Gold has insufficient support to clear $2,000, at least for now

Gold bars article image for an article on Precious metals and Gold
By :  ,  Financial Writer

The current trading range for the gold price is clearly a comfort zone. Gold has insufficient support to clear $2,000, for now at least. The near-term upside for gold still looks capped at $2,000 and $23.50, respectively. Our view on consolidation for more time is unchanged.


Immediate outlook

Fed chair Jay Powell’s comments about interest rates, not even thinking about cutting rates, and the latest numbers from the US economy, supported the gold price but marginally less the silver price.  While other asset classes were volatile towards the end of last week, gold was stable, one of its primary characteristics. Gold’s range was 2.9% (as a percentage of the low) over the week, and silver’s was 5.2%, typical given the relationship between the two.

Gold; technical considerations; now out of the uptrend, and rightly so

Gold Technicals_110623Source: Bloomberg, StoneX

US economic numbers argue against any further rate hikes

The cautious tone Fed Chair Powell adopted after last week's FOMC meeting was underscored by the latest round of US economic numbers. The Institute of Supply Managers’ (ISM) employment survey, released on 1st November, showed a drop in manufacturing, with a sharp fall in the employment index and slippage to 45.5 from 49.2 in the New Orders Index (a reading of 50 is neutral). Durable goods orders softened marginally. The increase in Nonfarm Payrolls was slower than expected, and the unemployment rate increased to 3.9% from 3.8% in September. Average hourly earnings also slowed.

Finally, the ISM Services numbers were all lower than expected.  The Services sector recovered later than manufacturing as the COVID impact was gradually shaken off, so these numbers come as a setback.  The Services index and Prices Paid index were down, but they were at least above the neutral 50 level, while the employment index dropped from 53.4 to 46.8 and Services New Orders fell from 51.8 to 45.5.

Gold in key currencies; correcting in Asia – which was necessary

Gold in FX_110623 Source: Bloomberg, StoneX

While these numbers are not catastrophic, they point to an easing in the recovery and suggest that the Fed need not tighten further.  The US bond markets are pricing in a rate cut in June, but in his Press Conference after the FOMC meeting, in response to more than one question from the floor about the potential for rate cuts next year, he said that the Fed is neither talking nor thinking about cutting rates.  However, the Fed will remain data-dependent, so we should continue to expect a flexible approach.

Implied Fed Funds rate

Fed Funds_110623Source: Bloomberg

Meanwhile, the Eurozone industrial confidence reading is still below zero on the other side of the Atlantic. CPI came in at 4.2% year-on-year, highlighting that the European Central Bank still has problems. At the same time, in China, the Purchasing Managers’ Indices are closely grouped around the 50 level, and the currency remains under pressure, keeping the People’s Bank of China’s attention focused on maintaining a steady exchange rate. This will prompt analysts to ponder the possibility of a fresh fall if and when the PBoC eases its support program.

Were this to happen, the knock-on effect into the rest of the region would, in theory, be supportive of gold, but in the short term, would put it under pressure in the face of any distress selling.  We must underline here that we are not suggesting this is on the horizon, but it is worth noting that analyst thoughts on the subject are making their way into the news.

Gold, silver and the ratio; five-year view

Gold Silver Ratio_110623

Source: Bloomberg, StoneX

Futures markets

Increased length in both gold and silver, but with different patterns.


  • From a net short of 96 tonnes on 3rd October, Managed Money is now at a net long of 126 tonnes, a swing of 223 tonnes.
  • Outright longs up 55 tonnes or 17% to 381 tonnes, the highest since 8th August, compared with a 12-month average of 359 tonnes.
  • Outright shorts are down 71 tonnes or 26% from 279 tonnes to 207 tonnes.

Gold COMEX positioning, Money Managers (tonnes)

Gold COMEX_110623

Source: CFTC, StoneX


Contractions on both sides but much more short covering than long liquidation.

  • Longs were down 5% or 227 tonnes to 4,761 tonnes.
  • Shorts were down 856 tonnes or 19% to 3,597 tonnes compared with a 12-month average of 4,587 tonnes. 
  • Shorts are down by 2,004 tonnes in a fortnight, and the net long is up from 535 tonnes to 1,164 tonnes.

COMEX Managed Money Silver Positioning (tonnes)

Silver COMEX_110623 

Source: CFTC, StoneX

Exchange Traded Products

Gold ETPs

In the ETP sector, we have seen a couple of chunky days of gold buying (14 tonnes on 20th October and 21 tonnes on 30th October).  The first tranche was bargain-hunting at the lows of the recent range and will have helped to generate the move that day from $1,960 to $1,977.

At the same time, the second took place on a day when prices were correcting after a smart move during the previous US afternoon, with gold reaching up to $2,010 as tensions escalated in the Middle East. Attention turned again to the US deficit and the cooling labor market.  Holdings are 3,237 tonnes for a year-to-date loss of 235 tonnes. Global mine production is roughly 3,700 tonnes per annum.

Silver ETPs

Silver has seen some scattered buying, but the sentiment remains cautious, and the silver ETPs encountered six consecutive days of redemptions over much of last week and the week before. However, there was some purchasing last Friday.  Since the start of October, the silver ETPs have posted a net loss of 69 tonnes, but this is minimal by comparison with the underlying holdings, which currently stand at just over 22,100 tonnes, with a net reduction of 1,154 tonnes for the year.  Global mine production is approximately 27,000 tonnes per annum.

Gold is still likely to hold in its current range, and silver is expected to continue to underperform, especially with so many COMEX silver shorts now closed out.



Taken from analysis by Rhona O’Connell, Head of Commodity Market Analysis for EMEA & Asia, StoneX Financial Ltd.


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