Market Updates

Precious metal investors suffered yet another rude shock early this week, with the price of gold plunging below USD $1100oz, with a nearly USD $50oz sell off occurring in a matter of minutes in early Asian trading on Monday the 20th July.

In total, some 5 tonnes of gold was dumped on the Shanghai market in this two minute window, an extraordinary amount when one considers DAILY trading volume is typically in the vicinity of 25 tonnes.

At the same time, according to ANZ Bank, there was also 7,600 August 2015 gold contracts traded on the COMEX, equivalent to another 23 tonnes of metal.

The market has since bounced around, trading back above USD $1100oz at one point, though this morning we see that the metal has eased again, currently sitting at USD $1,091oz, whilst silver has fallen below USD $15oz, with the gold/silver ratio now sitting at 73.82

Australian dollar investors have not been spared this time around, with the AUD price falling back below AUD $1500 per oz. Year to date, this has reduced gains (yes, investors are still UP for the year in local terms, albeit mildly) to just 2%, though the recent sell off has also led to marked increase in trading volumes for bargain hunting physical buyers.

Gold prices eased again this week, falling below the USD $1150oz level, as easing tensions around a potential Greek exit from the Eurozone, plus a somewhat hawkish sounding Janet Yellen dented demand for precious metals.

AUD prices have held up better, with an ounce of gold currently trading just below AUD $1550oz, whilst silver is still holding above AUD $20oz.

Starting with Greece, we see a scenario where politicians in Athens signed off on a deal that is in many ways harsher than those which Greek voters recently rejected in the now utterly pointless referendum.

The bailout package, which could come to some 86 billion euros, still faces a few hurdles, not least of which is the question mark around funding from the IMF, who would be expected to contribute a portion of the required funds.

The Financial Times created a useful graphic discussing where the money is due to come from, and what it would likely be spent on, which I’ve included below.

Precious metal markets have eased this week, despite extreme uncertainty in world markets caused by the latest drama in both Greece and China. Whilst many would have expected ‘safe haven’ demand to push metal prices higher in the face of a plunging Chinese stock market and a potential ‘Grexit’, we actually saw gold re-test the USD $1150oz mark, whilst silver fell below USD $15oz at one point.

We’ve since seen a minor recovery in the metal market, with gold currently sitting at USD $1160oz, whilst silver has moved back toward USD $15.50oz.

For local investors, we’ve actually seen an uptick in the market, as weakness in the AUD has seen the gold price head above $1550AUD, whilst silver has effectively been flat.

When it comes to Greece, despite voting NO in the referendum, there is still clearly no ‘solution’ in place, with it beyond doubt the country will need some kind of debt relief, which effectively means asset write offs for whoever owns that debt.

On that score, Eurocrats will be less worried today than what they were a few years ago when Greece first hit the headlines, as a lot of that debt has been transferred from private sector banks onto the backs of the taxpayer, who ultimately stand behind the various bailout mechanisms the ECB and the like have cooked up.

The broader issue therefore is not so much about financial contagion anymore (which is not to say that’s not an issue), but the politics of this whole process, as ‘debt forgiveness’ for Greece will inevitably lead to other nations asking for the same treatment. Furthermore, the truth that dare not speak its name is the reality that the entire western developed world has (to varying degrees) got the Greek disease, with unpayable sovereign debt hardly limited to our Hellenic cousins.

One final complication with the whole Greek drama is the geopolitical implications of a potential Grexit. As John Browne, writing for Euro Pacific Capital in mid June this year so aptly put it; “Despite Greece's almost complete lack of financial integrity, neither NATO nor the EU can afford the political cost of a Greek exit from the EU.”

Precious metal prices have eased this week, despite the ongoing drama in Greece, which many thought would have lent support the precious metal market. Indeed it’s been downhill for most of the week, despite a brief rally Monday, with the price of gold testing USD $1155oz overnight, before stabilising somewhat.

AUD Gold briefly went above $1550oz earlier in the week, though has since pulled back to $1530oz, whilst silver is sitting at AUD $20.74oz. The lack of upside movement in gold this week has frustrated many investors in the sector, who thought the price in USD would surge past USD $1200oz, with safe haven buying set to propel prices higher.

