Your Exclusive Summary: 2023 Mid-Year Gold Market Outlook

Gold Market Report – April 16, 2024

Last Night’s Activity

Gold softened last night and declined in continued nervous and choppy px action in a range of $2391 – $2363.  Gold slipped to its $2363 low during Asian and early European time, as it faded strength in the US dollar (DX to 106.44).  The DX gained against:

  • continued weakness in the yen (154.13 – 154.70, fresh 34-yr low)
  • firming US / Japan yield differentials / expectations
  • BOJ in no rush to normalize
  • Yen bears discounting the repeated verbal intervention from Japanese officials
  • Yuan retreat (7.2329 – 7.2397)
  • After initial rally from stronger Chinese GDP YoY (5.3% vs exp 5%, 5.2% last) and Fixed Asset Investment (4.5% vs exp 4.3%, 4.2% last), yuan pulled back on weaker readings on:
  • Industrial Production (4.5% vs exp 4.3%, 4.2% last
  • Retail Sales (3.1% vs exp 4.5%, 5.5% last)
  • Capacity Utilization (73.6% vs 75.9% last)
  • House Px Index (-2.2% vs -1.4% last)

Gold rebounded to $2375 during later European hours, helped by a pullback in the DX (106.10).  The dollar was weighted by a rally in the euro ($1.0602 – $1.0648), which was lifted by:

  • Much stronger German ZEW Economic Sentiment (42.9 vs exp 35.9, 31.7 last)
  • Higher German Wholesale Pxs (0.2% vs exp 0.1%, -0.1% last)
  • Stronger Eurozone ZEW (43.9 vs exp 37.2, 33.5 last)
  • Better Eurozone Bal of Trade (23.6B euro vs 11.4B last)

A continued firming in US bond yields was a modest headwind for gold however, with the US 2yr from 4.938% – 4.953%, and the US 10yr from 4.629% – 4.666% (inversion in to around 30bp).  Slightly stronger equities also weighed on gold, with S&P futures +13 to 5117.  Gains in United Health and Morgan Stanley on stronger earnings led the advance.

Ongoing geopolitical tensions continued to keep gold well supported:

  • Russia claims terrorists on the Crocus City Hall were connected with Ukrainian nationalists
  • Russian forces advancing on Chasiv Yar in Donetsk
  • US House Speaker Johnson announced separating bills for aid for Ukraine and Israel
  • Israel weighs response options to last Saturday’s attack by Iran
  • Iran warns of severe response if its “interests” are targeted by Israel
  • IDF says it killed a Hezbollah commander in southern Lebanon
  • China says Iran’s actions against Israel were “exercise of self defense”
  • Putin speaks with Iranian President Raisi, depicts strikes taken by Iran as “retaliatory measures”, and “the best way to punish an aggressor”

NY Time

This morning’s US Economic Data were generally soft:

  • Housing Starts lower (1.321M vs exp 1.48M, 1.549M last)
  • Building Permits (1.458M vs exp 1.514M, 1.523M last)
  • Redbook Sales lower (4.9% vs 5.4% last)
  • Industrial Production (0.4% vs exp, 0.4% last, rev up from 0.1%)
  • Capacity Utilization lower (78.4% vs exp 78.5%, 78.2% last)
  • Manufacturing Production lower (0.5% vs 1.2% last

The typical market action to this predominantly weaker data was short-lived however.  The S&P ticked up 6 to 5068.  Bond ylds dropped with the US 2yr down to 4.932%, and the US 10yr down to 4.627%.  The DX dipped to 106.07, and gold edged up to $2379. 

Markets quickly reversed in the later morning, with some hawkish comments from Fed’s Vice Chair Jeferson contributing:

  • Inflation data over the past three months were above the low readings in the 2nd half of last year, while job growth and retail spending remained stronger than expected
  • While we have seen considerable progress in lowering inflation, the job of sustainably restoring 2% inflation is not yet done
  • My base outlook continues to be that inflation will decline further, with the policy rate held steady at its current level, and that the labor market will remain strong, with labor demand and supply continuing to rebalance
  • But if incoming data suggest inflation is more persistent that I currently expect it to be, it will be appropriate to hold in place the current restrictive stance of policy for longer. 
  • I am fully committed to getting inflation back to 2%

The US 2yr bounced to 4.974% and the US 10yr rose to 4.683%.  Equities softened, with the S&P dipping to 5040 (off 20), and the DX rebounded to 103.36.  Gold was pressed back to $2364, where it found support just ahead of the ovn low ($2363).  However, as we’ve seen as a regular feature of the gold market lately, strong dip buying emerged that took the yellow metal up to $2398. 

