Commentary for Friday, Sept 13, 2024 – Today gold closed up $30.10 at $2581.30, and silver closed up $0.96 at $30.70. Both gold and silver made new recent highs today as traders anticipate an aggressive interest rate cut at the upcoming FOMC meeting (September 17th and 18th). The notion of lower interest rates has been part of the bullish scenario for some time but next week looks like it will be the cherry on the cake, as rate cuts become a reality. The catalyst behind this aggressive stance is the European Central Bank. ECB President Lagarde cut interest rates for the second time in three months as Europe faces economic headwinds. And CNBC today confirmed that US consumer spending is cooling, another plus for the bullish scenario. Last Friday gold closed at $2493.50 / silver at $27.81. On the week gold was higher by $87.80, and silver was higher by $2.89.
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 gold opened choppy, trading between $2485.00 and $2504.00 so we are still struggling with the “above $2500.00 scenario” as traders test support in the $2475.00 range. The CPI (Consumer Price Index) is out this week so this may offer a few hints, but until traders get more than just an inkling of the Fed’s next move this market will remain defensive. Personally, I don’t see any radical moves coming from the Fed anytime soon. It is just not in their DNA; they will nudge one way or the other depending on data and their best guess. This likely results in a back and forth market which drifts somewhat lower but does not fall out of bed. Not too exciting, kind of a Goldilocks approach, not too hot and not too cold. In the longer term however, there is no substitute for physical bullion in your hand. I have said this before but neither the Republicans nor the Democrats have what it takes to balance the books and solve the problem of overspending. Under these conditions $2500.00 gold might seem cheap in the coming decade.
FXEmpire (James Hyerczyk) – US Inflation Report to Decide Gold’s Next Move – “Gold prices traded nearly flat on Monday as market participants remained cautious, awaiting this week’s critical inflation reports to gauge the Federal Reserve’s next move on interest rates. Following Friday’s mixed U.S. jobs report, traders are assessing how upcoming inflation data will impact the Fed’s decision. Gold has been rangebound in recent weeks, hovering between $2531.77 and $2470.85, and currently trades below the psychological $2500 level, between a technical support level at $2482.00 and a technical resistance level at $2501.31. Gold eased slightly as the U.S. dollar index (DXY) rose 0.4%, making dollar-denominated bullion less attractive for holders of other currencies. Investors are closely watching for a potential breakout in the dollar through last week’s high of 101.917, with a further upside target at 102.040. The dollar’s strength reflects uncertainty over the size of the Fed’s anticipated rate cut at its upcoming meeting. Fed Policymakers Split on Rate Cuts – Fed officials have signaled that a rate cut is on the horizon, but the scale remains undecided. With the labor market sending mixed signals, some policymakers, like Fed Governor Christopher Waller, have indicated they are open to consecutive or larger cuts if incoming data justifies it. Wednesday’s Consumer Price Index (CPI) report is expected to provide more clarity on whether inflation is cooling enough to warrant aggressive easing. Gold’s Outlook Tied to Inflation Figures – Gold, which performs well in a low-interest-rate environment, could rally if inflation data surprises to the downside, leading to increased expectations of a larger Fed rate cut. According to market analysts like Carlo Alberto De Casa of Kinesis Money, if inflation comes in significantly lower than expected, gold could surge to new all-time highs. However, even if the Fed sticks to a 25 bp cut, gold prices are unlikely to see a sharp decline, as rate cuts are largely priced in. Market Forecast – In the short term, gold prices are likely to remain rangebound, with direction depending heavily on Wednesday’s inflation print. A lower-than-expected CPI could push gold higher, potentially challenging resistance near $2530. However, if inflation aligns with market expectations, gold may continue trading sideways, with strong support around $2470. Traders should prepare for potential volatility as key economic data shapes the Fed’s rate decision. Overall, a mildly bullish outlook for gold remains, driven by expectations of continued rate cuts through year-end.”
On the day gold closed up $8.30 at $2501.80, and silver closed up $0.48 at $28.29.
On Tuesday the price of gold seems to have benefited to some degree with yesterday’s mild close to the upside. This is not a big deal per se but pricing has moved between $2500.00 and $2514.00 with less downside testing. This bit of quiet may be rattled if the inflation numbers out this week hold any surprises. The Consumer Price Index (CPI) will be out tomorrow, and the Producer Price Index will be out Thursday. If we don’t see anything unusual expect the same narrow trading range in gold in the short term. Gold’s downside is limited by solid technical support while the upside is capped by a stronger dollar. I’m surprised however that there is not more interest in safe haven demand after today’s drone attack on Moscow by Ukraine.
