Gold – Steady for Now – Pulse or Minus $50.00
Commentary for Friday, Jan 26, 2024 (www.golddealer.com) – Today gold closed up $3.00 at $2016.90, and silver closed up $0.05 at $22.81. This was another one of those weeks in which traders waited for that second shoe to fall, relative to Fed interest rate policy. Patience is always a virtue but, in this case, it pays extra dividends. There was not much action this week, it was like watching the paint dry. But the inactivity provided time to get your ducks in a row. Let’s count our blessings that gold remains above the psychologically important support of $2000.00. I will settle for that in the messy government business of managing an inflationary economy. Hope for the best outcome and be patient in this uncertain consolidation. Last Friday gold closed at $2026.50 / silver at $22.57 – on the week gold was down $9.60 and silver was up $0.24.
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.
Should you decide to use our Delayed Delivery Program please talk with your service rep and understand how this program works. It is handy if you want to lock in the price “now” and insist on a new product – but is not for everyone. Just like us – you must pay upfront to “lock in” prices and you can’t “change” your mind. So, unless God has blessed you with patience, please ask your rep for other options and thank you for understanding.
On Monday the price of faded a bit as investors rolled back expectations of a US interest rate cut at the end of March, with a surge in equity markets further dampening interest in safe-haven bullion according to Reuters. Prices remained choppy between $2030.00 and $2016.00 with a downward drift as gold finished the day mildly in the red.
Chistopher Lewis’s (FXEmpire) suggestion that world central banks will soon be cutting interest rates would be a welcome plus for this market. There are, however, enough bearish cross currents to steady the price of gold at current levels plus or minus $50.00.
FXEmpire (Christopher Lewis) – Gold Continues to See Buyers on Dips – “Gold markets initially pulled back during the trading session on Monday, but then turned around to show a little bit of support. The 50-day EMA sits just underneath offering support. All things being equal, this is a market that I think will continue to find plenty of buyers, as that’s been the case for some time now. The $2,000 level underneath is a major large round number. All things being equal, this is a market that I think you will continue to see a lot of volatility due to the fact that the interest rate markets will of course be all over the place as well as we have had so much in the way of confusion when it comes to central banks. That being said, I think central banks around the world are going to start cutting rates, and therefore I am bullish on gold. That doesn’t necessarily mean that gold takes off straight up in the air, but what I think it does do is continue to put more of a buy on the dip mentality in the gold market. Monday was just a microcosm of this as we continue to see every time the market drops somebody’s willing to step in and pick things up. $2,000 should be your floor at the moment in this market, but we will have to wait to see whether or not it holds. In fact, I think there’s probably a zone of support extending from $2,000 down to the $1,980 level. On the upside, I believe that the $2,075 level above is your short-term ceiling. And if we can break that on a daily close, that would be a very bullish sign, perhaps allowing more of a buy and hold mentality when it comes to gold. Either way, I think you’ve got a pretty choppy market with more of an upward tilt than anything else so that’s how I’ve been trading this market. Not getting too big but definitely looking in one direction, and that is for the market to go higher.”
On the day gold closed down $6.70 at $2019.80, and silver closed down $0.41 at $22.16.
On Tuesday gold moved between $2031.00 and $2022.00 in a “See-Saw” fashion, finishing mildly in the green, helped by a short-covering rally according to technical commentary. This firm pattern of action is a bit surprising considering the continued strength of the dollar as the Dollar Index reaches weekly highs today (103.75) waiting for fresh trading information.
Reuters – “Gold prices steadied on Tuesday as investors awaited a slew of U.S. economic data this week for more clarity on the Federal Reserve’s interest rate cut timeline. “The gold market is just above the $2,000 mark and it seems to be a neutral market. Every time we start to break higher, we come back down,” said Daniel Pavilonis, senior market strategist at RJO Futures. “There is a lot of uncertainty on what is going to happen here economically in the United States.” Focus this week will be on the U.S. flash PMI report on Wednesday, fourth-quarter advance GDP estimates due on Thursday and personal consumption expenditures data on Friday. Fed officials last week said the U.S. central bank needs more inflation data in hand before any rate cut judgment could be made and that the baseline for cuts to start was in the third quarter.”
