Gold – A Choppy Week
Commentary for Friday, June 28, 2024 (www.golddealer.com) – Today gold closed up $3.20 at $2327.70, and silver closed up $0.32 at $29.24. It has been another one of those choppy weeks, with plenty of noise from both sides of the aisle. But all in all, gold is still holding ground above the $2300.00 support and silver is not exactly falling out of bed. Considering that the technical picture for both gold and silver has turned to the bearish side, I would call this rather quiet Friday close a win for the bulls. A win which will create breathing room next week. Last Friday gold closed at $2316.40 / silver at $29.57. On the week gold was higher by $11.30 and silver was down $0.33. Spreads are tight enough to suggest a stable market short term.
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On Monday the price of gold dipped in the early trade touching $2324.00 and then reversed direction and moved to session highs of $2332.00, so we are off to the races in typical fashion as the bulls and bears continue to fight for the middle ground. It would appear the lack of fresh news is not helping either the bulls or the bears. The fear of higher interest rates hurts the bullish scenario, so the pros are looking for a market which continues to churn at the higher end of its current pricing range for both gold and silver. I would say that last week was not a barn burner for the physical market although the public was relatively active, and the oddsmakers are betting on higher gold and silver prices before year end which provides some bullish encouragement.
FXEmpire (James Hyerczyk) – “The Personal Consumption Expenditures (PCE) data, the Fed’s preferred inflation measure, is scheduled for release on Friday. Additionally, speeches from at least five Fed officials, including San Francisco Fed President Mary Daly and Fed Governors Lisa Cook and Michelle Bowman, are expected to provide further insights into the Fed’s policy direction. According to the CME FedWatch Tool, traders are pricing in a 66% chance of a rate cut by the Federal Reserve in September. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, which is beneficial for its price. Despite U.S. business activity reaching a 26-month high in June, price pressures have significantly decreased, indicating potential economic slowdown.”
Reuters (Brijesh Patel) – Gold gains on dollar retreat, focus on US inflation data – “Gold prices rose on Monday, helped by a pullback in the dollar, while investors looked forward to U.S. inflation data due later this week that could offer more clarity on the Federal Reserve’s monetary policy. Spot gold was up 0.3% to $2,327.81 per ounce as of 10:01 a.m. ET (1401 GMT). U.S. gold futures rose 0.4% to $2,340.80. The dollar fell 0.5% against its rivals, making gold attractive for other currency holders. Gold is in consolidation mode here and we see active buying on dips. Traders are looking for the trajectory of interest rates moving forward and the timing of those potential rate cuts, said David Meger, director of alternative investments and trading at High Ridge Futures. Focus this week will on the U.S. Personal Consumption Expenditures (PCE) data, the Fed’s preferred measure of inflation, which is due on Friday. Also on the radar, at least five Fed officials will speak this week, including San Francisco Fed President Mary Daly, Fed Governors Lisa Cook, and Michelle Bowman. Traders are currently pricing in a 66% chance of a Fed rate cut in September, according to CME FedWatch Tool. “We believe gold can hit $3,000/oz over the next 12-18 months, although flows do not justify that price level right now,” BofA said in a research note. “Achieving this would require non-commercial demand to pick up from current levels, which in turn needs a Fed rate cut to happen. An inflow into physically backed ETFs and a pick-up in LBMA clearing volumes would be an encouraging first signal.” Lower rates reduce the opportunity cost of holding bullion. Elsewhere, spot silver rose 0.3% to $29.60 per ounce and platinum gained 1.1% to $1,003.07. Palladium climbed 6.3% to $1,008.32. In the previous session, prices hit a one-month high and breaking above the key level of $1,000 per troy ounce in volatile trade as some investors covered their short positions and the market was tight for nearby physical supply.”
On the day gold closed up $13.60 at $2330.00, and silver closed down $0.08 at $29.49.
On Tuesday gold pricing continued to move within a very tight $18.00 range, finishing the day mildly in the red. It initially rallied ($2336.00) to session highs and dipped to session lows $2318.00. Insiders believe that this back and forth action will continue through the week unless there is something amiss in the fresh economic data.
The first quarter GDP will be out on Thursday and the Personal Consumer Expenditures, which is a measure of consumer spending on goods and services among households in the US will be out on Friday. Our trading desk is steady, buyers and sellers split with the most popular bullion gold coin being the US 1 oz Eagle. There is also fresh interest in sealed monster boxes (500 coins) of the 1 oz US Silver Eagle. The public, I believe, is still focused on the longer term.
