HAA Gold Market Report 09 May 2024

Gold Market Report – May 09, 2024

Overnight:

Gold was fairly steady overnight and traded narrowly between $2307 – $2320.  The yellow metal was largely able to shrug off some potentially bearish developments, and find support ahead of yesterday’s $2304 low:

  • President Biden’s comments that he would halt weapons shipments to Israel if they proceeded to invade Rafah were certainly viewed as de-escalating (though Netanyahu vowed to into Rafah alone)
  • Hard right Rep Margorie Taylor Green’s attempt to oust House Speaker Mike Johnson failed woefully last night, providing the House – and markets – with new sense of stability
  • US dollar strength
  • DX from 105.54 – 105.74
  • Yen decline
  • After strengthening (155.60 – 155.16) off of a hawkish BOJ Summary of Opinions
  • Some seeing chance of hiking rates faster than anticipated (yen (drops over one handle from 154.57 – 155.60)
  • Yen softened again (155.96) as traders reassessed the weak reading on Japan’s Average Cash Earnings (0.6% vs exp 1.5%, 1.4% last, without wage inflation, the BOJ won’t be able to hike rates)
  • Euro weakness
  • While much of Eurozone was out with Ascension Day, euro softened on some dovish remarks today from the ECB’s de Guindos and with dovish remarks from the ECB’s Wunsch yesterday still resonating
  • Both are on board with a June rate cut
  • Wunsch says staying tight too long bigger risk that early easing
  • Pound weakness ($1.2501 – $1.2446)
  • BOE leaves rates unch,  but Bailey dovish
  • One small rate cut will still leave us with a restrictive monetary policy
  • No law that says we must move after the Fed
  • Move up in US bond yields
  • US 2yr from 4.843% – 4.855%
  • US 10yr from 4.483% – 4.523%

Weaker equities were gold supportive, however, with S&P futures off 18 to 5195.  Losses at Arm (guided lower), Airbnb (disappointing guidance), Tapestry (revenue miss), Roblox (off over 25%, earnings miss, guided lower), AMC (revenue miss), and Planet Fitness (revenue miss, guided lower led decliners. 


NY Time

The only US Economic release today was the 830 AM report on Jobless Claims, where the headline reading was worse than expected:

  • US Jobless Claims higher (231k vs exp 210k, 209k last, but a good chunk was seasonal from NY teachers)
  • Continuing Claims slightly lower (1785k vs exp 1790k, 1768k last)
  • 4 wk average higher (215k vs 210.25k last)

In the afternoon, while the Fed’s Mary Daly joined the mildly hawkish chorus since last week’s FOMC meeting and Powell presser, but did underscore what many perceive to be a Fed put:

  • interest rates are currently restraining the economy,  it may take more time to return inflation to their 2% goal
  • 2% is our target and the Fed is not going to change the goalpost
  • Considerable uncertainty about inflation’s path
  • Differenced between labor mkt getting “softer” and “weak”
  • If “weak”, that could be reason to change policy rate (Fed put)

Equities rallied fairly steadily through the session, with the S&P climbing to 5214 (+26).  Real Estate, Energy, Materials, and Utilities led the advance.  Bond yields were tugged lower, with the US 2yr to 4.807%, and the US 10yr to 4.448%.  The dollar softened, with the DX down to 105.23.  Gold rallied in response, tripping some buying over last night’s $2020 high, $2325-32 (5/1, 5/2, 5/6 highs, options) and $2337 (4/30 high) to reach $2444 (one wk high), where resistance in front of  $2345-52 (4/25, 4/26, 4/29 highs, options) held.


Technicals

Support:

$2304-10 (5/7, 5/8, 5/9 lows), $2300 (options), $2292 (5/6 low), $2278-86 (4/30, 5/1, 5/2, 5/3 lows), $2260-67(4/3, 4/5 lows, down trendline from 4/10 $2320 low), $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)

Resistance:

$2345-52 (4/25, 4/26, 4/29 highs, options), $2375-79 (options, down trendline from 4/12 $2432 ATH), $2381 – 89 (4/22 high,), $2393-2400 (4/16, 4/17, 4/18 highs, options), $2418-25 (4/19 high, options), $2432 (4/12 ATH)

FedWatch:

Today’s weaker Jobless Claims was a slightly dovish and added to last Friday’s mild Payroll Report along with Powell’s surprise dovish tilt last Wednesday that moved the probabilities of sooner and deeper FF rate cuts significantly.  Now, markets are predicting the first cut to occur in Sep (67% prob) and are back expecting a 2nd cut at the Dec meeting to reach a 4.75% Funds rate by year end.

FF Probabilities:

June: 8.4% prob of cut to 5% or below

July: 34.9% prob of cut to 5% or below, up from 31.4% prob yday

Sep:  67.4% chance of cut to 5% or lower, up from 65.7% chance yday

Nov: 37% chance of cut to 4.75% or lower, up from 34.2% prob yday

Dec: 60.1% prob of cut to 4.75% or lower, up from 57.9% prob yday


Market Positioning

Last Friday’s CFTC’s COT Report as of 4/30 showed the large funds trimming 0.7k contracts of longs and cutting 2.0k contracts of shorts to increase the Net Fund Long Position by 1.3k contracts to 204.3k contracts.  This was done on gold’s decline from $2322 – $2285 during 4/23 – 4/30.  Surprisingly, for the second week in a row,  this position wasn’t reduced further by liquidating longs given the sizeable market decline – leaving the market a bit long and vulnerable on the downside.  Still over 200k contracts, 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, 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 825-33 tonnes (830 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 remains strong, trading either side of  $60k). 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:

Q1 Earnings Season continues, so far it has been decent: with around 85% of S&P reporting, 78.2% reporting EPS > estimates, and 61% beating revenue estimates

Fri:  Japan’s Household Spending, Eco Watchers Survey, China’s Vehicle Sales, Current Account, UK GDP, Bal of Trade, Construction Output, Industrial Production, Eurozone ECB Monetary Pol Meeting Accounts, US University of Michigan Consumer Sentiment, COT


Gold 5/09/24

by Jim Pogoda

Senior Trader / Analyst


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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