Commentary for Friday, Oct 25, 2024 – Today gold closed up $6.00 at $2740.90, and silver closed down $0.01 at $33.60. This week’s somewhat erratic pricing in both gold and silver poses an interesting question to investors. Does this pattern suggest a tired bull? Or are you looking at a typical profit taking round which represents a fresh buying opportunity? This might be a tough call. Some traders believe that safe haven demand will continue to be spurred by Middle East tension and supported by a positive technical picture. Others see it differently and suggest we may be looking at the early stages of a tired bull market which will develop into more selling and lower prices. This is not a big dilemma because bullion market transition happens at a much slower pace than it does in the leveraged futures market. Still, bullion players should be prepared for more price volatility and rising tension levels. Last Friday gold closed at $2713.70 / silver at $33.03. On the week gold was higher by $27.20, and silver was higher by $0.57. Worth noting is that some customers are selling gold and buying silver suggesting that the old “gold to silver” ratios are still being watched.
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On Monday the price of gold climbed a choppy ladder higher, reaching $2740.00 in the early morning but traders sold this rally, which is good for this bullish trend in my opinion. Today also represents a great follow through after last Friday’s impressive close. Today’s surprising dip in the price of gold and modest close in the green suggests some trader caution. I believe that with $2800.00 gold now a consideration in the shorter term there is bound to be early talk of “too much too soon”. Which is probably true but not a big deal at even these lofty levels. Because recent record prices are supported by safe haven demand and growing political uncertainty.
FXEmpire (James Hyerczyk) – Can Geopolitical Risks Propel Gold Beyond $2,800? – “Gold prices surged to a new high on Monday, extending Friday’s exceptional rally driven by heightened geopolitical tensions and economic uncertainty. Investors are closely monitoring global developments, particularly the U.S. presidential race and unrest in the Middle East, as they weigh the potential for gold’s continued upward movement. With no resistance at its all-time highs, traders are focused on potential reversals driven by profit-taking. At 10:54 GMT, XAU/USD is trading $2732.45, up $10.55 or +0.39%. Geopolitical Tensions and Central Bank Policies Support Gold – Gold’s rally is supported by growing geopolitical risks and a dovish stance from major central banks. In particular, the U.S. Federal Reserve is expected to cut interest rates in November, with traders pricing in a 99% probability of such a move. Meanwhile, the European Central Bank (ECB) reduced its key interest rates by a quarter point last week, further bolstering gold’s appeal. Low-interest rates enhance gold’s attractiveness as a non-yielding asset, making it a go-to investment during periods of economic and political turmoil. Tensions in the Middle East are also influencing market sentiment. On Sunday, multiple explosions were reported in Beirut, as Israel prepared to target Hezbollah-linked financial operations, contributing to the flight of hundreds of residents. Additionally, the looming U.S. presidential election is adding to the uncertainty, with former President Donald Trump and Vice President Kamala Harris running a tight race in key battleground states. Economic Data and Rising Yields May Cap Immediate Gains – Despite the bullish environment, rising Treasury yields and a stronger U.S. dollar could limit further short-term gains. The yield on the 10-year U.S. Treasury rose to 4.11% on Monday, providing an attractive alternative for investors. A stronger dollar, driven by market expectations of higher U.S. interest rates, has also created headwinds for gold. Last week, the dollar index gained 0.55%, while the euro and yen weakened against the dollar. A continuation of this trend could temper gold’s upside potential. Profit-Taking and Technical Levels to Watch – Some traders expect gold to face resistance as profit-taking sets in, particularly after the recent surge. According to analysts, a key technical level to monitor is the 50-day moving average, which could signal a shift in the intermediate trend if breached. More critical would be a violation of the swing bottom at $2,604.39, which would indicate a potential trend reversal. Despite the possibility of short-term corrections, many expect that gold buyers will be waiting for pullbacks to enter the market at better prices. Upside Potential with Caution – Looking ahead, gold is likely to remain supported by global uncertainties and dovish central bank policies. Market analysts see $2,800 as a viable year-end target, but the immediate upside may be limited as investors lock in profits. Nonetheless, the broader environment remains favorable for gold, and any short-term dips could present buying opportunities for traders expecting further gains as economic and geopolitical risks persist.”
On the day gold closed up $9.40 at $2723.10, and silver closed up $0.84 at $33.87.
