Gold – Short Term Uncertainty
Commentary for Friday, June 14, 2024 (www.golddealer.com) – Today gold closed up $31.20 at $2331.40, and silver closed up $0.41 at $29.40. Gold and silver prices are still trying to get on their feet after the rather dramatic reaction to last week’s economic and inflation rhetoric. But gold and silver traders seemed to shake off this hangover as both finished the day in the green. This trading week has been a series of up and down drafts driven by interest rate confusion. The Fed kept rates steady on Wednesday and is now looking for only one rate cut in 2024 despite inflation progress. Chief Powell’s public comments after the meeting open the door to a more liberal understanding of inflation and is reflected in the rising optimism that rates will be cut by September. Yet even a small rate cut will put the bulls in the driver’s seat as some economists now claim Fed policy is outdated. The National Association for Business Economics poll published Monday showed 21% of respondents considered the US central bank’s current monetary policy stance to be “too restrictive” – the most since 2011. Insiders will, of course, keep their seatbelts fastened and expect more volatility. Last Friday gold closed at $2305.20 / silver at $29.34 on the week gold was higher by $26.20 and silver was higher by $0.06.
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On Monday the price of both gold and silver steadied. A big relief to traders after last Friday’s debacle in which gold fell $65.10 and silver followed along losing $1.92. Today the price of gold moved between $2294.00 and $2310.00, and silver moved between $29.45 and $29.80. While today’s price ranges may not seem worth noting, they are calming to everyone concerned because many believed today would be a continuation of the steep declines we saw last week. This is a relief rally for lack of better words, and prices will be watched carefully this week.
Friday’s market rhetoric which created this surprise mess was hyperbolic and suggested that a seismic shift in demand and inflation may be in the making. But in hindsight was probably overdone. The problem with the CFTC’s leveraged paper trade is that it can move from bullish to bearish on a dime, creating the volatility we saw last Friday. For now the bulls are happy that prices are not moving lower. The bears are ready, just in case lower prices are right around the corner. That being said the possibility of even lower prices should be part of your defensive plan.
A reminder that physical markets should be approached with a longer view in mind. Buying the dips make sense but under the circumstances use caution. If you believe we are moving lower soon, adjust your total position and calm your situation. Keep in mind that even with the dramatic dip in the price of gold and silver, gold is holding around $2300.00 and silver around $30.00…not exactly the end of the world if you get my drift. This is still a “stay tuned” market.
Reuters (Harshit Verma) – Gold ticks up after sharp sell-off; focus shifts to US inflation data, Fed – “Gold prices regained some ground on Monday, after dropping the most in three-and-a-half years in the previous session, as data out of China and the U.S. disappointed speculators betting on Chinese demand and an interest rate cut by the Federal Reserve. Spot gold was up 0.5% at $2,304.92 per ounce as of 1200 GMT. Meanwhile, U.S. gold futures fell 0.1% to $2,323.20. Bullion lost about $83 on Friday, declining 3.5% in its biggest one-day drop since November 2020 after a stronger-than-expected U.S. jobs report dented hopes for a September rate cut and news on China’s central bank holding off gold purchases put off investors betting on Chinese demand. “People’s Bank of China (PBOC) has never been a constant buyer. There have been distinct phases of buying followed by multi-month breaks. But, as long as the PBOC doesn’t resume buying, gold prices could trade sideways because the China buying topic is a key market focus,” Julius Baer analyst Carsten Menke said. “Given that we had this decisive sentimental move on Friday, I’d be very surprised if we get a similar-sized volatility outbreak this week again unless there’s a major surprise on the CPI side or the Fed side, but that seems quite unlikely.” Market focus has shifted to the U.S. consumer inflation report, due on Wednesday, the same day as the Fed’s policy decision. The U.S. central bank is not expected to make any change this week, and focus will be on comments from Fed Chair Jerome Powell and changes to economic projections from policymakers. Bets of the Fed cutting rates in September fell to 49% from around 70% before the jobs data. “We expect a lift in the Federal Reserve’s median “dots plots” to two cuts in 2024 (from three); but inflation should still moderate, and a September cut is our base case,” UBS said in a note. Spot silver rose 2.1% to $29.77 per ounce, platinum was up 0.1% at $964.73 and palladium climbed 0.7% to $918.55.”
