Gold – Another Surprise!
Commentary for Friday, June 21, 2024 (www.golddealer.com) – Today gold closed down $37.40 at $2316.40, and silver closed down $1.21 at $29.57. While the early market trade was flat, traders in a rather surprising turn sold this market and gold plummeted towards $2310.00. The reason behind this surprise is the latest PMI numbers. The Purchasing Managers’ Index is a measure of the prevailing direction of economic trends in manufacturing. It’s based on a monthly survey of supply chain managers across 19 industries. Activity in the manufacturing sector today rose to a three month high, and activity in the service sector has risen to a 26 month high! Business activity is accelerating and according to some this is not increasing inflation. This supports the notion that the Fed will not be forced to lower interest rates, increasing bearish sentiment and creating lower prices in both gold and silver today. Whether this fresh news will hold water a few weeks from now remains to be seen, but today’s action was unexpected. Last Friday gold closed at $2331.40 / silver at $29.40 on the week gold was down $15.00 and silver was higher by $0.17.
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On Monday the price of gold was again choppy between $2308.00 and $2326.00, a narrow range for the beginning of the week. The initial upward bias however reversed itself and gold finished the day in the red. The dollar remains strong likely because the US economy is doing nicely, which augers against higher prices for gold and silver in the shorter term. Still, the price ranges for both gold and silver seems to be steady, suggesting a stable trade in the short term.
Experts point to a technical advantage for both gold and silver, but the lack of fresh news has slowed the physical market, and the buzz continues to diminish. Investors seem to be equally split on interest rate expectation. About half (the bullish side) believe the Fed will soon be forced to at least reduce interest rates. The other half (the bearish side) are convinced that the Fed will continue with higher interest rates the rest of this year. Tough call, even the professionals seriously disagree, which basically means we may remain stuck with these price ranges for months, which tends to hurt the physical market because investors lose interest.
FXEmpire (Christopher Lewis) – Gold Continues to Bounce Around in a Range – “The gold market pulled back just a bit during the early hours on Monday, but we are still in an area that’s been very noisy and important. So, I do think it is probably only a matter of time before the buyers come back into the market. It’s probably worth noting that the 50 day EMA continues to slice through the consolidation area. And therefore, I think there is a certain amount of technical analysis that comes into this picture to offer a little bit of technical support and perhaps algorithmic support, depending on who’s out there putting money into the market. Underneath there, we have the $2,300 level, which of course has been supported for quite some time, which extends down to the $2,280 level. A break above the highs of the day opens up the possibility of a move to the $2,370 level, possibly a move to the $2,400 level after that. Keep in mind, gold has plenty of reasons to go higher, although pulling back is possible at this point, but given enough time, I think we do see the market try to get to that $2,400 level for no other reason than perhaps geopolitics. If we do break down below $2,280, then there are plenty of areas of support underneath, especially near the $2,200 level, maybe even the $2,150 level where the 200-day EMA sits. Regardless, this is a market though, that I don’t have any interest in shorting, and I do think it’s more likely than not we see a bit of a bounce from this region.”
On the day gold closed down $19.00 at $2312.40, and silver closed down $0.07 at $29.33.
On Tuesday the price of gold mildly dipped in the early trade but quickly recovered and closed on session highs of $2330.00, likely because the US retail sales for May was revised downward and the US dollar was weaker. Still the technical picture for gold may be turning flat which might suggest there is not much upside in the shorter term. But the longer gold remains above the psychologically important $2300.00 level the better for longer term bullish sentiment.
A reasonable dip below $2300.00 may create additional momentum selling but the downside at that point may not be as much as some might expect. And if the Fed turns to the dovish side in the process higher gold prices, perhaps even all-time highs may be in the making.
You have heard this dialogue before, as investors and traders move between the higher or lower interest rates options. At the same time, it is worth noting that the World Gold Council claims that 29% of world banks plan to buy more gold in 2024. Which supports the bullish scenario.
FXEmpire (Christopher Lewis) – Gold Pulls Back to Major Support – “Gold markets pulled back just a bit during the trading session on Tuesday in the early hours, as it looks like we are going to continue to see the $2,300 level as important support. The $2,300 level has been tested multiple times before, and now it looks like we’re just bouncing along the bottom of what appears to be a larger consolidation phase between $2,300 on the bottom and $2,400 on the top. We obviously have to ask a lot of questions about the Federal Reserve and whether or not they are going to be cutting, because now people are suggesting that there’s only going to be one cut between now and the end of the year, even out there suggesting that there will be none. So, with that, you have to recognize that the gold market is going to be very noisy in general. If we were to break down below the $2,280 level, then I think it opens up even more significant selling pressure. The market breaking down below the $2,280 level could open up a move down to the $2,200 level, possibly down to the $2,150 level where the 200-day EMA currently resides. Nonetheless, this is a market that I think, regardless, you’re going to be looking to buy dips. I don’t know what it’s going to take to get to the $2,400 level again, but at this point in time, I do think we will return there sooner or later. There are plenty of geopolitical concerns out there that will continue to cause headaches and therefore I think there will be a lot of demand for gold. Furthermore, central banks are big buyers and of course treasuries around the world are borrowing money hand over fist and that typically helps gold as well.”
