Gold price buoyed by weakening economy, higher rates, banking stress

Economic data continues to show weakness in the US economy, and the need for a final interest rate hike to curb persistent inflation. This supports the fundamental case for gold to remain above $2,000 per ounce, today at $2,020, with recent moves being driven by uncertainty and heightened risk.

From here, we expect the gold price to consolidate on either side of $2,000 as it absorbs the financial changes of the past few weeks. Gold investors have increased holdings in Gold ETFs and had increased net long positions on COMEX, the primary futures and options market for trading metals, in response to greater uncertainty, but here, too we are seeing stabilization.

Gold and the banking stress proxy

Source: Bloomberg, StoneX

Gold ETFs saw net inflows of 19 tonnes of gold after the addition of 35 tonnes of gold for a net dollar inflow of $2.27 billion, in three weeks since various banking crises roiled markets. Gold ETF holdings rose to 3,454 tonnes (for context, world mine production is around 4,000 tonnes pa). 

Managed money outright long positions in gold on COMEX increased in the two weeks following the banking crisis, from 406 tones to 443 tonnes, before profit taking shaved positions to 420 tonnes. Net long positions were up by 17 tonnes over the fortnight, to 325 tonnes, compared with a 12-month average of 111 tonnes.

Gold: managed money positions on COMEX (tonnes)

Source: CFTC, StoneX

On the other hand, sales of Gold Eagle coins, reported by the US Mint, slowed in April. After 215,000 ounces (6.7 tonnes) were sold in March, this dropped to 84,000 ounces (2.6 tonnes) in the first half of April.

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

Contact: Rhona.Oconnell@stonex.com.