It hasn’t eventuated though, and bears are now suggesting gold is sure to sink further in the coming weeks, with the argument being that if Greece isn’t a catalyst, nothing will be. Mark Hulbert offered a more interesting take than this, pointing out that gold market timers are still too positive on the prospects for the yellow metal, and that a stronger upward trend will only eventuate once these people have thrown in the towel re the metals prospects.

You can read more about that here.

A few weeks ago, ABC Bullion Chief Economist Jordan Eliseo sat down to discuss all things macroeconomics, investing and bullion with Gordon T Long, Co Founder of the Financial Repression Authority. He discussed how Australia is effectively “catching down” to the rest of the world, why even lower interest rates are on the way in Australia, and why liquidity should be a primary consideration when choosing which assets to hold in your portfolio today.

The precious metal market has been under pressure again this week, with the price of gold dropping back below USD $1200oz, whilst silver is back below USD $16oz.

The majority of the pullback occurred earlier in the week, when the market began pricing in a ‘resolution’ in Greece, though expectations that a deal between the Greek government and the EU-IMF was imminent have since been dashed, with the latest headlines suggesting talks are ‘going backwards’.

Renewed tension on that front has not been enough of a catalyst to boost the precious metals market though, with the US Dollar index rallying, and gold prices still subdued.

For Australian dollar investors – the local currency has been relatively stable – trading around the USD 0.77 cent range, with the price of the yellow metal still sitting above AUD $1500oz, whilst silver is AUD $20.68 as we write.

Data wise this week, we’ve seen durable goods orders in the United States fall by more than expected, though the less volatile ex-transports figure was more in line with expectations. GDP figures for Q1 also confirmed the slowdown in the economy, though personal spending figures for May were up strongly, perhaps suggesting some much delayed real wage growth is finally flowing through to spending.

Gold posted strong gains overnight as the price of the yellow metal reclaimed the USD $1200oz mark. Currently sitting at USD $1202oz, the yellow metal was up close to $20oz for the day. The market clearly interpreted the latest Fed policy decision and accompanying statements as dovish, with some economists now stating that the expected September rate hike might be further delayed, whilst continued concerns over Greece are still providing support for bullion.

On that note, despite testing the patience of markets, investors, politicians and everyday citizens for about 5 years now, Greece was again headline news this week, with German newspaper BILD reporting that the Greeks were seeking to delay a scheduled payment (of circa 1.5bn EUR) to the IMF by 6 months, a suggestion that was quickly denied by Greek government officials.

The issue of this payment arose again overnight, with IMF chief Christine Lagarde stating that Greece won’t be given a grace period past the 30th June, and that the Hellenic state will be considered “in default” if it has not paid up by the end of the month.

The ongoing drama (we should say tragedy) in Greece will keep investors nervous for the next 10 days at least, though if recent history is any guide, there will likely be another delay, or temporary solution put in place, just in time for European bureaucrats and officials to go on their taxpayer funded summer vacations.

Back to the Federal Reserve, and their interest rate decision this week, it was always expected that they’d keep rates unchanged at 0-0.25 per cent. Market moves in the aftermath were always going to be driven by interpretations of their monetary policy statement, and the press conference they gave after announcing their decision.

And in their usual case of doublespeak, they stated that they believed the US economy was strong enough to handle a rate hike, but that one wouldn’t be forthcoming until further improvement in the labour market is seen, and when they are reasonably confident inflation will head back to its 2 per cent target.

In the press conference held after the interest rate decision was announced, Fed chairwoman Janet Yellen sounded decidedly dovish, at least in my opinion.

Precious metal prices have retreated again this week, with the price of the yellow metal now trading below USD $1180oz, down just over 1%. Silver is also down for the week, falling just over 2%, and currently sitting at USD $16.27.

It’s been a similar result for Australian dollar investors. Earlier in the week we saw the currency rally, as an RBA on hold and better than expected GDP results for the quarter seeing the AUD bid.

This was very short lived though, with disastrous retail sales and trade figures released Thursday confirming the negative outlook for the local economy, and again increasing the likelihood of further RBA rate cuts this year.

