Commentary for Friday, Oct 11, 2024 – Today gold closed up $37.00 at $2657.60, and silver closed up $0.51 at $31.52. This was a relatively important week for the metals because traders tested support, recovered, and again moved higher, even as dollar strength remained steady. So, there is buzz out there to excite the bullish base but further gains through the end of this year will depend on how the FOMC reads fresh inflation and economic data. If Chief Powell sees no trouble spots in November insiders believe he will opt for a small rate cut. The metals will remain steady, which will further encourage bullish sentiment. In the unlikely event that he raises interest rates the short money will once again enter this trading picture. The price of the metals would likely become unsteady, as both gold and silver test support. The downside, however, is limited by world trouble spots and central banks lowering interest rates to sidestep economic slowdown. Last Friday gold closed at $2645.80 / silver at $32.13. On the week gold was up $11.80, and silver was down $0.61.
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On Monday the price of gold held steady, trading between $2640.00 and $2660.00 and closing about unchanged on the day. There are several reasons why gold will likely remain at the higher end of its current trading range in the short term. Rising tensions in the Middle East support this range and increase safe haven buying. A solid technical picture remains in place for both gold and silver. And it looks like interest rates will continue to cool between now and the holidays.
I don’t think the outcome of this election will create much change in the price of the metals. But the Fed will meet for a final time this year in November. And their interest rate decision will set the stage for higher or lower prices in gold. My bet is that traders anticipate lower interest rates which encourage the bulls. But you never know, especially if the inflation numbers do not cooperate. A conservative approach may see investors take profits before the end of the year, waiting until the Fed makes those rate changes before considering longer range options.
FXEmpire – Geopolitical Uncertainty Drives Gold Rally, Dollar Caps Gains – “Gold prices rose slightly on Monday, driven by heightened geopolitical tensions in the Middle East, which pushed investors toward safe-haven assets. Meanwhile, traders turned their attention to upcoming U.S. inflation data, which could offer further insight into the Federal Reserve’s interest rate path. The Fed is widely expected to announce a rate cut during its November meeting, but the extent of the reduction remains a key focus for market participants. At 12:32 GMT, XAU/USD is trading $2648.32, down $5.52 or -0.21%. Middle East Conflict Fuels Safe-Haven Demand – The 10-year U.S. Treasury yield, which is closely watched by traders, climbed back above 4% on Monday after strong labor market data shifted market sentiment. September’s nonfarm payrolls increased by 254,000, well above the expected 150,000, suggesting the U.S. economy remains resilient. As a result, expectations for a significant rate cut in November have diminished, with traders now pricing in a 95% chance of a 25-basis-point cut, according to the CME Group’s FedWatch tool. Stronger-than-expected economic data has led to a reassessment of how aggressively the Fed will ease monetary policy. “The employment update suggests that the Fed might reconsider a November rate cut altogether,” said Ian Lyngen, head of U.S. Rates Strategy at BMO Capital Markets, although he noted that a 25 basis point reduction remains the most likely outcome. Dollar Strengthens, Limiting Gold’s Upside Potential – The U.S. dollar hovered near a seven-week high, bolstered by the robust jobs report. A stronger dollar typically makes gold more expensive for foreign buyers, capping any significant upward movement in gold prices. The dollar index rose 0.05% to 102.60, nearing the peak of 102.69 reached after Friday’s jobs data release. Analysts, including Francesco Pesole from ING, noted that the market has largely abandoned the expectation of a 50-basis-point rate cut, limiting the greenback’s downside potential. Despite these headwinds, gold has managed to stay relatively stable, as ongoing demand for safe-haven assets continues to counterbalance the dollar’s rise. Gold Likely to Remain Range-Bound – Gold is expected to trade within a narrow range this week as markets await crucial U.S. inflation data. Thursday’s Consumer Price Index (CPI) report will likely shape the next move for both the dollar and gold, particularly as the Federal Reserve prepares for its November meeting. Analysts anticipate the CPI data to reaffirm expectations of a modest 25-basis-point rate cut. For now, geopolitical tensions should continue to provide support for gold, though any further gains are likely to be limited by a strengthening U.S. dollar. Gold is expected to remain near its current levels, with downside risks should the dollar rally further. A breakout from this range would depend on inflation surprises or an escalation of the Middle East conflict.”
On the day gold closed down $1.00 at $2644.80, and silver closed down $0.38 at $31.75.
