Gold – It’s Still About Interest Rates
Commentary for Friday, July 5, 2024 (www.golddealer.com) – Today gold closed up $28.70 at $2388.50, and silver closed up $0.84 at $31.39. While this week began rather quietly it woke up nicely on Wednesday and Friday, even though our domestic trade was closed Thursday for Independence Day. The prime mover here being interest rates as the Dollar Index lost a full point this week. The oddsmakers are claiming that there is a 72% chance of a rate cut by September. This made Wall Street happy, a rate cut would help decrease recession fears. And lower interest rates encourage the already bullish technical outlook for both gold and silver. All things considered the metals trade feels a bit lighter going into the weekend. Halloween, however, is not far off so remember that the bearish “trick” or bullish “treat” is still in the hands of the FOMC and will depend on their next interest rate move. Last Friday gold closed at $2327.70 / silver at $29.24. On the week gold was $60.80 and silver was higher by $2.15.
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On Monday the price of gold opened to the upside around $2338.00 and traders, in usual fashion sold this rally pushing prices to support levels around $2320.00. So, we opened this week with a yawn as gold held within last week’s range. Silver prices also followed last week’s support levels and traders sit back and wait for fresh news from the Federal Reserve regarding interest rates. This back and forth action at the higher end of both trading ranges is a plus for the bulls but these higher interest rates continue to “grind” both metals moving forward.
FXEmpire (Christpher Lewis) – Gold Continues to See Support Underneath Current Levels – “The gold market has gone back and forward during the course of the early hours on Monday, as we continue to hang out and look for a certain amount of momentum to finally go higher. I think in the meantime, you’re looking for short-term pullbacks as potential buying opportunities in a market that has obviously been bullish for some time. However, there is a lack of liquidity really at this point in a lot of contracts, mainly due to the fact that it’s the dead of summer and furthermore, a lot of people have no idea what to do. So I think you’re going to see more of a malaise, but it does look well supported near the $2,300 level that hangs down to the $2,280 level. In general, this is a situation where I think there will be plenty of buyers in that region. If we do break down below $2,280, then we could drop towards the $2,150 level, but right now I just don’t see that happening. Buyers probably jump in and try to push this thing closer to the $2,360 level, maybe even $2,400, but it might take some time. Keep in mind this is a typically quiet time of year and that’s pretty much what you’re seeing play out on the charts. This is a market that has been bullish until recently, but at this point in time, it is also worth noting that the summer is typically somewhat quiet, and therefore it is normal for it to do little in this environment. The silver market rallied just a bit during the trading session on Monday as the 50 day EMA continues to be a very significant technical indicator that a lot of people will be paying attention to as per usual. With that being the case, I think you have to look at this through the prism of whether or not you’re finding value and I do think you are finding value at this point. So with that being said, I think we continue to see plenty of buy on the dip traders get involved and quite a few defend the 50 day EMA as well as the $28.50 level. All things being equal, I do think that we are trying to get to the $30 level, which of course is a large round psychologically significant figure and an area where a lot of people would be involved. If we can break above the $30 level, then the market could continue the overall uptrend. In the short term, it wouldn’t be surprising to see this market as one that goes somewhat sideways because there is a serious lack of economic announcements during the day to really spook the market and that has a lot to do with the fact that we may just see a gradual lift in risk appetite as there isn’t much to be worried about. Silver of course is volatile, so this could be a big advantage for silver, assuming that there is no shock news. The market continues to look more positive than anything else going forward.”
On the day gold closed down $0.10 at $2327.60, and silver closed up $0.06 at $29.30.
On Tuesday pricing looked like another quiet day with gold trading between $2334.00 and $2320.00. Still, there are opportunities for gaining fresh insight this week. Today we will see fresh JOLTS insight into jobs and turnover. On Wednesday Chief Powell will speak with ECB President Lagarde in Portugal and we will also see fresh FOMC minutes. Thursday the 4th of July is Independence Day, and the domestic markets are closed. So given no one upsets the apple cart (a possibility if the Fed turns dovish) my bet is this week will finish on the quiet side.