Other data out this week in Australia was lukewarm at best. Gross operating profit numbers for the quarter showed a 0.2% rise, but they were still down over 7$% for the year. Building permits, whilst still up 16% for the year, fell short of expectations.

AiG Group published their latest surveys looking at the outlook for companies in manufacturing, services and construction. Manufacturing recorded a pleasing rise, but it has come after five months of contraction, so it’s nothing to get too excited about just yet. Ditto for services, with the sector still in contraction, as it has been for much of the post GFC era.

This is troubling as services dominate the Australian economy, and especially as authorities are so desperate to see the economy rebalance from our reliance on mining.

The one silver lining in the services result was the explosion in the employment sub-component of the survey, which has been expanding for 6 months now, with last month signalling the fastest pace of expansion since May 2004.

This mornings construction survey was also disappointing, especially the readings for home and unit building, which have been the supposed bright spots of the Australian economy.

Back to gold, and the weakness in the last week has been frustrating for bulls, as it has come despite noted volatility in fixed income and equity markets, something ECB President Mario Draghi warned investors to expect going forward.

There has also been no USD strength evident either, which one would typically expect to see when gold is struggling. Indeed we’ve even seen the IMF publically ‘advise’ the Federal Reserve on monetary policy, suggesting the Fed should wait until 2016 before hiking rates.

We’d have expected to see gold receive stronger support in the face of these developments, and the lack of support this week does highlight the still weak tone for the market.

Increases in rates across the board and relatively soft physical demand out of Asia have no doubt contributed to the weakness, and there could be a few nervous short term longs who have decided to lighten positions heading into tonight’s non-farm payrolls report in the USA.

With that key release due to dominate market sentiment leading into what will be a relatively quiet week (retail sales notwithstanding) next week, it’s a good time to put together a quick technical outlook, for the USD, AUD and Gold.

Gold prices have been in retreat this week, giving up some of the gains from their recent break above USD $1200oz. After closing out last week at USD $1220.50oz (London PM Fix), the market has pulled back, with gold currently sitting at USD $1207oz, down 1.1% for the week.

Silver has been a little more resilient, effectively unchanged for the week, though down from where it was on Monday, when it had pushed as high as USD $17.70oz

For Australian dollar investors, the decrease in the AUD, which is now back below USD $0.80, has supported the market, with AUD gold now trading for $1529.13, whilst silver is sitting at $21.90.

The pullback has been disappointing for gold bulls, who were hoping the metal would push higher after last weeks rally, and has served as a reminder of the still difficult environment for precious metals, and why dollar cost averaging is still the most appropriate strategy for investors.

Strong housing starts data out of the United States this week (the strongest since 2007), alongside a rally in the USD were partially responsible for the pullback, with US economic data, which has been weak all year, slightly surprising to the upside this week. Commodity prices were off a little too earlier in the week.

All up, this seemed to knock the wind out of gold’s sails, and were seemingly a more important driver for the precious metal market than the release of the minutes from the last Federal Reserve Open Market Committee (FOMC) meeting. Those minutes, which were released mid-week, were overwhelmingly seen as dovish, with the market increasingly pushing back their expectations of when the first Fed interest rate hike will be.

Some of the key comments in the minutes were the following;

After weeks of consolidation in and around the USD $1200oz level, gold prices finally broke to the upside this week, currently sitting at USD $1222oz. Silver has also rallied strongly, up an impressive 7 percent for the week, last trading at USD $17.48oz

With the Federal Budget set to dominate the news this week, we thought we’d pen a note regarding the outlook for business investment in Australia, and why, despite the lowest cash rates in history, it is still so subdued.

Perhaps worse than the current malaise is the fact that the outlook for business investment in the coming years is hardly encouraging either. Whilst the whole country has ‘priced in’ the end of the capital investment boom in the mining sector, it isn’t looking much better elsewhere, outside of property construction perhaps.

That it is a problem is hardly debatable, with even the RBA acknowledged the issue in their latest statement of monetary policy, where they noted that “indicators of non-mining business investment intentions suggest that a significant pick-up is not in prospect over the next year or so.”