On Tuesday gold was again choppy, moving between $2632.00 and $2652.00 in the early trade but soon fell out of bed testing fresh daily lows of $2605.00. You could say there were early signs pointing to this bearish development, like the escalating Middle East trouble not providing support for gold. And traders might also be wondering why the Fed’s recent dovish turn in interest rate policy did not push gold towards $2700.00. These were not big red flags, but they do suggest trader caution in the shorter term. So, what just happened to send bullish buzz out the window? Today’s rather dramatic drop in the price of gold may be the first indication of a shift in interest rate expectation between now and December. The market has given up the notion of a half point drop in rates this December and is now considering a quarter point.
Is this a big deal? That answer depends on whether this latest drop is considered a buying opportunity in a still developing, longer term market. My bet is that traders will just step aside, perhaps into next week and wait for this latest tumble to cool off, before making further plans. This view reflects my thinking from last week where I suggested that gold above $2700.00 may not be as easy as the technical picture might have suggested. May you live in interesting times as they say and be thankful that the physical market is generally not leveraged. I can assure you that today’s leveraged paper players went home early with a very large headache.
Reuters (Anushree Ashish Mukherjee) – Gold falls for fifth session as markets reprice Fed’s rate-cut policy – “Gold prices fell for a fifth consecutive session on Tuesday as recent U.S. employment data priced out the chances of a bigger rate cut, while markets awaited minutes of the Federal Reserve’s latest policy meeting for fresh signals. Spot gold fell 0.2% to $2,639.13 per ounce by 9:53 a.m. ET (1353 GMT), having registered losses in the last four sessions and was off record peak of $2,685.42 hit on Sept. 26. U.S. gold futures lost 0.3% to $2,658.00. “Last couple of days saw retracement or a pullback due to the change in outlook in regards to interest rates,” said David Meger, director of metals trading at High Ridge Futures, adding that bond yields have rallied and the idea of further extensive rate cuts has been muted. According to the CME FedWatch tool, markets priced out a 50-basis-point reduction at the Fed’s November meeting after last week’s strong jobs report. They now see an 87% chance for a 25-bp cut. Markets are focused on the minutes of the Fed’s latest policy meeting, due on Wednesday, followed by U.S. Consumer Price Index on Thursday and Producer Price Index data on Friday.
“U.S. inflation data to be released on Thursday is likely to show further decline in price pressure but is unlikely to trigger renewed speculation of stronger Fed rate cuts. Therefore, higher gold prices are likely to be primarily driven by geopolitical risks,” Commerzbank said in a note. Historically, gold is reputed for its stability as a favored hedge against geopolitical and economic risks. Global physically backed gold exchange-traded funds (ETFs) registered a fifth consecutive month of inflows in September as North America-listed funds added to their holdings, the World Gold Council (WGC) said on Tuesday. Elsewhere, Spot silver lost 1.9% to $31.13 per ounce. Platinum was down 1% at $962.65 and palladium fell 1.4% to $1,009.25.”
On the day gold closed down $29.80 at $2615.00, and silver closed down $1.39 at $30.36.
On Wednesday the price of gold was again choppy moving between $2623.00 and $2606.00 with a mild downward bias. Considering yesterday’s rather large drop in the price of gold this rather conservative chop is welcomed but does not guarantee the worst is over for the bulls. There are other factors which might upset the apple cart. The dollar continues to roar, as the Dollar Index just this morning moved a half point higher. And traders expect that September’s FOMC minutes release today will shed light on the rate cut debate according to Barron’s.
Still, insiders do not expect much in the way of fireworks considering the broader picture. An escalating war in the Middle East, the possibility of lower interest rates and continued safe haven demand will support gold. Whether this testing of support will keep gold prices above $2600.00, through the end of this year, and perhaps into next year remains to be seen. The crosswinds are strong enough at these higher levels to create a defensive bull, so keep your seat belt fastened.
