Senior Trader Update 26.04.2017

Good morning everyone.
 
The investing ‘herd’ eschewed safe haven assets and piled back into ‘risk-on’ assets (stocks) and currencies which resulted in lower precious metals prices overnight. Geopolitical tensions (temporarily?) took a back seat to a number of other factors that drove the shift in sentiment.

Good morning everyone.
 
The investing ‘herd’ eschewed safe haven assets and piled back into ‘risk-on’ assets (stocks) and currencies which resulted in lower precious metals prices overnight. Geopolitical tensions (temporarily?) took a back seat to a number of other factors that drove the shift in sentiment.
 
Namely, these were (in no specific order of importance);
 
·         A resolution to the perennial US ‘debt ceiling’ charade which had the potential to see sections of the US government shutdown (and the US government default) by the weekend, if Congress refused to increase the ceiling.
This has been averted by President Trump’s willingness to kick into the long grass, his beloved ‘Great Wall of Mexico’ project until September.
 
·         The result of the first round of the French Presidential elections at the weekend with the clairvoyants pollsters placing the establishment pro-Europe ‘centrist’ Emmanuel Macron 20 points ahead of the National Front’s Marine Le Pen and some institutional analysts giving Mr Macron a 99.9% probability of securing the Presidency (what could possibly go wrong in a two horse race?).
 
·         US dollar strength on the back of President Trump pressing legislators to move swiftly on reducing the US corporate rate of tax to 15%. Reports in the WSJ indicate that Trump has given orders to get it done and not worry about effects on the deficit (what difference does it make saddling US taxpayers with a mere estimated 2 trillion additional US government debt that this so far unfunded policy will add to the already gargantuan USD 20 trillion tab?). Additionally, the President’s Secretary of Commerce, Wilbur Ross announced a 20% retroactive tariff on Canadian softwood lumber as a reprisal for the dumping of allegedly ‘subsidised’ Canadian lumber onto the US market causing the Greenback to soar against the Loonie.
 
Elsewhere;
 
·         The arrival of a US nuclear submarine in South Korea was met with a series of live-fire military exercises from North Korea but this had little impact on precious metals values for the aforementioned reasons.
·         Gold bullion imports into China reportedly reached their highest level since May 2016 at approximately 112 tonnes as gold priced in CNY remained flat after two consecutive months of 3% average gains.
 
·         In the ETF space, the SPDR Gold Trust (the world’s largest ETF) saw inflows of 1.5 tons on Monday taking total holdings back to the 2017 high of 860 tonnes registered last week.
 
·         While market consensus is that further US Federal Reserve interest rate increases are probable this year, with the rest of the worlds central banks reportedly printing 200 billion a day in aggregate, many believe that inflationary expectations and negative real interest rates in those countries engaging in that form of financial alchemy will continue to underpin gold demand over the medium to longer term.
 
·         The Platinum Group Metals (PGM’s) have seen platinum in USD terms trading at an over $300 discount to gold for the past 2½ weeks whilst palladium at $800/oz narrows the gap to platinum.
 
Technically, gold in AUD terms continues to see mean reversion back at the AUD 1670 level and as mentioned last week GOLD/AUD could easily find itself consolidating back within the AUD 1660 – 1675 region. While in USD terms, gold has dropped back into the triangular congestion region and some consolidation within the USD 1245 – 1265 zone would provide a better base from which gold bulls might regroup and attempt a fresh assault on the psychologically important USD 1300.00 level eventually.
 
Good luck.
 
Kind regards,
Andre