On Tuesday the price of gold opened with an upward trend, closing nicely in the green and on highs for the day. The technical picture has been so symmetrical this year that traders see $2800.00 right around the corner. Since March it has moved from $2100.00 through $2750.00, driven by rising middle east tension, safe haven demand, and a dovish turn in the FOMC interest rate sentiment. But the World Gold Council Relative Strength Index (RSI), may have thrown up a small red flag. With a reading of 74 the RSI is suggesting that gold is now overbought.
Frankly, I don’t know if the RSI carries enough weight to alter the path of this bullish freight train. But at this point safe haven demand is all that is needed to maintain the current pricing structure. And it is hard to imagine that this demand will move lower as Middle East tension escalates. It might be a stretch to seriously consider $3000.00 gold if investors hedge their bets by selling into this spectacular rally. On the other hand, physical market players may want to double down, with a dicey election around the corner. Analysts will always ponder changing fundamentals. But the plain truth is we might be in the middle of the perfect storm which will create new record prices in gold and silver this year or in 2025.
Reuters (Anushree Ashish Mukherjee) – Safe-haven demand secures gold near all-time highs – “Gold climbed on Tuesday, trading not too far away from the record peak it hit in the last session, as concerns over rising geopolitical tensions, U.S. election uncertainties and prospects of central banks lowering interest rates boosted demand. Spot gold rose 0.5% to $2,732.06 per ounce by 1143 GMT and U.S. gold futures gained 0.3% to $2,746.50. Bullion, considered a hedge against geopolitical and economic uncertainties, hit an all-time high of $2,740.37 on Monday. The non-yielding asset has gained 32% so far this year. “Uncertainty is the key word at the moment and safe-haven like gold is actually the most important refuge asset possibly in traders’ portfolios at the moment,” said Ricardo Evangelista, senior analyst at ActivTrades. “I wouldn’t be surprised to see the $2,800 being touched at some point,” Evangelista said, adding that rate cuts, purchases from some central banks, geopolitical instability and uncertainty over the outcome of the U.S. presidential election are boosting demand for the metal. Gold’s rally comes despite a firmer U.S. dollar and Treasury yields, and the strength of gold’s momentum has outweighed weaker physical demand and higher supply, analysts said. “The precious metal could keep printing never-before-seen prices as long as markets can keep shrugging off the ongoing rebound in U.S. Treasury yields and the dollar,” said Han Tan, chief market analyst at Exinity Group. “Sustained net inflows into bullion-backed ETFs should also preserve the upside momentum in spot gold.” Global physically-backed gold ETFs saw their fifth consecutive monthly inflow in September, attracting $1.4 billion, according to the World Gold Council (WGC). From the technical point of view, the Relative Strength Index (RSI), currently at 74, suggests that gold prices moved into “overbought” territory. An RSI above 70 indicates a commodity is overbought. Spot silver rose 1.9% to $34.39 per ounce after hitting its highest since late-2012 in the last session. “We should see silver cross above $35 before the November 5th polling day, provided the tailwinds for precious metals remain intact,” Tan added.
On the day gold closed up $21.10 at $2744.20, and silver closed up $0.96 at $34.83.
On Wednesday the price of gold reached a daily high of $2757.00 in the early trade and then out of the blue dropped like a rock to $2712.00. A move which no doubt has the paper trade scratching their heads and wondering what just happened to a market that yesterday was talking seriously about $2800.00 gold. This sudden dip in price could be related to strength. The Dollar Index has moved a full point higher since Monday. Or this weakness might be related to the latest Bank of Canada aggressive half point reduction in their interest rate model. This dip happened right after the release of the latest US home sales data. Although the two events may not be related. It is too soon to understand this bearish gold sentiment. Keeping in mind that the ECB cut interest rates not long ago and said it expects further cuts next year. Whether this latest weakness turns out to be a buying opportunity or a bear trap remains to be seen. But it did get very quiet across our trading desk, just after the dip in prices.
