Gold – A Fundamental Plus
Commentary for Friday, July 26, 2024 (www.golddealer.com) – Today gold closed up $28.10 at $2380.00, and silver closed up $0.05 at $27.86. For the first three days of this week the metals looked tired, but it would be an overstatement to claim that gold and silver were losing base support as Biden stepped aside and endorsed Kamala Harris. On Thursday, however, gold closed the day down a whopping $61.40. Silver was equally shaky, down $1.31. Today silver slept in, but gold climbed $40.00 in the early trade. A surprise move that shored up sagging bullish sentiment. The bulls were bushwacked yesterday but took the first step in regaining their mojo today. This “bounce” is only one piece of this puzzle, and gold did settle on the day, but it does suggest underlying strength and bargain hunting. Last Friday gold closed at $2395.50 / silver at $29.09. On the week gold was down $15.50 and silver was down $1.23.
Please note that FedEx is no longer asking for delivery signatures. They are scanning IDs. We have complained to FedEx, but they remain resolute. Scanned identification is safer, but if you have a problem with this decision, please make your feelings known to FedEx. Unfortunately, the present delivery time for the USPS alternative is 2-3 weeks.
Should you decide to use our Delayed Delivery Program please talk with your service rep and understand how this program works. It is handy if you want to lock in the price “now” and insist on a new product – but is not for everyone. Just like us – you must pay upfront to “lock in” prices and you can’t “change” your mind. So, unless God has blessed you with patience, please ask your rep for other options and thank you for understanding.
On Monday the price of gold was surprisingly steady after President Biden dropped out of the race and endorsed Kamala Harris. How this will work out is hard to say, but some believe her battle with Trump may be closer than expected. I’m very surprised that gold is quiet, after the big drop in prices last Friday and with only 105 days before the election. Are these not crazy times!
Reuters (Sherin Elizabeth Varghese) – Gold firms as dollar loses footing following Biden withdrawal – “Gold prices edged up on Monday as the dollar weakened in response to President Joe Biden’s decision to withdraw from the 2024 presidential race, while the market geared up for Friday’s U.S. personal consumption expenditures (PCE) data for further clues on the timing of interest rate cuts. Spot gold rose 0.2% to $2,404.95 per ounce, as of 1021 GMT, while U.S. gold futures gained 0.3% to $2,406.50. The dollar eased following Biden’s decision on Sunday to abandon his re-election bid, making bullion more attractive to buyers holding other currencies. The market is now awaiting U.S. gross domestic product data for the second quarter on Thursday, as well as the personal consumption expenditure (PCE) data on Friday. Investors will also focus on comments by Fed Chair Jerome Powell at the conclusion of the Fed’s July 30-31 meeting, with money markets fully pricing in a 25 bps Fed rate cut by September. “While we still see two rate cuts by the U.S. Fed, there is a likelihood of a July rate cut if data this week, like the PCE continues to show an economic slowdown,” UBS analyst Giovanni Staunovo said. “We still believe gold has further upside from current levels, (and) target a level of $2,600/oz by the end of the year.” Gold prices scaled an all-time high of $2,483.60 last week on increased chances of U.S. interest rate cuts this year. Lower interest rates reduce the opportunity cost of holding non-yielding bullion. “We have seen a substantial increase in speculative holdings in gold futures/options in recent weeks. There is, however, still room to see an increase in ETF holdings, which requires clarity on a rate cut by the US Fed in our view,” Staunovo added. Spot silver fell 0.6% to $29.09 after falling nearly 5% last week. Platinum slipped 0.8% to $955.23 while palladium rose 0.7% to $912.44.”
On the day gold closed down $3.50 at $2392.00, and silver closed up $0.03 at $29.12.
On Tuesday the price of gold moved above $2400.00 in what may be a welcomed bounce to the upside after testing support around $2385.00. This may not seem like much but is an important step in stabilizing the metals after the Biden withdrawal. For those of you trying to decide which is better for the bullish sentiment, a Democrat or Republican president, I would approach this latest speculation from the cautious side. Each side of these opposing political forces offer several confusing programs which may influence the price of the metals. A few months of patience will be necessary to sort this out before and after the election.
