Gold –  Pulls Back from Record Highs

Commentary for Friday, Sept 27, 2024 (www.golddealer.com) – Today gold closed up $2.45 at $2646.75, and silver closed up $0.02 at $31.54. Gold closed the week on a quiet note, which presents a small red flag because traders pushed prices higher 4 out of 5 days this week. Today’s defensive pricing is likely the result of lower inflation numbers according to the latest PCE data. Still, many traders believe highs will be tested as early as next week for two reasons. First, interest rates are moving lower, sooner than later. And second, the CME FedWatch Tool claims there is a 51% chance of another ½ point interest rate cut by December, so this bull may just be taking a rest. Last Friday gold closed at $2619.90 / silver at $31.18. On the week gold was up $26.85, and silver was higher by $0.36.

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On Monday the price of gold initially dipped, finally finding support at $2614.00 which must be a disappointment to the bulls considering the price of gold jumped $31.90 this past Friday. Still traders bought this dip, pushing prices back to all-time highs of $2634.00 gold finishing the day mildly in the green. A plus for the bulls, suggesting continued underlying strength. Considering the escalation of Middle East problems, safe haven demand will support this current range, and gold’s technical picture suggests higher prices in the short to medium term. That being said, I would not be surprised to see the metals take a breather, as inventors show caution and consider a shifting geopolitical picture, and the real possibility of lower interest rates.

FXEmpire (Christopher Lewis) – Gold Continues to See Buyers – “The gold market has rallied slightly during the early hours on Monday as we continue to see a lot of upward pressure, but I think at this point, you have to look at this through the prism of a market that eventually will run out of a little bit of momentum and give us an opportunity to buy it on the dip. That’s essentially what you have to do at this point. The $2,530 level is likely to be a support level as the level has been resistance before. Short-term pullbacks are probably more likely than not going to continue to be the way forward to get involved, and I do think that gold has much further to go. We have the Federal Reserve cutting rates, and that directly affects the market, but really at this point, I think we also have a scenario where geopolitics comes into the picture and perhaps helps gold as well. I don’t like the idea of shorting gold, and quite frankly, I don’t even have an idea of where I would start. That doesn’t necessarily mean that I jump in and with both hands buy gold, but what it does mean is that occasionally I will start buying.” Silver Markets Technical Analysis – Silver initially fell during the early hours on Monday, but it has of course found quite a bit of support near the $30.25 level only to turn around and show signs of life. All things being equal, this is a market that I think continues to see a lot of noisy behavior, but I also would be paying close attention to the $31.50 level. That is an area that’s been important multiple times, and therefore if we can break above there, it does kick off quite a bit of FOMO trading. Remember that silver is not only a precious metal, but it’s also an industrial metal as well, so it will be influenced by inflation, but also industrial demand. It’s worth noting that we have seen PMI numbers around the world essentially tank, meaning that there are concerns about stability, so the precious metals part of silver is more likely than not going to continue to be one of the bigger drivers, as we aren’t sure where the industrial demand is going to be in the short-term future.

On the day gold closed up $6.60 at $2626.50, and silver closed down $0.41 at $30.77.

On Tuesday gold continued to look good as prices moved between $2624.00 to daily highs of $2650.00. Holding above what may become the $2600.00 support if anticipated lower interest rates become a reality. And all this bullish good news is supported by fresh interest in ETF flows according to the World Gold Council. An ETF or Exchange Traded Fund is a method of investing in gold without taking possession of the physical metals. They appeal to some, and recent interest helps bullish sentiment. But the primary reason for owning gold bullion is to ensure you have real money outside the banking system in the unlikely case of hyperinflation. This is an old threat but an important part of the physical gold business since the inception of fiat paper money. Do I expect the current system to blow up anytime soon? It is not likely but even our founding fathers did not completely trust the government. So it’s a good idea to have a backup plan especially if you believe today’s political rhetoric is getting crazier by the day.

