Gold – Rhetoric Verses Reality
Commentary for Friday, July 19, 2024 (www.golddealer.com) – Today gold closed down $56.30 at $2395.50, and silver closed down $0.91 at $29.09. On Tuesday gold finished up a whopping $39.50 as the bulls roared looking forward to even higher prices as the expectation of lower interest rates gained traction. On Friday the price of gold plunged, reaching $2395.00 in a matter of minutes as the bears roared sending the bulls to the sidelines. This is a great example of oversized expectations meeting up with powerful profit taking motivation. Now let’s decorate this already high voltage trade with a presidential election so unique that investors can’t figure out which person carries the most baggage. As President Biden assures the Democrats he can handle another term, Trump is welcomed back by the same Republican party that splintered over his reelection the last time around. Welcome to the upside down world of free money, rising debt, and political intrigue. Last Friday gold closed at $2414.00 / silver at $30.89. On the week gold was down $18.50 and silver was down $1.80.
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On Monday the price of gold was firm, moving to $2435.00 before settling somewhat, and finishing the day mildly in the green as the chance of a dip in interest rates improves.
Reuters notes that a Florida judge handed Trump a political victory ruling the prosecutor was unlawfully appointed. Still, the outcome of the election is problematic, so remember Lincoln’s famous remark: “the hen is the wisest of all the animal creation because she never cackles until the egg is laid”. The technical picture for gold remains a plus. Keep in mind however that traders have tested $2434.00 on three different occasions since April, and gold has failed on all three attempts, so overhead resistance looks tough and should be on everyone’s mind.
FXEmpire (James Hyerczyk) – Gold Edges Higher as Market Hovers Near Resistance – “Gold prices are inching upward on Monday after reversing earlier gains, with the precious metal testing resistance near recent highs. Traders are closely monitoring U.S. Treasury yields and dollar movements while awaiting comments from Federal Reserve officials and crucial economic data. At 11:21 GMT, XAU/USD is trading $2418.26, up $7.34 or +0.30%. Market Forces and Political Factors – The dollar’s strength, bolstered by safety bids following an attempted assassination of former U.S. President Donald Trump, is creating headwinds for gold. A robust dollar typically makes gold more expensive for foreign buyers. However, the impact of potential political outcomes on gold remains uncertain, with analysts suggesting that renewed trade tensions could benefit the metal. Fed Watch and Economic Indicators – Investors are eagerly anticipating remarks from Fed Chair Jerome Powell and other officials this week. Key economic releases, including U.S. retail sales, industrial output for June, and weekly jobless claims, will be scrutinized for clues about the Fed’s future rate decisions. Ilya Spivak, head of global macro at Tastylive, notes that a significant miss in retail sales could reinforce expectations for rate cuts, potentially supporting gold prices. Interest Rate Expectations – The CME Fedwatch Tool indicates a 93% probability of a Fed rate cut in September, which could boost gold’s appeal. Non-yielding bullion typically benefits from lower interest rate environments. U.S. Treasury yields remain mixed, reflecting investor uncertainty about the economic outlook and monetary policy direction. Global Economic Considerations – China’s economic slowdown in the second quarter has fueled expectations for additional stimulus measures, which could impact gold demand from this key metals consumer. Market Forecast – The short-term outlook for gold appears cautiously bullish, despite hovering near resistance levels. The critical level to watch is $2,450, with a breakthrough potentially leading to new record highs. However, gold must first overcome the recent high of $2,424.50 and the double-top formation at $2,431.59 to $2,450.13. This resistance zone is crucial for determining gold’s next significant move. Upcoming Fed comments and economic data releases will likely be pivotal in shaping gold’s direction. If retail sales data disappoints, it could strengthen the case for rate cuts and provide support for gold prices. Traders should remain vigilant, as the interplay between economic indicators, Fed policy expectations, and geopolitical factors will continue to influence gold’s performance in the near term. Technical Indicators – XAU/USD is rebounding on Monday after early session weakness. The price action suggests intraday investors are gathering the momentum needed to continue last week’s rally with their eyes set on the bullish trigger point at $2424.60. The potential target is $2450.13, the May 20 main top. The key support is the 50-day moving average at $2359.55. This indicator is controlling the intermediate trend. Despite the market’s strength, the distance between the current price and the moving average makes the market vulnerable to the downside should the fundamentals change.”
