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Back From Fresh 3-Month Lows; Dollar Rally Saps Strength

GOLD
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Gold is ~$3/oz firmer to print $1,825/oz at writing, extending a move higher after briefly dipping to three-month lows early in the session (at $1,811.7/oz).

  • The precious metal is on track to see a fourth consecutive weekly close, potentially recording its largest weekly decline since end-Mar at current prices.
  • To recap Thursday’s price action, gold closed ~$30/oz lower, facilitated by downward pressure from a broad uptick in U.S. real yields, and the USD (DXY) hitting fresh cycle highs. On the latter, the DXY is firmly on track to record a sixth consecutive higher weekly close, currently trading at levels last witnessed in Dec ‘02.
  • Looking back, a note that nonfarm payrolls, CPI, and PPI readings for Apr previously came in above expectations, reinforcing the narrative for recent Fed hawkishness, and exacerbating recent gloom surrounding non-yielding precious metals.
  • Nonetheless, June and July FOMC dated OIS are continuing to price in a cumulative ~105bp of tightening by the July meeting, suggesting little change in expectations for 2 x 50bp hikes at both meetings for now, in line with recent Fedspeak.
  • From a technical perspective, the downtrend remains intact. Gold has broken initial support at $1,832.1/oz (May 11 low), exposing further support at $1,821.1 (Feb 11 low) and $1,780.4 (Jan 28 low and key support. On the upside, initial resistance is situated at $1,865.4/oz.
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Gold is ~$3/oz firmer to print $1,825/oz at writing, extending a move higher after briefly dipping to three-month lows early in the session (at $1,811.7/oz).

  • The precious metal is on track to see a fourth consecutive weekly close, potentially recording its largest weekly decline since end-Mar at current prices.
  • To recap Thursday’s price action, gold closed ~$30/oz lower, facilitated by downward pressure from a broad uptick in U.S. real yields, and the USD (DXY) hitting fresh cycle highs. On the latter, the DXY is firmly on track to record a sixth consecutive higher weekly close, currently trading at levels last witnessed in Dec ‘02.
  • Looking back, a note that nonfarm payrolls, CPI, and PPI readings for Apr previously came in above expectations, reinforcing the narrative for recent Fed hawkishness, and exacerbating recent gloom surrounding non-yielding precious metals.
  • Nonetheless, June and July FOMC dated OIS are continuing to price in a cumulative ~105bp of tightening by the July meeting, suggesting little change in expectations for 2 x 50bp hikes at both meetings for now, in line with recent Fedspeak.
  • From a technical perspective, the downtrend remains intact. Gold has broken initial support at $1,832.1/oz (May 11 low), exposing further support at $1,821.1 (Feb 11 low) and $1,780.4 (Jan 28 low and key support. On the upside, initial resistance is situated at $1,865.4/oz.