Gold – Safe Haven Demand Soars
Commentary for Friday, October 13, 2023 (www.golddealer.com) – Today gold closed up $58.10 at $1927.40, and silver closed up $0.94 at $22.73. Today is typical of the gold trade lately, in that just when you think you have all the pieces of the puzzle lined up correctly an unexpected event upsets the apple cart. Gold prices began to rise overnight in the Hong Kong and London markets and kept on going in the New York domestic trade. Gold finally wobbled around $1930.00 but held as Middle East tension escalated. The Washington Post – “Israel called on the entire population of the northern Gaza Strip — about 1.1 million people — to move south within the Palestinian territory within 24 hours. Israeli strikes are pounding the densely populated enclave and troops are amassing nearby, ahead of an anticipated ground incursion after Hamas militants staged one of the deadliest attacks in Israeli history. Hamas described the Israeli evacuation warning as psychological warfare and urged people not to comply. Gaza authorities said there was nowhere safe to go under siege, while health officials said it would be impossible to evacuate hospitals, which are already facing power shortages and dwindling supplies. The United Nations, also criticizing the order, warned of devastating humanitarian consequences.” Last Friday gold closed at $1830.20 / silver at $21.54 – on the week gold was higher by $97.20 and silver was higher by $1.19.
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.
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On Monday gold trended lower on the open ($1843.00) but quickly reversed direction as a surprise Hamas attack in Gaza over the weekend refocused safe haven in gold. While the upward trend this morning topped out around $1855.00 this kind of hostile activity by terrorist groups is difficult to assess. Especially in an already volatile region like the Middle East. My initial reaction is to discount safe haven demand once the violence quiets down, but you never know because such terror can quickly attract all kinds of splinter groups. Let’s be hopeful.
Today used to be called Columbus Day, it has been renamed Indigenous People’s Day. It used to be a national holiday, but these rules have also evolved. The bond markets are closed, the banks are closed, the post office is closed, and Brinks celebrates the holiday.
Reuters (Ashitha Shivprasad) – Safe-haven gold hits 1-week high on Middle East conflict – “Gold prices scaled a one-week high on Monday after military conflict between Israeli forces and Palestinian Islamist group Hamas raised political unrest in the Middle East, boosting demand for safe-haven assets. Israel’s troops were battling on Monday to clear out Hamas gunmen more than two days after they burst across the fence from Gaza on a deadly rampage. There are a lot of questions about what could happen next in the Middle East, if the situation further escalates, then gold prices could move towards $1,900, said Bob Haberkorn, senior market strategist at RJO Futures. Gold is considered a safe store of value amid political and economic turmoil. The S&P 500 and the Nasdaq fell, while crude prices jumped more than 3% as the Middle East violence rattled markets. Market focus is also on minutes from the Federal Reserve’s latest monetary policy meeting and the U.S. inflation data due later this week. “We do not believe the FOMC will continue to hike rates into increased uncertainty, and the prospect for peak rates have suddenly move closer despite the potential inflationary impact of higher oil prices,” Ole Hansen, head of commodity strategy at Saxo Bank, wrote in a note. Traders are now pricing in an around 28% chance of another rate hike from the Fed this year, according to the CME Fedwatch tool.
On the day gold closed up $19.30 at $1849.50, and silver closed up $0.20 at $21.74.
On Tuesday the gold trade seemed to cool, adjusting to yesterday’s Hamas attack which placed the Gaza Strip in turmoil. This points to early containment and less safe haven demand, in the short term. But this recent attack may suggest the violent and more extreme factions are gaining strength in an area which has been plagued with war for nearly 18 years.
This morning CNBC reports “The al-Qassam armed wing of Palestinian militant group Hamas said it launched hundreds of missiles at the southern Israeli city of Ashkelon, saying the attack was “in response to the displacement of civilians.” It comes shortly after al-Qassam’s deadline of 5 p.m. local time for Ashkelon citizens to leave the premises had passed. This is the fourth day of an ongoing lethal conflict between Hamas and the Israeli administration.”
The problem here is that all sides feel justified in striking out, which leads to escalation. I assumed the price of gold this morning would trend much higher. The fact that momentum has cooled suggests the world has again ignored the problem, hoping for an internal solution.
This is a revival of an old fight, and the international community understands the resolve on all sides. Still, they are hesitant to show leadership in resolving this human catastrophe because it will lead to more religious radicalism. What a tragic mess, pray for the Middle East.
