Here is the KIS team's review of this week's gold market price dynamics, for your interest:
- For the week ending June 28, 2024, physical gold premiums over London spot appears to be converging, averaging at US$0.88/oz, US$0.77/oz and US$0.84/oz for Loco Singapore, Hong Kong and Thailand respectively.*
- The average weekly premiums saw declines of US$0.04/oz (-4.4%), US$0.10/oz (-11.5%) and US$0.04/oz (-4.5%) for Singapore, Hong Kong and Bangkok respectively when compared to the previous week. Despite this, premiums for Loco Hong Kong showed signed of recovery, climbing from US$0.72/oz on Monday to US$0.81/oz by the end of the week, a 12.5% increase.
- The Shanghai physical gold contract Au99.99 trade volume also observed an upward trend, increasing from 9.386 kg on Monday (June 24) to 11,214 kg on Thursday, a 19.5% increment, as trading activities picked up.?
- The Shanghai gold premium extended its decline seen through the week to operate near a three-month low on Thursday, slipping to US$13.23/oz from US$23.35/oz on Monday, settling below the current YtD average of US$40.01/oz. The Shanghai Gold Benchmark PM (SHAUPM) closed Friday (June 28, 2024) marginally higher at RMB 549.47/g.
- The fall in gold premiums this week was accompanied by a fall in the yuan, with USD/CNY marching upwards to operate near a seven-month high to print ~7.2671 at writing, staying just below the upper bound of its daily trading range (~7.2693). The PBoC broke its seven-day streak of weaker fixes to set a stronger fix at 7.1268 on Friday (vs 7.1270 prev) leaning a little against recent yuan weakness, although the direction of travel for the redback has remained lower.
- Putting a dampener on Chinese economic sentiment further, industrial profit growth for May accelerated at a sharply slower pace, with industrial profits dropping sharply to 0.7% in May from 4.0% in the previous month. Although the manufacturing sector remained robust, the property sector slump deepened in May despite the flurry of revival measures announced last month, weighing on domestic-facing sectors such as construction materials and household goods. Elsewhere, China’s third plenum will be held from 15 to 18 July – being one of the most important events on the government’s calendar, where the country’s economic development for the next five to ten years will be outlined.?
- Gold held onto its overnight gains to print ~US$2,324/oz at writing, staging a rebound after falling to a two-week low on Wednesday as perception of a weakening US economy drove the Dollar lower. The precious metal saw limited moves during the Asian trading session as markets await May Core PCE deflator (BBG median +0.1% MoM) due later today. ?
- To elaborate, US continuing jobless claims rose to its highest level since late 2021, increasing to 1839k from 1821k previously. Meanwhile, capital goods orders for May surprised to the downside, with declines reported across key sub groups such as core shipments, non-defence and shipments. The Atlanta Fed’s GDPNow estimate for growth in Q2 was lowered to 2.7% from 3.0% previously.
- Fed fund futures now price in a cumulative ~42 bps of rate cuts come the end of 2024, slightly lower than the ~43bps seen prior to Thursday’s data releases. Market participants now ascribe ~77% odds to the first rate cut of this cycle coming by November, 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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