Gold battles a strong greenback

Friday 29 April 2022

In this week's market report:

• Gold demand up 34% in Q1

• 200 years of the gold-to-silver ratio

• Weakening AUD drives Aussie gold price higher

• Inside the office this week…

Dear Investor,

US dollar gold price [XAUUSD] Daily chart

Source: Trading View
(Click to enlarge)

Gold gets pushed down: Gold was pushed down last week to back below US$1,900. Overall, spot gold is down 3.21% to US$1,889.

Greenbacks and a hawkish Fed keep Au down: The US dollar remains strong, and the Federal Reserve Bank is expected to increase rates at next week’s Federal Open Markets Committee (FOMC).

• Fed Chair Jerome Powell has warned future increases could be as much as 50 basis points.

• St Louis Fed president James Bullard is pushing for 75-basis-point increases in future meetings, though he is up against internal pushback.

USDJPY reaches a 20-year high: The Japanese yen continues to fall in value compared to the US dollar as the Bank of Japan maintains its ‘ultra loose’ monetary policy.

• The BoJ confirmed it would continue to guide 10-year Japanese government bond yields to near 0%.

• A USDJPY cross rate of 130 yen for 1 US dollar is an important psychological level.

DXY soars: The US dollar rally continues, not just against the yen but other major currencies like the euro, sterling, and Swiss franc. Commodity-based currencies like the Australian and Canadian dollar have also fallen against the USD.

With Reuters writing:

‘Measured against a basket of currencies, the dollar index had reached a five-year top of 103.28 and a further push above 103.82 would see it to levels not visited since late 2002.
‘The euro was pinned at US$1.0553, having hit a five-year low of US$1.0515 on Wednesday. The single currency has fallen 4.6% so far in April and is heading for its worst month since early 2015.’

All precious metals were down this week: Persistent strength in the USD is putting pressure on the value of precious metals, with falls across the board. Silver has been driven down to a two-month low. As discussed here, if silver remains above US$21.50, the overall bullish trend remains intact.

• Silver has dropped 5.95% to US$23.17

• Platinum has fallen 6.85% to US$919

• Palladium is down 6.45% to US$2,255

Bulls, gold is under pressure but looking to bottom: Au broke through the previous support of US$1,920 and appears to be looking for support in the US$1,890s. A move back up to the US$1,910s would bolster the bulls.

Bears, the next FOMC influences gold’s direction: Gold remains above two-month lows. The May FOMC risks gold being pushed back down below US$1,850, with US$1,833 in play if Au stays below US$1,912.

Weakening AUD drives Aussie gold price higher: The Australian dollar has fallen 3.74% against the US dollar, with the Aussie now dollar at 70.94 US cents — a five-week low. This local currency weakness has caused the Australian gold price to rise 1.39% this week to AU$2,626.

Gold demand up 34% in Q1

US dollar rally didn’t stop gold demand: The World Gold Council’s (WGC) quarterly showed gold demand had risen even as the US dollar rallied 8% over the first three months of the year.

• Gold demand increased by 34% year-on-year to 1,234 tonnes

• The highest amount since Q4 2018

• Q1 demand was 19