GOLD: Bullion Monitoring Fed & Middle East Developments
Gold prices range traded on Tuesday and that trend has continued in today’s APAC session as markets await the Fed decision later. They fell to $3370.75/oz but have rebounded to $3399.0 to be up 0.3% today supported by the softer US dollar (USD BBDXY -0.1%). Treasury yields are little changed. Bullion continues to be dependent on the Middle East too with any escalation driving safe-haven flows.
- Medium-term trend signals are bullish with moving average studies in a bull mode. Initial resistance is at $3451.3, 16 June high, while support is at $3340.2, 20-day EMA.
- Prospects of the US assisting Israel in its attacks on Iran have increased. President Trump has demanded that Iran surrender but said that they won’t assassinate the Ayatollah “for now” but his patience with Iran is “wearing thin”.
- Silver is 0.4% higher at $37.267 today to be up 13% this month. The intraday high of $37.282 is also the high for June. A bull wave persists and has broken above a number of resistance levels opening $37.478, March 2012 high.
- The Fed is widely expected to leave rates unchanged but the dot plot will be monitored closely (see MNI Fed Preview). Inflation and jobs data have yet to show an impact from tariffs but some activity/survey data have slowed. The Fed is likely to want more time to evaluate the impact and now oil prices are up over 20% this month, it will also monitor its impact on inflation if sustained. A prolonged hold would likely weigh on gold prices, depending on other events.
- There are also a number of ECB speakers including de Guindos, Elderson, Lane, Machado and Donnery and BoC’s Macklem appears. In terms of data, US May housing starts/permits, jobless claims, euro area May CPI and UK May CPI are released.
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OIL: Crude Monitoring Developments On Many Fronts
After rising over a percent on Friday, crude is moderately lower in APAC trading today following April data showing weaker retail sales and property sector in China. Brent is down 0.4% to $65.16 after falling to $64.69 early in the session, while WTI is -0.3% to $62.28 after a low of $61.77. The early sell off was driven by concern regarding the strength of US growth in the wake of Moodys’ downgrade. The USD index is down 0.2%.
- The progress of negotiations on Iran’s nuclear programme, US trade deals and peace in Ukraine remain highly uncertain. Iranian President Pezeshkian has said it won’t give up its non-military nuclear programme. Estimates suggest that an easing of sanctions on Russia and Iran would only have a moderate impact on global oil supplies as both have been able to find ways around restrictions.
- US President Trump has said that he will speak by phone to Russian President Putin about an end to the war in Ukraine at 10:00 EDT (14:00 GMT) today. This will be followed by a call with Ukrainian President Zelensky and some NATO leaders.
- China’s April IP data showed a 1.5% y/y rise in crude production but 8.1% y/y in natural gas.
- Later the FOMC’s Bostic, Jefferson, Williams, Logan and Kashkari appear. The Atlanta Fed’s financial market conference takes place until May 21. The April US leading index and euro area April CPI are released.
GOLD: Gold Bounces on Market Weakness
- Gold has had a better day today in the Asia trading day, rising +0.36% to US$3,215.30.
- Despite solid Chinese data (I/P beat expectations, retail sales in line) equity markets fell giving gold a boost.
- Gold is also likely being supported by the Moody's downgrade of the US rating given concerns for the economic outlook and budget deficit.
- Gold prices fell 1.1% on Friday to $3203.65/oz pressured by higher US yields after a low of $3154.60 to be down 3.6% on the week and 2.6% in May. Bullion has been trending lower since its peak on May 6 at $3435.62. The USD index rose 0.2%.
JPY: Asia Wrap - USD/JPY Demand Seen Sub 145.00
The Asia-Pac range has been 144.81 - 145.47, Asia is currently trading around 145.30. USD/JPY opened lower and traded heavily for most of our session on the back of a knee-jerk reaction lower in stocks to the downgrade news.
- MNI - China Data: “The April activity outcomes were mixed, with retail weaker than forecast, while IP posted a modest upside surprise. Both measures slowed versus March outcomes. Headwinds still persist in the property sector, while house price growth slipped further into negative territory.”
- "*ISHIBA: CAN'T ACCEPT US TARIFFS INCLUDING FOR CARS" - BBG
- JAPAN FINMIN KATO: JAPAN NOT FACING PROBLEM PROCURING FUNDS FROM MARKET VIA DEBT ISSUANCE, IF JAPAN LOSES MARKET TRUST IN ITS FINANCES, IT MAY FACE RISE IN INTEREST RATES THAT COULD AFFECT DEBT REDEMPTION" RTRS
- USD/JPY tested below 145.00 this morning as stocks turned down, some demand seen below 145.00 after the Japanese fix.
- The support around 144/145 looks important now and a break would once again bring the focus back to the pivotal 140.00 area. The price action though does not look great and the market is still more comfortable selling rallies..
Options : Closest significant option expiries for NY cut, based on DTCC data: Y141.90($1.07bln), Y147.00($969.6m), Y146.50($780.7m), Upcoming Strikes : 145.50($1.03b May 20), 145.00($789.7m May 20), 142.00($878m May21)
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg
