Gold sees record bullish sentiment among European retail investors / Metals React to Fed

(Kitco News, Fri. June 10th, 2022) – The gold market may be stuck around $1,850 an ounce; however, retail investors don’t appear to be giving up on the precious metal just yet.

According to Spectrum Markets, a European-based securitized derivatives trading platform, bullish sentiment in the gold market reached a record high last month among retail investors.

The platform calculated investor sentiment using its Spectrum European Retail Investor Index (SERIX). The index is calculated on a monthly basis by analyzing retail investor trades on the exchange and subtracting the proportion of bearish trades from the proportion of bullish trades.

The data shows that sentiment in the gold market hit 116 last month, “as retail investors took advantage of a lower gold price amid wider macroeconomic uncertainty,” the report said.

“After a period of decline in May that saw the gold price drop below 1,800 USD on the 16th, the gold price started what looked like a new rally in the last few days of the month, supported by both the dollar and euro undergoing a weak phase”, explains Michael Hall, Head of Distribution at Spectrum Markets.

Gold has been in high demand as uncertainty continues to dominate financial markets. Persistently high inflation continues to threaten the global economy. Rising prices have been exasperated by Russia’s ongoing invasion of Ukraine, driving good and energy prices higher.

“Considering the macroeconomic backdrop, it’s no surprise to see investors looking to take advantage of a dip in the gold price to make safe-haven allocations,” Hall said.

Looking at other assets, Spectrum Markets data shows that investors are relatively lukewarm on equity markets. The report said that investor sentiment for the DAX 40 remained bearish at 99. Meanwhile, sentiment regarding the S&P 500 dropped from 103 to a neutral 100 reading and NASDAQ 100 saw a similar decrease, from 103 to 101, remaining bullish.

Spectrum Markets’ analysis fits with other reports and anecdotal evidence. The U.S. mint sold 147,000 ounces of gold last month, its best May sales in 10 years. U.S. gold bullion sales are up more than 400% from the five-year average between 2015 and 2019.

Analysts have said that strong physical gold demand shows growing anxiety among retail investors looking to protect their wealth.

Metals React to Fed

A major data point of the week, if not the month, is the just-released U.S. consumer price index report for May, which came in hot at up 8.6, year-on-year. The CPI was expected to be up 8.2%, year-on-year, after a rise of 8.3% in April. This latest CPI number is the highest of the young inflation cycle. The CPI data comes just ahead of the Federal Reserve’s FOMC monetary policy meeting next week. The hot CPI hints the Fed will continue on its aggressive pace of tightening U.S. monetary policy. U.S. Treasury Secretary Janet Yellen told Congress this week that Americans should expect a prolonged period of high inflation. Many market watchers fear the U.S. economy could slip into recession or have a bout of dreaded “stagflation”—meaning stalled economic growth with high inflation.

Global stock markets were mostly lower overnight. U.S. stock indexes are pointed toward firmer openings when the New York day session begins. Risk appetite is dented on this last trading day of the week, as it appears China just can’t get past Covid 19. Reports said the major Chinese city of Shanghai has again imposed new Covid restrictions, after lifting some recently.

Gold market is waiting for next week’s Fed meeting – StoneX’s O’Connell

China reported its consumer inflation in May at up just 2.1%, year-on-year. China’s producer price index was up 6.4% in May. Meantime, China’s exports were up 16.9% in May, year-on-year, which is double market expectations. Imports were up 4.1% in May.

The key outside markets today see Nymex crude oil prices higher and trading around $122.50 a barrel. The U.S. dollar index is higher in early trading. The yield on the 10-year U.S. Treasury note is fetching 3.06%.

Other U.S. economic data due for release Friday includes the University of Michigan consumer sentiment survey and the monthly Treasury budget statement.

Technically, the August gold futures bears have the overall near-term technical advantage. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at the June high of $1,878.60. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at the overnight high of $1,851.00 and then $1,862.40. First support is seen at the June low of $1,830.20 then at $1,815.00. 

July silver futures bears have the firm overall near-term technical advantage. A a price uptrend on the daily chart has been negated. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $23.00 an ounce. The next downside price objective for the bears is closing prices below solid support at the May low of $20.42. First resistance is seen at the overnight high of $21.76 and then at $22.00. Next support is seen at $21.00 and then at $20.75.

Posted by:

Jack Dempsey, President

401 Gold Consultants LLC

jdemp2003@gmail.com