FXEmpire (James Hyerczyk) – Gold Forecast: Key US Data Eyed as Prices Climb – “Gold prices increased on Tuesday, driven by a declining dollar and weakening Treasury yields. Investors are closely watching upcoming US economic data for clues about the Federal Reserve’s interest rate cut timeline. At 10:15 GMT, XAU/USD is trading $2407.80, up $11.38 or +0.47%. Key Economic Indicators – Traders are focusing on Thursday’s second-quarter GDP report and Friday’s June personal consumption expenditures (PCE) data. These reports are expected to provide insights into future monetary policy decisions by the Federal Reserve. The PCE index, the Fed’s preferred inflation gauge, could significantly influence guidance issued at next week’s Fed meeting. While no rate cut is expected, markets anticipate clues about potential future monetary policy easing. Market Expectations – Traders currently price in a high probability of the first interest rate cut occurring in September. However, uncertainty persists regarding additional cuts this year. Fed Chairman Jerome Powell recently suggested the central bank might not wait for inflation to reach 2% before cutting rates. This statement has further fueled market speculation about the timing and frequency of potential rate cuts. Goldman Sachs Bullish on Gold – Goldman Sachs maintains a bullish outlook on gold, citing potential Fed rate cuts and strong Chinese demand as key drivers. The bank forecasts gold prices to reach $2,700 by 2025, a 12% increase from current levels. China’s central bank has been aggressively purchasing gold, driven by concerns about US financial sanctions and sovereign debt sustainability. This trend, combined with structural changes in the Chinese market, is creating what Goldman Sachs describes as an “unshakeable bull market” for gold in China. Market Forecast – The short-term outlook for gold appears bullish. The combination of a weakening dollar, falling Treasury yields, and anticipation of potential Fed rate cuts creates a favorable environment for gold prices. However, traders should remain vigilant, as upcoming economic data could introduce volatility in the precious metals market. Technical Analysis – “XAU/USD is edging higher on Tuesday, trying to break a four-day losing streak. Traders are also trying to bounce back from last week’s potentially bearish closing price reversal top. The short-term range is $2286.83 to $2483.74. The price action the past two sessions indicates traders are trying to establish support on its pivot at $2385.28. A failure to hold this level won’t be a disaster with the 50-day moving average at $2360.69 coming in right under it. Crossing to the weakside of the MA could trigger a steep break into the June 7 bottom at $2286.83. On the upside, a pivot at $2433.84 is the initial target.”
On the day gold closed up $12.60 at $2404.60, and silver closed up $0.01 at $29.13.
On Wednesday as the dollar weakened the price of gold moved initially higher ($2430.00) but this run quickly ran out of gas, as gold finished the day mildly in the green, and the aftermarket trade pushed to new recent lows ($2395.00), which is a darkening cloud, considering the CME FedWatch Tool anticipates a 100% chance of an interest rate cut by September.
India’s decision to lower import taxes on both gold and silver will also support world demand for gold between now and the election. With such assurances gold should move towards $2500.00. Yet the phones are quiet, and the element of anticipation seems to be missing.
Perhaps traders are approaching this trade from the cautionary side. If the Fed does not lower rates as expected profit taking becomes a consideration, underlined by the fact that gold is $75.00 higher this past month and $450.00 higher year over year. With increasing talk that gold and silver prices are overbought you may be seeing the first step in further settling.
