Gold Prices at 14-Week High as Yields Fall, Chinese Buyers Return
Gold prices extended higher above the $ 1,850 mark, reaching a 14-week high A weaker US Dollar and falling yields have boosted precious metal prices
Inflation and viral concerns also bolstered the appeal of gold. Chinese imports soared in March Gold prices edged higher on Monday as the 10-year Treasury yield fell for a third day. Poorer-than-expected US retail sales and consumer sentiment figures release on Friday eased market concerns about tapering Fed stimulus, pulling the US Dollar and yields lower. The real yield, as represented by the US 10-year inflation-indexed security, has declined to -0.92% from -0.87% seen mid last week. The DXY US Dollar index is hovering near an 11-week low at 90.40.
Recently, inflation fears and concerns about viral resurgence in the Asia-Pacific region remained on top of investors’ mind. Taiwan and Singapore, the two economies that handled the pandemic relatively well during 2020, have seen Covid-19 cases in the community surging. Both have since tightened border restrictions and social distancing controls to contain the spread of the virus. This is likely to result in a slower pace of recovery however, especially in the transportation, service and consumer discretionary sectors.
Rising demand for safety and inflation-hedge assets may continue to bolster the appeal of precious metals. Gold, silver and platinum prices have surged 10.0%, 15.2% and 6.8% respectively since the beginning of April, outperforming most equity benchmarks.
Meanwhile, Chinese buyers have likely returned to the bullion market after regulators increased import quotas to meet domestic demand. Chinese non-monetary gold imports surged to 38.58 tons in March, reaching the highest level seen more than a year (chart below). This trend may continue in the months to come, providing further support to bullion prices.
China Non-Monetary Gold Total Imports – Monthly
The world’s largest gold ETF – SPDR Gold Trust (GLD) – saw two consecutive weeks of net inflow. This suggests that more buyers are returning to the bullion market after months of selling. The number of GLD shares outstanding increased 1.1 million last week, after climbing 2.9 million in the prior week. Gold prices and the number of outstanding GLD shares have exhibited a strong positive correlation in the past (chart below). Therefore, an increased subscription of the ETF may be viewed as a bullish signal for gold.
Gold Price vs. GLD ETF Shares Outstanding – 12 Months
Technically, gold prices extended higher within an “Ascending Channel” after completing a “Double Bottom” chart pattern. This suggests that gold prices may have found a mid-term bottom at around $ 1,677 and since resumed its upward trajectory. The ceiling and the floor of the “Ascending Channel” may be viewed as immediate resistance and support levels respectively.
The MACD indicator is trending higher above the neutral midpoint, underscoring upward momentum.
Gold Price – Daily Chart
Dow Jones, Hang Seng, ASX 200 Outlook: Tech Rebound Bolsters Risk Appetite
Dow Jones, S&P 500 and Nasdaq 100 indexes closed +1.06%, +1.49% and +2.17% respectively US retail sales growth unexpectedly stalled in April as the boost from stimulus checks faded
Asia-Pacific equities may follow a positive lead, but viral resurgence and lockdowns remain top concerns US Retail Sales, Consumer Sentiment, Pandemic, Asia-Pacific Week-Ahead:
US markets shrugged off a slight miss in April’s retail sales figures and closed broadly higher on Friday. The technology sector rebounded sharply as slower-than-expected spending growth cooled tapering fears. The Commerce Department reported a flat MoM reading in April following a 10.7% surge in March, suggesting that the boost from stimulus checks is fading. Looking ahead, record savings and post-Covid economic reopening may still underpin spending in the months to come.
The University of Michigan consumer sentiment figure came in at 82.8, compared to a baseline forecast of 90.4. This also marked a sharp decline from the previous month’s reading of 88.3, suggesting that rising inflation expectations are weighing on consumer confidence. This followed a much poorer-than-expected nonfarm payrolls report last week alongside a rapid increase in average hourly salary due to a shortage in labor supply. Rapidly rising wages and prices may be starting to constrain the recovery in economic activity. On the other hand, poorer economic readings alleviated investors’ concerns about tapering Fed stimulus. This reinforced a rebound in Wall Street stocks last Friday, narrowing weekly losses for the Dow Jones, S&P 500 and Nasdaq 100 indexes to -1.14%, -1.39% and -2.34% respectively. This week, the release of FOMC meeting minutes leads the economic docket alongside Euro area inflation figures and the Australian jobs report.