On the day gold closed up $2.50 at $2307.70, and silver closed up $0.43 at $29.77.
On Tuesday the price of gold climbed to $2318.00 and silver to $29.50 which is a bit surprising considering the Dollar Index has moved from 104.00 through 105.50 since last Friday. This may provide some encouragement to the bulls in that it suggests interest in the metals even as bearish sentiment is moving higher. Both gold and silver closed virtually unchanged today, but this trade feels heavy even considering the small respite the bulls enjoyed yesterday.
The FOMC meets today and Wednesday, expectations being that the Fed will leave interest rates unchanged. Which is a challenge to current support levels for both gold and silver. Chief Powell will speak publicly this week, and he has a way of convincing the crowd that they can have their cake and eat it too. Still, many are beginning to believe interest rates will remain “higher for longer”. Which suggests lower metal prices may still be in the cards.
This quandary may not take long to resolve, which is a plus for the metals. If prices do move lower, it actually increases stability given that gold and silver do not fall out of bed. An event most professionals do not think has much of a possibility even with all the short term drama.
FXEmpire (James Hyerczyk) – Gold Prices Decline as Dollar Strengthens and Fed Meeting Approaches – “Gold prices remain under pressure, continuing their bearish trend after a steep sell-off last Friday. The metal is trading below its 50-day moving average, indicating weakness in the intermediate term. At 10:38 GMT, XAU/USD is trading $2307.650, down $3.345 or -0.14%. U.S. Dollar Gains Ahead of Key Reports – “On Tuesday, gold prices fell as the U.S. dollar strengthened. Investors are positioning themselves ahead of a crucial U.S. inflation report and the Federal Reserve’s interest rate forecasts. The dollar’s rise of 0.1% makes gold more expensive for holders of other currencies, reflecting their inverse relationship. Support Levels and Market Focus – “Gold is nearing the support level at $2,277.34. If the upcoming Consumer Price Index (CPI) report shows higher-than-expected inflation, the likelihood of the Fed delaying rate cuts could push gold prices below this level. Furthermore, if the Fed’s dot plot indicates minimal or no rate cuts this year, gold could face additional downward pressure. Federal Reserve Meeting and Projections – “The Federal Reserve’s June meeting starts on Tuesday, with a policy decision expected on Wednesday. The Fed is widely expected to keep interest rates unchanged. However, economic projections are anticipated to show fewer rate cuts than previously expected due to persistent inflation. High interest rates reduce the attractiveness of non-yielding assets like gold, as investors prefer bonds and other yielding investments. Treasury Yields and Investor Sentiment – “U.S. Treasury yields fell on Tuesday as investors awaited the Fed’s policy decision and key economic data. The 10-year Treasury yield dropped four basis points to 4.4256%, while the 2-year Treasury yield fell to 4.8488%. Investors are closely watching the Fed’s guidance for any hints about future policy moves. Market Forecast: Bearish Outlook – “Considering the current strength of the U.S. dollar, the approaching CPI report, and the expected Fed stance on interest rates, the short-term outlook for gold remains bearish. If inflation data and Fed projections support a delay in rate cuts, gold prices are likely to break below the key support level of $2,277.34. Traders should stay vigilant and monitor these developments closely as they impact the gold market. Technical Analysis – “XAU/USD’s intermediate trend continues to be controlled by the 50-day moving average, which is showing signs of flattening after providing support and direction since February 29. This makes $2344.03 the key level to watch today. A sustained move under the 50-day MA will signal the presence of sellers. If this creates enough downside momentum, then look for the selling to possibly extend into the last swing bottom at $2277.34. This is a potential trigger point for an acceleration to the downside with the next target bottom coming in at $2146.15.”
On the day gold closed down $0.20 at $2307.50, and silver closed down $0.64 at $29.13.