Reuters (Rahul Paswan) – Gold rises on softer dollar, traders eye more US data – “Gold prices rose on Wednesday as the dollar slipped with investors’ focus shifting to U.S. economic data due this week for fresh signals on the timing of the central bank’s interest rate cuts. Spot gold was up 0.7% at $2,425.28 per ounce, as of 1349 GMT. U.S. gold futures gained 0.8% to $2,426.60. “A weaker U.S. dollar index, lower U.S. stock index prices, and higher crude oil prices,” are supporting buying interest for both gold and silver, said Jim Wyckoff, senior market analyst at Kitco Metals. The dollar index was down 0.2%. A weaker dollar makes bullion more attractive to buyers holding other currencies. The tech-heavy Nasdaq took the biggest hit in a weak open for Wall Street on Wednesday. Investors are looking forward to a U.S. report on gross domestic product for the second quarter on Thursday and personal consumption expenditures data for June on Friday for clues on the Federal Reserve’s interest rate cut path. “The main thing helping gold right now is market expectations that the Fed may actually decide to cut earlier than September,” said Chris Gaffney, president of world markets at EverBank. “Also, India cutting the import taxes on gold and silver also helps as that’s going to increase demand,” Gaffney added. Markets are anticipating a 100% chance of a rate cut by the central bank in September, according to the CME FedWatch Tool. Lower interest rates reduce the opportunity cost of holding non-yielding gold. India slashed import duties on gold and silver to 6% from 15%. Investors are also closely watching developments in the U.S. election campaign, as Vice President Kamala Harris is expected to be the Democratic Party’s candidate to face Republican Donald Trump. Spot silver rose 0.5% to $29.36 per ounce, platinum rose 1.8% at $959.88 and palladium added 1.7% to $941.50.”
On the day gold closed up $8.70 at $2413.30, and silver closed down $0.01 at $29.12.
On Thursday the bulls frowned as gold was caught in a profit taking downdraft that pushed prices to recent lows of $2350.00. The most recent Gross Domestic Product data came in much better than expected at 2.8% which throws a wet blanket on the expectation that the Federal Reserve will reduce interest rates next week. Still there are cross currents which support gold at these lower levels like China’s recent cut in interest rates. Today’s drop, however, was large enough to create further downside anxiety for bullish sentiment. Investors and traders will carefully consider Friday’s PCE (Personal Consumption Expenditures), an inflation measure the Federal Reserve watches carefully. But insiders expect little change in the numbers. I would expect gold to steady at these levels into the weekend. Professionals will look to see if lower prices create bargain hunting (my person “go to” case). If so, this market will steady. If there is no bargain hunting, this market could become unstable and oversold creating bounce back sentiment and encouragement in the physical market. In either case expect volatility.
Reuters (Sherin Elizbeth Varghese) – Gold drops over 1% as investors book profits; focus on US data – “Gold slid over 1% on Thursday, falling to its lowest level in two weeks, as investors squared positions to focus on U.S. economic data that could offer additional insights into the timing of the Federal Reserve’s potential interest rate cuts. Spot gold fell 1.2% to $2,369.29 per ounce by 1302 GMT, having touched its lowest since July 10. U.S. gold futures dropped 1.9% to $2,368.80. “Much like the pivot we are witnessing in the stock market, market participants may be shifting from gold to other areas…while profit-taking may also be playing a role,” said Zain Vawda, market analyst at MarketPulse by OANDA. Stock markets were locked in a multi-trillion-dollar tailspin on Thursday due to a slump in global tech stocks. “I think from an institutional perspective the profit-taking could be attributed to repositioning and reallocations to other sectors. A significant correction has been long overdue,” Vawda added. The markets are awaiting the personal consumption expenditure (PCE) data on Friday to calibrate their expectations of the timing of rate cuts by the Fed. Markets see a 100% chance of a rate cut in September, according to the CME FedWatch Tool. Non-yielding bullion’s appeal tends to shine in a low-interest rate environment. Meanwhile, on the physical front, JP Morgan said “while softer Chinese demand remains a risk, we think one of the most important elements of physical demand in the gold market is its price responsiveness to dips, essentially acting as a trailing price floor in gold.” Spot silver shed 4.8% to $27.6 per ounce on the day, hitting an 11-week low. “We are observing a strong decline in silver and the platinum group metals (PGMs), which seems to be largely influenced by the weakness in certain equity markets spilling over into the industrial metals sector,” said Quantitative Commodity Research analyst Peter Fertig. Platinum eased 1.5% to $933.68, near a three-month low, and palladium slipped 2.9% to $905.32.”