Reuters (Anushree Ashish Mukerjee) – Gold eases for sixth session as dollar marches upward, markets eye Fed minutes – “Gold retreated for the sixth straight day on Wednesday on an advancing dollar and diminished expectations for a larger rate cut in November while markets awaited minutes from the Federal Reserve’s September policy meeting for further insights. Spot gold fell 0.4% to $2,612.88 per ounce by 9:24 a.m. ET (1324 GMT), having touched its lowest level since Sept. 20 on Tuesday. U.S. gold futures for December delivery eased 0.2% to $2,630.80. The dollar index hit a near two-month high, making bullion more expensive for holders of other currencies. “The dollar index continues to firm up, and economic data is more supportive for a 25 basis point cut,” said Phillip Streible, chief market strategist at Blue Line Futures. If the Fed minutes are extremely dovish and it seems pressured to cut rates aggressively, that could act as a tailwind for gold and could push prices to the $2,650 level, he added. Investors now await the minutes from the Fed’s Sept. 18 policy meeting, due at 1800 GMT, while the U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) data is due on Thursday and Friday, respectively. Zero-yield bullion is a preferred investment amid lower interest rates. Following last week’s robust jobs report, markets are expecting an 88% likelihood of a 25-basis-point cut and discounted a 50-bps cut at the Fed’s November meeting, according to the CME FedWatch tool. “Despite the modest pull-back, expectations of lower interest rates and ongoing geopolitical tensions suggest the backdrop for gold is likely to remain supportive over the long term,” said Kinesis Money market analyst Carlo Alberto De Casa in a note. Meanwhile, a rebound in gold prices to a record peak dashed the Indian bullion industry’s expectations of a lucrative festival season. In other metals, spot silver lost 1% to $30.38 per ounce. Platinum was down 0.3% to $947.30, and palladium fell 0.6% to $1,015.38.”
On the day gold closed down $9.00 at $2606.00, and silver closed up $0.07 at $30.43.
On Thursday the price of gold moved higher, so obviously traders bought Tuesday’s dip which encourages bullish sentiment. Prices quickly moved from opening lows ($2610.00) to daily highs ($2628.00) even as the dollar strengthened somewhat which is another plus for the “longer term higher pricing speculation”. Today’s Consumer Price Index (CPI) did not pose bearish problems for traders. And they expect Friday’s Producer Price Index (PPI) to be well behaved. The Fed watches the very PPI closely and if it continues “steady to cool” the expectation of higher future gold prices will continue growing as interest rates drift lower.
This picture will be supported by the tense geopolitical scene. But this does not mean that $2700.00 gold is right around the corner. If I describe trader sentiment after yesterday’s drop it would be “better but not hot”, the cross winds which might hamper bullish sentiment are just less obvious. Any price projection is subject to an 87% chance of a quarter point interest ratehike in November. If the Fed sees something it does not like in the next several months, it might offer up a half point drop in interest rates which would strengthen the developing bullish scenario.
FXEmpire (Christopher Lewis) – Gold Continues to Look Strong on Thursday – “The gold market has rallied a bit over the past few hours, as the market continues to see the $2600 level as important. There are a handful of reasons out there that the gold buyers continue to focus on, and this is the continuation of that interest. Technical Analysis – The gold market has found itself to be supported during the early hours on Thursday and the $2600 level has offered a significant amount of support. All things being equal, this is a market that I think given enough time probably takes off to the upside, but it could also be a little bit noisy to say the least. So, with that being the case, I think ultimately you look at this through the prism of each dip offering value that you can take advantage of. The $2,600 level of course being broken to the downside would be fairly negative, but I also recognize that quite frankly, we’ve got a situation where the fundamental reasons all line up. We have interest rates being cut by central banks around the world. We have the Federal Reserve of course leading the charge, and it’s probably worth noting at this point that traders are also paying attention to geopolitics as well as the fact that several central banks around the world are buying gold bullion as well. So really at this point, I just don’t see a reason to short this market. And I think given enough time, we probably take off quite a bit with this, I do expect a lot of volatility, I expect a lot of noise, but I also expect a longer term uptrend to continue, and it would not surprise me at all to see this market eventually make its way up to the $3,000 level. I have no interest whatsoever in shorting gold. Silver Continues to See Support – The silver market continues to see a lot of support near the $30 region, and as a result, this market looks as if traders are trying to jump in and push the uptrend again. With this, the market will remain a “buy only situation.” Technical Analysis – The silver market found quite a bit of support during the trading session on Thursday again, as we are hanging around the $30.50 level, and perhaps more importantly, have stayed above the $30 level. The 50-day EMA is in the same neighborhood, so I think it does make a certain amount of sense that the market has bounced, and I would fully anticipate that it should continue to do so given enough time. CPI numbers came out a little hotter than anticipated during the early hours on Thursday, so that could have an effect as well. But really, at this point, I think you’ve got a scenario where there are a lot of cross currents because we also had higher than expected unemployment claims coming out of the United States. So, you take the good with the bad. The question now is whether or not demand for silver will start to pick up and with central banks elucidating monetary policy, one would assume that inflation alone would probably come in and pick this thing up. But you also have to question whether or not there will be more people looking to invest in businesses and put money to work, which generally is good for silver. Silver is also an industrial metal. It’s not just a precious metal. A lot of people forget that. With this being said, the technical analysis does suggest that the $30 level should continue to be supported. So, I think you’re still somewhat in a buy on the dip scenario. But if we were to break down below the $29.70 level, then I think silver might be in a little bit more trouble.”
