All precious metals rally this week

Friday 3 June 2022

In this week's market report:

• US jobs data disappoints, supports gold

• Platinum leads the charge higher

• Will OPEC+ increase output?

• Silver price tracks energy transition stocks

Dear Investor,

US dollar gold price [XAUUSD]
Daily chart

Source: Trading View
(Click to enlarge)

Gold rallies: Spot gold rallied this week, up 1.23% to US$1,873, with Thursday being its best trading day in the past two weeks. Gold traded up into the release of US jobs data. The DXY fell 0.8% overnight to 101.65.

US jobs data disappoints, supports gold: Private payroll data by ADP showed that only 128,000 jobs were created in May, falling short of the expected 300,000.

• This is the slowest rate of job growth since May 2021.

• In contrast, official figures from the US Labor Department show that jobless claims fell to 200,000, just shy of the expected 210,000.

• August gold futures traded to US$1,855 on the news.

• US Treasury yields fell.

• Markets now expect the Federal Reserve Bank will increase rates by 50 basis points at the next three meetings.

Platinum leads the charge higher: Platinum has had its strongest seven-day run since the week starting 2 March. Pt’s rally is driven by increased demand from the auto industry as some normalisation to auto manufacturing is anticipated.

• Silver is up 1.96% this week to US$22.43

• Platinum has rallied 9.63% to US$1,026

• Palladium is higher by 2.58% to US$2,056

Gold is gathering momentum, bulls: This week’s rally is supportive of last week’s targets. Look for US$1,877 first, with room for gold to run to US$1,898 in the days ahead.

Bears, not this week: Gold above US$1,850 is bullish and will likely remain so into the Fed meeting on 15–16 June. If gold falls below here, it’s likely the yellow metal will find support in the US$1,820–30s.

Australian dollar creates buying opportunity: The Australian dollar has rallied 2.44% this week to 72.70 US cents. While spot gold moved higher, the Australian dollar gold price couldn’t match the currency gains and is down 1.58% to AU$2,575. However, a falling local gold price and strong Australian dollar is often the best time to increase your gold position. Click here to see why.

Will OPEC+ increase output?

Oil price falls ahead of OPEC meeting: Crude fell this week ahead of OPEC+ producers’ meeting on Thursday. Saudi Arabia has reportedly said they will consider raising production if Russia’s output drops ‘substantially’.

OANDA analyst Jeffrey Halley said:

‘None of that will alleviate the refining bottleneck/crunch that is causing petrol and diesel prices to soar globally, but it would be a rare piece of good news for the global economy and the inflation fight.
‘It certainly isn't in OPEC's interests to send the world into a recession.’

• Russian production has fallen by one million barrels per day.

• One economist said an increase in Saudi production could see prices stabilise at US$100–110.

• If oil reaches US$150 per barrel, Morgan Stanley says the euro area could dip into an ‘outright’ recession.

Silver price tracks energy transition stocks

Released in May, an insights report from Sprott Asset Management noted that they are bullish on silver and that the silver price has a neat correlation with energy transition equities, writing:

‘We see the energy transition story as a large force for silver demand — this year and in future years. The geopolitical issues dominating the current environment only strengthen that trend, even as they weaken other components of silver demand. The pandemic and the war in Ukraine have both served to reinforce investment in energy-transition initiatives.
[…]
‘From a pricing standpoint, silver is historically undervalued relative to gold right now, and offers an attractive investment opportunity. We see a picture of silver fundamentals where supply trends cannot keep up with longer-term demand. Overall, the silver market has been in a physical deficit since 2019, and silver mine supply has been in decline since 2016. There has been a lack of funds going into silver mine development and the timelines from discovery to production have gotten longer. On the demand side, all segments of silver demand are rebounding, led by industrial, jewelry and physical investment. We continue to believe that silver is likely to benefit from supply constraints in the face of growing demand. We expect green technology and de-carbonization trends to continue and increase, even if economic growth slows globally.’

Read the report in full here.

Silver correlates with energy transition equites, says Sprott

Source: Bloomberg; Sprott Asset Management

Inside our office this week…

Silver’s rally this week has seen renewed interest in the precious metal, with investors flocking to our 10oz ABC Bullion Cast Bar. And a strong Australian dollar has seen many investors take advantage of this, increasing their gold position with a 50g ABC Bullion Gold Cast Bar.

Before you go…

This year, the Asia Pacific Precious Metals Conference is being held from the 5-7th June, and ABC Bullion is honoured to be the Title Sponsor. The APPMC is an essential forum for both ourselves as well as any Australasian precious metal industry leaders, as it brings together some of the world’s most forward-thinking and innovative businesses and individuals to discuss the market, price fluctuations and more.

We are being represented by Nicholas Frappell, who is giving an address on ABC Bullion's experience and initiatives around increasing accessibility and fungibility of gold in Australia. Nicholas’ understanding of the market and industry experience is incomparable; as Australia's largest independent bullion dealer we're thrilled to have Nicholas represent ABC Bullion and the Australian precious metals industry on the international stage.

It’s shaping up to be an unmissable opportunity – we can’t wait! Keep an eye out on our social media for the full recording of Nicholas’ address and other exclusive content.

Warm regards,

The ABC Bullion Team