There’s no President Reagan to break the air-traffic controllers’ union, no worldwide push to boost fossil-fuel production.  Quite the contrary: Interventionist politics, “energy transition” initiatives and labor shortages characterize the present-day policy agenda, along with nascent movements to “rearm, reshore and restock.”- ZP

Gold & Silver: Breaking Down ANZ's New Report

Contents:

1. The ANZ Report’s Key Points
2. Gold: A Precarious Balance
3. Silver: A Symphony in Harmony with Gold
4. Platinum: Unassuming
5. ANZ Technicals
6. GoldFix Comment

1- The ANZ Report’s Key Points

Authored by GoldFix ZH Edit

• A ‘Goldilocks’ scenario in the US has taken some sheen from gold in the short term.
• Our medium to long-term view on gold remains bullish as structural drivers are still in place.
• Technically, price is in a downtrend with key support lying near USD1900/oz. A break of this level could trigger a fresh sell-off.

Here is our writeup of their report

2- Gold: A Precarious Balance

The new ANZ Bank report starts off focusing on the US macroeconomic landscape; noting it casts a shadow on the gold market. A 'Goldilocks' scenario, embodied by an ideal equilibrium, potentially poses a short-term drag on gold.

Amidst the Federal Reserve's unwavering hawkish stance and the backdrop of easing inflation, the looming specter of higher real rates ( indeed they are already here, and yet Gold still remains buoyant) and renewed US dollar strength emerges as headwinds.

Beneath the surface, a more nuanced view emerges. The Fed, they think, approaches the twilight of this hiking cycle. We’re not so sure, but understand the logic. Even if they are, stocks are too high given where rates are and we’re afraid that has yet to work through the system.

The USD, ensnared in a structural downtrend, could be further weakened by the Bank of Japan's Yield Curve Control adjustment, bolstering their softer stance on the greenback.

We do not agree with the BOJ part of their assessment. We think ANZ is giving the BOJ too much credit. Meaning, they feel the BOJ tweaking the YCC higher in rate permissions will make the Yen strengthen as it is designed to do. That may be the plan, and ultimately the result; but almost always before that happens, weakness in the currency is the first reaction. Why? Because the market does not know whether to trust the CB or not at first.

Just yesterday we saw Argentina raise rates to 118% and the Peso weakened versus the USD. This is what happens when a market loses faith. Neither is the market happy so far with the BOJ tweak.

Weaker Peso versus the USD…

And we have certainly seen the Yen weaken substantively since their tweaking of the JGB rates as pictured above. So while ANZ analysis is sound, they may be giving too much credit to the BOJ for managing the global bond market’s jitters. The dollar is sronger following the BOJ move.. for now. Moving along…

 

Gold hanging in there despite Real rates positive...

Amidst these currents, central banks continue to assert their weight in the gold market. A notable 55 tons of gold were acquired collectively in June, a testament to their enduring appetite. China, ever at the forefront, stands as the year's largest buyer, accumulating a remarkable 125 tons till July. As China's consumer spending hopefully resurges, bolstered by an expected economic recovery in the latter half of 2023, the demand for gold is poised to regain its vitality. WE would note, China is not looking so good right now, but that can change quickly with their next stimulus efforts.

 

Gold leaving the West, headed East...

We would temper this by saying, while the first half of the year saw a massive buy-in by Central banks of Gold: The second quarter showed a marked slowdown. We think the buying will taper off up and into the August BRICS meeting. Afterwards, who knows. Watch the China situation for sure.

 

3- Silver: A Symphony in Harmony with Gold

Silver, often considered gold's symphonic counterpart, dances to a rhythm conducted by its golden partner according to ANZ. Amid a lackluster investment demand, silver's price plummeted to USD22.7/oz, swayed by gold's downward pressure. Yet, beneath the surface, silver's supportive fundamentals await their cue. As manufacturing activity rekindles in China and other developed markets, the stage is set for investment demand to once again grace the spotlight.

Industrial off-take, a record high at 580 million ounces in 2023, (Hello China!) orchestrates silver's rise. Solar installations emerge as a leading crescendo, propelling demand for silver. An impressive 250GW of solar capacity installed in 2022 preludes an anticipated encore of 350GW in 2023 according to the bank.