Reuters (Harshit Verma) – Gold rally loses steam as yields edge up, stocks rebound – “Gold prices edged down on Tuesday after clocking a sharp rise in the last session as risk sentiment improved and bond yields rebounded, while investors awaited the U.S. inflation data due later this week. Gold prices edged down on Tuesday after clocking a sharp rise in the last session as risk sentiment improved and bond yields rebounded, while investors awaited the U.S. inflation data due later this week. Gold rose about 1.6% on Monday, its biggest one-day jump in five months, as military clashes between Israel and Palestinian Islamist group Hamas boosted demand for safe-haven investments. “Markets remain responsive to further signs of escalation and further events that unfold over the coming days. But for now, it seems that markets have settled down,” said Craig Erlam, senior markets analyst at OANDA. Gold has run into resistance at $1,865, with some initial profit taking on the back of two very positive days backed by risk aversion and the U.S. Federal Reserve’s balanced commentary, Erlam added. European stocks rebounded sharply on Tuesday as dovish comments from Fed policymakers and easing oil prices helped calm investor nerves. The military conflict in the Middle East is threatening more volatility for investors, adding to uncertainty ahead of the corporate earnings season and crucial U.S. Consumer Price Index data on Thursday, which could offer more visibility on the Fed’s rate-hike path. Fed Vice Chair Philip Jefferson and Dallas Fed President Lorie Logan said on Monday that the recent run-up in yields may reduce the need for further interest rate hikes. Benchmark 10-year Treasury yields rose to 4.7049%, decreasing the appeal for non-yielding bullion. In the longer run, however, U.S. rates will be the bigger driver, said Kyle Rodda, financial market analyst at Capital.com, adding that yields are broadly very positive “and that’s kryptonite for gold”.
On the day gold closed up $11.50 at $1861.00, and silver closed up $0.04 at $21.78.
On Wednesday the gold trade remained choppy with an upward bias, trading between $1868.00 and $1877.00. The fact that gold is up from recent lows is a plus for bullish sentiment, but professional traders remain cautious. The dollar is moving lower, and this helps fill in that base support. Troubles in the Middle East may further support higher gold and higher oil prices.
The Dollar Index peaked a week ago at 107.00 and is currently trading around 105.50. This weakness is likely transitory but a substantial drop like this braces the bullish gold scenario. As does the notion that bond yields may become unstable. The Hamas conflict could easily turn into another fundamental reason to own physical gold. Especially if the warring parties become more violent and they lose control of their most militant factions.
FXEMPIRE (Cristopher Lewis) – Gold Price Forecast – Gold Markets Rally – “Gold has completely ignored the PPI numbers coming out twice what they were expected to be in the United States, and despite the fact that inflation is so strong, it looks like the traders in the markets are going to continue to see gold at least attempt to rally. The CPI numbers on Thursday will probably be much more impactful, and it’s probably worth noting that the 50-Day EMA is getting ready to cross below the 200-Day EMA, kicking off the so-called “death cross.” We also have the $1900 level in that general vicinity, which of course has a lot of market memory attached to it. Gold will continue to move right along with bond markets, so pay close attention to those yields. If those yields start to turn around and rally again, that will be absolutely toxic for gold. Given enough time, there could come in the “safety trade”, into the gold market at least, which may be part of what we have seen over the last couple of days. The $1800 level underneath is a major support level, and an area that would be difficult to break through. In general, this is a market that I believe continues to be noisy, but it has had a nice relief rally, something that probably get sold into. On the other hand, if we break above those moving averages above, that opens up the possibility of a move to the $1950 level, and then possibly even the $2000 level. That being said, I don’t think it’s going to be an easy move to make that happen, but if we get above those moving averages, I would assume that we should eventually get to that $2000 level. All things being equal, you need to be cautious with your position sizing but I do recognize that it’s also become a bit of a short-term trading environment. That’s probably true with most markets around the world, so I don’t know that gold would or should be any different at this point in time. We’ve had a nice rally, but we still have a long way to go to change everything in the opposite direction.”
On the day gold closed up $11.80 at $1872.80, and silver closed up $0.18 at $21.96.
On Thursday the bulls should be happy with gold’s short-term bottom ($1820.00) and subsequent rise to recent highs approaching $1880.00. Inflation looks stubborn, the Middle East and Hamas continue to threaten. Fed uncertainty binds these volatile factors into an uncertain trade which will likely be prolonged for months.
And the price of gold again faces two old nemeses. The rising certainty of higher interest rates over the longer term and the tough price ceiling which remains above $1900.00. This trading model is not new, but it is predictable.
Expect paper traders, especially at these higher levels, to sell rallies. And aggressively buy weakness. This gives everyone plenty of time to sit tight and wait for something to give.