Ernest Hoffman (Kitco) – JPMorgan boosts its 2024 projections for Fed rate cuts, gold investment – “Gold prices are continuing to hold above $2,000 per ounce in the new year, and the precious metal will benefit from additional rate cuts in 2024, along with the return of investment demand, according to commodities analysts at JPMorgan. While the investment bank still maintains that “the only structural bullish call we hold is for gold and silver,” precious metals are expected to lose some of the additional boost provided by high inflation. “Commodities are unlikely to benefit from core inflation in 2024,” said Natasha Kaneva, Head of Global Commodities Strategy at JPMorgan. “Inflation should fall to under 3%, so that, along with properly timing the business cycle, are the two conditions needed to initiate long positions, making the outlook for the sector very tactical in 2024.” Economic and geopolitical uncertainty tend to be positive drivers for gold, which is widely seen as a safe-haven asset due to its ability to remain a reliable store of value. It has low correlation with other asset classes, so can act as insurance during falling markets and times of geopolitical stress. A weaker U.S. dollar and lower U.S. interest rates also increase the appeal of non-yielding bullion. The analysts pointed out that anticipation of a Fed pivot has played a key role gold’s recent price rally, as it has over the last three rate cutting cycles. “Across all metals, we have the highest conviction on a bullish medium-term forecast for both gold and silver over the course of 2024 and into the first half of 2025, though timing an entry will continue to be critical,” said Gregory Shearer, Head of Base and Precious Metals Strategy at JPMorgan. “At the moment, gold still appears quite rich relative to underlying rates and foreign exchange (FX) fundamentals, and still looks vulnerable to another modest retreat in the near-term, as Fed rate cut expectations are now running earlier than our forecasts,” he said. Shearer added that any price pullbacks in the coming months should be treated as buying opportunities ahead of a breakout rally which they expect to begin in mid-2024 as U.S. GDP growth slows. JPMorgan Research now predicts the Fed will deliver 125 basis points of cuts over the second half of 2024, which is 25 bps more than they projected in their 2024 outlook published just last month, as the central bank works to head off a U.S. recession. “Gold price predictions are based on Fed official forecasts, which see core inflation moderating to 2.4% in 2024 and 2.2% in 2025, before returning to the 2% target in 2026,” the analysts wrote. Based on this updated economic outlook, JPMorgan forecasts the U.S. 10-year nominal yield will fall 30 bp from 3.95% at the end of Q1 to 3.65% by the end of 2024, with the real yield declining from 1.75% to 1.45% over the same time frame. “We think over this period, the Fed cutting cycle and falling U.S. real yields will once again become the mono-driver behind gold’s breakout rally later in 2024,” Shearer said. “Gold’s inverse relationship to real yields has historically been weaker over Fed hiking cycles, before strengthening again as yields fall over a transition into a cutting cycle.” Falling yields will drive gold prices to new nominal highs in H2 2024, averaging $2,175 per ounce in Q4, and they expect a quarterly average peak of $2,300 per ounce by Q3 2025. The analysts predict central bank buying will continue to support gold prices through 2024, while positive net ETF flows will return later in the year. “There is still scope for boosted reserves at some central banks as institutions look to diversify reserve assets, so purchasing is likely to remain structurally elevated compared with the late 2010s.” The analysts believe that after two years of declining ETF gold holdings and below-average net long positioning on exchanges, increased investor appetite will also be a major contributor to the projected 2024 gold rally. “As of the end of 2023, managed money in net long positions — where more investors expect the price of gold to rise rather than fall — only screened at around 6/10 on a standardized scale, with 10 being the net longest positioning since 2018,” they said. “This means there is still a lot of capacity for investors, through the purchase of gold either on an exchange or via an exchange-traded fund (ETF), to increase their long positions.” “As rates eventually come down, we would expect recent ETF outflows to reverse with a return to retail-led ETF inflows boosting gold investor demand too, strengthening a move higher in prices,” Shearer said. “Continued central bank purchases, along with physical demand on price dips will remain a significant support to prices over the final twists and turns of the Fed cycle.”
