Gold – The Big Pushback
Commentary for Thursday, May 23, 2024 (www.golddealer.com) – Today gold closed down $54.20 at $2335.00, and silver closed down $1.02 at $30.28. This was not an optimistic week for the bulls, as overhead resistance proved stronger than most believed, and the technical outlook moved from promising to ominously bearish. This quick turn of events again proved that the Fed interest rate hammer is as powerful as ever, lest we all get too carried away with record prices. Trading reaction to the latest Fed minutes was extreme and perhaps even overdone. But one thing is sure, a hundred dollar drop in the price of gold in a few days presents an out of the blue whiplash trade no one appreciates and suggests further downside may still in the cards. Last Friday gold closed at $2412.20 / silver at $31.05 on the week gold was down $77.20 and silver was down $0.77.
Our newsletter was published on Thursday because I will not be available Friday. Please note that our phones are regular hours Friday, but our parking lot will be closed. We will be back to normal business next week. Have a blessed day and thanks for your patience. Richard
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On Monday the price of gold and silver benefited from Friday’s recent highs with follow through buying. Both metals finished the day firmly in the green. Gold and silver made new highs in the overnight trade as problems in the Middle East and generally rising geopolitical tensions continue to prompt safe haven buying.
While both silver and gold continue to create a technically solid pricing picture, I would feel better about these higher levels if this market cooled off a bit before attempting the climb to $2500.00, which I see as very challenging indeed. Gold’s 30 day pricing change is only about $13.00 suggesting a slowing trend is already in place.
But year-over-year gold is higher by $430.00 which might suggest that if the Fed does not move interest rates lower prices are subject to longer term profit taking. Still, world politics is a mess and this alone will cushion the possible dramatic swings in the price of gold.
Reuters (Ashitha Shivaprasad) – US rate cut optimism steers gold to another record high – “Gold prices touched a record high on Monday as recent economic data boosted bets for interest rate cuts by the U.S. Federal Reserve, while silver followed suit and surged to a more than 11-year high. Spot gold rose 0.5% to $2,427.21 per ounce as of 1204 GMT after hitting a record high of $2,449.89 earlier in the session. U.S. gold futures gained 0.6% to $2,431.10. “Gold’s ascent to fresh all-time peaks was likely fueled by restored bets for Fed rate cuts, following last week’s cooling U.S. inflation data. It may also be benefiting from the spillover of the surge in the broader metals complex,” said Han Tan, chief market analyst at Exinity Group. Data showed that U.S. consumer prices increased less than expected in April, suggesting that inflation resumed its downward trend, boosting expectations for a September interest rate cut. Lower rates reduce the opportunity cost of holding non-yielding bullion, which also benefits from uncertainty in the market. Iranian President Ebrahim Raisi, a hardliner seen as a potential successor to Supreme Leader Ayatollah Ali Khamenei, was killed in a helicopter crash. “Geographic tension environments are getting complicated,” said Dick Poon, general manager at Heraeus Metals Hong Kong Ltd. Meanwhile, a key consumer of gold and other industrial metals, China, announced on Friday “historic” steps to stabilize its crisis-hit property sector. Spot silver eased 0.7% to $31.27 after hitting an over 11-year high. “On silver, its dual characteristics as industrial and precious is finally getting more attention. Transition to clean energy should continue to see a greater role in the use of silver,” analysts at OCBC wrote in a note. Platinum dipped 1.3% to $1,066.53 after hitting its highest since May 2023. Palladium slipped 0.7% to $1,001.93.”
On the day gold closed up $21.70 at $2433.90, and silver closed up $1.16 at $32.21.
On Tuesday the price of gold saw profit taking and finished mildly in the red for the day. Still, as I mentioned yesterday, a settling trend in the price of gold would definitely create more faith in these higher numbers. At the present time the Fed still seems reluctant to lower interest rates. Fed Governor Waller recently said the economy is slowing down but he would like to see better inflation numbers before easing monetary policy. Most traders believe that higher interest rates will remain in place at least in the near term. So, the fact that gold still seems to be holding up around $2400.00 is a plus for the bullish scenario. Many believe this strength will eventually set the stage for higher prices as the Fed begins to lower interest rates before the end of the year.
Reuters (Ashitha Shivaprasad) – Gold eases from record highs as profit taking kicks in – “Gold prices slipped on Tuesday as U.S. Federal Reserve policymakers stuck to a cautious tone on monetary policy and investors locked in profits after bullion hit an all-time high in the previous session. Spot gold fell 0.3% at $2,417.95 per ounce, as of 0900 GMT, after scaling a record high of $2,449.89 on Monday. U.S. gold futures fell 0.7% at $2,421.70. “The loss of momentum is inevitable at some point as new participants are already in but there is a chance of more investors arriving. Most people are in for the long haul and likely to stay there in view of geopolitical tensions, banking issues and so many elections around the world this year,” StoneX analyst Rhona O’Connell said. “Gold’s key role is to offset risk, whether financial, geopolitical or volatility. That is not new, but sentiment has now realized.” Iranian President Ebrahim Raisi was killed in a helicopter crash on Sunday. Geopolitical events and lower rates make non-yielding gold an appealing investment. Recent data suggested that U.S. inflation resumed its downward trend, but several Fed policymakers remained cautious on Monday and want to make sure pricing pressures are fully back on track to the 2% target rate before starting to cut rates. Investors will keep a tab on minutes of the Fed’s last policy meeting due on Wednesday. Spot silver fell 0.6% to $31.64 after hitting an over 11-year high in the last session. “Silver is the beta for gold. Investors are attracted to silver because fundamentals are very strong coupled with growing industrial demand and it’s a cheaper alternative to gold,” said ANZ commodity strategist Soni Kumari. Platinum lost 1.4% to $1,032.30 and palladium dropped 0.5% to $1,021.77.”
