Gold – Another Amazing Week
Commentary for Friday, April 5, 2024 – Today gold closed up $36.90 at $2325.70, and silver closed up $0.26 at $27.40. The price of gold soared four of the five days this week making new highs on Friday. This jump has caught everyone by surprise because the price of gold faded on Thursday of this week as traders tested recent highs and found momentum and enthusiasm lacking. The jump in gold prices today may have been the result of comments by Fed’s Barkin: “That’s a quite strong jobs report” (Reuters). Still there are some who believe this market requires caution because recent gains have been based on the possibility of lower interest rates sometime this year. If the Fed turns hawkish, for whatever reason, the price of gold will pay the price. Being over-cautious here is a mistake because it is increasingly clear that higher prices for gold are becoming the norm. And they could easily move higher in a world of rising debt and geo-political tension. Last Thursday gold closed at $2217.40 / silver at $24.80 (Closed Good Friday) on the week gold was higher by $108.30 and silver was higher by $2.60.
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On Monday the price of gold moved above $2260.00 on the open but the rally was sold, and gold turned choppy settling around $2230.00 reacting to mild inflation numbers even as the Dollar Index moved to 105.00 which were highs on the week. So, there are the usual crosswinds holding the price of gold in check but at the same time the bulls continue smiling as gold holds solid ground at the upper end of this latest run and managed to finish this day in the green. The commentary about higher prices in gold is almost universally bullish this morning. The hedge funds and central banks are buying, the public is buying, other countries are buying. All this happiness should be enjoyed with a bit of caution. The price of gold is higher by $130.00 this past month and $250.00 year over year. All of this is pinned in place because traders expect lower interest rates. If the Fed again turns hawkish it could be a rough ride. That being said this market remains optimistic and there are reasons to expect even higher prices in the longer term.
Reuters (Anjana Anil) – Gold pares gains as higher US dollar, bond yields weigh – “Gold prices pared gains on Monday as the dollar and bond yields rose, after the bullion surged to a fresh record high on growing expectation that the Federal Reserve could deliver first interest rate cut in June. Spot gold was up 0.2% at $2,236.55 per ounce as of 10:15 a.m. EDT (1415 GMT) after hitting an all-time high of $2,265.49 earlier in the session. U.S. gold futures climbed 0.8% to $2,256.90. “The view out there is that the Fed will likely start cutting rates significantly before the time we reach the 2% (inflation) target based on what we’ve seen on the PCE data,” said Bart Melek, head of commodity strategies at TD Securities. Data on Friday showed U.S. prices moderated in February, keeping a June interest rate cut from the Fed on the table. Fed Chair Jerome Powell said February’s inflation data was “more along the lines of what we want to see.” Gold tends to gain when interest rates are low, which reduces the opportunity cost of holding non-yielding bullion. Traders are currently pricing in around 63% chance that the U.S. central bank will be cutting rates in June, according to CME FedWatch tool. However, the dollar rose 0.4% to a more than six-week peak against rivals, making gold more expensive for other currency holders, while yields on 10-year Treasury notes also climbed. “(Fed officials) will probably caution the market that they don’t necessarily have to get aggressive on cuts. There’s no guarantee that the U.S. Central bank will start cutting rates, and I think they’ll make that quite apparent and that may cause some reversals here,” Melek added. Bullion prices have also hit record highs in other currencies, including the euro, the yuan, Japanese Yen, Indian rupee and the British pound sterling.”
On the day gold closed up $19.10 at $2236.50, and silver closed up $0.15 at $24.95.
On Tuesday the price of gold continued higher, reaching another record close ($2261.00) and seemed to have plenty of gas in the tank, closing up another $20.00 in the aftermarket. Unlike yesterday the dollar was mildly weaker, which supported this push to higher ground as gold finished a second day this week nicely in the green. Which is extraordinary when you consider that higher gold prices have stymied the important physical demand in India. These higher prices are also the result of a momentum play created by a strong technical picture. And increased safe haven demand as aggressive Israeli air strikes in Gaza escalate Middle East tension.