On the day gold closed up $8.90 at $2422.90, and silver closed off $0.22 at $30.67.
On Tuesday the price of gold continued higher as the possibility of a September rate cut gathered momentum. The notion that Powell has already turned dovish, however, may be misplaced because traders have seen such sentiment before and for various reasons have ultimately been disappointed. And as mentioned yesterday, the overhead resistance in gold at these lofty levels is formidable. Now consider that with gold up a $100.00 this month and $450.00 year over year, profit taking rounds should be at least a consideration.
A break to the upside is not unreasonable because of the geopolitical mess here and abroad. With today’s strong move to the upside gold is already threatening $2500.00. If our shiny friend breaks through this tough overhead resistance all bets are off because this dynamic may have a life of its own. Still, a more cautious approach to the upside makes sense, while keeping your seat belts fastened. The price of gold usually keeps everyone honest in the long term but this time around it is difficult to say what may happen, with presential elections around the corner.
Reuters (Polina Devitt) – Gold rises with US rate cut optimism, close to record high – “Gold prices rose on Tuesday as comments from Federal Reserve Chair Jerome Powell bolstered the case for a September rate cut, while investors awaited more U.S. economic data for further monetary policy cues. Spot gold gained 0.8% to $2,440.29 per ounce by 1207 GMT. The bullion hovers only slightly below the record high of $2,449.89 hit on May 20. Powell said on Monday the three U.S. inflation readings over the second quarter of this year “add somewhat to confidence” that the pace of price increases is returning to the Fed’s target in a sustainable fashion. Investors were awaiting U.S. retail sales data due at 1230 GMT on Tuesday for further direction. Gold prices rose on Tuesday as comments from Federal Reserve Chair Jerome Powell bolstered the case for a September rate cut, while investors awaited more U.S. economic data for further monetary policy cues. Spot gold gained 0.8% to $2,440.29 per ounce by 1207 GMT. The bullion hovers only slightly below the record high of $2,449.89 hit on May 20. Powell said on Monday the three U.S. inflation readings over the second quarter of this year “add somewhat to confidence” that the pace of price increases is returning to the Fed’s target in a sustainable fashion. Investors were awaiting U.S. retail sales data due on Tuesday for further direction. However, with the expected nearing of rate cuts, global physically backed gold exchange-traded funds (ETFs), another crucial category of demand, started purchases again after several years of outflows. Gold ETFs, storing bullion for investors, saw inflows last week of $0.5 billion, or 7.6 metric tons, according to the World Gold Council. Among other metals, spot silver fell 0.7% to $30.78 per ounce, platinum lost 0.2% to $993.10 and palladium was down 0.7% at $943.19.
On the day gold closed up $39.50 at $2462.40, and silver closed up $0.53 at $31.20.
On Wednesday most were expecting more of a “bang” in prices considering yesterday’s strong move to the upside. And gold’s increasingly strong technical picture. It is surprising that the best gold could do in the early trade was up a few dollars and it finished the day mildly in the red! Perhaps the first round of profit taking? At any rate let’s call this a good example of the kind of “caution trade” I talked about yesterday. And there is an elephant in the living room. If the Fed’s easing cycle is already priced into today’s gold close, expectations between now and end of the year will sadly disappoint most bulls.
