The three things needed for a gold bull market are already here

Friday 13 May 2022

In this week's market report:

• Equities dip to 18-month low

• No more Fed put

• Silver’s relief rally

• The three things needed for a gold bull market

• Four more rate hikes ahead, says S&P Global

Dear Investor,

US dollar gold price [XAUUSD] Daily chart

Source: Trading View
(Click to enlarge)

Investors seek refuge from markets in gold: Gold continued its fall this week, down 3.15% in total, though Au lost 1.6% in trading on Thursday night. Investors are seeking refuge in gold as equity markets are hit much harder. The S&P 500 is down 8.15% in the same time frame, and the XJO is lower by 5%.

Equities dip to 18-month low: High inflation data and fears of a slowing global economy pushed equity markets down to 18-month lows overnight.

US dollar surges: The DXY rallied 1.95% to a fresh high of 104.66 this week, a level not seen since December 2022.

• The US dollar continues to surge on inflation concerns in the US and that the Fed’s policy decisions will slow global economic growth. Both of which are causing investors to move from emerging market currencies and into the safe-haven currency.

No more Fed put: Equity markets continue to fall since the Federal Reserve Bank May meeting, speculating the ‘Fed put’ days are over.

• The Fed put (first called the ‘Greenspan put’ after Fed chair Alan Greenspan) is a phrase to explain the central bank’s history of changing direction to looser monetary policy when equity markets significantly decline, as has happened in 2015 and then again in 2018.

All precious metals fall this week: Silver tumbled almost 9% this week, falling back under the key price level of US$21.50 per ounce. Palladium also suffered and fell back below US$2,000 per ounce.

• Silver drops 9% to US$20.89

• Platinum is down by 2.33% to US$957

• Palladium is lower by 16.04% to US$1,889

Silver’s relief rally: Silver rallied on the back of hot US CPI numbers on Wednesday this week. Though, it was more of a ‘relief rally’. It’s not surprising Ag couldn’t hold above US$22.00 per ounce.

• More than half of Ag’s use is industrial, making the silver price sensitive to changes in global growth. A softening economic outlook will put pressure on silver.

Gold bulls, is there anything to look forward to? Gold back up above US$1,850 in the short term would be positive. How Au behaves around here would determine what happens next, though gold needs to find support around the US$1,820s.

Bears, you’re in control this week: As mentioned last week, a sell-off risked gold being driven back into the US$1,820s. Look for the metal to dip to the US$1,790s, though being pushed into the US$1,780s can’t be ruled out.

Australian dollar gold price goes up: Despite spot gold falling this week, the Australian dollar gold price has risen 2.33%. The massive 5.33