Precious metals continue to surge following disappointing US GDP data
By Indrabati Lahiri and Piero Cingari
10:01, 29 July 2022
Precious metals were considerably upbeat on Friday morning, ending the week on a high note, with gold, silver and platinum all up, but palladium struggling somewhat, as the market scaled back expectations on Fed rate hikes in 2023.
Yesterday, the US GDP print for the second quarter of the year showed an annualized 0.9% contraction, following a 1.6% drop in Q1. This certifies a technical recession for the US economic, leading to a renewed interest in safe haven assets, such as precious metals, as market scaled back Fed rate hikes.
According to Piero Cingari, analyst at Capital.com, “A number of catalysts have emerged in recent days to support the recovery in precious metals prices. To begin with, Fed interest rate risks appear to be shifting downward rather than upward, according to market participants. Fed futures are already pricing in a cut in the first half of 2023.
Second, historically, the term “recession” has historically been gold’s best friend. With the US economy already facing a technical recession in Q2 and a persistently high inflation rate, this creates the conditions for a prolonged period of economic stagflation, which is
Finally, economic, geopolitical, and energy risks remain elevated, particularly in Europe, and this tends to increase demand for gold as a safe haven against inflation and crisis.Thus, gold may begin to decouple from its negative relationship with interest rates and see strong investment demand if economic actors start to factor in that inflation will be difficult to control even with higher interest rates.
Technically, gold’s price momentum is picking up, with the 14-day RSI crossing the key 50 mark for the first time since mid-June. The MACD indicator offered a bullish crossover this week, supporting the short-term bullish rebound.The 50-day moving average and the $1,800-1810 range are the most significant short-term resistance levels right now. If prices overshoot this region, they’ll break the descending channel since March’s peaks.”
Gold's 14-day RSI crossed 50 for the first time since mid-June
Gold's 14-day RSI has recently crossed the key 50 mark – Credit: TradingViewIn London morning trading, spot gold inched up 0.7% to $1,768 per troy ounce, spurred on by recent weakness in the US dollar (DXY), as well as increased safe haven demand.
Silver advanced 0.6% to $20.0 per troy ounce, tracking gold’s footsteps, with the precious metal cautiously attempting to move up from its recent two-year low of about $18.1 per troy ounce.
US 10-year Treasury yields inched up 1.2 basis points to 2.7%.
Platinum rose 0.8% to $894 per troy ounce, continuing to rebound from a 22-month low of about $814 per troy ounce seen
Palladium climbed up 0.9% to $2,097 per troy ounce, boosted by increasing Chinese demand, as Chinese imports of Russian palladium hit an all-time high recently.
Copper rose 1.3% to $3.5 per pound, having already risen about 3.7% this week, on hopes of China providing more stimulus packages to support a flailing economy.
Aluminum climbed up 0.5% to $2,483 per tonne, following China upping its aluminium production as smelters adjusted better to energy efficiency targets.
Iron ore advanced 7.3% to $118 per tonne, following increased Chinese steel shortages.
Top things to know about metals today
Gold: Aris Gold and GCM Mining have recently combined, in hopes of creating a top Americas gold producer.
Iron ore: China has recently started looking at alternative iron ore supplies from the Simandou iron ore mine in Guinea.
Copper: Copper miners have recently staged protests against Chile’s new copper royalty proposal.
Platinum: Zimbabwe has just raised taxes on platinum, in order to boost national revenue.
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Top things to know about mining stocks today
Glencore (GLEN) has recently warned of cash being tied up in record trading profits.
Rio Tinto (RIOgb) has just signed a joint venture deal with a Chinese supported consortium for rail and port services at Guinea’s simandu iron ore mine.
BHP (BHP) has recently pledged to up its efforts to decarbonise Indian steelmaking.
Antofagasta (ANTO) has just had its price target increased by the Royal Bank of Canada (RY)
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