Gold – Will Prices Hold Up?
Commentary for Friday, Dec 1, 2023 (www.golddealer.com) – Today gold closed up $32.90 at $2071.00, and silver closed up $0.21 at $25.50. This week some traders are considering the possibility that the price of gold will not substantially retreat despite higher interest rates and hawkish Powell comments. This seems a bit counterintuitive, and perhaps premature, but gold did finish in the green four days this week. There is not enough science behind this new trading wrinkle to keep the conservative bullish trade from fearing higher interest rates. But the kernel of truth which created this novel thinking is plain enough – traders and the public continue to buy weakness, nudging gold prices higher. Last Friday gold closed at $1991.40 / silver at $23.67 – on the week gold was up $79.60 and silver was higher by $1.83. We will be closed December 25th (Monday) and December 26th (Tuesday) for Christmas. And January 1st (Monday) for New Years. Holiday Insured mail is slow and unpredictable, please plan accordingly. Wishing you all a Merry Christmas and Happy New Year!
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On Monday the price of gold was typically choppy in the early trade, moving between $2008.00 and $2016.00 with a small upward bias. Still, gold’s price action seems a bit flat at these higher levels even though its technical picture suggests higher prices might be an option.
If you suspect gold’s momentum is turning south the 60-day pricing chart might offer better insight as momentum slows and our shiny friend consolidates between $1950.00 and $2000.00. This seems like a better fit because the Fed interest rate question is still undecided.
If you are looking for a better horse in this race, consider the silver bullion market. Granted prices are at 3-month highs, but its technical picture is still creating buzz. Its cost per ounce is much less than gold, allowing for wider participation. This aspect of silver investment is rarely explored these days but is a big plus because its price allows anyone to get started.
There are developing reasons to consider higher silver prices. Its possible upside is still being explored within the “green movement” and solar panel innovations. Finally, if you are optimistic about our economy silver prices tend to rise in times of economic expansion.
Reuters (Sherin Elizabeth Varghese) – Gold nudges higher on dollar dip, Fed pause bets – “Gold hit a six-month high on Monday as a softer dollar and expectations of a pause in the Federal Reserve’s monetary tightening helped bullion consolidate above the key $2,000 an ounce level. The dollar (.DXY) hovered near a three-month low, making greenback-priced gold less expensive for holders of other currencies. Gold is likely to trade around $2,000 for a little bit until we get some more information from the Fed on its plan on interest rates, said Bob Haberkorn, senior market strategist at RJO Futures. “Gold will trade higher if they are done with rate hikes for the time being.” Traders widely expect the U.S. central bank to hold rates in December, while pricing in about a 50% chance of a cut in May next year, CME’s FedWatch Tool shows. Lower interest rates reduce the opportunity cost of holding non-interest-bearing assets, often boosting gold prices. Investors’ attention will be on the U.S. third-quarter GDP figures on Wednesday and the PCE price index due on Thursday, the Fed’s preferred inflation gauge. “Economic figures coming out of the U.S. this week, both on the growth and inflation front, will make or break a case for whether gold remains above $2,000,” said Kyle Rodda, a financial market analyst at Capital.com. On the physical front, data showed that top consumer China’s net gold imports via Hong Kong fell for a second consecutive month in October as a patchy economic recovery weighed on demand in the key bullion market. Silver jumped 1.3% to $24.62, platinum fell 1.6% to $915.44 and palladium was down 1.3% to $1,055.24 per ounce.”
On the day gold closed up $9.60 at $2011.80, and silver closed up $0.34 at $24.67.
On Tuesday the price of gold continued to make the bulls smile as gold surged ($2040.00) and held this high into the close. This extra optimism is firmly attached to the notion that the Fed is finished raising interest rates in the short term, and in fact has enough gas in the tank to lower rates in case recession clouds create economic anxiety.
Optimistic or not, this latest jump to higher ground has a life all its own as computer programs wake up around the world and momentum players join the party. I’m still too old school not to show appropriate caution about these higher prices. Even though Fed insiders seem more relaxed, perhaps even dovish about Fed interest rate policy.
This turn in sentiment could be transitory. But it is amazing that not long ago all the Fed governors were hawkish and prepared to stop rising inflation with higher interest rates.
But for now, let’s enjoy this bullish ride. The economy remains steady, and inflation may continue to decline. The answer as to why gold and silver continue higher might even become obvious: Perhaps the Fed has created too much fiat currency, making gold and silver more valuable. That is what usually happens, but in this upside-down world let’s remain cautious.