Another week, another battle for USD $1200oz gold, as the market continues to trade just below this key level. After dropping below the critical mark last week, gold climbed back to USD $1197oz on the 5th May (London PM Fix), before easing back into the mid $1180oz range where we find it today.

The Silver market has been much the same, trading between USD $16.15 and USD $16.70oz, as the precious metal market continues to look for a decisive break out one way or another

AUD gold prices have pulled back below $1500oz, with silver below $21oz, as the strength in the Aussie dollar (despite the RBA interest rate cut), impacting the market for local investors.

I personally used that opportunity to top up my silver position, as I think the AUD rally will be relatively short-lived, in part because I think the RBA will continue to cut rates in 2015 and beyond.

As has been the case for some time now, the gold market is being impacted by a number of forces, some which are providing support, whilst others continue to dent demand for the metal.

In the last week or so, we’ve seen a not unsubstantial rise in bond yields the world over (something we’ll discuss in more detail below). Rising yields, especially in a period where official inflation is so benign, are of course a mortal enemy for precious metal bulls, as they effectively raise the opportunity cost of investing in the metal.

Anyone who can remember the gold price smash of 2013 will also likely remember that US bond yields rose substantially that year, with the 10 year note going from around 1.60% to 3%.

On the other hand, we’ve seen continued pressure on the USD, with the dollar index pulling back below 95 (down from near 100 in April). This is partly a result of a very oversold Euro gaining some traction, as well as the continued deterioration in US economic data, which is forcing more market participants to push back their expectations of when the Federal Reserve will first raise interest rates.

We’ve also seen a little risk aversion in global stock markets of late, with our own ASX under severe pressure in the last few days. Nervousness regarding equity positions will not necessarily have been helped in light of Janet Yellen’s comments this week regarding the markets, with the Chair of the Federal Reserve stating that she “would highlight that equity valuations at this point generally are quite high. They’re not so high when you compare the returns on equities to the returns on safe assets like bonds, which are also very low”

Finally, whilst this is a very early call, there are some who see inflation stirring – with oil near a 5-month high after the huge crash of 2014. This is despite the overnight fall of some 3%. The charts below (which go to the 7th of May) show what has happened in the oil market over the last year, with the huge fall between May 2014 and January 2015 easily observable, as well as the noticeable pick up since then.

‘Sell in May and go Away’ is a famous stock market saying, meant to protect investors from seasonal declines in equity markets by encouraging them to lighten up on their holdings by the end of April. This is because May has often heralded a period of weaker market returns, if not outright declines.

Overnight, the message appeared to be directed toward the precious metal market, with gold starting the month of May on the wrong foot, dropping down toward below USD $1180oz at one point.

The silver market was also rocked, plunging below USD $16oz, with the sell off occurring in an incredibly short period of time, as stops were triggered after a US initial jobless claims report which hit 262,000 last week, a 15 year low for the reading.

For some reason this seems to have tipped the market into taking a hawkish interpretation of the latest FOMC statement, despite the appalling Q1 GDP report which showed the US economy slowing to a standstill at the start of 2015, and a lacklustre personal income report.

There are a handful of key data points due to be released in the next 24 hours, including manufacturing reports from Markit and the Institute for Supply Management, as well as construction spending, vehicle sale sand consumer sentiment figures. A series of strong reads could be enough to send gold back below USD $1180oz, and comfortably below AUD $1500oz.

Alternatively, if those numbers come in below market expectations, we could see the market gravitate back toward the all important USD $1200oz level we’ve been oscillating either side of for some time now, with a huge week ahead in terms of economic data which could drive markets.

Up until last night, it was shaping up as yet another slow week in the precious metal market, but a wild night on Wall Street and a rise in bond yields dented demand for the precious metal complex.

As we discussed last week, the gold price in US dollars has been battling the $1,200 mark for the whole month of April. Up until last night, it seemed evenly matched, but action in the past 24 hours indicates that the bears could be about to take control again. Last night saw a drop through this level to $1,186 US and a further selloff could be on the cards for US gold.

Primary cause for the soft outlook for precious metals is again the strength in equity markets, with DOW above 18,000 points, and the S&P500 above 2,100 points. In Japan, the NIKKEI climbed back above 20,000 points as well.

