Gold’s upward rally continues with spot prices reaching a record high of US$2,265.73/oz yesterday following inflation data from the US late last week. However, stronger-than-expected US factory data for March dampened the rally in gold as the trading session progressed. The unexpected expansion in factory activity would have called into question the market’s expectation for the Fed to start cutting rates in June. We are likely to see further volatility in gold this week, particularly with the US jobs report scheduled for later this week. Gold remains in overbought territory and so there is certainly the potential for a pullback in the short term, particularly if we get a strong jobs report on Friday.
Meanwhile, ETF holdings in gold continue to not align with price action. ETF holdings continue to decline with them standing at around 82moz, down from 85.6moz at the start of the year. Over the same time period, spot gold prices are up around 9%. There is plenty of room for investors to buy the gold market, but maybe we need to wait for the Fed to actually start cutting rates before investors jump fully into the market.
Iron ore prices had a volatile session yesterday with prices falling to an intra-day low of US$95.2/t (the lowest since August 2023), only to settle above US$101/t as of yesterday. However, prices recovered most of the losses later in a volatile trading session yesterday. Iron ore prices are down more than 27% this year on the back of disappointing end-use demand along with ample supplies. Last week, the China Iron and Steel Association (CISA) noted that the depressed property sector and relatively weak infrastructure are delaying a recovery in steel demand. Meanwhile, the latest Steelhome data shows that Chinese iron ore port inventories rose by 1.6mt, with total stocks standing at 142.1mt as of 29 March, the highest since September 2022. Net inflows for March stood at 9mt as of last Friday, compared to net outflows of 5.7mt during the same time last year.
