HAA Gold Market Report 13 May 2024

Gold Market Report – May 13, 2024

Overnight:

After surging from $2304 to a 3wk high at $2360 (resistance at down trendline from 4/12 $2432 ATH held) in its last 2 sessions, gold pulled back overnight.  The yellow metal retreated in a range of $2365 – $2339, and fell below Friday’s $2345 low.  Gold’s decline was buffered by a modest decline in the US dollar, as the DX slipped from 105.35 – 105.13.  Though the dollar was a tad firmer against the yen:

  • (155.68 – 155.96)
  • Continued expectations of US-Japan interest rate differentials remaining wide

And firmer against the yuan: (7.2268 – 7.2358), as a firmer Chinese Inflation YoY (0.3% vs exp 0.1%, 0.1% last) was overshadowed by:

  • Weaker PPI (-2.5% vs exp -2.3%, -2.8% last)
  • Weaker Vehicle Sales (9.3% vs 9.9% last)
  • New Yuan Loans lower (730B yuan vs exp 1200B, 3090B last)

The greenback softened vs the euro ($1.0766 – $1.0798):

  • Traders pricing in earlier and deeper ECB rate cuts vs the on hold Fed, with expectations for US CPI this Wed only showing a modest improvement (CPI MoM exp 0.4% vs 0.4% last, Core CPI MoM exp 0.3% vs exp 0.4%)

US bond yields were lower and also gold supportive with the US 2yr from 4.868% – 4.844%, and the US 10yr from 4.503% – 4.479%.  Equities were slightly firmer and a modest headwind for gold, however, with S&P futures up 14 to 5260.  The advance was led by GameStop (posting by Keith Gill, aka “Roaring Kitty”, ignites short squeeze), Nvidia (upgrade by Jefferies), and Arm (expects to launch AI chips next yr).


NY Time

Markets digested a worse than expected reading on US Consumer Inflation Expectations (3.3% vs 3% last) along with moderately hawkish comments from the Fed’s Phillip Jefferson:

  • Economy has made a lot of progress
  • The labor market has been very resilient
  • I view the economy as in a solid position
  • The decline in inflation has attenuated
  • Inflation is a source of concern
  • Is focused even more so on inflation given broader strength
  • It is appropriate that we maintain the policy rate in restrictive territory
  • It is appropriate to keep the policy rate restrictive until clear inflation ebbing.

This prompted bond yields to rebound , with the US 2yr to 4.855% and the US 10yr to 4.488%.  Stocks slumped and turned negative, with the S&P off 5 to 5218.  The decline was led by Communication Services and Health Care. The DX, after a further softening to 105.06 just before and through the NY open, rebounded to 105.24.  Gold, which had an early bounce to $2350 off of the further softening in the DX, slipped back through its overnight low at $2339 to reach $2332. 


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), $2258-67(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:

$2365 (5/13 high), $2373-79 (options, down trendline from 4/12 $2432 ATH), $2389 (4/22 high,), $2400 (options), $2418-25 (4/19 high, options), $2432 (4/12 ATH)

FedWatch:

Today’s warmer Consumer Inflation Expectation reading echoed the University of Michigan Inflation Expectations from Friday, and tugged probabilities of the Fed cutting the Funds rate sooner and deeper slightly down.  This was after last Thursday’s weaker Jobless Claim that added to the slightly dovish tilt from the 5/3 Payroll Report along with Powell’s surprise dovish tilt on 5/1 that moved the probabilities of sooner and deeper FF rate cuts significantly.  Markets are still predicting the first cut to occur in Sep (63% prob) and are continuing to expecting a 2nd cut at the Dec meeting to reach a 4.75% Funds rate by year end.

FF Probabilities:

June: 8.9% prob of cut to 5% or below

July: 29.6% prob of cut to 5% or below

Sep:  63.4% chance of cut to 5% or lower

Nov: 33.1% chance of cut to 4.75% or lower

Dec: 55.5% prob of cut to 4.75% or lower


Market Positioning

Last Friday’s CFTC’s COT Report as of 5/7 showed the large funds cutting 6.7k contracts of longs and cutting 2.1k contracts of shorts to reduce the Net Fund Long Position by 4.6k contracts to 199.5k contracts.  This was done on gold’s advance from $2285 – $2315 during 4/30-5/7, showing a good amount of profit taking along with short covering during the rally.  At around 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 (832 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  $65k). 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 winding down… so far it has been decent: with around 92% of S&P reporting, roughly 80% reporting EPS > estimates

Tues: Japan’s PPI, Machine Tool Orders, German Inflation, ZEW Economic Sentiment, Eurozone ZEW, UK Employment, US NFIB Business Optimism, PPI, Redbook Sales, Powell Speech, API Oil Inv

Wed: China’s 1yr MLF Announcement, Eurozone GDP, Ind Prod, Employment Change, CPI, Retail Sales, Business Inv, EIA Oil Inv, Net LT TIC Flows

Thurs: Japan’s GDP, Ind Prod, Cap Util, ECB Fin Stability Review, BOE Fin Stability Review, US Housing Starts, Building Permits, Jobless Claims, Philly Fed, Ind Prod, Cap Util

Fri: China’s House Px Index, Fixed Asset Inv, Ind Prod, Retail Sales, Unemployment, Eurozone Inflation, US Leading Index, COT


Gold 5/13/24

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.


RELATED ARTICLES:

  • Gold Market Report – May 13, 2024

    Gold Market Report – May 13, 2024

    Overnight: After surging from $2304 to a 3wk high at $2360 (resistance at down trendline from 4/12 $2432 ATH held) in its last 2 sessions, gold pulled back overnight.  The yellow metal retreated in a range of $2365 – $2339, and fell below Friday’s $2345 low.  Gold’s decline was buffered by a modest decline in…

    Read more…

  • Gold Market Report – May 09, 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: Weaker equities were gold supportive, however, with S&P futures off 18 to 5195.  Losses at Arm (guided lower), Airbnb (disappointing guidance),…

    Read more…

  • Gold Market Report – May 08, 2024

    Gold Market Report – May 08, 2024

    Overnight: Gold was a bit choppy last night and either side of unch ($2314), trading between $2304 – $2321.  It was pressured on the downside by an improving US dollar, as the DX advanced from 105.41 – 105.64.  The greenback was helped by: However, gold was supported by a rate cut by the Sweeden’s Riksbank…

    Read more…