Reuters (Ashitha Shivaprasad) – Western ETF investors poised to heap fuel on gold’s record rally – “Inflows into gold exchange-traded funds, particularly from Western investors, are set to rise in coming months, adding yet more positive stimulus for already record high bullion prices, analysts said. Gold prices have surged some 27% so far this year to vault $2,600 per ounce, benefiting directly from looser central bank monetary policy and pockets of geo-political tension. Interest rate cutting cycles in the U.S., Europe and latterly China, have fanned bullish sentiment, with players focused on further gains including another record milestone of $3,000. Exchange Traded Products (ETPs), or Exchange Traded Funds (ETFs), allow investors to gain exposure to assets like gold without taking delivery. Any rise in holdings is significant for prices, as ETPs are backed by the physical commodity. Increased inflows will reduce the supply of precious metal available in the market, bolstering prices further. “Now that the rate cutting cycle has commenced, we think ETP inflows are likely to accelerate, supporting the next leg higher in gold,” Standard Chartered analyst Suki Cooper said. “ETP flows, which typically have a stronger correlation with real yields and the dollar, have turned positive. The bulk of the inflows have come from Europe, but over the past two months, North America has led fresh interest.” According to the World Gold Council (WGC), global gold ETFs saw inflows of 28.5 tons, or $2.1 billion, in August with all regions reporting positive flows while western funds contributed the lion’s share. North America added inflows of 17.2 tons or $1.4 billion last month. Softer U.S. economic data, dovish Fed comments, declines in the dollar and yields, as well as lowering opportunity costs fueled inflows, the WGC added. This comes after gold ETFs had three straight years of outflows amid high global interest rates. The latest four months of inflows have only managed to trim the year-to-date losses to a net outflow of 44 metric tons. Last week, the Federal Reserve kicked off an anticipated series of interest rate cuts with a larger-than-usual half-percentage-point reduction. The European Central Bank cut rates in June and also earlier this month. China’s central bank on Tuesday announced broad monetary stimulus and property market support measures to revive an economy grappling with strong deflationary pressures. Beijing’s new measures include a planned 50 basis point cut to banks’ reserve requirements. Major banks like J.P. Morgan, Goldman Sachs, Citi and UBS have reiterated their bullish stance on gold and forecast prices will move higher, with ETF holdings rising. “Fed cuts are poised to bring Western capital back into gold ETFs, a component largely absent of the sharp gold rally observed in the last two years,” Goldman Sachs said in a note. J.P. Morgan this week noted that retail-focused ETF builds will be key to a further sustained gold rally and projected prices to move towards a 2025 peak target of $2,850. Spot gold touched a record of $2,639.95 per ounce on Tuesday, driven by hopes of further monetary policy easing and geopolitical tensions. Lower interest rates reduce the opportunity cost of holding the zero-yield bullion and it is considered a safe-asset amid turmoil. “The foundation of the current fresh ETF demand has been that rates are coming down but it leaves the question whether investors are prepared to buy at such elevated prices,” Ole Hansen, head of commodity strategy at Saxo Bank, said.

On the day gold closed up $24.70 at $2651.20, and silver closed up $1.34 at $32.11.

On Wednesday the rise in the price of gold slowed a bit today trading between $2662.00 and $2659.00 as traders sold early price gains. Gold did however finish the day mildly in the green. Gold has had a record breaking run this year and some traders expect further gains well into 2025. As usual I would suggest caution even as fundamentals and a strong technical picture reinforce each other. Why? Because much of this bullish gold scenario is based on the notion that the dollar will continue to weaken. That may be the case in the shorter term but surprisingly some academics suggest that the dollar might already be oversold and look for a shorter term bounce back in relationship to other world currencies. This may hinder higher gold prices next year, creating a less aggressive pricing picture. It is true that physical gold is the ultimate safeguard in times of economic emergency, but it is also true that the dollar has always enjoyed “safe haven” status especially in times of economic stress. So, look for the “aggressive pricing picture” to oppose the potential for a turnaround in dollar strength.

