HAA Gold Market Report 15 May 2024

Gold Market Report – May 15, 2024

Overnight:

Gold was a little choppy last night, awaiting today’s key US CPI and Retail Sales readings.  It traded in a range of $2355 – $2374, largely fading movement in the US Dollar.  The yellow metal advanced to its $2374 high during Asian and early European time, where it was capped by resistance there ($2373-79, options, down trendline from 4/12 $2432 ATH), as the DX slipped from 105.02 – 104.80. The greenback was pressured by:

  • Yen strength (156.55 – 155.38, picking up over one handle)
  • Position squaring (yen shorts exit) ahead of US CPI, Retail Sales and tonight’s Japanese Q1 GDP reading
  • Euro strength ($1.0813 – $1.0836)
  • Eurozone Q1 GDP revision as exp (0.3% vs exp 0.3%, -0.1% last)
  • Ind Prod MoM stronger (0.6% vs exp 0.5% last)

Bond yields were also gold supportive, with the US 2yr down from 4.819% – 4.785%, and the US 10yr down from 4.446% – 4.407%.  Equities were either side of unchanged, with gains in Dell (upgrade by Morg Stan) and Nio (upgrade by JPM) offset by pullbacks from recent wild advances in meme stocks AMC and GameStop. 


NY Time

The much awaited US CPI and Retail Sales data were seen as softer (as were other reports of less import) and supportive for the Fed becoming more proactive in cutting rates earlier and deeper:

  • CPI MoM lower (0.3% vs exp 0.4%, 0.4% last)
  • Core CPI MoM as exp (0.3% vs exp 0.3%, 0.4% last)
  • CPI YoY as exp (3.6% vs exp 3.6%, 3.8% last)
  • Core CPI YoY as exp (3.4% vs exp 3.4%, 3.5% last)
  • Retail Sales MoM weaker (0% vs exp 0.4%, 0.6% last)
  • Retail Sales Ex Autos MoM as exp (0.2% vs exp 0.2%, 0.9% last)
  • Empire State Man Index weaker (-15.6 vs exp -10, -14.3 last)
  • Business Inventories as exp (-0.1% vs exp -0.1%, 0.3% last)
  • NAHB Housing Market Index lower (45 vs exp 51, 51 last)

This soft data far outweighed a reiteration of some mildly hawkish remarks from the Fed’s Kashkari:

  • The biggest uncertainty in my mind is how much downward pressure is monetary policy putting on the economy? That’s an unknown…
  • And that tells me we probably need to sit here for a while longer until we figure out where underlying inflation is headed before we jump to any conclusions

Breaking a streak of 3 straight months of inflation prints above expectations gave markets a sigh of relief.  Bond yields tumbled, with the US 2yr to 4.73%, and the US 10yr to 4.338%  both making 1 month lows.  Stocks surged, with the S&P driving past 5300 to a fresh ATH at 5306.  Gains in IT, Utilities, Real Estate, and Health Care led the rally.  The  dollar tanked, with the DX falling beneath its overnight low (104.80), 50-day MA (104.77) to support at its 200-day MA at 104.32.  Gold surged higher, taking out resistance at $2373-79 (options, down trendline from 4/12 $2432 ATH) and triggering buying to reach $2390, where resistance there (4/22 high) finally held.  A fair amount of short covering along with new longs were seen.


Technicals

Support:

$2373-79 (5/10 high, options, down trendline from 4/12 $2432 ATH) $2304-10 (5/7, 5/8, 5/9 lows), $2350-51 (options, 5/15 low), $2332-39 (5/13, 5/14 lows, up trendline from 5/3 $2277 low), $2325 options, $2300 (options), $2292 (5/6 low), $2278-86 (4/30, 5/1, 5/2, 5/3 lows), $2265-67(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)

Resistance:

$2389-90 (4/22, 5/15 highs), $2400 (options), $2418-25 (4/19 high, options), $2432 (4/12 ATH)

FedWatch:

Today’s tame CPI and soft Retail Sales readings pushed the probabilities of sooner and deeper FF rate cuts up.  However, with the recent continued hawkish FedSpeak, markets are still predicting just two FF rate cuts this year.  They’re looking for the first cut to occur in Sep (75% prob) and the 2nd cut at the Dec meeting (70% chance) 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 a cut to 5% or below

Sep:  75.2% chance of cut to 5% or lower

Nov: 44.9% chance of cut to 4.75% or lower

Dec: 69.7% 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

Wed: Remarks from the Fed’s Bowman, US 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 5/15/24

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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