After the worst start to the year in almost four decades and the worst quarterly performance in more than four years, gold is kicking off the second quarter on a much better note. But will it last?

"Gold has got off to the worst start to any year in 39 years, plunging by 10%, i.e. $190, in the first quarter. This was also its most negative price performance in any quarter since the fourth quarter of 2016," said Commerzbank analyst Daniel Briesemann.

Despite the disappointing news, gold bulls are encouraged by how well the precious metal was able to recover after dropping below $1,680 an ounce this week. At the time of writing, June Comex gold futures were trading at $1,728.00, up 0.72% on the day.

But there is still no clear catalyst for a significant move higher, according to analysts. "We were below $1,680, now we are in recovery mode — above $1,728. I don't see a big catalyst to the upside at this stage," TD Securities head of global strategy Bart Melek told Kitco News. "For the time being, we are range-bound."

Gold continues to take its cues from yields, meaning that when the U.S. Treasury 10-year yields rise, gold drops and vice versa.

On top of that, the U.S. dollar remains "the only game in town," Melek said, which is a problem for gold. "Right now, the U.S. dollar is the only game in town because the U.S. economy is the only game in town. Europe is locking up while the U.S. could be fully vaccinated by May. This is why the U.S. markets will do pretty well. Plus, we are getting a significant commitment to spend more on infrastructure. Earnings and everything else will be good," he said.

Gold will need to see the rest of the world start to recover compared to the U.S., which will trigger a reversal in the U.S. dollar, Melek added. "I'm a little bit more optimistic about Q2, but gold is not going to find its traction until the latter part of the year."

Also, bitcoin's popularity and the impact of higher equity markets should not be underestimated. "It is preventing interest in gold. More people are talking about crypto as a hedge. Right now, there is no big macro catalyst for gold to move higher," Melek stated.

For gold, it is not just about the U.S. bonds selling off, said Phoenix Futures and Options LLC president Kevin Grady. "Gold should be performing better, and it is not. Look at the amount of stimulus thrown into the economy. The 10-year yields shouldn't affect gold as much," Grady said. "Cryptocurrencies is what is hurting gold investments."

Considering all the stimulus out there, gold around $1,700 an ounce does not make sense, he added. "I'm waiting to see if interest will come back into gold."

From a technical perspective, gold is looking better. "Weak longs are out. Positioning is turning. There is significant potential for the upside," Melek pointed out, adding that he still sees gold reaching $1,900 by year-end as inflation picks up.

"Might see inflationary pressure. Fed keeps saying any price pressure this year would be transitory. That doesn't mean that market believes them. If that is the case, gold is in much better shape," Melek said.

Some analysts are more bullish for the second quarter. LaSalle Futures Group senior market strategist Charlie Nedoss said he sees gold going higher next week after it managed to hold $1,700 an ounce.

The U.S. Treasury yields could back off a bit in Q2, noted RJO Futures senior commodities broker Daniel Pavilonis, who is also bullish on gold next week.

"Yields could see a bit of a reprieve. If yields go back down, that is good for gold. In Q1, it was about how quickly yields rose. If they climb slower and in a more controlled way, it would give gold a better play," Pavilonis.
 

Data to watch

The biggest macro event to watch next week will be Wednesday's FOMC meeting minutes from March 16-17.

Also, Fed Chair Jerome Powell will be speaking on Thursday as part of the virtual International Monetary Fund Seminar.

"We doubt the Fed is yet ready to change its dovish tune and – as our bond team concluded at the time of the March FOMC – the Fed has left the long end of the bond market unprotected. Until we see some kind of turnaround in Europe, DXY should continue to edge higher," ING FX strategists said on Friday.

Other data to keep an eye on are the U.S. factory orders and ISM non-manufacturing PMI on Monday, and PPI on Friday.

 

By Anna Golubova

For Kitco News
 

The Best Place to Trade and Store Gold and Silver

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Gold and silver slide lower leading into the EU open

Gold and silver are starting the EU session in the red after falling in the Asia Pac session. The yellow metal is down -0.26% while silver trades nearly 1% in the red below the $25/oz psychological handle. It was not much better in the rest of the commodities complex as copper lost 1% of its value and spot WTI fell 1.77%.

The risk sentiment overnight was mixed as the Nikkei 225 (0.71%) and Shanghai Composite (0.55%) both closed higher but the ASX dropped -0.36%. In the FX space, the dollar index (0.11%) was firmer and the biggest casualty was the Canadian dollar as USD/CAD traded 0.36% in the black.

In news from the Asian session, Suez Canal authorities confirm that Ever Given has been successfully refloated. This hopefully means that the ships stranded either side can start moving again.

In Australia, there has been another COVID-19 case and the State of South Australia will close the border with Queensland. This comes after the nation had been handling the pandemic extremely well and managed to open up its economy.

Germany is also struggling with a third coronavirus wave and Germany's Merkel says the country need curfews, may use Federal law to tighten restrictions.

US Trade Representative Tai says the U.S. isn’t ready to lift tariffs on Chinese imports soon. Tensions between the two economic powerhouses remain high especially as the plight of the Uighur Muslims still remains a hot topic.

ECB chief economist Philip Lane stated, “There is a clear risk of self-fulfilling adverse dynamics taking hold". He added “To counter these risk factors, it is essential that the ECB acts as a stabilising force and boosts confidence by committing to the preservation of favourable financing conditions”.

In the UK BoE's Tenreyro has stated he does not currently see any sustained pick up in demand or inflation. He then added that the BoE stands ready to take whatever action is necessary to achieve its remit.

