A great week for gold bulls set to mark a third straight weekly rise, supported by cooling inflationary pressures and dovish comments from Christopher Waller, pushing treasury yields and the dollar to a four-month low. Nonetheless the physical market activity saw some signs of weakness with prices approaching all-time high in dollar terms.
Gold premiums charged in China stood at $41.8 an ounce above LBMA prices in November, 9% lower than October, but higher than a year ago ($17/ounce in November 2022). Week-on-week premium on the Shanghai Gold exchange remains flat at $30.8/ounce (Five day rolling average).
Monday and Tuesday saw a pickup in trading volume for the physical contract (Au9999) traded on the SGE, 15.3 and 19.3 tonnes respectively, but it has since receded to its five-day rolling average of 13 tonnes.
Premiums in Singapore remain similar to last week (0.50/0.75% for kilo bar) but we are noticing a slowdown in buying activity with retailers more willing to sell than buying. Dealers inventory remains more or less the same week on week.
Powell will dictate the Gold’s direction today and set the trend for the rest of the year. A dovish speech (rate cuts) will give a clear signal for bulls to push the metal to new all-time high, whereas an hawkish tone will trigger some profit taking.
Expect Gold to keep its bullish momentum toward year end, as it’s usually a positive seasonal month for the metal. Physical premiums in China should increase in December as it’s historically the case.
Nonetheless, after a 12% return in two-months, we can expect a short-term correction with Comex Gold Feb ’24 contract facing an important hurdle at $2,080, equivalent to spot 2,060 (xauusd).
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