Daily Report – 22 June 2022

Fundamental Report: The Gold futures are easing higher on Tuesday in reaction to a dip in U.S. Treasury yields and the U.S. Dollar. The volume is a little on the light side after Monday’s U.S. bank holiday so we’re not going to read into the move too much. At the start of the week, bullish traders are looking for signs of recession, while bearish traders are keeping steady pressure on prices on the hopes of continued rate hikes from hawkish central bankers. Despite these outlooks, however, the directions of yields and the dollar will ultimately determine which way and how fast the gold market moves. At 07:56 GMT, August Comex gold futures are trading $1841.20, up $0.50 or +0.03%. On Monday, the SPDR Gold Shares ETF (GLD) settled at $171.26, down $1.43 or -0.83%. In the absence of major economic reports, gold traders will be seeking direction this week from a number of Federal Reserve representative. On Wednesday, Fed Chair Jerome Powell will deliver a semi-annual monetary policy testimony before the Senate Banking Committee. On Thursday, his testimony will be before the House Financial Services Committee.

Gold prices continued to consolidate as the dollar traded mixed. The yield differential widened versus the yen allowing the greenback to gain traction versus the Japanese currency. Despite weaker than expected U.S. existing home sales, U.S. treasury yields remained stable. The CME Fed Watch shows a 95% chance of a 75-basis point Fed hike at the July Fed meeting. According to the National Association of Realtors, existing Home Sales declined in May, falling by 3.4% to an annualized rate of 5.41 million units. Sales were 8.6% lower than in May 2021. This is the weakest reading since June 2020. The drop in demand is a function of higher mortgage rates. During May, the average rate on the 30-year fixed mortgage rose from around 4% to 5.5%.

On Monday, St. Louis Fed President James Bullard said the U.S. Federal Reserve could raise interest rates swiftly this year and forge a “stellar” economy ahead if it can pull off a repeat of the success of the central bank’s 1994 tightening cycle, Reuters reported. With the major economic reports out of the way, Federal Reserve speakers are likely to be the source of volatility this week. Over the week-end, Fed Governor Christopher Wallers issued a few hawkish remarks. Waller on Saturday became the latest U.S. central banker to pledge a whatever-it-takes approach to fight inflation, days after the Fed raised interest rates by 75 basis points and signaled more hikes to come. Wallers’ remarks echoed similar statements from Federal Reserve Chairman Jerome Powell on Friday. The key report this week, is Friday’s University of Michigan Sentiment Index. It is expected to come in at an extremely low 50.2, matching an earlier estimate. The rest of the week is filled with Federal Reserve speakers including St. Louis Fed President James Bullard at 16:45 GMT later today. The highlight of the week is likely Fed Chair Jerome Powell’s testimony on monetary policy to the Senate Banking Committee on Wednesday and to the House Financial Services Committee on Thursday. “That tightening episode caused some disruption that year,” Bullard said during an event held by the AXA-Barcelona School of Economics in Barcelona, Spain.