On Wednesday the price of gold surged in the early domestic trade, a surprise challenge to $2340.00, which quickly settled. Still, gold finished nicely in the green for the day. This challenge was high enough to convince some traders that gold may be oversold. That remains to be seen but inflation numbers seem to have cooled in May which could give the Fed room to ease interest rates later this year. This story has faded in and out of the daily metals trade for months so while it does gather interest some believe this inflation data may be transitory and therefore discounted to some degree. The Fed has made no secret about its primary mandate to tame these still strong inflation numbers. Which to me suggests that rates will remain unchanged, perhaps through the end of this year obviously discouraging bullish sentiment. The question at this point is how much gold will be discounted before the Fed begins to lower rates?
Reuters (Brijesh Patel and Ashitha Shivaprasad) – Gold rush to endure through 2024 though $3,000 mark may prove elusive – “Gold’s lightning rally to successive record highs shows every sign of continuing in the second half of 2024 as the fundamental case for bullion remains firmly in place, though $3,000 per ounce looks just out of reach, traders and industry experts said. Investors have flocked in droves towards the precious metal, driven by expectations for monetary easing, geopolitical tension in Europe and the Middle East and – most notably – central bank purchases led by China. Spot gold is trading around $2,300 per ounce after hitting a record $2,449.89 on May 20, gaining more than 11% so far this year. “There are lots of reasons driving gold right now…, but one of the major factors is China,” Ruth Crowell, CEO of the London Bullion Market Association, told Reuters on the sidelines of the Asia Pacific Precious Metals conference in Singapore. “Usually, China and Japan have been budget shoppers, but given the state of the economy, real estate challenges and equity markets, gold is a safe choice… I think gold is going to be of interest for some time.” Central banks across the globe, especially China, have been ramping up reserves held in gold due to currency depreciation and geopolitical and economic risks. Bullion is traditionally known as a favored hedge against geopolitical and economic risks, thriving in a low-interest rate environment. Physical demand for gold is strong, but we have not seen retail investment demand coming in yet like exchange-traded funds, demand from the United States…I see prices reaching $2,600 – $2,700 very easily this year,” said Amar Singh, Head of Metals – Asia Pacific and Middle East at StoneX. As investors seek clarity on the timing of interest rate cuts from the Federal Reserve, the November U.S. elections are likely to add more volatility to the market, analysts said. While most of the analysts and traders remain bullish on gold, the possibility of the precious metal surpassing $3,000 per ounce looks remote at this point, they said. “It’s not a case of some particular factor holding back gold but rather that $3,000 would mean another 30% from here, which is quite a lot given we have already had some hefty gains,” said Nikos Kavalis, managing director, Metals Focus. Silver Performs – Silver, both an investment asset and an industrial metal used in electronics and solar panels, has performed well on the back of gold’s strength and firm physical demand. The metal was trading at $29.20 per ounce on Tuesday, close to a more than 11-year peak scaled in May. “The future is bright for silver with respect to its use in green energy transition. Also, there is further room for gold prices to go higher and silver prices will follow as well,” said Michael DiRienzo, president & CEO of The Silver Institute. India’s silver imports in the first four months of the year have already surpassed the total for all of 2023, on rising demand from the solar panel industry and as investors bet on an outperformance versus gold, government and industry officials told Reuters last month. The silver market is currently in the fourth year of a structural market deficit due to expectations of higher industrial demand, Metals Focus said in research produced for industry body the Silver Institute.”
On the day gold closed up $28.50 at $2336.00, and silver closed up $1.05 at $30.18.
On Thursday gold was choppy between $2325.00 and $2295.00, so was silver moving between $29.70 and $28.40. Both metals tested support after weeks of mixed sentiment and each finished the day in the red as they struggled against the specter of higher interest rates. The daily price swings in gold have been volatile this month. But it is trading today for the same price as it was 30 days ago, so short term gains have evaporated. Its price gain over the past year, however, is higher by $400.00, suggesting that profit taking is becoming a more important option.
At the same time the Fed seems to have turned a bit to the dovish side judging by Powell’s public statements this week. Gold is still holding around $2300.00 and silver around $29.00 but these support levels are being tested and the technical picture of both metals has lost its buzz, leading to speculation that lower prices may be in the offing. Still this recent Barron’s headline is a plus for the bulls – “Markets remain confident of cuts despite the Fed.” For now, however, higher interest rates create a volatile market, uncertainty and lower prices.