Still, you can’t argue with the numbers, with gold nicely above $2400.00, up $150.00 this month and $510.00 year over year. Just don’t get too carried away here as the political “noise” increases and some traders believe $2600.00 gold is right around the corner. A bullish market feeds on its own rhetoric until it runs out of energy. The latest trading information is whipping itself up with the expectation of higher and higher prices. So, a bit of wisdom might prove insightful.
Take at least some of this bullish happiness with a “grain of salt”, an English idiom meaning to “view or consider something with skepticism.” When someone uses this expression, they suggest that the information provided may not be credible and should be received with reservation.
Reuters (Rahul Paswan) – Gold extends record rally on Fed rate-cut bets, softer dollar – “Gold prices extended rise to a fresh all-time high on Wednesday, as growing optimism for an interest rate cut from the U.S. Federal Reserve in September and a weaker dollar boosted demand. Spot gold rose 0.5% at $2,480.75 per ounce as of 1402 GMT, after hitting an all-time high of $2,482.29 earlier in the session. U.S. gold futures gained 0.7% to $2,485.30. “The expectation that we are getting closer to a Fed interest rate cut and we’ve seen this as yields continue to slowly grind lower in anticipation, that, along with a weaker dollar, are the main supportive factors behind this gold move,” said David Meger, director of alternative investments and trading at High Ridge Futures. More Fed policymakers have suggested they are getting increasingly comfortable that the pace of price increases is more firmly on track, back down to the Fed’s goal, after higher-than-expected readings earlier in the year. Fed Governor Christopher Waller said the time for a U.S. central bank interest rate cut “is drawing closer”, but uncertainty about the path of the economy makes it unclear when a lowering in the cost of short-term borrowing might happen. Data showed production at U.S. factories increased more than expected in June, contributing to a solid rebound in output in the second quarter. Markets now see a 98% chance of a U.S. rate cut in September, according to the CME FedWatch Tool, opens new tab. Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies. The U.S. unit weakened 0.5% to near a four-month low against a basket of currencies. Elsewhere, silver fell 1.2% to $31.01 per ounce. Platinum rose 1.3% to $1,013.07 and palladium steadied at $959.25.”
On the day gold closed down $7.60 at $2454.80, and silver closed down $1.06 at $30.14.
On Thursday the bulls were smiling this morning as gold drifted higher, moving into the $2465.00 range even as the Dollar Index bounced off recent lows. Still, it could not hold the high ground and finished the day mildly in the red. Yet the trading mood continues surprisingly upbeat as two Fed governors turn dovish on interest rates. The playbook for higher prices may be in place but I think the move towards $2500.00 will be rocky. It is not encouraging that the European Central Bank left their interest rate structure unchanged although ECB President Christine Lagarde sweetened the pot by saying that a move in September was “wide open”. Still not all the “informed” are bullish. Christopher Lewis (FXEmpire) – Gold Continues to Look a Bit Stretched – “Plenty of traders out there will be looking for a buy on the dip opportunity due to geopolitical concerns and of course interest rates around the world possibly dropping. In general, I think this is a market shooting straight up in the air that just quite frankly needs to collect more buyers, whether that is through cheaper pricing or just being comfortably elevated, that doesn’t really matter.” The general mood is still one of anticipation in my view and I can tell you that across our trading desk a few whales have appeared this week.