So, is today’s weakness in the price of gold related to increasing geopolitical tension (perhaps election driven) or the surprisingly aggressive drop in central banks interest rates? Again, too soon to tell but Reuters offers this insight: “The European Central Bank will need to be cautious when deciding on further interest rate reductions and take its cue from incoming data, ECB President Christine Lagarde said on Wednesday. Traders have ramped up bets on faster and potentially bigger rate cuts from the ECB after a host of policymakers warned about the risk of undershooting the central bank’s 2% inflation target – a remarkable change in tone after a two-year campaign to rein in prices. Lagarde did not directly comment on the path for rates, but she appeared to pour some cold water on market speculation. “We need to be cautious because data will come up and will indicate to us what is the state of the economy, what is the state of inflation, of underlying inflation,” she told an event in Washington. “And there will be a judgmental aspect to our decisions, but we will indeed have to be cautious in doing so.” Speaking at a separate event in Washington, where policymakers are gathered for the IMF/World Bank annual meetings, the ECB’s chief economist Philip Lane said he still expected a recovery in the euro zone’s economy even though “recent data raised some questions” about it. The ECB cut its key interest rate by 25 basis points to 3.25% last week – its third cut this year. Policymakers are now debating how far interest rates may need to fall and how to signal their plans to investors. Portuguese central banker Mario Centeno suggested rates could be cut by a larger 50 basis points at the bank’s next meeting on Dec 12. We need to look at the incoming data, the trend in the data that we have been observing and certainly 50 basis points can be on the table because we continue to be data dependent and the data, we are getting points in that direction,” he told CNBC. Even Dutch central bank governor Klaas Knot, in the past an outspoken hawk, said the ECB could “continue to cut rates until (they) reached neutral territory,” which economists put at around 2.0-2.5%.” In other metals, palladium jumped 8% to $1,142.75, its highest level since December 2023. The U.S. asked the Group of Seven allies to consider sanctions on Russian palladium and titanium, Bloomberg News reported. “Considering that Russia accounts for about 40% of palladium mine supply, such a decision would tighten the market and see prices rising considerably,” UBS analyst Giovanni Staunovo said. “With a larger producer scaling back production next year, we see the market balanced to slightly under-supplied in 2025, with prices trading around $1,000/oz” Spot silver firmed 1.1% to $34.10, having hit its highest since late 2012 touched on Oct. 22. Platinum rose 2% to $1,036.10.”
On the day gold closed down $29.80 at $2714.40, and silver closed down $1.19 at $33.64.
On Thursday the price of gold moved to daily highs ($2742.00) in the early trade, which is good news for the flagging bullish sentiment, especially after yesterday’s significant weakness. That’s the good news, the bad news is that traders sold this rally, perhaps showing some lack of conviction. Gold did finish the day mildly in the green but today feels like a small bullish setback within the bigger picture. Still, with the election right around the corner and rising tension in the Middle East it is difficult to imagine significantly lower prices in gold. And if this latest turbulence produces settling in gold prices into next year, so much the better in the long haul.
Jordan Finneseth (Kitco) Paul Tudor Jones: ‘I’m long gold, I’m long Bitcoin’ as U.S. faces potential ‘Minsky moment’. “The list of prominent figures warning about the U.S. government’s current fiscal deficit and the increased spending promised by both presidential candidates continues to grow as a respected billionaire hedge fund manager recently suggested that rising bond prices could force unexpected actions from the government following the election. “We are going to be broke really quickly unless we get serious about dealing with our spending issues,” Paul Tudor Jones told CNBC’s Andrew Ross Sorkin on Tuesday. The Tudor Investment founder and CIO expressed concerns that if the U.S. continues to spend beyond its means, a major sell-off in the bond market could ensue, leading to a spike in interest rates.
“Will we have a Minsky moment here in the United States and U.S. debt markets?” Jones questioned. “Will we have a Minsky moment where all of a sudden there’s a point of recognition that what they’re talking about is fiscally impossible, financially impossible?”
For those who fell asleep in Economics 1 a Minsky moment is a sudden, catastrophic drop in asset prices that occurs after a long period of economic stability and growth. It’s a term used to describe the end of a growth phase in business activity or credit markets. The term comes from the work of economist Hyman Minsky (1911-1996), who specialized in how excessive borrowing can lead to financial instability. Minsky believed that the relative stability of the mid-20th century lulled economists into a dangerous financial complacency.
Reuters (Anushree Ashish Mukherjee) – Global risks buoy gold; palladium soars 8% on supply fears – “Gold prices firmed on Thursday as the bullion remained in demand in the face of ongoing geopolitical risks, while palladium jumped 8% to a near 10-month peak on fears of supply sanctions on top-producer Russia. Spot gold rose 0.8% to $2,739.09 per ounce by 1150 GMT after pulling back from the record high of $2,758.37 on Wednesday. U.S. gold futures gained 0.8% to $2,751.70. “The fact that gold has rebounded from yesterday’s lows is a positive signal confirming the strong massive interest that investors have currently in bullion,” said Kinesis Money market analyst Carlo Alberto De Casa. “We have the U.S. election in just 10 days, a very complicated geopolitical scenario. In this situation, investors are betting on gold,” Carlo said, adding that massive demand from central banks is supporting prices. Gold, used as a safe store of value during times of uncertainty, has hit multiple record highs and surged over 33% so far this year. Expectations of further monetary policy easing by major central banks have also boosted the non-yielding bullion’s appeal. “Further, concerns around rising U.S. fiscal debt outlook is strengthening the investment case for gold. We think that the recent rally can fade once the market focus shifts to prospects of a gradual easing cycle by the Fed rather than deeper cuts,” ANZ said in a note.”