Reuters (Polina Devitt) – Gold slips amid elevated Treasury yields – “Gold prices fell on Tuesday under pressure from elevated U.S. Treasury yields and a stronger dollar while investors awaited comments from Federal Reserve Chair Jerome Powell and more data for further clues about the interest rate path. Spot gold was down 0.2% at $2,327.90 per ounce by 1257 GMT. The benchmark 10-year Treasury yield hit a one-month high on Monday and stayed elevated on Tuesday, making non-yielding bullion less attractive, amid bets on the possibility of a second Donald Trump presidency. “Markets are waiting for the nonfarm payrolls report at the end of the week,” said StoneX analyst Rhona O’Connell. “Trump Supreme Court verdict may be supportive (for gold) for geopolitical reasons. Dollar and bond yields are already reflecting that postulation.” Gold is down 5% from a record high of $2,449.89 per ounce it touched on May 20, a rally caused by safe-haven demand driven by geopolitical and economic uncertainty as well as persistent central bank buying, a crucial category of demand. “Physical demand is still subdued in major markets like India and Turkey but there are signs of recovery there as consumers are keen to protect against other factors like local inflation which still remains high,” said a trader. There are, however, signs that central banks are slowing down gold purchases amid high prices, though their demand remains above the pre-2022 level. Central banks reported about 10 metric tons of net gold buying in May, 56% lower month-on-month, according to the World Gold Council. Central banks of Poland, Turkey and India were the largest buyers, while Kazakhstan sold 11 tons. Saxo Bank expects gold and silver to hit $2,500 and $35 per ounce, respectively, by the end of 2024 as U.S. rate cuts could invite back demand for physically backed gold exchange-traded funds. Spot silver edged up 0.4% to $29.55. Platinum added 1.7% to $993.97 and palladium rose 2.4% to $994.50 with the focus on improved prospects for hybrid car sales vs slower growth of palladium-free electric vehicles market.”
On the day gold closed down $4.60 at $2323.00, and silver closed up $0.05 at $29.35.
On Wednesday the price of gold surged higher in a surprise move challenging $2365.00. A bit surprising, I was expecting a quiet week because of Independence Day but recent economic data and Chief Powell’s conversation with the ECB’s President Christine Lagarde has apparently reshuffled the economic deck. It is worth noting the word “apparently” because Powell is a master at controlling this dynamic, so for now the bulls roar, but this windfall could change quickly if the Chief decides to double down on the inflation threat. Jim Wycoff (Kitco) – “Many markets were assuaged, including the precious metals and the U.S. stock market, after Federal Reserve Chairman Jerome Powell leaned easier on U.S. monetary policy in a speech at a European Central Bank confab in Portugal Tuesday. Said Angus Campbell of Trade Nation in an email dispatch today: “Powell delivered a fairly dovish speech, with the headline being that the U.S. central bank has made progress on reducing inflation. But he went on to say that he needs to see more evidence that inflation is on a sustainable path back towards the 2% target before he will be happy to loosen monetary policy. Despite this, the market continues to assign a high probability for two 25-basis- point rate cuts before year-end.” Reads a Wall Street Journal headline today: “Powell puts rate cuts back into view.”
Reuters (Brijesh Patel) – Gold at near 2-week high as soft US data lifts Fed rate-cut bets – “Gold prices rose more than 1% to a near two-week high on Wednesday, driven by increased bets for a September interest rate cut by the Federal Reserve after recent U.S. data suggested that the labor market was softening. Spot gold was up 1.4% at $2,362.32 per ounce by 10:09 a.m. ET (1409 GMT). U.S. gold futures climbed 1.7% to $2,372.40. “The precious metals complex, as well as base metals, are rallying across the board on ADP and jobless claims data that reinforces the ‘softening economy’ narrative which will likely lead to the first rate cut in September,” said Tai Wong, a New York-based independent metals trader. “Bulls are trying to get ahead of what many believe will finally be a weak payrolls report on Friday,” he added. First-time applications for U.S. unemployment benefits increased last week, while the number of people on jobless rolls rose further to a 2-1/2 year high towards the end of June, consistent with a gradual cooling in the labor market. A measure of U.S. services sector activity slumped to a four-year low in June amid a sharp drop in orders, potentially hinting at a loss of momentum in the economy at the end of the second quarter. Following the U.S. data, the dollar slipped to a two-week low, making gold more attractive for other currency holders, while the yield on the benchmark U.S. 10-year Treasury note slid. The market now sees a 68% chance of the Fed cutting interest rates in September as well as another cut in December. Lower rates reduce the opportunity cost of holding non-yielding bullion. Investors now look forward to the minutes from the U.S. central bank’s latest policy meeting due later in the day, and the non-farm payrolls report due on Friday for more clarity on U.S. rate cuts. Elsewhere, spot silver rose 3.4% to $30.52 per ounce, platinum gained 1.8% to $1,008.50 and palladium climbed 2.7% to $1,049.”