Reuters (Anushree Ashish Mukherjee) – Gold holds firm above $2,500 level as US inflation data looms – “Gold prices held firm above the $2,500 level on Tuesday as market participants positioned themselves ahead of U.S. inflation data for further clues on the depth of interest rate cuts by the Federal Reserve next week. Spot gold rose 0.3% to $2,513.07 per ounce by 9:10 a.m. ET (1310 GMT). U.S. gold futures were up 0.4% at $2,542.10. “Gold prices are trading in an extremely tight range, waiting for the next catalyst, which are likely to be both the U.S. presidential debate tonight, followed shortly by inflation data tomorrow,” said Daniel Ghali, commodity strategist at TD Securities. The investors will closely scan through U.S. Consumer Price Index data on Wednesday and the Producer Price Index reading on Thursday. The CPI for August is expected to have risen by 0.2% month-over-month, unchanged from the previous month, according to a Reuters poll. “Spot gold remains supported above the psychological $2,500 level, and any post-CPI forays below that big, round number should see bulls buying the dip once more, as they have consistently done since mid-August,” said Han Tan, chief market analyst at Exinity Group. So far this year, gold has gained 21%, hitting an all-time high of $2,531.60 on Aug. 20. Lower interest rates reduce the opportunity cost of holding zero-yield bullion. Markets are currently pricing in a 73% chance of a 25 basis point U.S. rate cut at the Fed’s Sept. 17-18 meeting, and a 27% chance of a 50 bps cut, the CME FedWatch tool showed. Spot silver rose 0.3% to $28.43 per ounce. Platinum gained 0.9% to $946.75 and palladium was up by 1.2% to $957.58.”
On the day gold closed up $10.50 at $2512.30, and silver closed down $0.03 at $28.26.
On Wednesday the price of gold moved higher in the early trade but soon dipped to session lows around $2505.00 as traders worried over an unexpected uptick in monthly core inflation according to the Wall Street Journal. While commentators are expecting an easing of inflation rates, the latest CPI (Consumer Price Index) suggests that inflation is still a problem. This may lead traders to believe that the Fed may not lower rates as quickly as expected. This “back and forth” decision making relative to inflation is a familiar cycle. It indicates that traders are focused on the short term and have to some degree moved away from the longer term picture. I would not overreact to this latest “snapshot”, but it does suggest that the next Fed interest rate change may not exceed a quarter point. Which is small enough to support the FOMC dovish side and large enough to cap short term gold prices. Look for gold to continue in a rather tight pricing range.
Reuters (Anushree Ashish Mukherjee) – Gold falls as CPI data dampens talk of over-sized US rate cut – “Gold prices fell on Wednesday as the dollar and Treasury yields firmed after U.S. inflation data prompted investors to scale back expectations of an over-sized rate cut from the Federal Reserve next week. Spot gold was down 0.4% at $2,505.17 per ounce at 9:40 a.m. ET (1340 GMT). U.S. gold futures were down 0.4% to $2,533.70. Following the data, the dollar index was up 0.1% and benchmark U.S. 10-year yields also edged higher, putting pressure on bullion. U.S. consumer prices rose only slightly in August, but underlying inflation showed some stickiness, which could dissuade the Fed from delivering a half-point interest rate cut next week. “Inflation is still here. The consumer is still feeling it. If they do a half, it signals they’re throwing in the towel here … a quarter point is something that they’re almost forced into doing here at this point,” said Bob Haberkorn, senior market strategist at RJO Futures. Markets are currently pricing in an 85% chance of a 25-basis-point U.S. rate cut, compared to 71% before the data, the CME FedWatch tool showed. The Fed will lower interest rates by 25 basis points at each of the three remaining policy meetings in 2024, according to a majority of economists in a Reuters poll that found only nine of 101 expected a half-percentage-point cut next week. “The uptick in core CPI has more or less cemented at 25 bps cut next week… A new all-time high (for gold prices) may have to wait just a little longer,” said Tai Wong, a New York-based independent metals trader. Markets will now look towards the U.S. producer price index reading and initial jobless claims due on Thursday. Among other metals, spot silver was up 0.2% at $28.44 per ounce, platinum rose 0.4% to $941.30, and palladium firmed 1.4% to $978.39.”
On the day gold closed down $0.20 at $2512.10, and silver closed up $0.30 at $28.56.
On Thursday gold got the shot in the arm it was looking for as the European Central Bank cut interest rates as inflation slowed and economic growth falters (Reuters). The price of gold quickly moved to a season high of $2555.00. The most recent technical view supports even higher prices as traders anticipate a continued trend of lower interest rates between now and the end of this year. You have seen this bullish scenario before so some caution may be warranted. But as this cycle repeats itself the public is becoming more comfortable with record highs. Across our trading desk this week the public has been a net buyer of gold bullion, sometimes in large quantities. Silver bullion action is more like a push – buyers and sellers being about equal.