On the day gold closed up $20.50 at $2734.90, and silver closed down $0.03 at $33.61.
On Friday the gold trade looked choppy, trading between $2715.00 and $2740.00, but gold managed to finish the day mildly in the green, and silver followed gold’s lead. This tepid finish to the week might look defensive to some considering yesterday’s dramatic move to the upside for gold and silver’s sleepy response. But it would be a stretch to conclude this trading pattern represents a tired bull rather than reasonable consolidation. You could easily be looking at an opportunity to buy weakness as paper traders take short term profits going into the weekend.
FXEmpire (Christopher Lewis) – Gold Continues to See Upward Pressure but Shows Exhaustion – “Gold continues to see a lot of noisy behavior at this point in time, as we have shot higher, only to give up the gains. All things being equal, this is a situation that has gotten a bit ahead of itself and has to work off some of the “froth in the markets.” Technical Analysis – The gold market initially rallied during the week showing signs of strength, but really at this point in time it looks as if it is going to give back some of the gains and I think this is a good thing. Quite frankly, this is a market that is overstretched and although I remain very bullish on gold from a fundamental standpoint, the momentum is going to continue to be an issue here because markets can only go in one direction for so long. That being said, there are a lot of geopolitical issues out there that will drive gold higher. But furthermore, we also have the interest rate situation going on around the world as central banks are cutting rates. That tends to drive gold higher as well. Furthermore, we also have central banks in places like Indonesia, India, China, and Russia, all buying gold. So that puts a little bit of a boost into it. Short-term pull banks at this point in time, I think continue to offer buying opportunities. Think also the market is likely to continue to see plenty of buyers at the $2,600 level, assuming we even dropped that far. If we break above the top of the candlestick for the week, that would obviously be very bullish. And it is probably worth noting that previously we have formed a bullish flag on the daily chart and the measured move is anticipated to be to the $2,800 level. I believe the gold will go looking to the $3,000 level eventually, but it won’t get there in a straight line. So, I look at and quite frankly welcome any pullback as an opportunity. Silver Continues to See Volatile Moves – The silver market looks as if it might be getting a bit exhausted at this point in time, but the market is obviously still very bullish, and any significant pullback should be thought of as a potential opportunity to get involved here. That being said, it is worth noting that the potential volatility means you should be cautious with your position size. Technical Analysis – Silver initially pulled back just a bit during the early hours on Friday, but it looks as if we are starting to see value hunters come back into this market. Quite frankly, we are in a massive uptrend, so that should not be a huge surprise, and I think all things continue to point towards higher pricing. The $32.50 level is an area that previously had been major resistance and now should be major support. With all of this being said, I think you’ve got a situation where silver continues to move on with interest rates being cut by central banks and of course the idea of geopolitical concerns driving precious metals higher. Silver also has its industrial component so that comes into the picture as well, but with this environment I think you have to just simply look at the momentum. Markets are definitely shifting in one direction and although the market is continuing to see a lot of volatility the last couple of months have been rather strong and there’s no real letup on the chart from what I can see. I think as long as we can stay above the $32 level the market itself is very much in an uptrend and it’s likely to go looking toward the psychologically important $35 level above, which I would anticipate could be a bit difficult due to the fact that there almost certainly will be a significant amount of options barriers in that area.”
On the day gold closed up $6.00 at $2740.90, and silver closed down $0.01 at $33.60.
Platinum closed up $3.00 at $1027.20, and palladium closed up $38.70 at $1199.70.
Jim Wycoff (Kitco) – “Technically, December gold bulls have the strong overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at $2,800.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $2,650.00. First resistance is seen at the $2,750.00 and then at the contract high of $2,772.60. First support is seen at the overnight low of $2,729.10 and then at this week’s low of $2,722.10. December silver futures bulls have the solid overall near-term technical advantage. Prices are in an accelerating 2.5-month-old uptrend on the daily bar chart. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $37.50. The next downside price objective for the bears is closing prices below solid support at $32.00. First resistance is seen at $34.00 and then at $34.50. Next support is seen at the overnight low of $33.26 and then at $33.00.”
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