Gold Market Report – June 18, 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 softened overnight, trading lower in a range of $2326 - $2307. However, once again, support at $2300-07 (up trendline from 2/14 $1984 low, 6/14 low, options) proved solid. It faded a modest bounce in the US dollar, as the DX rose from 105.32 105.56. The greenback was helped by:

• Yen weakness (157.51 158.24)
• BOJs decision to push plans for reducing bond buying operations to next month still resonating
• Euro weakness ($1.0741 - $1.0709)
• Miss on Germanys ZEW Economic Sentiment Index (47.5 vs exp 50, 47.1 last), with a large miss on the Current Conditions (-73.8 vs exp -65, -72.3 last) overcomes stronger ZEW reading for the Eurozone (51.3 vs 47.8, 47 last)

Bond yields continued on their upward trajectory and were also modest headwind for gold, with the US 2yr up from 4.762% - 4.78%, and the US 10yr from 4.277% - 4.302%. Equities were steady around ATHS, with S&P futures trading either side of unch (5546). Gains in La-Z-Boy (earnings beat) and Kroger (upgrade by BMO), were offset by declines in Lennar (guided lower) and NextEra Energy (offering $2B in equity units).

The headline report of this holiday shortened week, US Retail Sales, was softer than expected:

• Retail Sales MoM lower (0.1% vs exp 0.2%, -0.2% last, rev down from 0%)
• Retail Sales Ex Autos MoM lower (-0.1% vs exp 0.2%, -0.1% last, rev down from 0.2%)
• Retail Sales Ex Gas / Autos MoM better (0.1% vs -0.3% last, rev up from -0.3% last)
• Moderating gasoline pxs hurt receipts at gas stations that reported a 2.2% monthly decline
• Retail Sales YoY lower (2.3% vs 3% last)
• Retail Sales Control Group lower (0.4% vs exp 0.5%, -0.5% last)

This largely overshadowed subsequent better readings on US Industrial Production, Cap Util, and a Business Inventories reading that was as expected:

• Industrial Production MoM much higher (0.9% vs exp 0.3%, 0% last)
• Industrial Production YoY higher (0.4% vs -0.4% last)
• Manufacturing Production MoM higher (0.9% vs exp 0.3%, -0.4% last)
• Manufacturing Production YoY higher (0.1% vs -0.5% last)
• Capacity Utilization better (78.7% vs exp 78.6% last, 78.2% last)
• Business Inventories as exp (0.3% vs exp 0.3%, -0.4% last)

And overcame a slew of largely hawkish Fedspeak:

• Barkin
• we are at a restrictive level, it is a fair question though how restrictive we are
• Im open minded to the possibility of rate hikes if there are signs of overheating
• I didn't quite get more confidence in Q1 this year about inflation, we'll see where we go
• This month's inflation reading was very encouraging
• Labor market is also heading in the right direction
• Consumer spending is still solid
• It's not hard to see scenarios where the labor market weakens
• data is headed in the right direction, while cautioning that inflation is not yet at target
  
  
• Collins
• too soon to determine whether inflation is durably on a path back to the 2 percent target
• Uncertainty remains high and the volatility of monthly data remains elevated, including for inflation
• We should not overreact to a month or two of promising news, just as it was not appropriate to take too much signal from the disappointing data at the beginning of this year.
  
  
• Logan
• Fed is in good position, latest report welcome news, but several months of good data will be needed to instill confidence that inflation is headed back to Feds 2% target
• need to be patient on rates
• sees higher neutral rate than pre-pandemic
  