On the day gold closed up $36.80 at $2359.80, and silver closed up $1.20 at $30.55.
On Thursday Golddealer.com and the domestic markets were closed on the 4th of July.
On Friday the price of gold finished the week on a bullish note as prices moved towards $2385.00 and unemployment data suggests that interest rates will soon weaken. The latest technical picture, according to the experts, is also good news for both gold and silver. Still, without that expected interest rate cut the recent gains in both gold and silver will soften. But these developing trends offers both sides some happiness. The geopolitical picture is not improving regardless of the latest spin, so safe haven demand may increase because of Middle East troubles and continued Russian aggression. And if you are looking for a wild card, even the possibility of another Trump ticket will fire up the bulls.
Reuters (Brijesh Patel) – Gold prices rise to one-month high after US jobs report – “Gold prices extended gains on Friday to their highest level in a month following key U.S. jobs data the showed labor market was softening, lifting expectations around a Federal Reserve interest rate cut in September. Spot gold was up 0.7% at $2,371.58 per ounce as of 09:05 a.m. (1305 GMT). Bullion is up nearly 2% for the week so far. U.S. gold futures gained 0.4% to $2,379.70. “Gold is trading at one-month highs as lower payroll revisions and yet another uptick in the unemployment rate help ‘cement’ a September rate cut,” said Tai Wong, a New York-based independent metals trader. “Bulls are eyeing a return to $2,450 all-time highs if the Fed starts openly hinting at September,” he added. Data showed U.S. non-farm payrolls grew by 206,000 jobs in June, slightly higher than the 190,000 new jobs estimated by economists polled by Reuters. Meanwhile, estimated job growth for May was revised down to 218,000 new jobs from 272,000, while April’s job growth was revised down to 108,000 new jobs from a previous 165,000. The unemployment rate rose to 4.1%, slightly higher than the estimated 4.0%. Following the data, U.S. interest-rate futures prices reflected continued market confidence in a September rate cut, with the implied probability remaining at about 72%. Traders are also pricing in a rising chance of a second rate cut in December. Lower rates reduce the opportunity cost of holding non-yielding gold. The dollar slipped to a three-week low against its rivals after the jobs data, making gold less expensive for other currency holders, while yield on the benchmark U.S. 10-year Treasury note crept lower. Elsewhere, spot silver rose 0.9% to $30.66 per ounce and is on track for its best week since May 17. Platinum rose 1.8% to $1,020.63 per ounce and palladium gained 0.3% to $1,020.28.
On the day gold closed up $28.70 at $2388.50, and silver closed up $0.84 at $31.39.
Platinum closed up $33.30 at $1035.30, and palladium closed up $1.60 at $1035.80.
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 $2,300.00. First resistance is seen at $2,382.60 and then at
$2,400.00. First support is seen at the overnight low of $2,359.00 and then at $2,350.00. September silver futures bulls have the overall near-term technical advantage and have regained upside momentum. Silver bulls’ next upside price objective is closing prices above technical resistance at $32.00. The next downside price objective for the bears is closing prices below support at the June low of $28.90. First resistance is seen at the overnight high of $31.08 and then at $31.225. Next support is seen at the overnight low of $30.45 and then at $30.00.”
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