Gold Bullion Holds 1-Week Lows After 'Blowoff Top' Record in Comex Futures
Tuesday, 12/05/2023 14:55
GOLD BULLION prices held around 1-week lows in London trade Tuesday, sitting more than 5% below yesterday morning's sudden spike to new all-time highs in all major currencies except the Swiss Franc even as betting edged higher that the US Federal Reserve will start cutting Dollar interest rates as soon as March.
Prices for wholesale gold bullion settled in London – heart of the global precious metals market – held around $2025 per Troy ounce, some £1603 in Sterling and €1871 for Euro investors, while Shanghai gold prices held 1.9% below Monday morning's new all-time high above ¥482 per gram.
That helped the incentive for new bullion imports into China, gold's No.1 consumer nation, rebound to the equivalent of $26 per ounce from yesterday's 5-month low of $9, suggesting continued tight supply versus demand.
Trading volumes in US Comex gold derivatives meantime fell back after yesterday's near-45% jump to the highest 1-day turnover since mid-March, when gold began a surge to its prior all-time highs amid the
Silicon Valley Bank collapse.
"Technically, the spike [in gold prices] has had all the hallmarks of a blowoff top," says a note from strategist Nicky Shiels at Swiss refining and finance group MKS Pamp, looking at the Dollar gold price chart and its plunge from yesterday's new record of $2143 per Troy ounce.
"An outside reversal day is worrisome [because while] one day's events shouldn't change the bullish narrative we have in the medium term, one day of super bad technicals is cause for a rethink."
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After peaking as high as $2152 during Monday's early spike, the February 2024 Comex gold futures contract – now the
most active gold derivatives contract traded on the CME exchange – settled last night $47.50 per ounce below Friday's record-high finish, ending the session at $2042.20.
At physical bullion's twice daily
London benchmarking auction, in contrast, gold failed to make a new record high on Monday, fixing yesterday morning at $2066.95 per Troy ounce – 20 cents beneath the all-time high set at the 3pm auction of 6 August 2020 – but then sliding much less than Comex derivatives to fix almost $4 higher from Friday's 3pm finish at $2049.05 per Troy ounce.
"Market participants are already expecting 120 basis points of rate cuts [from the US Fed] in 2024," Reuters quotes Swiss bank and London bullion market-maker UBS's analyst Giovanni Staunovo.
"So a repricing of those expectations
could result in near-term volatility, particularly if upcoming US economic data comes in on the positive side."
After
US factory orders on Monday showed a plunge of 3.6% by value in October from September - the steepest crash since spring 2020's Covid crisis – new figures later on Tuesday were set to show the latest reading of US job openings on the Jolts measure, plus service-sector activity in the world's largest economy during November on the ISM's PMI surveys.
Services activity in the Eurozone and UK beat analyst forecasts this morning as Western stock markets edged higher but failed to reverse Monday's 0.5% drop in the MSCI World Index of developed-economy equities from last week's new 4-month high.
Shorter-term US borrowing costs held 0.1 percentage points above Friday's sudden 5-month low of 4.54% on 2-year Treasury yields, hit after Fed chair Jerome Powell suggested in a speech that
Dollar interest rates have peaked at the current 2-decade high of 5.33% per annum.
Following Monday's early spike in bullion prices, the giant GLD
gold-backed ETF saw a 2nd consecutive day of net investor inflows, but the smaller IAU gold ETF shrank again, as did the SLV silver exchange-traded trust fund.
Silver prices today held $1.50 per ounce below yesterday morning's 7-month high of $25.88, while fellow industrially-useful precious metal platinum slipped back towards $900 per Troy ounce and
the price of palladium – which had also been left untouched by the surge in gold and silver prices – dropped back towards mid-November's 5-year lows at $960.
"We expect market participants who missed out on the gold rally would likely step in and buy gold on dips below $2000," reckons Staunovo at UBS.
"Our bullish expectations have been brought forward into Q1 24," says Shiels at MKS. "We do not believe [Monday's] break-up is gold's peak for 2024 [thanks to] ongoing dedollarization [by major emerging Asia central banks] and the underlying fear over an upcoming recession."
Betting on the Fed's March 2024 decision today put the odds of a rate cut at 60%, down from Friday's surge to 75% but slightly above Monday's pricing.
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