On the day gold closed up $18.00 at $2330.40, and silver closed up $0.18 at $29.51.
On Wednesday the price of gold first rose to session highs ($2334.00) and then dipped to session lows ($2325.00), but still managed to close nicely in the green by the end of the trading day. So, while this trade is “frothy” for lack of a better word, gold remains above the important $2300.00 support, which is a bullish plus and may portend even higher prices sooner than later.
Reuters (Harshit Verma) – Gold gains traction on weak US economic data – “Gold prices edged up on Wednesday after data suggesting lackluster U.S. economic activity kept alive hopes for at least one interest rate cut this year. Spot gold was up 0.1% at $2,330.27 per ounce as of 1156 GMT. Prices rose about 0.4% in the previous session. U.S. retail sales barely rose in May and figures for the prior month were revised considerably lower, data showed on Tuesday, suggesting economic activity remained lackluster in the second quarter. That slightly boosted the odds of a Federal Reserve rate cut in September to 67% from 61% a day earlier, the CME FedWatch tool showed. The main drive for gold’s price action remains the market expectations over the Fed’s monetary policy and despite prices creeping up, the move is quite subdued as the market waits for more substantial news, said Ricardo Evangelista, senior analyst at ActivTrades. Lower interest rates reduce the opportunity cost of holding non-yielding bullion. “Market expectations point to at least one rate cut from the Fed. That scenario has been fully priced in the value of the dollar. Government purchases (of gold) remain stable as well. So, unless there is any significant change in this scenario, prices are expected to remain supported above the $2,300 level,” Evangelista said. Gold prices rose about 1.3% last Friday on signs of inflation cooling in the United States amid a selloff across European equities as French stocks were battered by political turmoil. Political uncertainty surrounding Europe can be a positive, with elections in France and the UK nearing, Kinesis Money market analyst Carlo Alberto De Casa said. The more immediate focus, however, is on the U.S. weekly jobless claims data on Thursday and flash purchasing managers’ indexes on Friday. Spot silver was up 0.1% at $29.54 per ounce, platinum rose 1.1% to $983.45 and palladium gained 1.9% to $904.00.
On the day gold closed up $18.00 at $2330.40, and silver closed up $0.18 at $29.51.
On Thursday the gold momentum bulls managed to capitalize on yesterday’s rising optimism as the early trade challenged $2365.00 and silver surged more than a dollar. All this bullish happiness is of course based on the notion that our economy is slowing down, and the Fed will cut interest rates this year. This speculation may be misplaced, because the Fed can have it cake and eat it too by lowering rates only a small amount, perhaps a quarter point. The optimistic reader will claim that even a quarter point starts the ball rolling, and that is correct, but I’m not convinced the Fed will turn from its hawkish viewpoint so easily. The FOMC is now tapping the interest rate breaks trying to find the “right” number. Fingers crossed, if you get my drift.
Neils Christensen (Kitco) – Gold and silver caught in prolonged consolidation but prices will head higher – Saxo Bank – “Although gold and silver are stuck in neutral at elevated levels, one market analyst remains a long-term bull on precious metals. Ole Hansen, Head of Commodity Strategy at Saxo Bank, published a report Tuesday saying investors and traders are just catching their breath after the market’s nearly $250 rally from its February lows to its peak above $2450 an ounce last month. Hansen added that although gold has lost some momentum, there is very little bearish sentiment in the marketplace as investors and money managers see no urgency to take profits. He explained that many hedge funds jumped into gold when prices were still below $2,200 an ounce. This sentiment is helping gold hold sticky support at around $2,300 an ounce. “It is clear that the bulk of the run-up in prices back in February and March was supported by strong demand from managed money traders, such as hedge funds. Having joined the rally at an early stage, they have subsequently not been forced to adjust (sell) positions as the current correction phase has kept prices above levels that otherwise would have forced them to reduce their exposure,” he said in the report. “Getting on board early and at much lower levels helps explain why the current gold volatility is relatively low compared with other metals such as silver, platinum, and copper, where speculators joined a bit later and at higher prices, leaving them more exposed to long liquidation and with that, the risk of a deeper correction,” Hansen added. Hansen said that one of the biggest pillars of support in the marketplace comes from gold’s role as a safe-haven asset and hedge against market risks as geopolitical uncertainty continues to impact the global economy. At the same time, Hansen said that growing sovereign debt is forcing central banks to continue to diversify their foreign reserves away from the U.S. dollar. As to how long gold and silver’s prolonged consolidation will last, Hansen said that is up to the Federal Reserve. He noted that while retail investors in Asia and central banks continue to support the market, it is still missing a key component: investor demand. “Gold and silver continue to see limited interest from ETF investors who have remained mostly net sellers since 2022 when the FOMC began its aggressive rate-hiking campaign, raising the cost of carry, or opportunity cost, of holding a non-coupon-paying metal investment. Demand from ETF investors will remain likely subdued until interest rates are lowered, and this cost is reduced”.
