Here is the KIS team's review of this week's gold market price dynamics, for your interest:
- For the week ending July 5, 2024, physical gold kilobar premiums over London spot converged, averaging at US$0.82/oz, US$0.81/oz and US$0.82/oz for Loco Singapore, Hong Kong and Thailand respectively.*
- The average weekly premiums saw declines of US$0.06/oz (-6.8%), and US$0.02/oz (-2.4%) for Singapore and Bangkok, respectively, compared to the previous week. Conversely, the average premiums for Loco Hong Kong recovered US$0.04/oz (+5.2%) from the previous week, indicating a slight recovery in demand.?
- The Shanghai gold premium traded in a tight band this week, ticking ~US$0.32 higher to close Thursday nearly flat at US$23.86/oz from US$23.54/oz at the start of the week, settling below the current YtD average of US$39.38/oz. The Shanghai Gold Benchmark PM (SHAUPM) climbed back to a near two-week high on Friday (July 5, 2024), rising ~RMB 8 to close the week higher at RMB 557.81/g. The measure has gained traction as focus domestically has turned towards the Party’s upcoming Third Plenum.
- The yuan strengthened this week, with USD/CNY extending its decline away from intraweek high of ~7.2735 seen on Wednesday to print ~7.2686 at writing, remaining a short distance below the upper bound of its daily trading range (~7.2715). The PBoC opted for a stronger yuan fix on Friday (7.1289 vs 7.1305 prev) after two consecutive sessions above the 7.13 mark, the highest level since late November last year.
- On the data front, the divergence between the growth in the manufacturing and services sector widened in June, with the Caixin manufacturing PMI (51.8 vs 51.2 prev) expanding at its fastest pace in three years, marking the eighth straight month of growth for manufacturers in China. That as may be, the European Commission slapped temporary tariffs on Chinese EVs on Thursday, with the broader trade conflict expected to apply drag to manufacturing and exports in the coming periods. The services sector (51.2 vs 54.0 prev) grew at its slowest pace in eight months, weighed by slower growth in new orders amid a plunge in business confidence to a near four-year low.?
- Turning to property, real estate transactions in China’s major cities jumped to a fourteen-month high in June, turning positive for the first time since February this year – an encouraging sign that the property easing measures announced earlier this year may be starting to bear fruit. In the primary market, the decline in yearly sales value for the nation’s top 100 property developers narrowed to 16.7% YoY from 33.7% YoY in May per data from research firm CRIC.
- Gold is consolidating near a two-week high at ~US$2364/oz, holding on to a ~$40 move higher on Wednesday (July 3), with the balance of US economic data leading up to the release of US NFPs so far proving supportive of the narrative of more Fed rate cuts this year.
- To elaborate, ISM manufacturing (48.5 vs BBG median 49.1, 48.7 prev) index on Monday and services gauges (48.8 vs BBG median 52.5, 53.8 prev) on Wednesday both provided surprises to the downside, with the latter noted to have hit a four-year low, intensifying views of weakness in the US economy. Sticking with the services report, price pressures showed signs of weakening, supporting Fed rate cut hopes, with the manufacturing prices subindex easing to a six-month low of 52.1.
- The latest round of soft US data points towards a cooling economy and softening labour market conditions, boosting the case for a September interest rate cut from the Fed. The US jobs data for June (BBG median +190k; +272k prev) due tonight will headline matters today, where markets are expecting a sharp deceleration in employment gains following last month’s blowout job figures.
- Fed fund futures have priced in near-100% odds for two 25bp rate cuts come the end of 2024 ahead of the jobs data release. Market participants now ascribe ~74% odds for the first rate cut of this cycle to come by September 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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