Reuters (Polina Devitt) – Gold hits fresh record high with support from momentum-following funds – “Gold prices rose to a fresh record high on Tuesday as demand from momentum-following funds offset a strong U.S. dollar and the possibility of higher-for-longer U.S. rates. Spot gold was up 0.5% to $2,262.51 per ounce by 1055 GMT, after hitting an all-time high of $2,266.59. The bullion has been hitting fresh record highs for three sessions in a row. “An underlying bid from retail and central banks is being joined by momentum-following speculators who have extended their already elevated longs following the break above $2,200,” said Ole Hansen at Saxo Bank. “In addition, there is no doubt that geopolitical tensions have added an additional layer of support.” The bullion rose by 9.3% in March, which was its biggest monthly growth since July 2020, amid persistent safe-haven demand and central bank purchases. China’s central bank has been adding gold to its reserves for 16 months in a row. Gold kept rising on Tuesday despite a strong U.S. dollar after Monday’s data showed U.S. manufacturing grew for the first time in 1-1/2 years in March. Traders pared bets of a June interest rate cut to 56% after the data, according to the CME Group’s FedWatch Tool. “What makes the gold rally so unusual is that is occurring despite significant traditional headwinds with the U.S. dollar rising, treasury yields rising, the likelihood of higher for longer U.S. rates increasing,” said independent analyst Ross Norman. “Furthermore, we are moving into a slack period for seasonal demand. You could not imagine a more inauspicious backdrop.” Amid high prices, European physical investors are selling metal wholesale back to their dealers and Indian demand has cratered, he added. Meanwhile, support from gold extended to other precious metals. Spot silver rose 2.3% to $25.66 per ounce, platinum added 1.8% to $918.10 and palladium climbed 3.0% to $1,026.”
On the day gold closed up $24.50 at $2261.00, and silver closed up $0.85 at $25.80.
On Wednesday the price of gold again confounded the experts as it flirted with $2300.00! Encouraged by a weaker dollar and continued worries on the geopolitical front. I think however this latest push to record highs in gold needs a bit of time to at least consolidate, if not weaken given that analysts are talking about the “too much, too soon” scenario. And with gold higher by $175.00 this past month a round of profit taking may be in the offing. Still, geopolitical concerns underpin recent price gains. Chief Powell’s comments today did not change the policy line as the Fed wants lower inflation numbers before easing interest rates sometime this year. So, the FOMC leaves the door open to options depending on how the economy settles. And while expectations of lower interest rates takes center stage, higher gold remains in the cards. A great short squeeze pop in silver today up $1.15! Higher prices expected with this break to the upside!
Reuters (Brijesh Patel) – Gold hits pause after record run on safe-haven inflows – “Gold took a breather after notching another record high on Wednesday as growing tensions in the Middle East and U.S. interest rate cut hopes continued to push investors to the safe-haven asset. Spot gold was down 0.3% at $2,272.79 per ounce, as of 1211 GMT after hitting a record high of $2,288.09 earlier in the session. Analysts attributed the slight pullback to an uptick in U.S. yields. “The most important factor pushing gold prices higher is the bullish market mood… the narrative seems to center very strongly around central bank buying,” said Julius Baer analyst Carsten Menke. “We remain rather cautious on gold and believe there is more downside than upside to prices from current levels. That said, we also acknowledge that near-term price risks are skewed to the upside, considering the bullish market mood.” Strong central bank buying and safe-haven inflows amid escalating geopolitical risks have fueled the 10% gain in bullion so far this year. “It seems as if gold turns every market development into a price increase,” said Alexander Zumpfe, a precious metals trader at Heraeus. Federal Reserve policymakers on Tuesday said they think it would be “reasonable” to cut U.S. rates three times this year, even as stronger economic data recently has sown doubts about that outcome. “The U.S. economy is surprising with its strong performance, which would make a first interest rate cut in June less likely and thus weigh on the gold price – but the precious metal is holding its value,” Zumpfe said. Investors now await remarks from Fed Chair Jerome Powell later in the day for clues on when the central bank will deliver its first rate cut. Gold tends to gain when interest rates are low, which reduces the opportunity cost of holding the non-yielding bullion.”
On the day gold closed up $33.40 at $2294.40, and silver closed up $1.15 at $26.95.
On Thursday gold was again choppy, moving between $2297.00 and $2282.00, seeing some light technical selling but still closing only mildly in the red. Today’s trade was really a test of possible higher highs in both gold and silver. A test which did not gather much enthusiasm for either metal considering the fireworks earlier in the week. Expect a settling in prices as traders look to next week for information which will create enough buzz to tip this balance.
Reuters (Brijesh Patel) – Gold powers to new high above $2,300/oz on rate cut optimism – “Gold prices hit a new record high on Thursday, breaking above the $2,300 per ounce mark, boosted by prospects for lower U.S. interest rates this year after Fed Chair Jerome Powell said upbeat economic data had not changed the overall picture for monetary policy. Spot gold was down 0.5% at $2,287.88 per ounce, as of 1230 GMT, taking a breather after hitting a record high of $2,304.09 earlier in the session. “There is big demand coming from Asia, particularly from China and solid demand from central banks. We have geopolitical risks and expectations around central banks cutting rates. All these factors are lifting gold prices higher,” Carlo Alberto De Casa, a market analyst at Kinesis Money, said. Fed officials, including Chair Jerome Powell, on Wednesday continued focusing on the need for more debate and data before U.S. interest rates are cut, a move financial markets expect to occur in June. Traders are currently pricing in about 59% chance that the Fed will cut rates in June, according to the CME FedWatch tool. Gold, which pays no interest, benefits when interest rates fall as this reduces the opportunity cost of holding bullion. Focus now shifts to U.S. non-farm payrolls for March due on Friday that could shed more light on the timing of the Fed’s first rate cut. Strong central bank buying and safe-haven inflows amid growing geopolitical tensions have boosted demand for gold, helping to drive the price up more than 25% since October. “Gold’s blistering rally may have further room to run in the medium term,” Singaporean bank OCBC said in a note. “Historical evidence since 2001 showed that gold strengthened when Fed rate hike cycle ended and continued to extend its bullish run when Fed rate cut cycle gets underway. That said, we caution for the risk of a pullback.” Spot silver fell 0.8% to $26.99 per ounce after hitting its highest since June 2021. Platinum rose 0.1% to $937.85 and palladium was steady at $1,013.48.”