Reuters – Most banks expect gold’s bull run to persist into 2025 – “Major banks expect gold to extend its record-breaking price rally into 2025 because of a revival in large inflows to exchange-traded funds (ETFs) and expectations of additional interest rate cuts from prominent central banks around the world, including the U.S. Federal Reserve. “Strong physical demand from China and central banks supported gold prices over the past two years, but investor flow, and retail-focused ETF builds in particular, continue to hold the key to a further sustained rally over the upcoming Fed cutting cycle,” analysts at J.P. Morgan said in a note on Monday. Non-yielding gold has gained nearly $570 an ounce, or over 27%, so far this year, putting it on track for its biggest annual rise since 2010 and positioning itself as one of the standout assets of 2024. The precious metal hit a record high of $2,639.95/oz earlier on Tuesday and has notched record highs several times this year. “Despite reaching multiple highs this year and outperforming major stock indices, we believe gold has more room to run over the next six to 12 months,” analysts at UBS said in a note last month, adding that “key factors in our view include a revival of large inflows to exchange traded funds (ETFs) – something that has been missing since April 2022.” The Fed began its easing cycle last week with a half-percentage-point rate cut and forecast another 50 basis points of cuts by the end of this year and a full percentage point of cuts next year. Zero-yielding bullion tends to be a preferred investment in a low interest rate environment and during geopolitical turmoil. The Nov. 5 U.S. presidential election could also boost gold prices further as potential market volatility may drive investors towards safe-haven gold, analysts said. The following are a few gold projections by Reuters – Commerzbank ($2600 for mid-2025) – Goldman Sachs ($2700 by early-2025) – UBS ($2700 by mid-2025).

On the day gold closed up $8.00 at $2659.20, and silver closed down $0.41 at $31.70.  

On Thursday gold was choppy, trading between $2660.00 and $2685.00, finishing the day in the green. So the bulls remain happy, the price of gold being up every day since Monday. Using the monthly picture, gold has moved from $2520.00 through $2680.00, setting the stage for the big $2700.00 sooner than most figured. Still, a common question is are there any bears waiting to short this market? I don’t think so, and this upbeat feeling will likely remain in place if the FOMC remains dovish on interest rates. But let’s not get carried away, the next big step is $3000.00 and that is bit of a stretch without settling. There are two key reasons. First, gold has moved higher $800.00 this past year and $160.00 this past month. And second, continued dollar weakness is not necessarily a sure thing. The Dollar Index has moved 6 points lower this past 3 months which is so aggressive that some believe it may now be oversold. So a turnaround in the dollar and profit taking are reasons to believe that some kind of correction is in the making.

FXEmpire (Christopher Lewis) – Gold Continues to Fly – “The gold market continues to see a lot of buyers, as the price continues to climb overall. With this, the market is one that we will have to pay close attention to, as there are a lot of reasons for this to happen. Technical Analysis – Gold markets have rallied in the early hours of Thursday, again, as it looks like we are just going to continue to rip to the upside. That being said, it did look a little bit tired during the Wednesday session, and I do think it is probably only a matter of time before we get some type of pullback. It’s very difficult to buy gold all the way up here unless of course, you’re willing to have a stop loss that is going to be about $150. So, with that, unless you’re already involved, there isn’t a whole lot to do other than to wait for it to calm down and perhaps offer a little bit of value. If you’re already involved in gold, then again, there is not a lot there to do other than to let it take you to wherever it’s going. As far as where it’s going, I believe that could be the $3,000 level, but that’s a longer term call. That’s not something I’m expecting to see in the short term. Gold has performed quite well during the last three or four weeks, and I think that will only be accelerated by the fact that central banks are now clearly in a rate cutting mode, and of course, we have more than enough geopolitical concern out there to continue to drive money into the gold market. Interest rates dropping, geopolitical concerns, and lots of central banks, especially in Asia buying gold, all continue to make this a buy on the dips market. I currently have the $2,530 level as your floor.” Silver Markets Technical Analysis – The silver market has rallied a bit during the course of the early hours on Thursday, breaking above the recent swing high. The question now is whether or not we can hang on to these gains, because we are a bit stretched and it’s obvious that there is a lot of noise here. All things being equal, I do think this is a market that given enough time will break out to the upside and continue going much higher, but short-term pullbacks are most certainly likely at this extreme high. We have seen a lot of volatility in the early hours, and of course, silver by its very nature is much more volatile than gold and most other markets, so this is not a huge surprise. On a pullback, I think there will be plenty of buyers out there willing to get involved, and the $30 level now sets up an interesting floor in the market as the 50-day EMA is racing towards that psychologically significant figure. On the other hand, if we can close to a fresh new high, then it’s likely that silver will continue to rally rather significantly and take off for perhaps a move all the way up to the $50 level before it’s all said and done. Keep in mind that the Federal Reserve cutting interest rates by 50 basis points has people looking for hard assets and of course silver thrives in that environment. Furthermore, we also have the idea that it’s a bit of a knock-on effect from gold as central banks around the world continue to hoard the yellow metal. It tends to be felt in the silver markets as well.”

On the day gold closed up $10.70 at $2669.90, and silver closed up $0.33 at $32.03.

