Gold – Volatility Returns
Commentary for Friday, July 12, 2024 (www.golddealer.com) – Today gold closed down $1.00 at $2414.00, and silver closed down $0.50 at $30.89. After Thursday’s round of fireworks to the upside it must be a disappointment to bullish sentiment to see gold momentum fizzle into the weekend. Still the optimism cup is more than half full. Momentum still favors the bulls and the chance of an interest rate cut before year end is increasing. Which should put $2500.00 gold in the spotlight before Thanksgiving. I would not ignore today’s pricing drag, but it does suggest that higher prices create the usual volatile downdrafts. Last Friday gold closed at $2388.50 / silver at $31.39. On the week gold was up $25.50 and silver was down $0.50.
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On Monday the price of gold dipped lower in the early trade bouncing off $2355.00 and finally closing in the red for the day. Traders still believe that downside support remains firm. This should sound familiar by now because it is the same old playbook of “interest rate intentions”. This theme dominates gold prices as bullish optimist’s look for that interest rate cut, as the bearish sentiment waits for the once hawkish FOMC to reestablish itself by holding interest rates steady. For the present both sides of this argument are “stuck”. But if there is a silver lining here it would be that this “back and forth” pricing has created a more stable and predictable market, with increasingly upbeat sentiment. Frank E. Homes (Kitco) “Excessive government spending in the U.S. and geopolitical uncertainty are underpinning calls from some investor heavyweights to buy gold as a hedge against sovereign debt risks. Schroder Investment Management and UBS Global Wealth Management are bracing for a rocky second half, and gold has emerged as a preferred trade to navigate the volatility, according to Bloomberg.”
Reuters (Sherin Elizabeth Varghese) – Gold succumbs to profit-taking after US jobs-fueled rally – “Gold slipped on Monday as investors booked profits after soft U.S. jobs data fueled prices to a more than a one-month high on rising expectations that the Federal Reserve will begin cutting interest rates in September. Spot gold fell 0.6% to $2,376.40 per ounce as of 1223 GMT, after rising to its highest level since May 22 on Friday. U.S. gold futures eased 0.5% to $2,384.80. Data last week pointed to a slackening labor market that keeps the U.S. central bank on course to start cutting interest rates soon. Markets are currently pricing in a 72% chance of the Fed cutting interest rates in September as well as another cut in December. “We should not forget gold had a nice rally last Friday, so some profit taking and a stronger dollar post the French elections are weighing on gold today,” UBS analyst Giovanni Staunovo said. “Lower U.S. interest rates are likely to support more inflows into gold ETFs (exchange-traded funds), which likely has the room to push the yellow metal to $2,600/oz by the end of the year.” This week investors’ focus will be on Fed Chair Jerome Powell’s semi-annual Congressional testimony, comments from a series of Fed officials, and U.S. inflation data. “If we get another downside surprise in inflation data, which we have seen pretty consistently in U.S. data, then that’s going to be a tailwind for gold,” said Kyle Rodda, a financial market analyst at Capital.com. Elsewhere, top consumer China’s central bank refrained from gold purchases to its reserves for a second consecutive month in June. “Monthly data based on IMF reporting don’t catch the full picture of central bank activity, so I would not be surprised if the final data from the World Gold Council indicates solid central bank activity in the second quarter of this year,” UBS’ Staunovo said. Spot silver fell 0.4% to $31.09, platinum edged 1.6% lower to $1,010.10 and palladium dropped 21.3% to $1,012.94.
On the day gold closed down $33.30 at $2355.20, and silver closed down $0.77 at $30.62.
On Tuesday the price of gold moved between $2356.00 and $2368.00 in the early trade, but the latest news from the Fed might suggest this interest rate stalemate will begin to resolve itself sooner than later. (Reuters) “Inflation remains above” the U.S. Federal Reserve’s 2% target but has been improving in recent months and “more good data would strengthen” the case for central bank interest rate cuts, Fed Chair Jerome Powell said on Tuesday in congressional testimony. In comments that appeared to show increasing faith that inflation will return to the Fed’s target, a requirement for easing monetary policy, Powell compared the lack of progress on that front in the first months of the year to recent improvement that has helped build the Fed’s confidence that price pressures will continue to diminish.” The price of gold and silver were little changed after the release of this fresh information, suggesting caution from investors and traders. But I am more optimistic here, you may be looking at the first steps in what has turned out to be a rather long process of unwinding interest rates. In other words the Fed, by its own admission is moving in the right direction so you could see gold climb above $2400.00 before the end of the year!