On the day gold closed down $61.40 at $2351.90, and silver closed down $1.31 at $27.81.
On Friday the price of gold closed higher on bargain hunting, which is a step in the right direction. But my feeling is that both gold and silver have topped out in the short term unless the technical picture turns very bullish. Still the bullish cup is more than half full for the optimist who views the world with a cynical eye. Safe haven demand will underpin the price of gold in this violent world. And silver already has an established home within the “green movement”.
But the fact is that the Federal Reserve cannot live with high interest rates indefinitely. Sooner or later the FOMC will begin to lower rates to keep our economy away from recession. And at that time, you will likely see a trend of higher prices in both gold and silver.
In the meantime, consider these goals. The first goal is to purchase bullion on a regular basis regardless of price. The second and probably the more important goal of the two is to find safe storage outside the banking system. Now don’t get me wrong, I do not believe that our monetary system is unsafe, but it is unattended. And it does not matter whether the next president is a Democrat or Republican. The safe approach to this potential economic danger is to develop an “off the radar” savings program in case no one notices the next Black Swan. Not having all your eggs in one basket makes the most sense in these troubled times.
Reuters (Rahul Paswan and Brijesh Patel) – Gold rises as yields slip after US data lifts rate-cut hopes – “Gold prices rose 1% on Friday, supported by lower U.S. Treasury yields amid growing optimism for an interest rate cut by the Federal Reserve in September after data showed U.S. prices rose modestly in June. Spot gold was up about 1% to $2,386.99 per ounce by 10:17 a.m. ET (1417 GMT), after hitting its lowest since July 9 on Thursday. U.S. gold futures for August delivery rose 1.4% to $2,386. “Today’s mixed-to-weaker U.S. data suggests inflationary pressures and economic activity are waning, paving the way for the Fed to cut rates twice this year,” said Fawad Razaqzada, market analyst at Forex.com. Fed policymakers on Friday got fresh evidence of progress on their battle against inflation, fueling expectations they will use their meeting next week to signal interest-rate cuts starting in September. Lower interest rates reduce the opportunity cost of holding non-yielding bullion. The personal consumption expenditures (PCE) price index nudged up 0.1% last month after being unchanged in May, the U.S. Commerce Department’s Bureau of Economic Analysis said. Following the data, benchmark 10-year note yields fell to a one-week low. Meanwhile, physical demand in India, the second-largest consumer, received a boost as the country slashed import duties on gold and silver earlier this week. Gold premiums in India jumped to their highest level in a decade this week as well. Spot silver fell 0.6% to $27.80 per ounce on Friday, tracking its worse week since early December. Platinum was up 0.1% at $931.83, while palladium lost 1.1% to $897. Silver, platinum and palladium were headed for their third straight weekly fall.”
On the day gold closed up $28.10 at $2380.00, and silver closed up $0.05 at $27.86.
Platinum closed down $0.80 at $934.10, and palladium closed down $9.10 at $884.90.
Jim Wycoff (Kitco) – “Technically, August gold bulls still have the overall near-term technical advantage but are fading. Bulls’ next upside price objective is to produce a close above solid resistance at the record high of $2,488.40. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $2,300.00. First resistance is seen at $2,385.00 and then at $2,400.00. First support is seen at the overnight low of $2,362.00 and then at $2,350.00. September silver futures bears have gained the overall near-term technical advantage. Prices are now trending down on the daily bar chart. Silver bulls’ next upside price objective is closing prices above solid technical resistance at this week’s high of $29.63. The next downside price objective for the bears is closing prices below solid support at the May low of $26.55. First resistance is seen at $28.00 and then at $28.50. Next support is seen at $27.50 and then at $27.00.”
Brothers and Sisters, thank you for your friendship. If you have unusual circumstances, need cash or a special favor – talk to Harry or Eric or Ken Slater. We are now back to our traditional business model. Thank you for your patience. Blessings. Richard Schwary
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