Investor Centre

Gold inches up

01 April 2022

Friday 1 April 2022

In this week's market report:

  • Gold inches up

  • Buy the dip

  • RBA ‘back of the pack’ says Bloomberg

  • Expect back to back increases from the Fed

  • Russia, rubles and gold

Dear Investor,

US dollar gold price [XAUUSD] Daily chart

Source: Trading View
(Click to enlarge)

Gold inches up: Gold rallied to an overnight high of US$1,949 per ounce, only to settle back down to US$1,936 at the time of writing. Overall, Au is down 1.07% for the week.

Buy the dip: Spot gold has struggled to move this week, though the yellow metal appears to be finding support around these levels. With the Federal Reserve Bank ‘lift off’ underway, there is little noise to nudge gold in either direction. As discussed over here, futures positioning in gold has reduced for the third consecutive week, which contrasts with gold backed exchange traded funds (ETFs) where inflows have increased.

Pallidum back to pre invasion levels: Platinum has been pushed back under US$1,000, sitting at US$986 per ounce. Pt may look for further support around here. The heat has come out of the pallidum spot price, with this industrious metal back to its pre invasion levels.

  • Silver is lower by 2.96% to US$24.79

  • Platinum has fallen 4.30% to rest at US$986

  • Palladium continued its slide this week, down another 10.20% to US$2,267

Bulls, two levels to watch: Spot gold extending up to US$1,950 overnight is positive. Gold may make another run for US$1,948. If there is enough momentum, Au could seek out the high US1960s again.

Bears, no big dips…yet: US$1,920 is providing excellent support for gold at present. If this breaks, we could see gold driven down to US$1,880s.

Australian dollar buffers spot gold’s fall: The price dip in spot gold has been softened by the ongoing strength of the Australian dollar.  While the Australian fell 0.31% this week to 74.89 US cents, it buffered the bigger falls in spot gold, with the Australian dollar gold price now at AU$2,588 per ounce.

RBA ‘back of the pack’ says Bloomberg

The Federal Reserve Bank, Bank of England and Reserve Bank of New Zealand are all raising rates.  Bloomberg observed our own central bank is yet to commence rate hikes and is at the ‘back of the pack’:

RBA lags other central banks

Source: Bloomberg
(Click to enlarge)

Expect back to back increases from the Fed

ABN AMRO says expect two 50 basis point increases from the Fed: Stubbornly high inflation in the US has now forced the Federal Reserve Bank to switch from stimulatory policy to fighting inflation.

  • Dutch bank ABN AMRO pencilled in two 50 basis point increases from the Fed, expected in May and June this year.

  • ABN AMRO suggests the terminal rate will be in the vicinity of 2.5-2.75% by 2023.

  • Here, however, says the Fed’s terminal rate may be as high as 3.25-3.50%

Russia, rubles and gold

Russia is out to save the ruble: The Russian ruble has witnessed a turn around after Russian President Vladimir Putin attempts to salvage the currency. It now takes 99 rubles to buy one US dollar, which is still 17% less than before the invasion. In addition to the Central Bank of Russia (CBR) raising the rates to 20%, Russia has announced:

  • The CBR will begin buying gold again at the fixed rate of 5,000 rubles (AU$77) per gram, a discount to the spot price.

  • Part retaliation for Western sanctions and part about providing support for the ruble, Russia has said ‘unfriendly’ countries must pay for gas and other commodities in either rubles or ‘hard currencies’.

On this, the Chairman of the Energy Committee of the State Duma, Pavel Zavalny said:

‘If they want to buy, let them pay either in hard currency, and this is gold for us, or pay as it is convenient for us, this is the national currency. As for friendly countries, China or Turkey, which are not involved in the sanctions pressure. We have been proposing to China for a long time to switch to settlements in national currencies for rubles and yuan. With Turkey, it will be lira and rubles. The set of currencies can be different and this is normal practice. You can also trade bitcoins.’

Inside our office this week…

This week many of our clients have taken advantage of the strong Australian dollar and dipping spot price by increasing their allocation to gold through their Pool Allocated gold account. For those who like to hold the physical precious metal in their hands, it appears our 50g ABC Bullion Gold Cast bar was extremely popular again this week.

Warm regards,

The ABC Bullion Team