Commentary for Friday, Sept 6, 2024 (www.golddealer.com) – Today gold closed down $17.90 at $2493.50, and silver closed down $0.91 at $27.81. The bullish gold trade got a piece of good news from New York Fed President Williams this week: ‘It is now appropriate to dial down the degree of restrictiveness in the stance of policy’. And the Dollar Index has moved a full point lower since last Monday, another plus which should have helped gold. But today the price of gold weakened as surprised traders tried to figure out what just happened. It could be that “the lower interest rate scenario” was already dialed into current prices and something in the new jobs data muddied the waters. We now have a puzzling situation in which there is enough optimism for the bulls to claim that prices must move higher. And enough pessimism for the bears to anticipate even lower numbers. This is not exactly a mess if the bulls buy this weakness early next week, but it surely presents a red flag signaling caution. Last Friday gold closed at $2493.80 / silver at $28.73. On the week gold was down $0.30, and silver was down $0.92.
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On Monday the domestic markets, and Golddealer.com were closed for Labor Day.
On Tuesday the price of gold traded between $2505.00 and $2475.00, but traders bought the dip so that’s a plus. We are getting off to a slow start on this short week, likely because the Dollar Index moved a full point higher since Wednesday of last week, and bearish sentiment seems to be rising. Everyone is hedging their bets as to what the FOMC will have to say on the 17th and 18th of this month. My bet is that we will see something favoring the dovish side, perhaps a quarter point hike. This is favored by the oddsmakers. The half point hike may be too aggressive given the current state of the economy. But there is a bright spot out there for bullish sentiment. Central Bank gold purchases doubled in July according to the World Gold Council.
Reuters (Anushree Ashish Mukherjee) – Gold at over one-week low on firm dollar; US payrolls data awaited – “Gold prices eased to their lowest in more than a week on Tuesday, pressured by a firm dollar, while investors awaited U.S. non-farm payrolls data that could determine the size of the potential cut in the Federal Reserve’s September policy meeting. Spot gold fell 1% to $2,475.39 per ounce by 10:20 a.m. ET (1420 GMT). U.S. gold futures eased 0.9% to $2,505.80. The dollar hovered near a two-week high, making gold more expensive for other currency holders. “As long as the dollar moves higher, interest rates move higher, that’s not going to be good for commodities, however, the trend has still been up in gold,” said Daniel Pavilonis, senior market strategist at RJO Futures. “We’re just kind of hanging around the highs from the last few months, we’re still staying elevated, but I think at this point we just need to see more economic data that is coming out this week.” Focus will be on Friday’s U.S. payrolls report along with ISM surveys, JOLTS job openings and the ADP employment report due later this week. Markets are pricing in a 63% chance of a 25 basis point (bps) cut when the Fed meets on Sept. 17 and 18, with a 37% probability of a 50-bps cut, the CME FedWatch tool showed. “If the U.S. jobs report is significantly weaker, speculation about a U.S. recession and faster rate cuts will resurface, further supporting gold,” Commerzbank. Bullion is heading for its best year since 2020, driven by investor optimism about upcoming U.S. rate cuts and lingering concerns about the Middle East conflict. Gold “remains our preferred hedge against geopolitical and financial risks, with additional support from imminent Fed rate cuts and ongoing emerging market central bank buying. We open a long gold trade recommendation,” Goldman Sachs said. Spot silver dipped 2.7% to $27.74, platinum fell 2.8% to $904.00, and palladium lost over 4% to $933.75.”
On the day gold closed down $3.90 at $2489.90, and silver closed down $0.78 at $27.95.
On Wednesday the price of gold continued to move between $2475.00 and $2500.00 ignoring a dip in the Dollar Index and the drop in the number of jobs available for July. Both data points should have encouraged the bullish scenario because each suggests that the economy is weakening, which encourages a dovish reduction in interest rates. But the paper trade chose to ignore both, and gold managed to finish only slightly in the green by the end of the day.