Reuters (Polina Devitt) – Gold slides as investors await more clarity on US rate path – “Gold prices fell on Tuesday as investors awaited the U.S. inflation data due later this week to gain more certainty on the timing of future U.S. rate cuts, while a weaker Chinese currency supported demand in Asia. Spot gold was down 0.3% at $2,326.24 per ounce by 1247 GMT. The non-yielding bullion is down 4.7% from a record high of $2,449.89 touched on May 20 amid a rally which happened against traditional headwinds such as a strong dollar and high interest rates. “Gold has de-coupled from its traditional drivers just now and the prices are driven by sentiment in China amongst new players who are taking highly leveraged positions,” said independent analyst Ross Norman. “The problem for them is they have driven prices above where most others see the fair value price of gold. So it is yo-yo’ing in a trading range on relatively light volumes with modest participation from US and European investors.” In China, yuan hit its weakest since mid-November against the dollar on Tuesday, supporting demand for gold from local investors looking for a currency depreciation hedge. The yuan is set for its sixth straight monthly decline in June. “Whether the West adjusts its perception of the fair value price of gold upwards and participates more fully, or the East lowers its expectations for prices downwards as gravity takes hold is the key question”. In the West, traders were waiting for the U.S. first-quarter gross domestic product (GDP) estimates due on Thursday and the personal consumption expenditures (PCE) price index report on Friday. “The upside price potential for gold is limited in the short term, as the first interest rate cut in the US is expected to take place at the end of the year,” Commerzbank. Meanwhile, global physically-backed gold exchange-traded funds (ETFs), a crucial category of demand, saw inflows last week of $212 million, or 2.1 metric tons, according to the World Gold Council. It estimates the net outflows since the start of 2024 at $7.3 billion.”
On the day gold closed down $13.40 at $2316.60, and silver closed down $0.65 at $28.84.
On Wednesday the price of gold held up in the early trade but finally dipped below the psychologically important $2300.00 support and finished the day in the red. This must be disappointing to the bulls, but I still believe that there is not as much downside here as some might have you believe because the world geopolitical situation is unsettling. The relationship between Russia, China, Iran, and Israel is unstable. Still, higher interest rates continue to “grind” on the price of gold and lower prices in the short term are becoming more of a possibility.
Reuters (Harshit Verma) – Gold falls near two-week low as dollar strengthens – “Gold prices fell to their lowest in nearly two weeks on Wednesday as the dollar firmed, while investors awaited a report on the Federal Reserve’s preferred inflation gauge due later this week for the latest clues on the central bank’s rate cut prospects. Spot gold fell 0.5% to $2,308.00 per ounce by 1059 GMT, hitting its lowest since June 14. U.S. gold futures also fell 0.5% to $2,319.50. “Gold flashed red on Wednesday thanks to hawkish comments from a Fed official in the previous session and a stronger dollar,” said FXTM senior research analyst Lukman Otunuga. Fed Governor Michelle Bowman on Tuesday reiterated her view that holding the policy rate steady “for some time” will probably be enough to bring inflation under control, but also repeated her willingness to raise borrowing costs if needed. Higher interest rates increase the opportunity cost of holding non-yielding bullion. The dollar rose 0.3% against its rivals, making gold more expensive for other currency holders, while benchmark 10-year yields also edged higher. “This could be a wild week for gold due to economic and political forces. The Biden Vs. Trump face off and PCE report could inject the precious metal with renewed volatility. In the near term, support can be found at $2300 and resistance at $2340,” said Otunuga. Investors will be watching out for the U.S. first-quarter gross domestic product estimates and a crucial debate between U.S. President Joe Biden and Republican rival Donald Trump on Thursday, and the personal consumption expenditures (PCE) price index report on Friday.”
On the day gold closed down $17.40 at $2299.20, and silver closed up $0.07 at $28.91.
On Thursday the price of gold moved higher on the open, touching $2325.00, which is a bit surprising considering the reasonable dip we saw in prices yesterday. The dollar was somewhat weaker as the Dollar Index moved from 106.00 to 105.80, welcomed by the bulls but not a large enough push to create this latest bounce to the upside. It may be that insiders believe that gold support is not going away anytime soon, despite higher interest rates.
I can’t get my head around higher gold prices and higher interest rates, at least on the short term. But today’s nice bounce is significant – a plus for the gold bulls. If the $2300.00 support level eventually gives way, traders may gain insight, especially if the drop is not significant – a real possibility, and another plus for the bulls. All of this to say that the price of gold may have stabilized at this two week low, a third plus for the bulls. So bullish sentiment seems to be firming up, perhaps the public believes the inflation genie is already out of the bottle.