Reuters (Sherin Elizabeth Varghese) – Gold clings to record high on growing US rate-cut bets – “Gold prices firmed on Thursday to hover near a record peak hit in the previous session, as traders ramped up bets of an earlier start to interest-rate cuts by the U.S. Federal Reserve, constraining gains in the dollar and Treasury yields. Spot gold was up 0.3% at $2,464.90 per ounce as of 1155 GMT, having hit an all-time high of $2,483.60 on Wednesday. U.S. gold futures also climbed 0.3% to $2,468.20. “Gold continues to shine on growing speculation around lower U.S. interest rates this year. Recent dovish comments by Fed officials, complemented with a broadly weaker dollar and subdued Treasury yields have sweetened appetite for the precious metal,” said FXTM senior research analyst Lukman Otunuga. Further signs of the U.S. labor markets cooling and more dovish remarks by Fed officials could keep this upside momentum alive, opening doors to fresh all-time highs, Otunuga added. Fed Governor Christopher Waller and New York Fed President John Williams both noted the shortening horizon toward looser monetary policy. Separately, Richmond Fed President Thomas Barkin said he was “very encouraged” on broadening declines in inflation. Lower rates increase the appeal of non-yielding bullion. Gold price will continue to trade higher during the second half of 2024, analysts said in a brief review conducted by LBMA. According to the World Gold Council, global physically backed gold exchange-traded funds recorded their second consecutive month of inflows in June. However, “the surge in (gold) price has stifled the physical markets in south and southeast Asia, with buying evaporating and some selling coming back. This is not unusual, and the buyers will return once they have acclimatized to the new range,” said StoneX analyst Rhona O’Connell in a note. Over the next six to 12 months, Citi expects gold to rise $2,700-$3,000 per ounce and silver to climb $38 per ounce. Spot silver rose 0.3% to $30.39 per ounce, platinum firmed 0.2% to $996.22 and palladium lost 0.1% to $950.50.”
On the day gold closed down $3.00 at $2451.80, and silver closed down $0.14 at $30.00.
On Friday the price of gold was unstable, even scary as the bulls ran for cover in one of the most confusing trading weeks I have seen in a long time. Sentiment moved from positively bullish early in the week to absolutely bearish by the end of the week. It is too early to assess the damage done to the bullish side of this equation. Traders, however, will watch carefully to see when the “bounce” is finally apparent. In other words, will bargain hunting reappear quickly, which I suspect is the case. Or will pessimism linger, and prices drift lower? Standing aside for the present may prove rewarding, or at least eliminate some of this drama. This latest explosion will settle quickly, but there is a good chance it will reappear between now and the election.
FXEmpire (Chistopher Lewis) – Gold Plunges in The Early Hours of Friday – “The gold market plunged in the early hours of Friday, as the market participants seemingly jumped back into the US dollar. The $2400 level now becomes very important in the short term, and it will be worth paying attention to. Gold Markets Technical Analysis – The gold market plunged quite drastically during the early hours on Friday, as it looks like we are hell bent on racing towards the $2,400 level. I find this interesting because I think that could be a good entry point. We’ll have to wait and see. What I want to see is the market test that area and then bounce and hold it. If it does, it makes a lot of sense. That was an area that was previously resistant to prices. The 50-day EMA is closer to the $2,350 level, but it is rising at a pretty sharp angle. So, it does suggest that perhaps the market is going to continue to see value hunters. A lot of this will come down to the US dollar and what it’s doing, and it’s probably worth noting that the US dollar is strengthening, so that is causing a little bit of trouble for gold. Nonetheless, this is a market that has plenty of things going for it, not to mention geopolitical issues. And of course, central banks around the world are buyers of gold as well. Interest rate cuts should help gold, at least in theory, so we’ll have to wait and see how that plays out. But I think any bounce at this point in time probably sends the market straight back up. So, I believe that the Friday candlestick is going to be very crucial in determining whether we buy it here or if we maybe let it come back into the previous consolidation before buying it.”
On the day gold closed down $56.30 at $2395.50, and silver closed down $0.91 at $29.09.
Platinum closed down $12.20 at $962.50, and palladium closed down $27.20 at $899.10.
Jim Wycoff (Kitco) – “Technically, August gold bulls still have the solid overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at the record high of $2,488.40. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $2,350.00. First resistance is seen at $2,425.00 and then at the overnight high of $2,448.40. First support is seen at $2,400.00 and then at $2,375.00. September silver futures bulls have the slight overall near-term technical advantage but have faded badly this week. 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 the June low of $28.90. First resistance is seen at $29.50 and then at $30.00. Next support is seen at $29.00 and then at $28.90.”
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