You should have a pressure cooker trade at this point because there is plenty going on, but the daily price spreads are uneventful. Patience will be needed, but not necessarily rewarding.
Reuters (Ashitha Shivaprasad) – Gold trims gains as yields, dollar rise after US inflation data – “Gold prices pared gains on Thursday as dollar and Treasury yields ticked higher after U.S. consumer prices rose more than expected in September and raised worries that the Federal Reserve could keep rates higher for some time. The consumer price index increased 0.4% last month after a 0.3% gain in August, the Labor Department said. However, year-on-year consumer prices have come down from a peak of 9.1% in June 2022. “The warm CPI print might be enough to slow gold’s formidable rally into a consolidation but in itself shouldn’t trigger a serious selloff especially given high geopolitical tensions,” said Tai Wong, a New York-based independent metals trader. Traders now see a 40% probability of a rate hike in December from the Fed, according to CME Fedwatch tool, compared with about a 28% chance seen before the report. U.S. benchmark 10-year yields and dollar index rose after the data. Offering support to safe-haven gold, the escalating conflict between Israel and Palestinian militant Islamist group Hamas has kept investors on the edge. Gold is used as a safe investment during times of political and financial uncertainty, but higher interest rates raise the opportunity cost of holding non-yielding bullion. “There are still some signs that there is a slowdown in the U.S. economy, this should benefit gold. I anticipate prices could trade in the $1,860-$1,920 range in the near term,” said Edward Moya, senior market analyst at OANDA.”
On the day gold closed down $3.50 at $1869.30, and silver closed down $0.17 at $21.79.
On Friday the price of gold moved dramatically higher as years of tension within the Gaza Strip boiled over into fierce fighting between factions. The fact that Hamas has taken and threatened to kill hostages raises the stakes considerably. This escalation in a small area already devastated by decades of conflict has focused attention on a perennial question.
Should you negotiate with terrorists, under any conditions? The divisions here are deep, long standing and rooted in opposing religious views. But I believe that negotiation with an open mind to both sides of the problem is sensible in a complicated world. If Israel continues with its proposed ground assault within Gaza it provides little hope for the innocent.
As far as the gold trade is concerned, easing this escalation would weaken prices. It would also encourage the short trade which has been helped by the belief that interest rates have peaked.
Reuters (Ashitha Shivaprasad) – Gold gains on safe-haven inflows, set for best week since March – “Gold jumped more than 2% and was set for its best week in seven months on Friday, as conflict in the Middle East lifted safe-haven demand for the metal, combined with expectations that the U.S. interest rates may have peaked. Expectations of an escalation in the conflict between Israel and Islamist group Hamas is mainly pressuring yields and driving gold prices higher, said David Meger, director of metals trading at High Ridge Futures. Israel called for all civilians in the northern half of the Gaza Strip to relocate south within 24 hours, as it amassed tanks for an expected ground assault in response to an attack by Hamas. Gold is considered a safe investment during times of geopolitical and economic turmoil. “Despite yesterday’s warmer than expected inflation report, currently there is an expectation that Fed will not hike rates in the November meeting, which is also helping prices.” U.S. Treasury yields and the dollar fell, having strengthened in the last session after data showed U.S. consumer prices increased in September. Traders currently see around a 67% chance of the Fed leaving interest rates unchanged this year, according to the CME Fedwatch tool. In the physical gold market, a rebound in domestic prices dulled activity in India, while premiums in China retreated further from recent highs.”
On the day gold closed up $58.10 at $1927.40, and silver closed up $0.94 at $22.73.
Platinum closed up $8.50 at $875.50, and palladium closed up $9.40 at $1148.70.
Jim Wycoff (Kitco) – “Technically, the gold futures bears still have the overall near-term technical advantage. However, bulls have momentum and recent price action begins to suggest a market bottom is in place. Prices are still in a four-month-old downtrend on the daily bar chart. Bulls’ next upside price objective is to produce a close in December futures above solid resistance at $1,950.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at the October low of $1,823.50. First resistance is seen at $1,913.60 and then at $1,922.00. First support is seen at the overnight low of $1,881.50 and then at Wednesday’s low of $1,871.70. The silver bears still have the overall near-term technical advantage. Prices are still in a downtrend on the daily bar chart. However, the bulls have gained momentum this week to begin to suggest a market bottom is in place. Silver bulls’ next upside price objective is closing December futures prices above solid technical resistance at $23.00. The next downside price objective for the bears is closing prices below solid support at the October low of $20.85. First resistance is seen at $22.555 and then at $23.00. Next support is seen at $22.00 and then at this week’s low of $21.70.”
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