Gold has managed to finish a week’s worth of trading sessions above the key level of US$2,000/oz, and October futures are pointing to the precious metal trading above US$2,050. While the US dollar has had a slight spike over the past couple of days, it continued its month long downtrend overnight as US treasury yields stabilised and the market once again reassessed the future of the Fed’s rate hiking plans. 

The GDX is up 11% over the past month and has skyrocketed 50% across the past 6 months, as investors have flocked into the asset. A combination of portfolio restructuring to hedge against volatility, and gold producers margins drastically increasing has made the sector look a lot more attractive in recent months.

Reduction in mine development capex over the past decade has been largely led by gold, and existing infrastructure has become more valuable than ever. Producers’ hedging strategies are also being closely examined, as the recent run in gold has left some producers without enough exposure to the commodity’s price movements.

The ASX 200 has been trading well and is less than 3.5% away from it’s all time high on 20th April 2022. The RBA’s decision to take a wait and see approach for April’s interest rate decision was welcomed by the market, and while they have stated further hikes could be needed, the domestic economy is certainly towards the height of the cycle.

China’s economic growth in the first quarter of 2023 took the market by surprise, coming in at 0.5% above expectations at 4.5% year-on-year. 

The XJO has extended its rally to multi month highs, up over 2% in the last week. The index broke above the 50-day moving average but recently found resistance around 7364 on 17th April 2023. Futures continue to grind higher despite recent commentary by the RBA. The extended rally has seen volatility move even lower with the XJO currently with an IV Rank of 4. 

As mentioned previously the XJO has found resistance around the 7,364 level, we would look to see the index close above this level and move higher to see the rallyreally continue to February highs. If the index closes with lack of conviction we expect to see the index reverse lower and head towards support at the 50-day MA (7,238).

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Past performance is not a reliable indicator of future performance.

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