Reuters (Brijesh Patel) – Gold holds steady as traders await US inflation data for Fed clues – “Gold prices were little changed on Tuesday as the dollar held firm and Treasury yields ticked higher, while investors looked forward to the U.S. June inflation data due later this week for more clarity on the U.S. interest rate path. Spot gold was up 0.1% to $2,360.70 per ounce as of 10:13 a.m. ET (1413 GMT), after dropping more than 1% in the previous session. U.S. gold futures firmed 0.2% to $2,367.80. The dollar was up 0.1% against its rivals, making gold more expensive for other currency holders, while Benchmark 10-year Treasury yields inched higher. There’s an expectation that the Federal Reserve is more likely to start cutting rates as early as September, which is contributing positively to current market condition, said Bart Melek, head of commodity strategies at TD Securities. Recent U.S. economic data pointed to a slackening labor market, cementing expectations that the U.S. central bank is on course to start cutting interest rates soon. However, Fed Chair Jerome Powell on Tuesday in congressional testimony said inflation “remains above” the Fed 2% target but has been improving in recent months and “more good data would strengthen” the case for central bank interest rate cuts. Focus now shifts to the consumer price index (CPI) data on Thursday, with recent numbers showing a cooling from unexpectedly high levels at the start of the year. If markets are shown evidence of still-stubborn U.S. inflation, that may prompt the precious metal to unwind more of its recent gains, said Han Tan, chief market analyst at Exinity Group. Traders currently see about a 75% chance of a rate cut in September, according to the CME Group’s FedWatch Tool. Non-yielding bullion’s appeal tends to grow when interest rates are lower. Elsewhere, spot silver rose 0.4% to $30.91 per ounce, platinum fell 0.5% to $991.90 and palladium slipped 0.5% to $1,003.75.”
On the day gold closed up $4.90 at $2360.10, and silver closed up $0.15 at $30.77.
On Wednesday the price of gold surged reaching $2386.00 before traders sold the rally. Still, gold finished in the green for the day. All this excitement was created by Powell’s opening comments before a Senate Committee. Traders did take profits, but I think remain cautious of this latest bullish news because the following talk with a House Committee was nothing special. Still the trading mood remains upbeat on even the possibility of lower interest rates and the bulls are encouraged by a technical outlook which suggests thar higher prices are in the offing.
FXEmpire (James Hyerczyk) – Gold Edges Higher as Fed Signals Potential Rate Cuts – “Gold prices are moving upward on Wednesday, finding strong support at the 50-day moving average of $2343.27. The market’s next challenge is to surpass last week’s high of $2392.97 to attract new buyers and fresh capital. At 11:11 GMT, XAU/USD is trading $2372.93, up $8.90 or +0.38%. Fed Chair’s Cautious Stance – Federal Reserve Chair Jerome Powell’s recent comments have bolstered the case for interest rate cuts. While maintaining a cautious approach, Powell acknowledged improved inflation data and stated that “more good data would strengthen” the argument for looser monetary policy. This stance has provided support for gold prices. Market Expectations – Traders are currently pricing in a 73% probability of a rate cut in September, with another reduction expected by December, according to CME Group’s FedWatch Tool. The non-yielding nature of gold makes it more attractive in a lower interest rate environment. Treasury Yields and Economic Outlook – U.S. Treasury bond yields decreased slightly on Wednesday following Powell’s warning about the potential negative impact of prolonged high interest rates on economic growth. The 10-year Treasury yield fell by 2 basis points to 4.275%, while the 2-year Treasury note yield remained relatively stable at 4.618%. Upcoming Economic Data – Investors are eagerly anticipating key economic releases, including the June Consumer Price Index (CPI) on Thursday and the Producer Price Index on Friday. The CPI data is expected to show headline prices rising 0.1% month-on-month and core prices gaining 0.2%, with annual increases of 3.1% and 3.4%, respectively. ETF Inflows – The World Gold Council reported that global physically backed gold exchange-traded funds experienced inflows for the second consecutive month in June, driven by additions to holdings in Europe- and Asia-listed funds. Market Forecast – The short-term outlook for gold appears bullish. With the Fed signaling a potential shift towards rate cuts and ongoing economic uncertainties, gold’s appeal as a safe-haven asset is likely to strengthen. However, the market will be closely watching the upcoming CPI data, which could influence the Fed’s decision-making process and, consequently, gold prices in the near term. Support and Resistance Levels – Gold maintains its position above the 50-day moving average at $2343.29, which serves as key support. This level has held for six consecutive trading sessions, indicating buyer presence. Breakout Potential – The market faces resistance at last week’s high of $2392.97. A break above this level could trigger a rally towards $2450.13. Such a move is likely to be driven by significant news events. Downside Scenario – If gold falls below the 50-day moving average, it may not necessarily indicate a bearish trend. Instead, it could suggest the market needs more time to consolidate before attempting an upward move. Strong Support Zone – A triple-bottom formation between $2277.34 and $2293.69 provides a robust support zone, offering potential buying opportunities on significant dips.”