On the day gold closed up $14.60 at $2620.60, and silver closed up $0.58 at $31.01.
On Friday gold finished strong with solid price gains as the cash market moved between $2636.00 and $2660.00. The Producer Price Index (PPI) came in unchanged today further encouraging bullish sentiment, even as the dollar steadied at current levels. Over the past month gold has held close to $2650.00 with one dip in prices in which $2600.00 support was tested. Today’s solid move to the upside further emboldens this bullish development as traders bought weakness this week. A bit surprising because the dip in prices was large enough to create caution. Traders might have expected it would take a week or two for gold to settle but fresh buyers were ready and took advantage of lower prices. I’m cautious as we approach all-time highs ($2700.00) but if interest rates cool the bulls will attract fresh interest. As far as our trading desk is concerned the public is buying gold bullion but has cooled over silver bullion. Next week will provide a better idea of whether these levels will hold up or further settling is in the cards.
Reuters (Daksh Grover) – Gold gains as dollar off 2-month highs on Fed rate cut expectations – “Gold extended gains after the release of the latest data on U.S. producer prices on Friday, as the U.S. dollar pulled back from two-month highs on heightened expectations for a Federal Reserve rate cut in November. Spot gold rose 0.7% to $2,647.55 per ounce by 1316 GMT. U.S. gold futures gained about 1% to $2,665. U.S. producer prices were unchanged in September, pointing to a still-favorable inflation outlook and supporting views that the Fed would cut interest rates again next month. “After stronger-than-expected U.S. jobs data and higher-than-expected inflation data, the market is a bit split on how many rate cuts we will see from the Fed over the coming months,” UBS analyst Giovanni Staunovo said. Data on Thursday showed U.S. consumer prices rose slightly more than expected in September, but the annual increase in inflation was the smallest in more than 3-1/2 years. Slowly cooling inflation and a U.S. job market that remains strong but at the risk of deteriorating give a green light for more interest-rate cuts in coming months, Fed policymakers indicated on Thursday. The CME FedWatch tool shows markets currently see an 84.4% chance of a 25-basis-point rate reduction in November and a 15.6% probability of the Fed keeping rates on hold. “Gold prices are likely to stay volatile in the short term, but we look for higher prices as we look for further rate cuts by the Fed,” Staunovo said. Gold is on track for its second straight week of declines after prices retreated from a record high of $2,685.42 hit last month. Physical gold dealers in India charged premiums for the first time in two months this as the festival season attracted jewelry buying. Spot silver rose 0.7% to $31.41, and platinum climbed 1.2% to $979.20. Both metals were headed for weekly declines. Palladium firmed 0.2% at $1,071 and was up 6% for the week.”
On the day gold closed up $37.00 at $2657.60, and silver closed up $0.51 at $31.51.
Platinum closed up $17.30 at $985.00, and palladium closed down $3.60 at $1061.80.
Jim Wycoff (Kitco) – “Technically, December gold bulls have the solid overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at the contract high of $2,708.70. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $2,572.50. First resistance is seen at this week’s high of $2,679.20 and then at $2,690.60. First support is seen at today’s low of $2,645.20 and then at this week’s low of $2,618.80. December silver futures bulls have the overall near-term technical advantage. Prices are in a two-month-old uptrend on the daily bar chart but bulls need to show fresh power soon to keep it alive. Silver bulls’ next upside price objective is closing prices above technical resistance at the May high of $33.50. The next downside price objective for the bears is closing prices below solid support at $29.00. First resistance is seen at $32.00 and then at $32.50. Next support is seen at the overnight low of $31.26 and then at $31.00.”
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