FXEmpire (Christopher Lewis) – Gold Continues to Look Well Supported – “The gold market continues to see a lot of buyers willing to jump into the market and get long again. After all, this is a market that has a lot of reasons to continue going higher, and as a result, this is a market that will continue to go higher over the longer term. Technical Analysis – The gold market initially fell during the trading session on Wednesday, but really at this point in time, it does look like the $2,480 level is trying to do everything it can to hold up the market. And if it does in fact hold here, I think you’ve got a real shot at a potential long opportunity. I don’t necessarily think that the market is going to shoot straight up in the air, but I do think that we are basically killing a little bit of time here in order to sort out whether or not we have enough momentum going forward. I think there are plenty of reasons for gold to rally, not the least of which will be interest rates dropping and perhaps more importantly, geopolitical concerns. But the US dollar has been strengthening a little bit over the last 24 hours and it’s put a little bit of a drag into the gold market. Now they both can go higher at the same time, and I would fully anticipate that will be the case given enough time if we have some time of economic trouble ahead and I think we do. But we also have to keep in mind that gold is being bought by central banks around the world so that puts a little bit of a floor in it anyway. And then finally and probably the most obvious and important part of my analysis is that we are in an uptrend there’s no reason to think that’s going to change suddenly. Silver Continues to See Volatility – The silver market looks as if it is trying to find its floor, but at this point in time, it is also very noisy, and there are a lot of reasons this market could find even more volatility going forward. Technical Analysis – The silver market has gone back and forth during the trading session on Wednesday as we are trying to find the floor, but ultimately, we also have to keep in mind, this is a market that is going to be extraordinarily volatile. The market will continue to see a lot of questions asked about industrial demand. And if we turn around and break above the $28.50 level, then the market could go much higher. If we can break above there, then the market is likely to go looking to the $30 level. If we break down from here, then the 50 day EMA and the 200 day EMA squeezing this market could send it crashing through the 200 day EMA and looking to the $26.50 level. That’s an area that’s been extraordinarily supported. And if we were to drop to that area, it could set up a complex head and shoulders, but we’ll have to wait and see. In general, this is a market that I think continues to be very noisy and therefore I think volatile, but really at this point in time, it’s over and I think is going to be very difficult to trade. Above the $28.50 level though, I am willing to take a shot at a small position, perhaps aiming for that $30 target. This is an area that I think will be difficult to overcome, but if we did, the silver market would almost certainly continue much higher at this point in time. The market will remain one that you need to be cautious with.”
On the day gold closed up $3.50 at $2493.40, and silver closed up $0.22 at $28.17.
On Thursday the price of gold moved to daily highs rejecting a test to the downside which has been in the making since last Friday (Aug 30) when gold lost $31.90 closing at $2493.80. Today our shiny friend opened around $2495.00 and moved to daily highs ($2520.00), but in typical fashion the paper trade sold the rally. Still gold closed in the green and above $2500.00. Traders and investors continue to look for something more substantial from the Fed relative to interest rates. But if the expectation of lower interest rates remains on the front burner, bullish sentiment will continue to suggest further potential. The investor plus here is that even with higher interest rates (+5.00%) the price of gold is hovering around all-time highs.
FXEmpire (James Hyerczyk) – Gold Prices Supported by Rate-Cut Expectations and Weak Job Data – “Gold prices surged nearly 1% on Thursday, recovering from recent lows as buyers defended key support levels. After rebounding from Wednesday’s bottom of $2,471.91, gold recaptured the $2,501.31 pivot, positioning it close to the record high of $2,531.77. The rise in gold prices is driven by increasing expectations of a more aggressive U.S. Federal Reserve rate-cutting cycle, which traders anticipate could begin this month. At 11:22 GMT, XAU/USD is trading $2516.19, up $20.65 or +0.83%. Fed Rate Cuts Fuel Gold Demand – The primary driver of Thursday’s rally is the growing belief that the Federal Reserve will initiate a more substantial rate-cutting cycle due to signs of a slowing U.S. economy. Recent data, including Wednesday’s Job Openings and Labor Turnover Survey (JOLTS), showed job openings fell to a three-and-a-half-year low, raising concerns about the labor market’s strength. As a result, traders are now pricing in a 57% chance of a 25-basis-point rate cut and a 43% probability of a 50-basis-point cut for September, according to the CME FedWatch tool. Ole Hansen, head of commodity strategy at Saxo Bank, noted that the global economic slowdown has increased downside risks across growth-dependent commodities, adding further support for gold. As rate cuts lower bond yields, gold, which offers no yield, becomes more attractive to investors. ETF Buying Resumes as Treasury Yields Fall – The anticipation of a rate cut has also spurred renewed interest in physically-backed gold exchange-traded funds (ETFs). These funds had seen outflows in recent years as investors favored U.S. Treasury bonds, which offered higher yields. Now, with yields expected to drop, ETFs are once again increasing their gold holdings. Carsten Menke, an analyst at Julius Baer, highlighted that while the Fed’s potential rate cuts will keep interest rates in restrictive territory, above the neutral rate, this could limit a major wave of buying by Western gold investors. However, gold has still gained 22% year-to-date, marking its strongest performance since 2020. ADP Employment Data to Influence Fed’s Next Move – The next significant market mover will be the ADP Employment Change report, scheduled for release today. Economists expect private-sector job growth of 144,000 in August, which would surpass July’s figure of 122,000. The ADP report, along with Friday’s nonfarm payroll data, will provide further clarity on the labor market’s health. Any surprises could shift the Fed’s approach at its upcoming September 17-18 policy meeting. A stronger-than-expected ADP report might dampen expectations for a larger rate cut, while weaker data would likely fuel expectations for more aggressive easing. Treasury yields, already impacted by the weak JOLTS report, could see further volatility based on today’s ADP results. Gold Prices Forecast – Given the weakening labor market data and heightened expectations of Fed rate cuts, the short-term outlook for gold remains bullish. A deeper rate-cutting cycle would continue to support gold prices, especially if upcoming jobs data further confirm economic slowing. With central banks continuing to buy gold and safe-haven demand persisting, the metal is poised to challenge its record high of $2,531.77 in the near term. However, any unexpected strength in the labor market could limit upside momentum.”
On Thursday gold closed up $18.00 at $2511.40, and silver closed up $0.55 at $28.72.