On the day gold closed up $12.10 at $2372.20, and silver closed down $0.04 at $30.73.
On Thursday the gold bulls were again smiling as it moved from $2380.00 to $2420.00 in a flash after surprisingly cooling inflation data and Powell’s latest dovish comments seem to underpin bullish sentiment on the short term. There are still some naysayers who claim that while the Fed may lower interest rates between now and the end of the year the dip will not be large enough and this latest bullish energy will dissipate. I don’t know about that story line; the whole world may be interested in gold and silver bullion as political tension and geopolitical shifts in power perhaps compete with the dollar. But one thing is sure, prices are high for both gold and silver so it figures you will be reading more fantastic stories, much of which I would ignore. This is a period however where technical analysis can warn of turns in the road. In the meantime, it looks like $2500.00 might be in short term cards for gold.
FXEmpire (Christopher Lewis) – Gold Continues to Find Buyers After CPI – “The gold market went straight up in the air after the consumer price index numbers in the United States came out weaker than anticipated, but in doing so, it does suggest that we are going to continue to be very noisy but continue to focus on the idea of whether or not the Federal Reserve will cut rates. If, in fact, they will, then that should help gold over the longer term. On the other hand, if they remain tight, then it’s possible that the Federal Reserve will squash gold. I think at this point in time, though, the market has already made up its mind, and it’s probably only a matter of time before we truly see gold take off to the upside. Clearly, we have a lot of momentum, and the $2,300 level underneath has been like a brick wall. It’s probably worth noting that the $2,400 level has been very difficult to overcome as well. So with all of that being said, I think you’ve got a situation where traders continue to press the resistance above, and I think short term pullbacks will end up being buying opportunities given enough time. Ultimately, this is a market that not only breaks higher, but I think eventually breaks above the $2,450 level to go looking to the $2,500 level. But we don’t necessarily know that it’s going to happen right now. With this, I remain bullish, but I’m looking for short term pullbacks to get involved. Silver Continues to Look Strong – “The silver market has broken to the upside during the trading session on Thursday, as the consumer price index numbers in the United States came out much weaker than anticipated. This has people hoping and perhaps even believing that the Federal Reserve is going to cut rates later this year, and that has people excited for risk appetite. With that being the case, it’s just a continuation of the very bullish behavior that we had seen in the silver market. And now it looks like we could threaten the recent highs near the $32.50 level. We certainly saw a huge surge initially after that announcement came out cooler than anticipated. So, it’ll be interesting to see if we get any follow through. Short term pullbacks at this point in time should continue to be thought of as buying opportunities, and I think the $31 level will be the first support level. After that we have the $30 level, which of course is a large, round, psychologically significant figure which is starting to attract the attention of the 50 day EMA. All things being equal, I think it is becoming increasingly obvious that silver is not a market you can sell, and therefore you have to look for buying opportunities, perhaps on dips, on short term charts, or maybe just a fresh new high. Silver, of course, is highly sensitive to interest rates, which obviously are dropping and therefore it frees silver to go higher. Also, there’s the industrial demand aspect of silver. So don’t forget that a lot of people will be looking to whether or not the Fed will stimulate the economy.”