US Retail Sales (MoM)
Asia-Pacific markets look set to kick off the week on the front foot. Futures in Japan, mainland China, Hong Kong, Australia, South Korea, Taiwan and Singapore are pointing to a higher start on Monday. Bitcoin edged lower after Elon Musk replied “Indeed” to a tweet that hinted Tesla may have sold or could soon sell its Bitcoin holdings.
Singapore returned to quasi-lockdown on Sunday amid rapidly rising community Covid-19 cases. The Straits Times Index tumbled over 2% after the government tightened social-distancing measures on Friday. The near-term outlook remains cloudy as mutant viral strains appear to be more contagious and fatal than the previous ones. Escalating pandemic situations across India, Japan, Taiwan and Singapore hint at tighter border restrictions and more lockdowns across the Asia-Pacific, threatening the economic recovery in the region.
Looking back to Friday’s close, 8 out of 9 Dow Jones sectors ended higher, with 83.3% of the index’s constituents closing in the green. Energy (+2.62%), materials (+2.57%) and financials (+2.20%) were among the best performers, while communication services (-2.01%) trailed behind.
Dow Jones Sector Performance 14-05-2021
Dow Jones Index Technical Analysis
The Dow Jones index hit the 200% Fibonacci extension level (34,920) and has since pulled back slightly. Prices remain within an “Ascending Channel” formed since early November, the ceiling and the floor of which serve as key support and resistance levels respectively. The MACD indicator formed a bearish crossover and trended lower, suggesting that upward momentum is fading
Dow Jones Index – Daily Chart
Hang Seng Index Technical Analysis
The Hang Seng Index (HSI) breached below the range-bound zone between 28,290 and 29,344 last week (chart below). This may open the door for further losses with an eye on 27,505 (the previous low) for support. The 20- and 50-day SMA lines are about to cross below the 100-day line, forming a “Death Cross”. The MACD indicator is trending below the neutral midpoint, suggesting that bearish momentum may be prevailing.
Hang Seng Index – Daily Chart
ASX 200 Index Technical Analysis
The ASX 200 index pulled back from record highs after a failed attempt to breach the 261.8% Fibonacci extension level at 7,126. Prices have also breached below a “Rising Wedge”, hinting at further downside potential with an eye on 6,920 (the 50-day SMA) for support. The MACD indicator formed a bearish crossover and trended lower, suggesting that upward momentum may be fading.
ASX 200 Index – Daily Chart
Cardano Cryptocurrency (ADA) Outlook: Green Bitcoin Alternative for Tesla?
Cardano (ADA) prices surge after Elon Musk announces Bitcoin suspension
Focus on sustainable energy elicits demand for an environmentally-friendly digital currency Could Ethereum-inspired ALT coin Cardano (ADA) be a perfect replacement for Bitcoin?
It’s been a busy weekend for Cardano cryptocurrency (ADA) after the Ethereum-based ALT coin proved to be resilient against a major cryptocurrency sell-off last week. The move came shortly after Elon Musk announced the suspension of BTC/USD as an alternative payment method for Tesla, highlighting the detrimental effects its mining has on the environment.
Discover why Elon Musk remains a key catalyst for the crypto sphere
As speculation and crowd psychology remain to be the primary catalysts for price action, Tesla CEO Elon Musk has swiftly transitioned from friend to foe for BTC enthusiasts after another one of his controversial tweets resulted in a cryptocurrency blood bath last Wednesday.
As the sell-off gained traction, ADA/USD took the center stage after revealing a negative correlation to Bitcoin, Ether and Dogecoin, sending it’s prices soaring into the weekend.
Cardano (ADA/USD) Daily Chart
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