Despite the soaring US Dollar, US company earnings (the headline ones anyway), are holding up better than expected too, though a host of companies are still disappointing when it comes to revenue and sales growth.

Weakness in the broader commodity complex also isn’t helping, with copper under serious pressure in the past 48 hours, down roughly 6%, despite stimulus efforts from the People’s Bank of China.

US existing home sales also flew higher overnight, about the first US data point that has surprised meaningfully to the upside in some time. Though one swallow does not make a summer, this will embolden those who are again expecting the US economy to ‘bounce back’ from a poor Q1, with expectations of stronger growth later in the year.

This line of thinking will be tested again later this week, with the all important durable goods orders report for March set to be released. If that is stronger than the 0.4% (ex transports) result expected, gold could again take a hit.

On the plus side for gold right now, we’re seeing continued buying out of Russia, and the heightened chances of a Greek exit from the Euro will provide some support.

Furthermore, should Durables miss this Friday, then expectations of a Fed rate hike could be pushed back even further, which could hurt the USD and provide some kind of bid for gold, or at least encourage some short-covering. As it stands, when we look at US macro data and the lack of official inflationary pressure, there seems little reason for the Fed to hike right now. When (or should I say IF) the market comes to price that in more fully, we could see a stronger bid for gold.

But all up, there isn’t any huge reason to expect bullion bounce strongly right now, which dovetails in with a technical picture that is also somewhat troubling.

The battle for USD $1200oz raged on this week, with prices oscillating around the key point again. The trading for spot gold can be seen in the chart below, which shows what has happened over the last 3 days. Earlier in the week, gold looked like it was breaking down again, with prices heading back toward USD $1180oz. From there though we’ve seen more short-covering, with the metal bouncing back above USD $1205oz on the 15th, before giving back a few dollars again.

In last week’s report we discussed whether or not precious metal investors would receive a golden egg over the Easter weekend. Good Friday’s very bad non-farm payroll report ensured that this was so, with USD Gold prices pushing up toward the USD $1215oz mark earlier this week. Silver originally rallied too, with the little cousin of the precious metal complex trading near USD $17oz too.

Since then, the bounce has faded, with gold now trading back below USD $1200oz, whilst silver is closer to USD $16.30oz, as a renewed USD strength had quelled demand for the precious metal complex.

For Australian dollar investors, gold has given up close to $50oz this week, after pushing up towards the $1600oz mark originally. This has been as a result of both the pullback in USD gold, and the rally in the Australian dollar over the past few days.

That Aussie dollar bounce was largely a reaction to the Reserve Bank of Australia’s surprise (according to the market) decision to keep interest rates steady at 2.25% at its meeting earlier this week. Declining business and consumer confidence, coupled with an iron ore price below USD $50 per tonne had led most in the market to expect the bank to cut rates, but their obvious (if unstated) concerns about a Sydney housing bubble led them to hold the line. A rally in the Aussie dollar, and a pull-back in the local share market was the end result, though how long that lasts remains to be seen, with expectations still strong that the RBA will lower rates all the way to 1.5% by the end of 2015.

Back to gold, and we’ve seen softer demand out of Asia, with the Shanghai premium dropping into negative territory, whilst ETF demand remained lack-lustre, with holdings to the 3rd April dropping by some 40,000 ounces.

The rally in the metals earlier in the week was therefore driven predominantly by some short-covering amongst the speculative community, though the lack of flow through, especially in light of just how bad US data is turning should be of concern to the bulls.

Short term –headwinds to further gold price appreciation remain. The metal failed to push through earlier resistance just above USD $1220oz. The technical outlook is also cloudy at best, with RSI looking like it might roll over, as it did back in December last year.

After running up to the USD $1220oz level at one point last week, the gold price eased back, with the yellow metal settling in around the USD $1180-USD$1185oz range earlier this week.

Overnight we saw a decent rally, with gold again back above USD $1200oz, as another set of disappointing US economic data had short investors scrambling for cover in the lead in to this Friday’s non-farm payrolls report.

The latest price action caps off another frustrating start to the year for USD gold investors. After racing up to and temporarily above the USD $1300oz mark in late January, the market has largely been in retreat, crashing below USD $1150oz by mid March.