On the day gold closed up $42.80 at $2415.00, and silver closed up $0.66 at $31.39.
On Friday the price of gold was surprisingly choppy, moving between $2394.00 and $2412.00. This type of action will hurt the bullish momentum created on Thursday, but I think traders are still looking for further upside in both gold and silver prices, all things considered. Across our trading desk volume numbers have been steady, not too hot and not too cold. The public is surprisingly interested in buying even with these higher interest rates. And I’m happy that well into July gold is still holding up around $2400.00. In my opinion the physical market in both gold and silver is not running out of gas, it has plenty of potential, especially in the longer term.
Ernest Hoffman (Kito) – Gold falls below $2,400 as U.S. PPI sees sharp rise in June – “The gold market is selling off after the latest data shows U.S. producers saw surprisingly strong price pressures last month. The Producer Price Index (PPI) rose 0.2% in June, following May’s 0.2% decrease, the U.S. Labor Department announced on Friday. The latest inflation data was higher than expected, as economists looked for a 0.1% increase. In the last 12 months headline wholesale inflation increased 2.6%, the report said, which was well above the consensus for a 2.3% reading. Core PPI, which strips out volatile food and energy costs, rose 0.4% in June against economists’ forecasts for a 0.2% increase and following May’s flat reading. Annual core PPI was 3.0% against the consensus expectation for a 2.5% reading and following May’s 2.3% print. The gold market is selling off on the worse-than-expected inflation data. Spot gold fell sharply below $2,400 per ounce in the moments following the PPi release, last trading at $2,397.13 for a loss of 0.76% on the day. PPI is viewed as a leading inflation indicator as producers pass higher input costs on to their customers. Paul Ashworth, Chief North America Economist at Capital Economics, said the PPI report is actually a lot better than it looks. “Ignore the fact that core PPI increased by a slightly bigger-than-expected 0.4% m/m in June and that May was revised to a 0.3% rise from unchanged,” he wrote in a note shared with Kitco News. “The PPI components that feed into the Fed’s preferred PCE deflator inflation measure were significantly lower than expected for June and it looks like May’s PCE gain could be revised down too, albeit only slightly.” “The big news is that, after applying our own seasonal adjustment, PPI hospital prices increased by only 0.1% m/m in June and the massive 1.3% m/m surge in May was revised down to a 0.6% gain,” Ashworth added. “In addition, after rising by 0.8% m/m in May, PPI office of physicians prices fell by 0.4% m/m in June. Portfolio management prices only increased by 1.0% m/m in June, which barely reversed the 0.8% gain in May. Admittedly, PPI international air transportation prices rebounded strongly, but prices on domestic routes continued to fall, echoing what we learned in June’s CPI report.” “The upshot is that our post-CPI estimate that the core PCE deflator increased by 0.19% m/m in June has, post-PPI, been cut to only 0.12% m/m,” he concluded. “In addition, we think that May’s increase could be trimmed from 0.08% to 0.05%. That would be enough to pull the annual core PCE inflation rate down to 2.5%, from 2.6%, with the 3m annualized growth rate dropping back to 1.8%, from 2.7%.” “September rate cut on the way – and we can’t completely rule out a surprise move in July.” Market analysts have said that falling producer prices, combined with improving CPI inflation, could give the Federal Reserve the confidence to begin lowering interest rates as early as September, supporting gold’s long-term uptrend.”
On the day gold closed down $1.00 at $2414.00, and silver closed down $0.50 at $30.89.
Platinum closed down $6.50 at $999.00, and palladium closed down $24.30 at $969.10.
Jim Wycoff (Kitco) – “Technically, August gold bulls have the firm overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at the May contract high of $2,477.00. 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 the overnight high of $2,421.80 and then at this week’s high of $2,430.40. First support is seen at today’s low of $2,396.90 and then at Thursday’s low of $2,376.80. September silver futures bulls have the firm overall near-term technical advantage. Silver bulls’ next upside price objective is closing prices above solid technical resistance at the May high of $33.05. The next downside price objective for the bears is closing prices below solid
support at the June low of $28.90. First resistance is seen at $31.00 and then at $31.50. Next support is seen at today’s low of $30.62 and then at $30.45.”
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