Reuters (Anushree Ashish Mukherjee) – Gold extends gains on Fed pause bets, dollar retreat – “Gold rose for a fourth consecutive session on Tuesday and hit a more than six-month high, driven by a retreating dollar and expectations that the U.S. Federal Reserve has finished hiking interest rates. Gold continues to be bullish in the near term, with the dollar index in a downtrend on hopes the Fed will no longer raise interest rates and will maybe even cut rates by springtime, Jim Wyckoff, senior analyst at Kitco Metals, said. However, “if (U.S.) GDP numbers and inflation indicators are stronger than expected, it will dent traders’ enthusiasm in bullion,” Wyckoff added. Traders widely expect the U.S. central bank to leave rates unchanged in December and are pricing in about a 50% chance of cuts in May next year, CME’s FedWatch Tool shows. Lower interest rates reduce the opportunity cost of holding the non-interest-bearing bullion. U.S. Fed Governor Christopher Waller said he is “increasingly confident” that policy is in the right spot. Making bullion less expensive for overseas buyers, the dollar index touched its lowest since mid-August. Investors will monitor Thursday’s U.S. Personal Consumption Expenditures (PCE) data, the Fed’s preferred inflation indicator. The focus is also on the revised U.S. third-quarter GDP figures scheduled for Wednesday. “A sense of caution ahead of another busy week for global financial markets is also lending support to the precious metal. Given how the $2,000 level proved an extremely tough resistance to conquer, gold could end up dipping without a potent fundamental catalyst,” FXTM senior research analyst Lukman Otunuga said. Silver rose 0.8% to $24.81 per ounce; platinum was up 1.9% to $935.74. Palladium fell 1.2% to $1,058.01 per ounce.”
On the day gold closed up $27.90 at $2039.70, and silver closed up $0.26 at $24.93.
On Wednesday the price of gold cooled on the open, recovered and finally managed to finish in the green for the day, a plus for the bulls. And the third green finish in as many days. But many are beginning to worry about gold’s overhead resistance at $2050.00. It has played an important role since last April as gold tried on three occasions to overcome this obstacle and failed.
This could suggest a tired market looking to consolidate, which is the line the technically minded trader would likely follow. I feel this conclusion is the most popular assumption today.
The hard asset optimist, however, sees an equally good argument for higher prices in gold. Especially if the Fed is finished with higher interest rates. The $2050.00 overhead shelf is thin, and a break to the upside is not a big stretch.
This of course would further rally the physical market developing the notion that gold may double in value. I talked with a long-time customer not long ago and asked him what he thought of $2000.00 gold? His answer was straightforward – “This is just the beginning – mark my words, gold is moving much higher.” This may sound like a radical idea to some, but only because it has never happened. True followers, however, rarely question this outcome.
FXEmpire (Christoher Lewis) – Gold Price Forecast – Gold Markets Showing Signs Of Exhaustion – “Gold initially tried to rally during the trading session on Wednesday but gave back gains rather quickly as we are overextended by just about any measure you use. The Relative Strength Index is reaching the overbought condition, and of course we are testing a previous resistance barrier that was very difficult to overcome multiple times. Because of this, and the fact that we had gotten straight up in the air rather quickly tells me that a short-term pullback makes a certain amount of sense. That being said, I’m not necessarily looking to short this market, but if we see the US dollar pick up a little bit of strength in an oversold condition, it will show itself in the gold market as well. The market certainly has a lot of bullish pressure underneath it, but I think given enough time we probably will have to work off some of this excess froth. If we were to break out from here, that would actually be somewhat dangerous considering the last couple of days have been straight up and vertical. Underneath, the $2000 level is an area that I believe will offer a significant amount of support and a potential “floor in the market.” This of course assumes that we even get down there, which is not something that I think will be easy to make happen. However, the PCE Core Price Index coming out on Thursday could cause a lot of volatility in the markets as it is the Federal Reserve’s favorite indicator. It might be an excuse for people to take quite a bit of profit in this market, as gold has been explosive as of late. Recently, we have been seeing some conflicting statements coming out of Federal Reserve governors, and that of course has the markets being choppier than ever. This is what the Federal Reserve does, it fumbles the ball time and time again. Quite frankly, the Federal Reserve will wait too long to loosen monetary policy, as they typically do. It’s almost impossible that we do not head into a recession, so it’ll be interesting to see how long it takes for them to change their attitude, but right now it looks like the simplest explanation to this chart is that we have come too far, too fast.”
On the day gold closed up $7.40 at $2047.10, and silver closed up $0.14 at $25.07.
On Thursday the price of gold moved between $2042.00 and $2032.00, settling mid-range, as traders sold the rallies and bought the dips going into the weekend. I think the smarties do not know exactly what to make of both the gold and silver trade this year.
Year over year gold is higher by 13% and silver is higher by 10%, but these percentages are misleading. Because the price of both metals has been all over the street. Sentiment has moved from highly bearish to higher bullish as traders tried to second guess Fed interest rate policy. And frankly we are probably in for another year of confusion. So, keep your seatbelts buckled and do not be swayed by the tide of changing sentiment.