  
• Kugler
• likely appropriate to cut rates later this year if economy unfolds as she anticipates
• While I remain cautiously optimistic that inflation is coming down, it is still too high, and it is moving down only slowly
• I believe that policy has more work to do
• Musalem
• First public comments (took over from Bullard)
• I will need to observe a period of favorable inflation, moderating demand and expanding supply before becoming confident that a reduction in the target range for the federal funds rate is appropriate.
• These conditions could take months, and more likely quarters to play out
• did not rule out additional rate hikes should inflation become stuck "meaningfully" above 2% or reaccelerates, although emphasized that was not his base case
• believe that monetary policy is continuing to exert downward pressure on aggregate demand and inflation
• I also perceive some uncertainty about the degree of restrictiveness, noting that financial conditions "feel accommodative for some parts of the economy while restrictive for others
  
  
• Goolsbee (more neutral, still largely an Admin cheerleader)
• Inflation number that came out during last week's meeting was "excellent".
• Hopefully we'll see more data like that.
• We will get to 2% inflation
• Sees potential for more inflation cooling this year

Markets also digested a solid US 20yr bond auction (3^rdone in a row, bid/cover 2.74) at 1pm.

Bond yields worked lower throughout the session, with the US 2yr to 4.701%, and the US 10yr to 4.207%. Stocks pushed slightly higher into record territory, with the S&P touching 5491 (+18). Gains in Nvidia (ATH, now the most valuable public co), IT, and Industrials led the advance. The DX softened to 105.13, then had a modest bounce to trade either side of 105.30. Gold firmed, and rallied up to $2333, where resistance there ($2333-41, 6/12, 6/14, and 6/17 highs) held.

With todays Retail Sales report coming in softer, gold escaped a potential breach of the long term up trendline at $2306 from the 2/14 $1984 low. With the Juneteenth Holiday tomorrow and a lack of significant reports / market drivers over the rest of this week and next, expect gold to remain rudderless and firmly in summer doldrums mode in the near term.

Support:

$2300-07 (up trendline from 2/14 $1984 low, 6/14 low, options), $2295-97 (6/11, 6/13 lows), $2278-87 (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), $2223-32 (options, 4/1 low, 100-day MA), $2217 (50% retracement of up move from 2/14 $1984 low to 5/20 $2450 ATH)

Resistance:

($2333-42, 6/12, 6/14, 6/17, 6/18 highs), $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 soft Retail Sales Report pushed the probabilities of quicker and deeper FF rates cuts higher, overshadowing a firmer Industrial Production Report and a chorus of moderately hawkish FedSpeak from Barkin, Collins, Kugler, Logan, and Musalem. Markets still expect the Fed to begin lowering rates at the Sep meeting (68% prob), and believe the Fed will cut again by December to 4.75%. This despite the FOMCs dot plot indicating only 1 rate cut this year and recent FOMC members hinting at the likelihood of only one cut to 5%.

FF Probabilities:

July:10.3% prob of a cut to 5%

Sep:67.7% of cut to 5% or lower, up from 61.5% yday

Nov:30.7% chance of cut to 4.75% or lower, up from26.8% yday

Dec:68.8% prob of cut to 4.75% or lower, up from 63.3% yday

Last Fridays CFTCs COT Report as of 6/11 showed the large funds cutting 7.8k contracts of longs and 4.4k contracts of shorts to reduce the Net Fund Long Position by 3.4k contracts to 234k contracts. This was done on golds decline from $2328- $2316 during 6/4-6/11, reflecting a moderate amount of long liquidation along with profit taking from shorts during that period. 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 (825 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:Net LT TIC Flows, API Oil Inv

Wed:Japans Tankan Index, Bal of Trade, BOJ Mon Pol Minutes, Imports, Exports, UK Inflation, PPI, ECB Current Acct, Construction Output, US NAHB Housing Index

Thurs: Chinas Loan Prime Rates, Eurogroup Meeting, Consumer Confidence, German PPI, BOE Interest Rate Decision, US Housing Starts, Building Permits, Jobless Claims, Philly Fed, Consumer Confidence, EIA Oil Inventories

Fri:Japans Jibun Bank PMI, UK Gfk Consumer Confidence, Retail Sales, PMI, Eurozone PMI, US PMI, Leading Index, Existing Home Sales, 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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