Senior Trader Update 24.04.2017

Good morning everyone and I trust you had a pleasant weekend.
 
As expected, gold went into a holding pattern as the week drew to a close on Friday, there was little to propel the metal outside of its AUD 1690 - 1710/15 (USD 1275 – 1295) trading band.
 
Of course, most investors decided that the prudent course of action was to take a “wait and see” approach ahead of the outcome of the first round of the French Presidential elections yesterday.
 
This morning, Gold/AUD has gapped AUD 20.00 lower on the open and Gold/USD approximately USD 10.00 lower as centrist Independent candidate Emmanuel Macron pipped National Front’s Marine Le Pen (23.8% vs 21.6% with approximately 92% reported), both of whom will now square off in the second round of voting on May 7th. The result was the first time in 60 years that an establishment candidate from either the Republican or Socialist parties has failed to make it through to the second round.
 
With Madame Le Pen’s nationalist, protectionist and decidedly hostile European Union policy platform (she has promised to offer French voters the opportunity of ‘Frexit’ and a withdrawal from NATO should she prevail) running a close second to Mr Macron’s more moderate European Union policy (he believes the project needs reformation but does not want to take France out entirely), investors have (for the moment) assessed that the existential threat to the EU has suffered a setback, hence a sharp rally in the Euro (and general USD weakness) on the open this morning transmitting through to precious metals weakness. Furthermore, it is expected that the majority of supporters of the failed first round candidates are likely to swing in behind Mr Macron on May 7th making it extremely difficult for the Nation Front leader to secure the Presidency.
 
Technically, we noted in Friday’s commentary that a break on the downside through the AUD 1690 level would likely open the way to some mean reversion back towards AUD 1670 and that is precisely what we have seen this morning whilst Gold/USD also traded down to the top of the USD 1245 – 1265 zone (this morning’s low USD 1265.75 to this point in time), that we mentioned might be a better base from which gold can attempt to scale the USD 1300.00 eventually.
 
It should be noted that silver was pressured heavily to the downside in Friday’s trading with market sources suggesting that this was due to First Notice Day for the May futures contract on COMEX this week. The May EFP has been hit and the May/July spread has moved out with the outright May futures driven lower. Buyers are expected to emerge today when the May-July rolls / liquidations are complete.
 
Have a great week.
 
Kind regards,
Andre