18/08/2023: This Week in Gold with Market Updates
Price Action:
Gold started trading on Sunday night at $1,913 and gradually fell throughout the course of the week and is currently trading below $1,900. The price of the metal is down 0.5% for the week at the time of writing. The price remained quite resilient following last week’s sell-off.
Silver opened the week at $22.69. After falling to $22.42 on Tuesday, silver rallied 1.5% to $22.75 on Wednesday. Another reversal saw the metal drop back below $22.45, before rallying to finish the week strongly, trading at $22.75 at the time of writing, a small increase for the week.
While Platinum also finished the week with little change, Palladium slumped more than 4%. Now trading at $1,247, Palladium is now down more than 70% from the all time high of $3,307 posted in February 2022. The current live price is as low as Palladium has been since late 2018. With Russia and Ukraine both being key suppliers of the metal, Palladium had rocketed 75% in the run up to and immediate aftermath of the Russian invasion of Ukraine.
Market Updates:
China in Trouble:
Trouble in the Chinese economy weighed on markets this week as growing fears around the country’s property market spread to the financial sector. Zhongrong International Trust, one of the country’s largest shadow banks, missed payments to clients this week, leading to protests outside the bank’s headquarters. Metal fences were set up around the Beijing landmark – a sign that China’s political and financial elite may fear wider unrest.
This came in the same week that China’s previously largest property developer filed for bankruptcy protection in New York. The developer’s demise was already factored in by many analysts, the company’s initial troubles in 2021 roiling global markets at that time.
FED’s Meeting & Higher Yields:
Gold Prices gained a little on Thursday following three days of declines this week. The price of the yellow metal has been struggling due to relentless rises in high-quality bond yields, notably in the United States but also elsewhere, as markets move to price in higher interest rates for longer.
Minutes from the latest US Federal Reserve meeting left investors expecting considerable upside risks to inflation which in turn may warrant more interest rate hikes.This news helped ten-year Treasury yields test the 4.3% level, their highest for more than fifteen years.
Gold tends to do much better in times of low or negative interest rates when lower yields on offer in other markets compensate for the lack of yield inherent in holding the precious metals. Furthermore the stronger Dollar those yields inevitably bring also negatively impacts gold by making products denominated in the US currency more expensive for buyers elsewhere.
U.S. jobless claims:
The U.S. labour market continues to be resilient as applications for jobless claims fell again last week and remain at healthy levels in the face of high interest rates and inflation.
Applications for unemployment benefits dropped by 11,000 to 239,000 for the week ending August 12, down from 250,000 the previous week, the Labor Department reported Thursday.
Upcoming Jackson Hole:
The Federal Reserve’s Economic Policy Symposium in Jackson Hole, Wyoming, gets underway on August 24. Fed Chair Jerome Powell is expected to attend and speak at the meeting.
Powell warned of economic pain twice in last year’s speech and investors will be listening out for whether a similar negative sentiment will be heard this time round.