On Friday gold finished this short week on a sour note dropping to session lows ($2485.00) and finishing the day in the red. The unemployment rate moved lower, as hourly wages moved higher so this mixed bag contained enough good news to at least support the price of gold today.
But no dice here, the bears roared, and the bulls moved to the sidelines. The bullish news from New York Federal Reserve President John Williams that now was the time for lower interest rates met a similar fate.
While this large drop in prices was unexpected, the specter of profit taking always surrounds this trade. Gold prices were higher by $123.00 this month and almost $600.00 higher year over year.
Still, this latest drop seems overdone considering the bigger picture. The notion that interest rates are trending lower continues to gain traction. And given time cheaper money will help the metals to move higher, supported by safe haven demand in a tenuous Middle East.
FXEmpire (Anushree Ashish Mukherjee) – Gold drops from near-record level as US jobs data blurs rate outlook – “Gold prices eased on Friday, retreating from near-record levels reached earlier, after mixed U.S. jobs data cast doubts on the scale of interest-rate cut from the Federal Reserve this month. Spot gold fell 0.3% to $2,509.35 per ounce by 10:21 a.m. ET (1421 GMT), having hit their highest since Aug. 20, when gold last scaled a record peak. U.S. gold futures eased 0.2% to $2,538.90. “The picture is muddy though as the unemployment rate retreated and average hourly earnings ticked up. This won’t give the market clarity on the size of September’s rate cut,” said Tai Wong, a New York-based independent metals trader. A Labor Department report showed non-farm payrolls rose by 142,000 in August, compared with estimates of 160,000, as per economists polled by Reuters. July numbers were also revised down to 89,000. However, the unemployment rate stood at 4.2%, in line with expectations, but down from 4.3% a month earlier. “Investors are now completely unsure whether the Fed will opt for 25 or 50 basis points rate cut. U.S. CPI next week is the last major release before the FOMC’s meeting on Sept. 18, and this may well be the deciding factor,” said Fawad Razaqzada, market analyst at Forex.com Following the data, the chances of a 25-basis-point (bp) reduction by the Fed this month came down to 59% from about 70% a week earlier, while those of a bigger 50-bp reduction rose to 41% from 30% last week, according to the CME FedWatch tool. Fed New York President John Williams said August hiring data was not a surprise given what he expects from the economy right now and lowering rates soon will be about helping keep the job market balanced. Elsewhere, spot silver fell 0.6% to $28.65. Platinum gained 0.5% to $929.00 while palladium fell 0.2% to $938.75.”
On the day gold closed down $17.90 at $2493.50, and silver closed down $0.91 at $27.81.
Platinum closed down $11.60 at $914.30, and palladium closed down $38.40 at $896.30.
Naeem Aslam (Kitco) – What is next for the gold price? “Today’s US NFP data has provided numerous insights for gold traders, and although they are still assimilating the full implications, it is quite reasonable to assert that reality has begun to set in. As the dust settles from the US NFP, gold traders are now wondering where the price will go and whether it makes sense to remain biased in light of the data we have seen today. On Friday, gold traders were extremely optimistic, anticipating a significant market reaction due to the significance of the US NFP data. They were correct in their assessment of the significance of this data, given its status as the planet’s most important economic data, which the Fed closely monitors. Before the data was released, traders had been shooting in the dark rather than paying attention to the real picture. Essentially, speculators had been focusing on key components of the US NFP data, such as the US ADP number, the US JOLTS number, and the US ISM manufacturing number. However, based on the results of these numbers, their expectations for the economic data were somewhat unrealistic. I am not suggesting that the US ADP, JOLTS, or even the revision to the US job data did not indicate weakness in the US job market, but rather that the context and interpretation of these numbers were not in line with reality. For example, the US unemployment rate, which fell in the early three handles during a very hot US labor market and then jumped all the way to 4.3% as of last month, was considered a weakness in the US market. Traders and investors began to view the situation differently, recognizing that the unemployment rate in the early three handles was not likely to persist. And the fact is that anything that is under the 4.5% handle actually represents full employment or at least a solid economy with a solid job market. So the Fed hasn’t made a policy mistake? Before the release of today’s US NFP data, there was apprehension that the Fed had committed yet another policy error, that the data would reveal further weakness, and that this would force the Fed to act more aggressively by cutting rates. But the fact that the actual number matched the expectations of 4.2% and the headline number of 142K wasn’t too far from the expectations confirmed that there is nothing wrong with the US job market or even with the Fed policy. Is the 20 basis points rate cut a done deal now? It would not be incorrect to believe that the Fed has no reason to adopt an aggressive monetary policy, and that a 25 basis point rate cut is the appropriate course of action. Speculators would have to adjust to reality, which means there may be some wind out of the current rally. Where Do We Go From Here? Speaking from a technical price point, the yellow metal’s price is well above the lows of the week, and reality is sinking in now. This means that the price is going to show some volatility, but the chances for it to close the week in negative territory are remote. As we progress towards the 18th of September, the key level to monitor is 2,500. Bears may attempt to push the price lower, given the strong gains in the gold price this year, but the overall trend may remain positive as speculators adjust to reality.”
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