In the afternoon, further hawkish commentary from the Fed’s Barkin

  • CPI data has not been supportive of a soft landing…
  • the economy is not overheating, but if so, we can deal with it…
  • smart for Fed to take its time on decision to cut rates…

were underscored by the Fed’s Powell (@ Wilson Center)

  • recent data shows a lack of further progress on inflation
  • new uncertainty on whether the Fed can cut rates later this year
  • Fed can maintain higher rates for as long as needed

Bond yields pushed higher with the US 2yr up to 4.998%, and the US 10yr back up to 4.698%.  The S&P slipped to make a new low (5039, off 22), with Real Estate, Utilities and Energy leading the decline.   The DX rose to 106.52 (fresh 5-mo high), and knocked gold briefly back to $2380.  Again, the decline was met by bargain hunters that brought the market back up to the $2390-93 level. 



$2320-26 (4/10, 4/11 lows, options), $2300-03 (4/8 low, options), $2266-67(4/3, 4/5 lows), $2247-50 (4/2 low, options), $2208 (50% retracement of up move from 2/14 $1984 low to 4/12 $2432 ATH),  $2229 (4/1 low), $2187 (3/28 low), $2174-75 (3/27 low, options, $2157-68 (3/22, 3/25, 3/26 lows, $2146-50 (3/18, 3/19, 3/20 lows)


$2375-78 (4/11, 4/15 highs, options), $2400 (options), $2432 (4/12 ATH)

Remains Overbought:

After rallying $211 (10.6%) from its 2/14 $1984 low to $2195 on 3/8, and $160 from 2/28-3/8, gold’s 14-day RSI shot to a white hot 85 – a level it hasn’t seen since March 2022 (Russian invasion).  After a pullback over the subsequent 7 sessions to the 67 –  70 level, it surged back up to an overbought 75 on the rally to the $2222.  After another dip to $2157 on 3/22, the market surged $275 to a fresh ATH at $2432 by putting in 13/14 sessions of new highs.  This took the14-day RSI back to the white hot overbought level of 85.  Despite Friday’s blow off top price action (rally to ATH $2432 was followed by a $100 pullback), the market put in two consecutive gains, leaving its RSI at a very overbought 76.


Recent stronger US Economic Data, including the most recent robust US Payroll Report, hotter CPI, and stronger Retail Sales have combined with a generally more hawkish narrative from recent Fed Speakers, including Chair Powell today, to push back on the rapid and deep rate cut narrative that was prevalent just a couple of months ago. 

The door is essentially shut on the Fed beginning to cut rates in June (prob down to under 20%), and July (46%), and now expect them to begin in Sep (71.3%).  Additionally, markets also reduced their expectation of cuts from 3 to 2 for the remainder of the year. 

FF Probabilities:

May: 0.5% prob of cut to 5% or below

June: 19.3% prob of cut to 5% or below

July: 45.9% chance of cut to 5% or below

Sep:  71.3% prob of cut to 5% or lower

Nov: 37.2% prob of cut to 4.75% or lower

Dec ’24: 56.9% prob of a cut to 4.75%, or lower, only 22.2% chance of a cut to 4.5% or lower, reflecting expectations of only two 25bp cuts by yr end. 

This compares to the most recent FOMC Dot Plot where 10 members are looking for 3 cuts to 4.5%, and 9 members are expecting 2 25bp cuts to 4.75%

Market Positioning

Last Friday’s CFTC’s COT Report as of 4/9 showed the large funds trimming 1.6k contracts of longs and adding 3.2k contracts of shorts to surprisingly reduce the Net Fund Long Position by 4.8k contracts to 202.4k contracts.  This was done on gold’s sharp rally from $2280 on 4/2 – $2352 on 4/9.  Since then, this position is out at least 10-15k contracts on gold’s rally to $2432.  At well over 200k contracts, this position is 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, sliding to just 815 tonnes on 3/12 – its lowest level since July 2019.  This is despite gold’s $200+ move ($1980 – $2080) during that period.  Though gold has rallied another $350+ since then, GLD holdings have only increased by around 15 tonnes to 825-30 tonnes (828 tonnes last).  This continues to reflect a fair amount of profit taking from GLD longs into the rally, along with some diversification of AI assets into bitcoin ETFs (Bitcoin continues to surge, 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.

Reports / Events

Today: API Oil Inventories

Wed: Japan’s Tankan Index, Bal of Trade, China’s FDI, UK Inflation, Eurozone Inflation, US EIA Oil Inventories, 20 year bond auction, Beige Book, Net LT TIC Flows

Thurs: Eurozone Construction Output, US Jobless Claims, Philly Fed, Existing Home Sales

Fri: Japan’s Inflation, Tertiary Industry Index, UK Retail Sales, COT

Gold 4/16/24

by Jim Pogoda

Senior Trader / Analyst

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