Weakness in the AUD has meant that the returns for domestic investors have been far more favourable, with the AUD gold price return circa 9% for Q1, whilst silver has rallied by 17%, a great return over just 3 months.

Euro and British investors have also done well in bullion these past 3 months, with prices up 11% and 5% respectively in Q1

The price action isn’t entirely surprising in light of the confusing data we’re getting regarding the US economy, and the confusing lead from the Fed.

As to the former, with the exception of payrolls, US data has been overwhelmingly weak this year. Retail sales, durables, personal spending, industrial production and the like have all disappointed, yet payroll growth has been strong. Make no mistake, the quality of the jobs being created is also poor, but the market usually just pays attention to the headline, and the headlines on the employment front, including a falling unemployment rate continues to impress.

But the better than expected payroll data can’t hide the clear deterioration in US economic data. If we look at the Bloomberg Economic Surprise Index for the US, we can it’s almost back to early 2009 lows, which, if past is prologue, would suggest sharply declining US growth (if not a recession).

This is something the Atlanta Fed projections would also indicate, with current Q1 growth forecast to be 0.0%. That is right, the Atlanta Fed is now predicting the US economy didn’t grow at all in Q1 this year.

Two months ago, they thought the number would be over 2%. You can see how their projections have declined over that period in the image below, with the Atlanta Fed GDPNOW forecast the one to look at.

It’s been a good few days for precious metal investors. After dropping below USD $1150oz on the 18th March, we’ve seen a more than USD $50oz rally in the gold price, with the yellow metal again trading back above USD $1200oz.

Silver has had an even more impressive move, rising over 10%, from USD $15.47oz to USD $17.26 as we speak.

Australian dollar investors haven’t had quite the same bounce, with the AUD rising strongly over the past few days, currently sitting at USD 0.7826, a more than 3% rise since the mid month lows around USD 0.76.

The recent strength in the yellow metal has not been unexpected, with the US Dollar rally petering out, market volatility returning with share markets the world over falling a couple of percentage points, and the technical picture also looking more favourable for gold.

Underpinning this of course has been the markets reaction to last weeks Federal Reserve Monetary Policy Statement, which was almost universally viewed as dovish, and suggestive of a slower path to the first interest rate hike.

At one point overnight, gold traded as high as USD $1220oz, though it has since pulled back, after an intraday reversal in the US Dollar, which you can see on the chart below.

Gold prices have rallied this week, with the price of the yellow metal trading at USD $1171oz at present, up USD $20oz on last Friday’s London PM Fix.

The bounce has fed through to silver too, which is currently sitting at USD $16.26oz, up from USD $15.50oz where it was sitting last Friday.

AUD gold is now firmly back above $1500oz too, with the local currency now trading at USD 0.7651, after a volatile week on FX markets, with most major currencies experiencing significant moves in the past 48 hours.

The catalyst for all of this was of course the release of the latest Federal Reserve Monetary Policy statement, and the Janet Yellen press conference that followed soon after.

In the week leading into the release of this policy statement, there were hundreds of articles written as to whether or not the Fed would drop the word ‘patient’ from the statement, which would be interpreted as them moving closer to their first interest rate hike in nearly 10 years.

This did end up eventuating, with the Fed officially dropping its patient stance, but the Fed was at pains to point out that whilst they’re no longer officially ‘patient’, there is also in no rush to raise interest rates.

On the patient versus impatient continuum, the Fed appears to have carved out a niche of their own. Some of the other highlights of the FOMC statement, and the Yellen press conference were that they thought;

In last week’s market report, titled Gold: Calm Before the Storm, we noted that there was a good chance gold prices would soon move sharply, with the non-farm payroll report a potential catalyst.

The headline figure, which suggested 295,000 jobs were created in the USA, blew away market expectations, and saw gold prices sink the better part of USD $40oz.

We must admit to being surprised by the strength of the print, if only because so many headline data releases (factory orders, construction etc) had been weak leading in, but these things are always a lottery. Either way, given the strength in the headline print, the market reaction in gold wasn’t surprising.

The market closed the week off around the USD $1160oz mark, giving up all of the gains we’d seen so far in 2015 in the process. The weakness has persisted throughout this week, with gold prices trading today at just USD $1155oz, with silver also now back below USD $16oz as well.

