Here is the KIS team's review of last week's?gold market price dynamics, for your interest:
- For the week ending May 24,?2024, physical gold?premiums over London spot averaged at?US$0.92/oz, US$0.69/oz and US$0.83/oz for Loco Singapore, Hong Kong and Bangkok respectively.*
- The average weekly premiums decreased across all 3 regions. Loco Hong Kong led with the largest decline at US$0.05/oz (-6.3%). Both Loco Singapore and Loco Bangkok saw decreases?of US$0.03/oz, with declines of 3.6% and 4.0% respectively.
- Shanghai gold premiums drifted sideways this week, closing virtually flat on Thursday at US$27.46/oz from US$26.83/oz on Monday, far below the YtD current average of US$41.91/oz. The Shanghai Gold Benchmark PM (SHAUPM) settled lower at RMB 550.57/g on Friday (May 24, 2024), extending a move away from Monday’s fresh record high (RMB 574.83/g) against the backdrop of simmering tensions between China and the US.
- USD/CNY has continued to head higher, with the pair trading at ~7.2211 on Friday, keeping away from the upper bound of its daily trading range (~7.2524). The PBoC weakened the yuan fix gradually all throughout the week amidst a surge in the Dollar as markets had pared 2024 Fed rate cut bets, culminating in the first fix of the yuan above the 7.11 mark for the first time since January 23 on Friday.
- Gold is ~$75 softer on the week to change hands at ~$2,335/oz on Friday, operating just above a fresh two-week low of $2,325.53/oz established earlier in the day. The precious metal has extended a fall away from its recent record high of $2,450.10/oz made early on Monday, succumbing to pressure from worry surrounding aforementioned paring of Fed rate cut expectations for this year as the latter has driven the Dollar and Treasury yields higher.
- Of note this week, minutes from the May FOMC released on Wednesday presented a hawkish surprise, revealing openness from officials to more rate hikes if needed, with “several” members questioning whether monetary policy is currently sufficiently restrictive. Just a day later, US flash PMIs for May came in above expectations across the board, with the composite reading hitting a 25-month high (54.4 vs BBG median 51.4; 51.3 prev), signalling the fastest growth seen in two years. Output in the services sector (54.8 vs 51.3 prev) grew at its quickest pace in a year, alongside a more modest expansion in the manufacturing sector as well (50.9 vs 50.0 prev).
- In combination, the higher-for-longer view on peak Fed rates was likely reinforced, as reflected in the retreat of rate cut expectations with fed fund futures slipping to ~35bps of cuts this year from ~40bps priced pre-US-PMI (and 44bps at the start of the week), pointing to just one rate cut expected by December, and ~40% odds of a second 25bps rate cut by then as well.
* 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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