On the day gold closed up $3.90 at $2023.70, and silver closed up $0.17 at $22.33.
On Wednesday gold ran out of gas in early trading, finishing on lows for the day ($2010.00). The drop was cushioned by a weaker dollar, adding some stability to these lower prices. Conflicting factors, however, make this trade awkward. Interest rate uncertainty stresses the short and medium term outlook. Countries like England and the United States benefit from the better than expected economic news which provides the Fed more policy choices. At the same time, China’s flagging economic outlook has their central bank scrambling to create liquidity. This slowdown could negatively impact one of the world’s largest gold bullion buyers. Finally, an informed trader believes a large futures speculator may have been working overtime today.
Reuters (Anushree Ashish Mukherjee) – Gold stumbles on strong US data, as traders strap in for more – “Gold eased on Wednesday after data showed strong U.S. business activity, even as a weakened dollar limited losses, while investors looked ahead to more economic indicators to assess when the Federal Reserve might first cut interest rates. “Gold prices are pretty insulated from a hawkish repricing in rates markets, because there are signs that investors are historically under-positioned in gold despite markets expecting an imminent start to the Fed’s cutting cycle,” said Daniel Ghali, commodity strategist at TD Securities. U.S. business activity picked up in January and inflation appeared to abate, an S&P Global survey showed. A strong U.S. economy and pushback from central bank officials is leading some investors to rethink their bets on how quickly the Fed will cut rates this year. According to the CME’s FedWatch Tool, opens new tab, markets expect the Fed to keep interest rates unchanged at its Jan. 30-31 policy meeting and have pushed back the timeframe of the first interest rate cut. The dollar slipped 0.5% against its rivals, making greenback-priced bullion cheaper for overseas buyers, while benchmark 10-year Treasury yields also edged lower. “China is putting together a more comprehensive package to stem the pervasively pessimistic sentiment that has plagued their markets for months which is weighing on the broad U.S. dollar,” Ghali added. China’s central bank announced a deep cut to bank reserves that will inject about $140 billion of cash into the banking system.” Investors are now focusing on the fourth-quarter advance U.S. GDP estimates on Thursday, and personal consumption expenditure data on Friday. Lower interest rates reduce the opportunity cost of holding non-yielding bullion. Spot silver rose 1.1% to $22.67 per ounce, platinum was up 0.3% to $903.13, and palladium rose 0.8% to $955.87.”
On the day gold closed down $9.80 at $2013.90, and silver closed up $0.43 at $22.76.
On Thursday there was a mild rise to the upside in the price of gold as jobless claims rose. At the same time the Dollar Index moved back above 103.5 after yesterday’s weakness capping higher prices. Expect a choppy back and forth trade as the week draws to a close and traders look for something more dramatic to move the trading needle before the March FOMC meeting.
The ECB left interest rates unchanged as Lagarde claims it is too early to talk about rate cuts. The bullish “rate cut” door is closed in Europe. And the much talked about US rate cut will likely be delayed, perhaps into the summer. These actions will hinder higher gold prices. That being said, gold and silver closed mildly in the green, and gold holds above $2000.00.