Reuters (Brijesh Patel) – Gold rises 1% to two-week peak as Fed rate cut bets lift demand – “Gold prices rose more than 1% on Thursday to their highest level in two weeks, as recent U.S. economic data showing signs of a slowdown in the world’s largest economy boosted bets for interest rate cuts from the Federal Reserve this year. Spot gold was up 1% at $2,351.55 per ounce as of 10:04 a.m. ET (1404 GMT), its highest since June 7. U.S. gold futures rose 0.8% to $2,365.50. “The market is starting to increasingly expect the U.S. central bank to start its easing program. I suspect we might be getting some long positions getting installed into the market,” said Bart Melek, head of commodity strategies at TD Securities. U.S. jobless claims fell in the latest week, data showed, suggesting a generally stable labor market. U.S. single-family homebuilding in May fell 5.2% to a seasonally-adjusted annual rate of 982,000 units. Last week’s data showed a moderation in the labor market and price pressures, followed up with soft retail sales data on Tuesday, suggesting that economic activity remained lackluster in the second quarter. “The precious metals bulls are more confident late this week, following the weaker U.S. retail sales report earlier this week,” said Jim Wyckoff, senior market analyst at Kitco Metals, in a note. Traders are currently pricing in about a 64% chance of a Fed rate cut in September, according to CME FedWatch Tool. Lower interest rates reduce the opportunity cost of holding non-yielding bullion. Safe-haven demand, driven by geopolitical and economic uncertainty, as well as persistent central bank buying contributed to a rally in gold from March to May, taking spot prices to a record high of $2,449.89 on May 20. Among other metals, spot silver rose 2.1% to $30.37 per ounce, platinum eased 0.1% to $979.45 and palladium gained 1.7% to $920.00.”
On the day gold closed up $23.40 at $2353.80, and silver closed up $1.27 at $30.78.
On Friday the price of gold fell out of bed, moving from the possibility of higher prices on Thursday to the unsettling notion that gold may now break down at the important $2300.00 support. This sudden change from bullish to bearish is nothing new for traders but this latest information seems to have overwhelmed the paper trade and many insiders are looking for even lower prices in gold and silver. But is this entirely warranted? This market has been churning for some time now and the difference between bullish and bearish is only a few hundred dollars. This latest dip may only test support at $2300.00. So, take a breath and enjoy your weekend, pricing, in my opinion should settle next week. The key is to realize that there is nothing that can replace gold or silver as a unique financial asset. Physical possession became much more important as Kim Jong Un and Putin signed a mutual defense pact in North Korea this week. “Strange bedfellows” is a phrase coined by Shakespeare. Its full context is “Misery acquaints a man with strange bedfellows.” It means finding oneself in a difficult situation which forces one to associate with unsavory people. AP today says that South Korea will consider supplying arms to Ukraine after Russia and North Korea signed a strategic pact.
On the day gold closed down $37.40 at $2316.40, and silver closed down $1.21 at $29.57.
Platinum closed up $7.50 at $981.10, and palladium closed up $12.70 at $918.10.
Jim Wycoff (Kitco) – “Technically, August gold bulls have the overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at the June high of $2,406.70. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at the June low of $2,304.20. First resistance is seen at $2,390.00 and then at $2,400.00. First support is seen at the overnight low of $2,368.60 and then at $2,300.00. July silver futures bulls have the firm overall near-term technical advantage. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $31.67. The next downside price objective for the bears is closing prices below solid support at the June low of $28.73. First resistance is seen at today’s high of $30.905 and then at $31.00. Next support is seen at the overnight low of $30.28 and then at $30.00.”
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