6/11/2024

Gold continues to consolidate Friday's sharp losses

OUTSIDE MARKET DEVELOPMENTS: The precious metals market continues to assess the implications of Friday's news that the PBoC did not buy any gold in May. While China had added to official reserves for 18 consecutive months through April, buying in April was only 2 tonnes. That was well below their average purchase of 18 tonnes going back to Nov 2022.



Based on the chart above, it's obviously not uncommon for China to hold steady on gold reserves for extended periods. The market will eagerly anticipate June data to see if China's reserves remain at 2264 tonnes.

A number of central banks have been participating in the gold-buying spree so far this year. Turkey has actually been leading the charge. China was number 2 in terms of YTD volume through April. India, Kazakhstan, and Singapore round out the top 5.

With or without PBoC participation, central bank buying is likely to remain an important theme with regard to the underlying bull trend in gold.

Conservatives made gains in the recent EU Parliamentary elections, based in large part on voters' growing concerns about mass immigration. French President Macron reacted by dissolving the General Assembly and calling for a snap election. This may be an attempt by Macron to re-consolidate his power, but there is a risk that it will backfire. 

There is growing speculation that gains by the right in Europe could be a harbinger ahead of U.S. elections in November. Political uncertainty may provide some support for gold in the months ahead.

Look for choppy consolidative trading to prevail – with a bearish bias – ahead of Wednesday's FOMC decision and CPI data. PPI data comes out on Thursday.

GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -2.94 (-0.13%)
5-Day Change: -18.58 (-0.80%)
YTD Range: $1,986.16 - $2,449.34
52-Week Range: $1,812.39 - $2,449.34

Gold continues to consolidate the sharp losses seen on Friday, with a bit of a bid emerging in early U.S. trading that has taken the yellow metal into positive territory for the session.



Initial resistance at $2,315.47/$2,318.36 has been slightly exceeded, leaving $2326.73 vulnerable to a test. The more important level to watch is the midpoint of Friday's range at $2,337.27. Penetration of this level would set a more favorable short-term tone, shifting focus to $2348.98 (61.8% retrace) and then $2,386.90.

However, it seems unlikely in the wake of last week's collapse that the bears won't try and take the market lower again. Today's intraday low at $2,298.90 protects the lows of the previous 2 sessions at $2,289.43/$2,287.64. Key support is marked by the low from 01-May $2,281.97.  


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CDT: -$0.481 (-1.62%)
5-Day Change: -0.165 (-0.56%)
YTD Range: $21.945 - $32.379
52-Week Range: $20.704 - $32.379

Silver eked out a new 4-week low of $29.103 in overseas trading, sightly exceeding Friday's low at $29.146. The magnitude of the total decline off the 11-year high at $32.379 (21-May) is now 10.1%.



The lack of downside follow-through is perhaps mildly encouraging, yet further attacks on the downside seem likely. Another round of new lows would confirm potential to $28.467 (61.8% retracement of the leg-up from $26.049 to $32.379).

Initial resistance defined by Monday's high at $29.805 has been reinforced by today's price action. Penetration is needed to call for further retracement of Friday's losses to the midpoint of that range at $30.764.

 

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Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
Tornado Precious Metals Solutions by Zaner
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