Reuters (Sherin Elizabeth Varghese) – Gold edges up on weaker dollar; focus on US data, ECB decision – “Gold prices edged higher on Thursday, helped by a slight fall in the dollar, while investors awaited more U.S. economic data and the European Central Bank’s (ECB) policy decision. “The rate cut expectations have somewhat slowed as we came into the year with elevated or high expectations, and that has left the markets exposed to disappointments,” said Ole Hansen, Saxo Bank’s head of commodity strategy. “For now, gold is being left a little bit on its own because the market simply needs more data to judge whether the market is at risk of a deeper correction or whether this level around the $2,000 is strong enough to support the market in the short term.” Hansen added. According to the CME FedWatch Tool, opens new tab, markets widely expect the Federal Reserve to hold rates unchanged at its policy meeting on Jan. 30-31 and have pared back the timing of the first interest rate cut. The ECB is scheduled to announce its policy decision at 1315 GMT. While the central bank is expected to keep rates steady, investors will be looking out for comments from President Christine Lagarde. The first reading of fourth-quarter U.S. GDP is due at 1330 GMT and the personal consumption expenditure data on Friday are also on the radar, for more cues on the Fed’s rate cut plans. Data on Wednesday showed that the U.S. economy began 2024 on a positive note, with economic activity increasing in January and inflation starting to ease. Spot silver rose 0.9% to $22.85 per ounce, platinum dipped 0.2% to $897.08, and palladium edged up 0.1% to $964.01.”
On the day gold closed up $3.00 at $2016.90, and silver closed up $0.05 at $22.81.
On Friday gold opened firm, touching $2025.00 but traders sold a small rally and prices quickly moved to session lows of $2015.00. It is a small surprise that gold did not do better today considering the Dollar Index lost half a point in early trading, but so goes a market which is stuck between a rock and hard place relative to Fed policy. I’m hoping we will not need the patience of Job in this still developing transition.
Reuters (Anushree Ashish Mukherjee) – Gold holds steady with spotlight on Fed verdict – “Gold prices held steady on Friday as investors’ attention shifted to the U.S. Federal Reserve’s policy meeting due next week for more insights into the interest rate outlook. “We are seeing the gold market consolidating at the moment as the expectations of rate declines aren’t quite as soon as the market would like,” said David Meger, director of metals trading at High Ridge Futures. “But underlying theme or the idea that interest rates will come down in 2024 continues to underpin and support the gold market.” Markets widely expect the Fed to leave interest rates unchanged at its policy meeting on Jan. 30-31, but have pared back expectations of a rate cut by March, according to the CME FedWatch Tool, opens new tab. Lower interest rates decrease the opportunity cost of holding bullion. U.S. prices rose moderately in December, keeping the annual increase in inflation below 3% for a third straight month, which could allow the Fed to start cutting interest rates this year. Another set of data on Thursday showed the U.S. economy grew faster than projected in the fourth quarter. On the physical side, China’s gold premiums climbed this week as additional stimulus measures aided sentiment, days before Lunar New Year celebrations begin. In the short-term, the direction of gold and silver will continue to be dictated by incoming economic data and their impact on the dollar, yields and rate cut expectations, said Ole Hansen, Saxo Bank’s head of commodity strategy in a note. Spot silver lost 0.5% to $22.79 per ounce and headed for its best week in five. Platinum rose 1.8% to $907.60 and palladium gained 1.9% to $957.42, with both on track for a weekly increase.”
On the day gold closed up $3.00 at $2016.90, and silver closed up $0.05 at $22.81.
Platinum closed down $18.20 at $887.40, and palladium closed down $30.90 at $936.40.
Jim Wycoff (Kitco) – “Technically, the gold futures bulls have the overall near-term technical advantage but have faded a bit. Prices are still in a three-month-old uptrend on the daily bar chart, but just barely. Bulls’ next upside price objective is to produce a close in March futures above solid resistance at $2,067.30. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $2,000.00. First resistance is seen at this week’s high of $2,039.30 and then at $2,050.00. First support is seen at this week’s low of $2,004.00 and then at $2,000.00. The silver bears have the overall near-term technical advantage. Prices hit a three-month low Monday and are in a six-week downtrend on the daily bar chart. Silver bulls’ next upside price objective is closing March futures prices above technical resistance at $24.00. The downside price objective for the bears is closing prices below support at the October low of $21.17. First resistance is seen at this week’s high of $23.15 and then at $23.50. Next support at Thursday’s low of $22.76 and then at Wednesday’s low of $22.46.”
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