(Kitco News) – Gold prices have fared fairly well in the wake of the Fed’s hawkish rhetoric and rate projections, while silver’s coin demand is seeing a significant divergence between major producers as spot prices test support, according to precious metals strategists at Heraeus.
In their latest precious metals report, the analysts noted that gold prices have made gains despite the Federal Reserve’s renewed hawkishness.
“On 12 June, the US reported a relatively flat headline CPI – a 3.3% year-on-year increase and unchanged on a seasonally adjusted basis – the lowest numbers in three years,” they noted. “This provided some support for the gold price, although Fed Chairman Jerome Powell’s subsequent signalling of cautiousness on rate-cutting after a Federal Open Market Committee (FOMC) meeting made it temporary.”
“Currently, members of the FOMC remain divided on whether to support one or two rate cuts this year,” they said, adding that the swap market is still pricing in a 42% chance that the Fed will deliver 50 basis points of rate cuts in 2024. “The gold price is still consolidating its gains, with support around $2,280/oz holding,” they said.
The analysts also noted that extreme weather events have disrupted first-quarter gold production in Australia. “Cyclones and heavy rain that led to floods resulted in a drop in gold output in Australia to 70 t in Q1’24 from 77 t in Q4’23,” they wrote. “In 2023, Australia was the world’s second-largest gold producer (310 t), second only to China (source: Statista). However, buoyed by high prices, most miners are maintaining production forecasts for the year.”
Gold is seeing a subdued start to the week, with spot gold opening at $2,334.87 per ounce in the overnight session before dropping to a daily low of $2,315.54 around 3 am EDT. It has since recovered somewhat, last trading at $2,324.71 per ounce for a loss of 0.34% on the day.
Turning to silver, the analysts said that after dropping below $30 per ounce following the June 7 Fed meeting, the gray metal’s spot price oscillated between $29 and $30 last week, testing key support.
“The gold:silver ratio rebounded to 79 from early June’s low of 73 as silver has underperformed gold, with both metals’ prices falling,” they noted.
On the physical demand side, Heraeus highlighted the significant divergence between the Perth and US Mint’s silver coin sales this year.
“Perth Mint silver coin sales remained weak, as the May sales of 796,934 oz significantly trailed previous years,” they noted. “May sales data represented a 58% decrease year-on-year and the lowest May figure in five years. Year-to-date sales reached 4.12 moz, a 51% drop year-on-year.”
They said that the weakness of Perth Mint silver coin sales in 2024 suggests that higher metal prices have impacted consumer demand.
“The US Mint sales, in contrast, appeared much more robust than in previous years,” they wrote. “During May, sales of 1.75 moz were recorded, a 9.7% year-on-year rise. Year-to-date sales reached 12.6 moz, a 52% increase year-on-year.”
Silver prices followed gold lower in early trading on Monday and tested key support at $29.026 per ounce just before 3 am EDT. The gray metal has since staged a modest recovery but remains in negative territory on the session, last trading at $29.468 for a loss of 0.30% on the daily chart.