Reuters (Balaza Koranyi and Francesco Canepa) – ECB cuts interest rates as growth dwindles – “The European Central Bank cut interest rates again on Thursday as inflation slows and economic growth falters, but provided no substantial clues to its next step, even as investors bet on steady policy easing in the months ahead. The ECB lowered its deposit rate by 25 basis points to 3.50% in a widely telegraphed move, following up on a similar cut in June as inflation is now within striking distance of its 2% target and the domestic economy is skirting a recession. With the cut widely expected, investor attention has already shifted to what will come next and how ECB decisions will be shaped by the U.S. Federal Reserve’s widely expected start to its own rate-cutting next week. But the ECB, the central bank for the 20 countries that share the euro, gave nothing away. “We are not pre-committing to a particular rate path,” ECB President Christine Lagarde told a press conference, using the bank’s standard formula for what it calls its “data-dependent”, meeting-by-meeting approach to policy. “We are looking at a whole battery of indicators,” she said, noting that September was likely to deliver a low reading of inflation simply because of statistical base effects. Euro assets were little changed by the move and by the absence of clues on the future rate path, which analysts interpreted as evidence of the ECB’s caution. “Given that the ECB’s track record of predicting inflation on its way up is rather weak, the ECB will want to be entirely sure before engaging in more aggressive rate cuts,” said Carsten Brzeski, Global Head of Macro at ING. Lagarde painted a mixed picture of inflation in the euro area continuing to be sustained by rising wages even as overall labour cost pressures moderated and were absorbed by companies. More dovish ECB policymakers, mainly from the euro zone’s south, have been arguing that recession risks are rising and high ECB rates are now restricting growth far more than needed, raising the risk that inflation could undershoot the target.”
On the day gold closed up $39.10 at $2551.20, and silver closed up $1.18 at $29.74.
On Friday the price of gold moved to all-time highs ($2580.00) as the Dollar Index moved lower and New York Fed President Dudley claimed there is a strong case for a half point cut in interest rates at next week’s FOMC meeting. Helping cement this fresh news is data that inflation dropped to its lowest level since February of 2021. This latest talk is whipping up bullish sentiment and the metals are moving higher. I believe however the Fed will find a middle ground next week, a quarter point makes more sense. But the point here is that any cut at all simply reinforces the notion that interest rates are moving lower, which helps the bullish scenario.
Reuters (Amanda Cooper and Pete Schroeder) – Stocks climb, gold hits record as investors consider more aggressive cuts – “U.S. stocks opened higher on Friday and gold hit a record high after an overnight upheaval in investor expectations for a supersized Federal Reserve interest rate cut next week. Stocks, Treasury prices and commodities all rallied after traders raised the chances of a half-point cut from the Fed next week to 41%, from closer to 14% a day ago, before articles in the Financial Times and Wall Street Journal each called the decision “a close call”. In early trading, all three major U.S. indexes were higher. The Dow Jones Industrial Average rose 0.36%, the S&P 500 gained 0.26%, and the Nasdaq Composite climbed 0.16%. Hopes for a bigger cut were further boosted when influential former New York Fed President Bill Dudley said at a forum in Singapore “there’s a strong case for 50.” Beyond the scale of Wednesday’s anticipated rate cut, the language coming out of the Fed’s policy statement and future projections will provide more fodder for market expectations. “The decision to cut between 25bp vs 50bp could be closer than most people anticipate. In our view, the dot plot will be the most prominent part of the Fed’s guidance next week, along with Chair Powell’s post-meeting press conference. Our expectation for the Fed’s forward guidance is for it to lean broadly dovish,” TD Securities wrote in a note. The dollar dropped as much as 1.0% to 140.36 yen , its weakest since Dec. 28. It was last down 0.83% at 140.61. The yen has also been supported this week by hawkish comments from Bank of Japan officials, with policy board member Naoki Tamura saying on Thursday he was “worried that upside inflation risk was heightening.” The dollar index, which measures the currency against the yen and five other major rivals, dropped to a one-week trough at 101.00. Benchmark 10-year Treasuries rallied, pushing yields down 2.1 basis points to 3.659%, while rate-sensitive two-year yields dropped 6.8 bps to 3.5803%. GOLD AND OIL CONTINUE CLIMB Global shares, rose for a fifth day, up 0.45%. Gold headed for its strongest weekly gain since mid-August, up 0.82% to a record high of $2,579.61 an ounce, driven by dollar weakness and looming rate cuts. Crude oil continued to climb after surging and was up 0.78% to $69.51 a barrel early Friday, as producers assessed the impact on output after Hurricane Francine tore through the Gulf of Mexico.”
On the day gold closed up $30.10 at $2581.30, and silver closed up $0.96 at $30.70.
Platinum closed up $24.60 at $1006.50, and palladium closed up $22.20 at $1076.00.
Jim Wycoff (Kitco) – “Technically, December gold bulls have the strong overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at $2,700.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $2,500.00. First resistance is seen at the overnight record high of $2,601.00 and then at $2,625.00. First support is seen at the overnight low of $2,585.00 and then at $2,570.40. December silver futures bulls have gained the overall near-term technical advantage. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $31.00. The next downside price objective for the bears is closing prices below solid support at $28.00. First resistance is seen at the August high of $30.67 and then at $31.00. Next support is seen at $30.00 and then at $29.55.”
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