On the day gold closed down $5.60 at $2288.80, and silver closed up $0.19 at $27.14.
On Friday the price of gold again surprised even insiders as it roared to new all-time highs. This unexpected ending for this week may have been the result of a hot jobs report, increased safe haven demand because of Middle East troubles, momentum created by a surprisingly strong technical picture or Bank of America’s latest call that gold is on track to hit $2400.00 this year and is less dependent on Fed rate cuts. Take your pick in this tricky market but today’s finish should cement the idea that gold is an undervalued asset when compared to any other asset class. And those investors who have been sidelined because of these higher prices risk missing another chance to secure some financial protection outside the traditional banking system. A good bet is to insure all your eggs are not in one basket, just in case something goes wrong.
Reuters (Polina Devitt) – Gold bulls eye more record highs despite lightning gains – “An upgraded gold price forecast for 2024 from Nicky Shiels, head of metals strategy at Swiss gold refinery MKS PAMP, drew an unexpected follow-up question this week from market participants. The enquiry was: “Will or can gold ‘go cocoa’?” Cocoa prices have more than doubled since the start of 2024 due to poor harvests in Ivory Coast and Ghana. Meanwhile, spot gold , a much more global and liquid market, hit record highs on five previous trading sessions as investors jumped in looking for exposure to the metal used to preserve wealth. Gold’s record high at $2,305.04 an ounce hit on Thursday amounts to a gain of 12% since the start of the year. “There is almost zero probability gold can replicate those gains in that amount of time,” Shiels said. While cocoa price growth is driven by supply shortage, the gold market is protected by significant stocks held by individuals and reserves of central banks, which own one-fifth of all the gold ever mined. “One cannot de-stock chocolate bars at the same rate as one can de-stock gold bars,” she said. Her forecast for the 2024 average gold price was raised by $150 to $2,200 an ounce. However, while the market may not exactly “go cocoa”, analysts retain a bullish tone even as technically the market feels ripe for hefty falls due to it being overbought. “It is hard to say where values are going to top out as there are no resistance “signposts” on the charts,” said Marex analyst, Edward Meir. Gold’s April rally came on top of its 9.3% jump in March, the strongest since July 2020, which unfolded despite traditional macro headwinds such as a strong dollar and elevated U.S. real interest rates. Over-the-counter and futures gold markets have been buoyant, with an estimated 40% rise in trading volumes, said Johan Palmberg, senior quantitative analyst at the World Gold Council. “And there is outsized activity in the gold options market, in comparison with the likes of equities and bonds, which implies that the current interest is specifically in gold.” Further out, many analysts expect gold to test new highs once the U.S. Federal Reserve starts cutting key rates triggering demand from investors sitting on the sidelines such as holders of physically-backed gold exchange traded funds (ETFs). “We had previously proposed a $2,400 per ounce price estimate if the Fed cut rates in the first quarter of 2024; we commit to that estimate for this year, even if rate cuts come later,” analysts at BofA said.
On the day gold closed up $36.90 at $2325.70 and silver closed up $0.26 at $27.40.
Platinum closed down $11.30 at $928.50, and palladium closed down $33.90 at $995.40.
FXEmpire (Vladimir Zernov) Gold, Silver, Platinum Forecasts – Gold Climbed Above $2300 Amid Rising Tensions In The Middle East – “Gold tests new highs amid rising demand for safe-haven assets. Gold traders stay focused on rising tensions in the Middle East. Gold has recently settled above the resistance at $2295 – $2305 and is ready to test new highs. Silver is moving higher as traders focus on the strong rally in gold markets. Gold/silver ratio stays below the 85 level, which is bullish for silver. From the technical point of view, silver is moving towards the nearest resistance at $27.75 – $28.00. Platinum pulled back after an unsuccessful attempt to settle above the resistance at $925 – $935. If platinum settles below the $925 level, it will head towards the support at $880 – $890.”
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