The White House Press secretary Psaki has said that President Biden plans to split his "build back better" package into two separate proposals.

Looking ahead to the rest of the session highlights include the ECB PEPP purchases and comments from ECB's de Cos.

 

By Rajan Dhall

For Kitco News

 

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Gold and silver trade flat leading into the EU open

Gold and silver are trading flat this morning leading into the EU open. Gold is trading at $1727/oz while silver has moved near the psychological $25/oz area.

Risk sentiment overnight was mostly weak following the weak handover from the US. The Nikkei 225 (-2.04%) and Shanghai Composite (-1.30%) moved lower while the ASX closed 0.50% in the black.

In FX markets, it was the dollar that outperformed overnight. The weakest major currency was the pound which fell over half a percent. In the rest of the commodities complex, copper (0.80%) and spot WTI (1.95%) both trade higher.

Looking at some of the news stories, BOJ's Kuroda said the central bank is to continue with powerful monetary easing persistently.

There was a fall in aluminium prices overnight with some analysts citing the fact that China is considering a sale of around half a million tons of aluminium from state reserves as the reason for the move.

UK medical firm AstraZeneca says it will release up-to-date results from the final stage trial of its vaccine, responding to criticism from a U.S. science agency.

On the data front, Japan (Jibun Bank) Markit preliminary manufacturing PMIs for March came in at 52.0 (prior 51.4), Australia preliminary March Markit PMIs manufacturing it 57.0 vs the prior reading of 56.6 and services printed at 56.2 vs the prior 54.1.

Elsewhere in the Asia Pac area, the Australian Treasury Secretary said he expects a spike in long term unemployment following the COVID-19 pandemic.

On the central bank front, BoC Gravelle said he sees a smoother recovery and Fed's Bullard says he sees the target rate staying near zero through 2023. Fed's Bullard looking for 6.5% GDP growth, unemployment down to 4.5% this year and lastly, Fed's Brainard says she expects to see transitory increases in inflation.

US President Biden says the US will have 600m doses of vaccine by the end of May. Sticking with the US President Biden's first fiscal 2022 proposals will be released on Friday and a full budget is expected in Spring.

On the geopolitical front, South Korean military officials confirmed that North Korea fired 2 missiles off its west coast on Sunday.

Looking ahead to the rest of the session highlights include PMI's from the major nations, DoE's, EZ consumer confidence and comments from Fed's Powell, Barkin, Williams, Daly Evans, ECB's Lagarde and US treasury secretary Yellen.
 

By Rajan Dhall

For Kitco News
 

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Gold and silver trade marginally lower leading into the EU open

Once again gold and silver trade lower this morning but only marginally. The yellow metal is just under flat at $1737/oz while silver over around half a percent into the red at $25.64/oz.

After inheriting a positive close from Wall Street, the bourses in the Asia Pac area struggled. The Nikkei 225 (-0.61%), ASX (-0.11%) and Shanghai Composite (-0.93%) all closed in negative territory.

In FX markets, the dollar once again reigned supreme. This time it was the commodities currencies that suffered as CAD, NZD and AUD all traded lower against the greenback. NZD/USD was the worst-performing major down -1.09%.

In the rest of the commodities complex, there was more weakness. Copper and WTI are both down 0.77% but nickel was the only one to buck the trend and traded 1.14% higher.

We had some comments from ECB's Lane who said, PEPP purchases will show a substantial increase in a consistent way over several weeks.

Over in Asia, China says will promote the use of a safe travel pass between China and Russia.

This comes after, the U.S., Canada, U.K. and EU sanction China over the treatment of Uyghurs. China responded by adding 10 more EU individuals to their travel ban list.

On the plus side, China's Premier Li Keqiang says again economic growth this year could exceed a target of above 6%.

It has been reported that there are signs that North Korea is deploying multiple rocket launchers on a western border island.

In the UK, there are some vague reports that AstraZeneca may have provided outdated data about its COVID-19 vaccine trial, according to the NIH.

On the vaccine front, the Biden administration is concerned Johnson & Johnson may miss vaccine goal.

Sticking with the President, there are reports that Biden's Economic Advisors are ready to present the President with the $3 trl next phase of the stimulus plan.

Adding to this on the stimulus front, Japan's MoF announces stimulus spending to support firms, workers.

Overnight Fed head Powell said the Fed will continue to support the economy 'for as long as it takes'.

As the house prices continue to rise in New Zealand, the government announces new measures to curb the rises. NZ housing agency can borrow NZ$2bnb for land purchases. The government are looking to boost housing supply, infrastructure with NZ$3.8bn fund. The administration has also extended the horizon for tax on investment property sales.

Looking ahead to the rest of the session highlights include the UK labour market report, ECB purchase data, US new home sales, NZ trade data, BoJ minutes and comments from BoE's Bailey, Cunliffe, Fed's Powell, Bullard, Bostic, Barkin, Williams and Brainard.

 

By Rajan Dhall

For Kitco News

How to Use your gold and silver everyday and earn money

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Can the government confiscate your gold? E.B. Tucker on 'the war against your wealth'

Ray Dalio, co-chief investment officer of Bridgewater Associates, recently wrote that policy makers short on money will likely raise taxes and prevent capital flows into “other assets” like gold and Bitcoin. E.B. Tucker, director of Metalla Royalty and author of “Why Gold, Why Now” said that the government already has the tools to do this.

“Everyone gets this idea that the [government] will raid your house and look for your gold. It’s not necessary. All you have to do is limit the ability to transact gold in the legal market, and then you assess an excise tax,” Tucker said.

By David Lin

For Kitco News

 

Protect your Gold use the kinesis money system

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