The short-term price of both gold and silver should be of interest only to the highly leveraged paper trade. For the rest of us mortals, this type of leverage should be avoided as we concentrate on the bigger picture and longer time frame. How much do you think gold or silver will bel in a decade? Of course, this is strictly speculation but if the past is any indication, it’s not a bad bet to say both metals will be higher in value. Perhaps considerably higher depending on how this government sorts out its debt problem.
FXEmpire (Christoher Lewis) – Gold Price Forecast – Gold Markets Look Stretched – “Technical Analysis – Gold markets have dropped a bit during the trading session on Thursday in the early hours, but quite frankly it doesn’t look like we are ready to fall apart just yet. We are overextended, and that’s probably something that we need to pay close attention to as well. The area right around the $2050 level continues to be significant resistance, just as it had been multiple times in the past. This is a major resistance barrier, and at this point it’s probably worth noting that the Relative Strength Index indicator is now in the overbought condition, suggesting that perhaps a pullback is imminent. That being said, it doesn’t necessarily mean that gold is going to suddenly be something that you should be shorting, just that if you are already long in this market, you may want to tighten your stop losses. Remember, markets don’t go straight up in the air forever, so it does make a certain amount of sense that we need to take a bit of a breather. Given enough time, I do think that we could break out to the upside, especially if the Federal Reserve starts to sound a bit more dovish, which is something that a lot of people were trying to front run. In general, this is a market that I think continues to see a lot of volatility, and therefore you will have to pay close attention to the bond market in the United States, and of course speakers from central banks. I don’t think at this point in time it’s very easy to short this market, but I do think that the pullback could offer a nice buying opportunity, especially if we drop anywhere near the $2000 level. While that would be $40 below where I see the market trading at the moment, it is still but a small blip on the radar considering that we launched this move from just above the $1800 level. Be cautious with your position size but recognize that a short-term pullback should end up being buying opportunities in what is a very bullish market that simply needs to take some type of break from the relentless buying pressure.”
On the day gold closed down $9.00 at $2038.10, and silver closed up $0.22 at $25.29.
On Friday the price of gold moved to daily highs ($2070.00) in the early trade, again helping the technical picture and increasing bullish sentiment. It appears this market has gotten ahead of itself, but it is becoming difficult to make the usual argument – that higher interest rates will blunt short term gains in the price of gold. The logical view is that interest rates are trending lower creating more interest in the metals. But relatively speaking interest rates are still high and may not be moving lower anytime soon. This may have created an interesting wrinkle in today’s trade. It does not feel as heavy – so perhaps there is something at work which suggests a change in the trading wind. A change which might further encourage bullish sentiment.
Reuters (Anushree Ashish Mukherjee) – Gold firmer, traders brace for cues from Fed’s Powell – “Gold firmed on Friday en route to a third consecutive weekly gain on bets that U.S. interest rates could soon be cut, but investors awaited further confirmation from Federal Reserve chair Jerome Powell. “Gold will pull back if there is a hawkish push back. But, it is certainly within the realm of possibility that gold re-tests record highs.” Lower interest rates reduce the opportunity cost of holding zero-yield gold. Chicago Fed President Austan Goolsbee said he believes U.S. inflation is “on track” to reaching the Fed’s 2% target. Data on Thursday showed U.S. consumer spending rose moderately in October, while the annual increase in inflation was the smallest in more than 2-1/2 years. Traders were currently pricing in a 50% chance of a Fed rate cut in March, CME’s FedWatch Tool showed. But, “prices may have entered overbought territory and gold has been known to price in monetary policy expectations prematurely over the past two years,” Standard Chartered analyst Suki Cooper said in a note. Powell will take part in a discussion later in the day, traders will watch out for his opinion on the recent shift in rate expectations. U.S. 10-year Treasury yields slipped and the dollar (.DXY) marked its weakest month in a year in November.”
On the day gold closed up $32.90 at $2071.00, and silver closed up $0.21 at $25.50.
Platinum closed up $0.80 at $932.00, and palladium closed down $9.10 at $1000.00.
Jim Wycoff (Kitco) – “Technically, the gold futures bulls have the firm overall near-term technical advantage. Prices are in a two-month-old uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close in March futures above solid resistance at $2,100.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $2,000.00. First resistance is seen at the overnight high of $2,069.70 and then at this week’s high of $2,072.70. First support is seen at $2,050.00 and then at this week’s low of $2,030.00. The silver bulls have the firm overall near-term technical advantage. Prices are in a two-month-old uptrend on the daily bar chart. Silver bulls’ next upside price objective is closing March futures prices above solid technical resistance at the July high of $26.10. The next downside price objective for the bears is closing prices below solid support at $23.50. First resistance is seen at the overnight high of $25.87 and then at $26.00. Next support is seen at $25.245 and then at $25.00.”
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