Australian dollar gold was originally supported by the weakness in the local currency, though it has now fought back somewhat, trading at 0.77 vs. the USD. The end result is that AUD gold is now trading at almost exactly $1500oz, with silver sitting just above $20oz.

No matter which way you look at it, it was another win for the gold bears, with the market again breaking out of a key trading range to the south.

Further evidence that we’re not totally out of the woods in this cyclical correction, and that dollar cost averaging is the best approach to take with this market.

It’s been another quiet week for the precious metal complex, with gold oscillating around the USD $1200oz mark, and silver sitting just above USD $16.30. This is down a touch on last Friday’s London PM fixes, which saw gold at USD $1214 oz.

We’re not surprised to see this calm before a potential storm, with the market focused on the non-farm payroll report, which will be released tonight Sydney time.

As it stands, the market is expecting that the United States about 240,000 jobs, with the unemployment rate tipped to hit 5.6%.

Whilst predicting this number is a complete lottery, and it is subject to revisions all the time, we wouldn’t be surprised to see the number underwhelm this time around, with nearly all US macro data released this month underwhelming market expectations, suggestive of a broad based slow-down in the US economy.

Even this week, we’ve seen

It has been a relatively quiet week in the precious metal space, with gold and silver largely unchanged from last Friday. As it stands, it’s been a poor February for the sector, with gold falling 4% in USD terms, whilst silver has dropped 1.5%.

All up for the year though we’re still sitting on modest gains, with Australian dollar investors up nearly 4% for the year. Currency has obviously been a factor, though in the last couple of weeks the AUD has actually strengthened somewhat.

After falling into the mid 0.76 level vs. the USD, the little battler has climbed back toward 0.79 vs. the US Dollar, with the market starting to think the RBA might hold fire for a month or two before cutting interest rates again.

In the next week or so we could see the AUD head back above 0.80 vs. the USD, though the strength is likely to be short lived, with the just released Australian private capital expenditure report showing how soft the domestic economy now is.

On that note, it’s worth looking at this long-term chart of gold in Australian dollars.

The chart, which goes back to the late 1990s shows the first leg of the bull market very clearly, as well as the pullback we’ve suffered through these past three years.

Gold prices have eased again this week, as markets increasingly anticipate a benign end to the 'Grexit' drama, and equity markets show continued strength.

As it stands now, gold has given up the majority of its early 2015 gains, currently sitting at jus USD $1213oz. That is up just 1.2% from the London AM Fix at the end of 2014, with the recent weakness disappointing the bulls who were encouraged by gold’s very brief trip back above USD $1300oz in late January 2015

Silver, which at one point had climbed above USD $18oz, is now back to just USD $16.63oz, up just over 4% for the year.

Australian dollar gold has also had a decent pullback in the last few weeks, currently sitting at just $1553oz, down from above $1650 just a few weeks ago.

In USD terms, the market is looking supported at around the $1200oz level, though a break through that marker would likely see more downside ahead, with a move back through USD $1180oz likely.

On the bearish front, solid moves in equity markets are slackening demand for precious metals, with less ‘safe haven’ demand in the face of any share market strength.

Momentum is also against the precious metals now too. Had gold held above USD $1250oz, then anyone short the market would have been second guessing their positions. Instead, they’ve been emboldened by the recent weakness. As a result, if anything we’ve seen those we’ve been long precious metals winding back their positions, which has of course contributed to the recent weakness.

Commodity news and market moves are generally very bearish now, with oil slumping again, and some extreme headlines even telling us that we’re on our way to USD $10 a barrel oil. Whilst I don’t believe that for a minute, it’s evidence of where market sentiment is right now, not only towards oil, but all inflation sensitive assets, including gold.

On the plus side for gold we still expect some kind of safe haven bid to stay in the market until the end of February, or until the Greece scenario plays out.

We’ve also had a stream of negative US economic data of late, which if anything will force markets to reconsider when they see the Fed raising interest rates (more on this below).

Net positioning in the futures market also looks healthier than it did a couple of weeks ago, whilst physical demand out of Asia is also holding up OK.