Reuters (Daksh Grover) – Gold rises as traders brace for US inflation report – “Gold prices rose on Thursday as the dollar softened, with the market spotlight on key U.S. inflation data that could offer cues on the Federal Reserve’s next interest rate move. Spot gold was up 0.7% at $2,314.22 per ounce, as of 1127 GMT, after falling on Wednesday to its lowest level since June 10. U.S. gold futures were 0.5% higher at $2,324.60. The dollar index weakened 0.2% after hitting a nearly two-month high in the previous session. A weaker dollar makes gold more attractive for other currency holders. U.S. gold futures were 0.5% higher at $2,324.60. “Gold is finding support from a moderating U.S. dollar, with traders also aware that dips below $2,300 since April have so far proven short-lived,” said Han Tan, chief market analyst at Exinity Group. “If the prospects for Federal Reserve rate cuts by end-2024 are further diluted, gold bulls may ultimately relinquish their bid to sustain bullion above the psychological $2,300 level.” Traders are currently pricing in about a 62% chance of a rate cut in September, according to CME FedWatch Tool. Lower interest rates reduce the opportunity cost of holding non-yielding bullion. Fed Governor Michelle Bowman reiterated on Wednesday her view that “inflation will decline further with the policy rate held steady.” Data lined up for the week includes U.S. first-quarter gross domestic product estimates, and the personal consumption expenditures (PCE) inflation data on Friday. “Gold prices remain tangled in a tug of war between a less-dovish Fed and high levels of geopolitical tension,” analysts at BMI said in a note dated Wednesday. In the Middle East, cross-border strains between Israel and Lebanon’s Hezbollah have been escalating in recent weeks, stoking fears of an Israel-Hezbollah war that could draw in other regional powers.”
On the day gold closed up $25.30 at $2324.50, and silver closed up $0.01 at $28.92.
On Friday the price of gold moved between $2324.00 and $2338.00, finishing the day only mildly in the green, after a rough week of volatile pricing. Still, there seems to be a bit of stability around existing support for both gold and silver.
Across our trading desk the volume numbers remain solid, even with this week’s back and forth days of decision. Which might suggest the public is beginning to ignore rate hike speculation.
Reuters (Rahul Paswan) – Gold gleams on rate cut hopes after inflation data, en route quarterly gain – “Gold prices steadied on Friday and were headed for a third straight quarterly gain after a key U.S. inflation report came broadly in line with expectations, boosting hopes that the Federal Reserve may cut interest rates by September. Spot gold was steady at $2,328.29 per ounce, as of 1558 GMT. Prices have gained over 4% for the quarter. “We are continuing on trend in a very incremental slow pullback of inflation. As a result, we’ve seen yields continue to creep lower, bonds creep higher and that is somewhat supportive for the gold market,” said David Meger, director of alternative investments and trading at High Ridge Futures. Gold was also supported by a decline in the U.S. Treasury yields, which makes the non-yielding bullion more attractive for investors. On Friday, market bets rose on hopes that the Federal Reserve will cut interest rates by September and do so again in December after a government report showed inflation by the personal consumption expenditures index (PCE) did not rise at all from April to May. PCE last month followed an unrevised 0.3% gain in April data, while consumer spending rose moderately. Traders are currently pricing in about a 68% chance of a rate cut in September, compared with 64% before the release of the inflation data, according to CME FedWatch tool.
San Francisco Federal Reserve Bank President Mary Daly – also a member of the 2024 Federal Open Market Committee – said the latest data showing inflation did not rise at all from April to May is “good news that policy is working.” “The price of gold has been trading in a fairly tight range and will probably hold this range until the FOMC confirms they will be cutting rates,” said Chris Gaffney, president of world markets at EverBank. Elsewhere, spot silver rose 0.7% to $29.27 and platinum gained 1.1% to $998.65. Both metals were set for quarterly gains. Spot palladium rose over 5% to $978.50, but was headed for a third straight quarterly drop.
On the day gold closed up $3.20 at $2327.70, and silver closed up $0.32 at $29.24.
Platinum closed up $10.20 at $1001.90, and palladium closed up $50.30 at $977.90.
Jim Wycoff (Kitco) – “Technically, August gold futures prices hit a 3.5-month low today. Bears have the overall near-term technical advantage. Prices are in a seven-week-old downtrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at $2,000.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,900.00. First resistance is seen at $1,930.00 and then at this week’s high of $1,943.40. First support is seen at today’s low of 1,911.40 and then at $1,900.00. July silver futures bears have the overall near-term technical advantage. A choppy, seven-week-old price downtrend is in place on the daily bar chart. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $24.00. The next downside price objective for the bears is closing prices below solid support at $21.00. First resistance is seen at this week’s high of $23.15 and then at $23.50. Next support is seen at this week’s low of $22.435 and then at the June low of $22.14.”
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