Here is the KIS team's review of this week's?gold market price dynamics, for your interest:
- For the week ending July 12, 2024, physical gold kilobar premiums averaged at US$0.82/oz, US$0.86/oz and US$0.82/oz, for loco Singapore, Hong Kong and Bangkok, respectively.*
- The average weekly premium for Singapore saw declines of US$0.01/oz (-1.2%), when compared to the previous week. Conversely, the average premiums for Loco Hong Kong recovered US$0.05/oz (+6.1%) from the previous week. Meanwhile, premiums for Loco Bangkok remained unchanged.
- The PBOC reported no change to their gold reserves holding as of June, with total reserves remaining at 72.8 million ounces. This marks the second consecutive month without an addition, following 18 consecutive months of buying. ETF data for June showed that China have increased their gold ETF holdings by 5.6t (6.5%) MoM, bringing total holdings to 92.4 tonnes. Hong Kong's gold ETF holdings also rose by 0.7% MoM, reaching a total of 3.9 tonnes.
- The Shanghai gold premium closed Thursday little-changed from opening levels for the week (~US$22.70/oz), keeping well below its current YtD average of US$38.66/oz, having maintained a tight sideways channel since late-June (between US$20.00-US$25.00).
- Conversely, the Shanghai Gold Benchmark PM (SHAUPM) gained further traction this week to close Friday higher at RMB 564.46/g, extending its hold above the 560 level for a second straight session, as markets await details on possible economic support measures from the Party’s Third Plenum (July 15-18).
- The yuan was buoyed by dollar weakness in the second half of the week, with USD/CNY seen trading at a near two-week low (~7.2648) on Friday, keeping a respectful distance below the upper bound of its daily trading range (~7.2741). The PBoC set a stronger yuan fix on Friday (7.1315 vs 7.1339 prev), extending the streak of fixes above the 7.13 mark for a fourth straight session despite softness in the US Dollar following the release of US CPI on Thursday.
- Turning to domestic data, Chinese trade data for June released on Friday likely added to worry over the state of domestic demand, with imports posting a surprise decline (-2.3% YoY; BBG median +2.5% YoY; +1.8% YoY prev), contracting for the first time since February 2024. While the growth in auto and semiconductor exports drove demand for hi-tech imports (+10.8% YoY), the majority of the sub-categories remained in contraction for the year to date, with steel (-7.0% YoY) and timber (-5.1%) imports weighed by the ongoing property market slump.
- On the other hand, there was less concern over the manufacturing/export sector, with Chinese exports firmly beating forecasts to record an 8.6% YoY (vs BBG median 8.0% YoY) growth in June, driven by strength in automobile (export volume +18.9% YoY YtD) and semiconductor (export volume +9.5% YoY YtD) shipments.
- As a result, the trade surplus in June grew more by than expected to US$99.1 billion, rising to its widest seen since 1991, although some drag may be expected when auto tariffs from the EU and US come into play in the coming periods.
- Gold sits ~$20 softer at writing on Friday, backing away from Thursday’s seven-week high (at ~$2,424.62/) made after the release of US CPI. The latter report had sent the Dollar plunging, with the greenback seen sitting ~0.5% softer come the close after having recorded its own one-month low during that session as well. The post-CPI bid in gold reversed losses seen earlier in the week as cooler than expected US inflation for June added to optimism for more Fed rate cuts this year, driving the dollar and Treasury yields lower.
- To elaborate, gold started the week on the back foot, coming under pressure on Monday (July 8) amid speculation of profit-taking, closing ~1.4% lower come the closing bell. The precious metal regained some poise over Tuesday and Wednesday following Fed Chair Powell’s much-anticipated two-day appearance in the Senate and the House as part of the Fed’s Semi-annual Monetary Policy Report to Congress, with Powell’s dovishly-tinged remarks helping to keep a lid on the Dollar ahead of the release of US CPI on Thursday.
- The precious metal then rallied on Thursday (July 11), closing ~1.9% higher and above the $2,400 mark for the first time in seven weeks after headline US CPI (-0.1% MoM vs BBG median 0.1% MoM; 0.0% MoM prev) posted a surprise decline, notably falling for the first time in four years, boosting rate cut bets. Dovish Fedspeak added to rate cut optimism, with San Fran Fed Pres Daly (’24 voter) noting that “some policy adjustment will be warranted” given the recent round of data releases and economy outlook.
- Fed fund futures now price in 100% odds for a 25bp rate cut to come by September, with a cumulative ~61bp of rate cuts by year-end. Similarly, market participants now ascribe 92.6% odds for the first rate cut of this cycle to come by September, from up 77.7% odds last Friday as per the CME Fedwatch tool.
* KIS gold price premiums reflect the mid-point of the average bid and ask premiums over spot reported by market participants for each location.
To receive daily updates on gold price premiums for key Asian markets visit www.kallindex.com
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