On the day gold closed down $12.20 at $2421.70, and silver closed down $0.34 at $31.87.
On Wednesday the price of gold dipped considerably on the open as gold broke through the $2400.00 support reaching $2375.00 before traders bought the dip. This would suggest follow through profit taking from yesterday and the growing reality that the Fed will not turn dovish before inflation numbers turn significantly lower. Keep in mind however that trading weakness these past few days may not be a trend. It does resonate with those who believe gold was overbought. And those who think a healthy correction will be good for the longer term market.
Breaking down at $2400.00 is not a good sign, but it does reinforce the conviction that the Fed’s interest rate policy is the elephant in the living room. Safe haven demand will come and go but interest rates will likely be the determining factor relative to the price of gold into next year.
It may be too soon to assume that gold will continue lower because the Fed will remain hawkish, but that feeling is definitely growing. There is talk that a test of $2300.00 would be good for this market but in the meantime, traders are in a kind of “half time” mode trying to piece together the next Fed move relative to interest rates. One thing is sure, the trading mood is turning pessimistic and those bulls who claim that $5000 gold is right around the corner may want to reconsider.
On the day gold closed down $32.50 at $2389.20, and silver closed down $0.57 at $31.30.
On Thursday it might be an understatement to say that the bears have taken over and the bulls are now hiding under the bed. This latest down draft in gold prices began suddenly on Tuesday, continued through Wednesday and increased in intensity on Thursday. The reasoning is simple enough, the latest Fed minutes suggest that the FOMC will remain hawkish on its interest rate policy. And perhaps even raise rates if inflation continues higher. Whether this turnaround is another buying opportunity remains to be seen, but the price drop was quick, large, and scary.
Reuters (Polina Devitt) – Gold falls to one-week low on hawkish Fed minutes – “Gold prices declined to a one-week low on Thursday, extending their fall for a third consecutive session on profit-taking after minutes from the U.S. Federal Reserve’s latest meeting indicated that interest rates would stay higher for longer. Spot gold fell 0.9% to $2,356.29 per ounce as of 1355 GMT, after hitting its lowest since May 14 at $2,351 earlier in the session. The non-yielding bullion hit a record high of $2,449.89 on Monday and is up 14% so far this year. The market has also been concerned that high gold prices could affect purchases by central banks, which were active buyers in 2022-2023, as well as demand from Chinese investors. “We expect them to continue with strong purchases on any price dips, and we don’t expect the downside to gold prices to be pronounced,” said Nitesh Shah, commodity strategist at WisdomTree. Gold could see the next level of support at $2,300, and signals that the Fed is ready to cut interest rates would be the next major catalyst for its price gain, he added. Meanwhile, imports to India, the world’s second-biggest gold consumer, could fall by nearly a fifth in 2024 as high prices spur consumers to exchange old jewelry for new items, according to an industry body. Spot silver fell 0.6% to $30.57. The recent rally in gold and copper prices drove it to $32.5, an 11-year high, earlier this week. Platinum was down 0.2% at $1,033.44. The metal is up 11% so far this month after a wave of forecasts of the second year of structural market deficit. Providing further support, platinum’s technical chart formed a golden cross – a bullish pattern – in late April when its short-term moving average pierced through a long-term moving average, Shah said. Palladium lost 1.7% to $982.38 under pressure from future market share growth of electric vehicles and despite structural supply deficit.”
On the day gold closed $54.20 at $2335.00, and silver closed down $1.02 at $30.28.
Platinum closed down $18.40 at $1025.70 and palladium closed down $29.60 at $973.30.
Jim Wycoff (Kitco) – Technically, June gold futures bulls still have the overall near-term technical advantage but are fading. A bearish double-top reversal pattern has formed on the daily bar chart to suggest a near-term market top is in place. Bulls’ next upside price objective is to produce a close above solid resistance at the record high of $2,454.20. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $2,300.00. First resistance is seen at today’s high of $2,385.70 and then at $2,400.00. First support is seen at today’s low of $2,341.20 and then at $2,325.00. July silver futures bulls have the firm overall near-term technical advantage but are fading a bit. Prices are in a three-week-old uptrend on the daily bar chart. Silver bulls’ next upside price objective is closing prices above solid technical resistance at this week’s high of $32.75. The next downside price objective for the bears is closing prices below solid support at $29.00. First resistance is seen at today’s high of $31.185 and then at $31.50. Next support at today’s low of $30.36 and then at $30.00.
On Friday – Our newsletter was published on Thursday because I will not be available on Friday. Please note that phones are regular hours on Friday, but our parking lot will be closed. We will be back to normal business next week. Thanks for your patience. Richard
Brothers and Sisters, thank you for your friendship. If you have unusual circumstances, need cash or a special favor – talk to Harry or Eric or Ken Slater. We are now back to our traditional business model. Thank you for your patience. Blessings. Richard Schwary
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