FXEmpire (Christopher Lewis) – Gold Markets Continues to Show Noise – “The gold market fell a bit during the trading session on Thursday, as it looks like we are testing the $2,300 level again, and of course we are trading right around the 50 day EMA. In general, this is a market that I think will continue to see a lot of noisy behavior and that does make a certain amount of sense considering that the markets have a lot to try to digest in the form of geopolitical events, the interest rate situation, and of course, just profligate spending by the central banks around the world, the treasury departments, US Treasury specifically. So, with that being said, I do think that eventually we will have buyers coming back into the market and taking advantage of cheap gold as it were. This is an area that I would expect to be supported, perhaps down to the $2,280 level. If we break down below there, then we probably go looking for a buying opportunity between the $2,200 level and the $2,150 level. In general, that’s an area that I think defines the trend, especially considering that the 200-day EMA sits there as well. If we can break above the shooting star from the Wednesday session, then I think we go looking to the $2,400 level. This is an area that I think will continue to be resistant, but if we can clear that level, we are likely to go much higher at this point.”
On the day gold closed down $35.80 at $2300.20, and silver closed down $1.19 at $28.99.
On Friday the price of gold surged to session highs ($2335.00) as traders worked their way through another volatile week in the metals. Still, this jump to higher ground today was a surprise as the Dollar Index made weekly highs (105.00). I think this is not so much counterintuitive as illustrative of gold’s ability to keep everyone honest in a troubled world coming to terms with rising inflation. I’m not sure where the price of gold or silver will go from here, but my resolve is certain. Gold and silver bullion are unique financial assets. Keeping their ownership private, outside the banking system, and away from government confiscation always makes sense. This approach may seem paranoid but it’s my favorite “just in case” scenario.
Reuters (Stephen Culp) – Wall St dips and gold surges, capping a tumultuous week – “U.S. stocks dipped and gold surged on Friday at the conclusion of a week fraught with the apparent contradiction of cooling economic data and a hawkish Federal Reserve. Benchmark U.S. Treasury yields extended their slide, while the dollar gained ground against a basket of world currencies amid geopolitical uncertainties in Europe. All three major U.S. stock indexes were moderately lower amid a broad sell-off in which economically sensitive industrials and transports. For the week, the S&P 500 and the Nasdaq are on track to advance, with the latter lining up its biggest weekly percentage gain since late April. The Dow looks to be headed to end the week lower than last Friday’s close. “There’s a lot of cross currents going on,” said Thomas Martin, Senior Portfolio Manager at GLOBALT in Atlanta. “Are we worried about the economy and the Fed or are we taking a breather?” “We have been at all-time highs and we’re just taking a breather here and adjusting to the new rate cut scenario,” Martin added.
The Fed capped its two-day monetary policy meeting with no change to its key interest rate, as expected. But in its Summary of Economic Projections, the central bank reduced the number of its projected rate cut this year from three to one, striking a more hawkish than expected tone. he sting was soothed by a series of economic indicators, which showed inflation is cooling faster than analysts projected, which could convince the data-dependent Fed to reconsider the timing and number of cuts this year. Cleveland Fed President Loretta Mester called the recent cooling inflation data “welcome,” in the wake of the week’s CPI and PPI reports, which came in below analyst expectations.”
On the day gold closed up $31.20 at $2331.40, and silver closed up $0.41 at $29.40.
Platinum closed up $4.00 at $955.30, and palladium closed up $13.20 at $890.60.
Jim Wycoff (Kitco) – “Technically, August gold bulls and bears are on a level overall near-term technical playing field amid recent choppy trading. 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 the June low of $2,304.20. First resistance is seen at this week’s high of $2,358.80 and then at $2,375.00. First support is seen at $2,330.00 and then at the overnight low of $2,316.70. July silver futures bulls have the overall near-term technical advantage. However, prices are trending down on the daily bar chart. 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 $28.00. First resistance is seen at Thursday’s high of $29.83 and then at $30.00. Next support is seen at $29.00 and then at this week’s low of $28.73.”
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