bias from the $2317 where it went out yesterday. The dollar was slightly lower, with the DX moving down from 105.32-105.10, where it found support there at its 50-day MA. Modest weakness in the yen (157.04 157.43, expectations BOJ likely to announce trimming of bond purchases overshadows firmer PPI) and yuan (weaker Chinese Inflation Rate) was overcome by strength in the euro (107.34 107.67, German inflation reading higher). Bond yields were little changed, with the US 2yr hovering around 4.835%, and the US 10yr near 4.40%. Equities were a tad firmer and a modest headwind for gold, with S&P futures up 8 to 5392. Gains in Oracle (announced deals with Open AI and Google) and Rentokil Initial (Peltz announced significant position) led the advance.

The much-anticipated US CPI Report was cooler than expected:

• CPI MoM lower (0% vs exp 0.1%, 0.3% last)
• Core CPI MoM lower (0.2% vs exp 0.3%, 0.3% last)
• CPI YoY lower (3.3% vs exp 3.4%, 3.4% last)
• Core CPI YoY lower (3.4% vs exp 3.5%, 3.6% last)

Markets saw this tamer inflation report as giving the Fed ammo to begin cutting the Funds rate sooner and deeper. Bond yields plummeted, with the US 2yr to 4.672% and the US 10yr to 4.255%, both off around 15bp and made 2-month lows. Stocks cheered, with the S&P soaring 72 points to another ATH at 5447 (but 14-day RSI touching an overbought 72.8). A massive 2.5% gain in IT led the advance, with help from Real Estate and Consumer Discretionary. The DX sank, plunging through support at 105.10 (ovn low, 50 day MA), 105, 104.50 (100 day MA), and 104.43 (200-day MA) to reach 104.26. Gold rallied sharply, taking out resistance levels and tripping buying over $2314-20 (6/10, 6/11 highs, former support 6/3, 6/4 lows), $2325 (options). The move ran out of steam at $2342, just ahead of resistance at its 50-day MA ($2344).

Into mid-day and ahead of the Fed, stocks trimmed some gains (S&P +56 to 5432). Bond yields remained soft near their lows, as did the DX. Gold, however, turned choppy, dropping back to $2320 (upper end of the first former resistance level) before bouncing to trade either side of $2335

What to Expect from the Fed:

FF rate:no chance for change from 5.25%, remaining at its 23-yr high

FOMC Statement:very little changes anticipated

New Dot Plot:Last consensus of the dot plot in March projected a total of 3 rate cuts for the rest of this year. Since then, stronger data had brought market expectations down just 1 cut. With todays softer CPI, expect the Fed to reduce their projections from three to 2 - and not one as some doves feared. As for 25, questionable whether they will also raise the projected yr end FF rate by 25bp to keep north of 4% for next 18mo, or leave at 3.75%

Summary of Economic Projections:expect a higher reading on inflation, slowing economic growth

Powell Presser:expect the Chair to emphasize the Feds patience: waiting patiently for more evidence that inflation is heading toward their 2% target before beginning to lower the Funds rate. Questionable on how he will describe financial conditions, saying last we were well into restrictive territory, with some analysts viewing conditions as becoming less restrictive.

Support:

$2300 (options), $2291-97 (5/6 low, up trendline from 2/14 $1984 low), $2278-8 (4/30, 5/1, 5/2, 5/3, 6/7 and 6/10 lows), $2265-67(4/3, 4/5 lows), $2247-50 (4/2 low, options), $2225-29 (options, 4/1 low), $2217 (50% retracement of up move from 2/14 $1984 low to 5/20 $2450 ATH), $2211 (100 day MA)

Resistance:

$2344 (50 day MA), $2350 (options), $2378-88 (5/23, 6/6, 6/7 highs), $2425 34 (5/22, 5/21 highs, options), $2450 (5/20 ATH, options)

FedWatch:

Todays slightly softer CPI Report had a significant upward impact on the markets probabilities for the Fed to cut the Funds rate sooner and deeper. Now, markets fully expect the Fed to begin lowering rates at the Sep meeting (73% prob), and are more confident in the chance of a 2^ndrate cut at the December meeting (72%).

FF Probabilities:

Today:0.1% prob of cut to 5% or below

July:14.5% prob of a cut to 5%, up from 8.9% yday prob of a cut to 5% or below

Sep:72.7% chance of cut to 5% or lower, up from52.6% yday

Nov:35.3% chance of cut to 4.75% or lower, up from 19.1% yday

Dec:71.8% prob of a cut to 4.75% or lower, up from 51.3% yday

Last Fridays CFTCs COT Report as of 6/4 showed the large funds trimming 2.2k contracts of longs and 2.9k contracts of shorts to increase the Net Fund Long Position by 0.7k contracts to 237.3k contracts. This was done on golds decline from $2361- $2326 during 5/28-6/4. This position remains significantly large, and will be a significant bearish factor going forward.

GLD holdings:

After reaching 883 tonnes on 11/17/23, holdings became surprisingly steady / lower, and slid to just 815 tonnes on 3/12 its lowest level since July 2019. This is despite golds $200+ move ($1980 - $2080) during that period. Though gold has rallied another $350+ since then, GLD holdings have only increased by around 20 tonnes to 825-39 tonnes, with just 5 tonnes being added on the move to $2450 on 5/20 (831 tonnes last). This continues to reflect a fair amount of profit taking from GLD longs into the rally, buying from other sources (Chinese) along with some diversification of AI assets into bitcoin ETFs (Bitcoin remains strong, trading either side of $70k).This level for GLD holdings 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.

Today: Fed Rate Decision, Powell Presser

Thurs:Chinas New Yuan Loans, Ind Prod, PPI, Jobless Claims

Fri:Japans BOJ Rate Decision, Ind Prod, Cap Util, Eurozone Bal of Trade, US Import Pxs, Export Pxs, U. Michigan Consumer Sentiment, 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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