On Friday gold finished the week on a quiet note, as prices steadied moving between $2647.00 and $2677.00. This spread and the mild downward pricing trend suggests that traders see the latest Personal Consumption Expenditures (PCE) inflation data as cooling. Barrons (Megan Leonhardt) – Inflation Was Benign in August, Fed’s Preferred Metric Shows – “The Federal Reserve’s preferred inflation measure continued to show muted growth in August, providing more evidence that policymakers were on the right track with the recent interest rate cuts.”

Still, insiders are looking for a test of $2700.00 and some consolidation on the shorter term. In the longer term higher prices are just a matter of time even as inflation cools. The reasoning being is that these record prices for gold are fueled by the creation of too much fiat paper money. Even now there is little reason to believe that Congress will take the necessary steps to balance our budget. This is the old story of kicking the political can down the road. Whoever is in charge takes no responsibility for this mess so count on record prices for gold and silver in the future.

FXEmpire (James Hyerczyk) – Dollar Slide and Fed Rate Cuts Support Rally, But Correction Looms – “Gold prices are retreating slightly on Friday but remain within Thursday’s trading range, signaling indecision among investors as they await more decisive market drivers. Despite Thursday’s rally to a record high of $2,685.64, gold remains susceptible to a near-term correction as it continues to trade significantly above its 50-day moving average of $2,499.04. This moving average has provided solid support since mid-July. Weekly Gains Driven by Fed Rate-Cut Hopes – Although gold pulled back from its peak, the precious metal is poised for weekly gains, supported by growing expectations of further U.S. interest rate cuts. The Federal Reserve’s recent decision to lower rates by an aggressive 0.5% helped fuel a surge in gold, which has gained 1.8% so far this week. Anticipation for another cut later this year continues to provide strong tailwinds. Market analysts are increasingly factoring in a 51% chance of another 50-basis-point rate cut in November, according to the CME FedWatch Tool. Such cuts typically lower the opportunity cost of holding non-yielding assets like gold, further reinforcing its appeal. Kyle Rodda of Capital.com emphasized that gold prices are also benefiting from China’s economic stimulus efforts, which have been weakening the dollar. Dollar Weakness Supports Gold – The dollar has been in a downtrend for four consecutive weeks, amplifying the attractiveness of gold for holders of other currencies. As traders turn their attention to upcoming inflation data, U.S. Treasury yields have remained largely stable. The yield on the benchmark 10-year Treasury is hovering around 3.789%, with little movement ahead of key economic reports. Focus on Inflation Data and Market Sentiment – Investors are eagerly awaiting the release of the core personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, due later today. Economists are expecting headline PCE to show a 2.3% increase year-over-year and a slight 0.1% uptick from the previous month. Personal income and spending data will be released alongside the PCE figures, which will likely influence market sentiment and future Fed policy. According to BMI Research, ongoing geopolitical tensions, such as conflict in the Middle East and the upcoming U.S. presidential elections, are additional factors driving gold prices higher. These concerns, combined with expectations of a more accommodative monetary policy, support a bullish outlook for gold in the coming months. Bullish Outlook for Gold Prices – Given the ongoing geopolitical risks and the strong likelihood of further U.S. rate cuts, the near-term outlook for gold remains bullish. The dollar’s sustained weakness and market anticipation of dovish monetary policy from the Federal Reserve are expected to push gold prices higher. While a short-term pullback remains possible due to technical factors, any dips are likely to be viewed as buying opportunities. Gold is expected to continue its upward momentum, potentially testing new record highs in the coming weeks.”

On the day gold closed up $2.10 at $2646.40, and silver closed up $0.02 at $31.54.

Platinum closed down $2.70 at $1005.80, and palladium closed down $29.90 at $1014.40.

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 $2,800.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $2,600.00. First resistance is seen at the contract high of $2,708.70 and then at $2,725.00. First support is seen at the overnight low of $2,680.60 and then at Wednesday’s low of $2,673.40. December silver futures bulls have the solid overall near-term technical advantage. Prices are in a six-week-old uptrend on the daily bar chart. Silver bulls’ next upside price objective is closing prices above solid technical resistance at the May high of $33.50. The next downside price objective for the bears is closing prices below solid support at $30.00. First resistance is seen at this week’s high of $33.02 and then at $33.50. Next support is seen at the overnight low of $31.865 and then at $31.50.”

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