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Gold – Another Tough Week

Gold – Another Tough Week

Commentary for Friday, May 13, 2022 (www.golddealer.com) – Gold closed down $16.40 at $1807.40 and silver closed up $0.22 at $20.98. The bulls are still trying to gather themselves today as gold notches its fourth weekly dip and struggles to hold the important $1800.00 support. The 30-day pricing chart makes the bears smile as gold touched $1980.00 a month ago and traders were looking for a rather dovish FOMC reaction to rising inflation. The reality took time to set in – but building FOMC hawkish sentiment and Chief Powell’s warning that taming US inflation will cause “some pain” redefined “rising interest rates” by introducing the powerful half point hike. And rising yields reinvented the dollar as the world’s “go to” safe haven during times of uncertainty. There was light bargain hunting and mild short covering in the domestic market as traders bought today’s dip, but the effort looks fainthearted and I suspect the bulls are happy this is Friday, it has been a tough week. Last Friday gold closed at $1881.20 / silver at $22.33 – on the week gold lost $73.80 and silver was down $1.35.

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 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 gold was again weak in the overnight Hong Kong and London markets, caught a decent bid in the domestic trade, yet finally sold off as New York tested daily lows. The bears are in control of this market as traders fear rising interest rates and the Dollar Index moved above 104.00 in early trading. Clearly the metals are under pressure and the DOW remains weak, losing 600 points today. Tech stocks continue to take a price beating, and Barron’s expects another down leg in stocks as bond yields march to new highs. No happiness on Wall Street today.

A steep stock market sell-off amid rising inflation should support the price of gold. But for now, traders remain focused on higher interest rates and a hawkish Fed. Which keeps the metals left footed and looking for price support. Technically the bears hold the cards as gold tests $1860.00 support for the second time in a week and silver moves to a five-month low.

It is not as though we are in the dark as to what the Fed has in mind. Analysts expect another half point hike in interest rates in June. And it’s not as though the drop in stocks was unexpected. A few right thinkers predicted early carnage in the stock market as the Fed dropped the interest rate hammer. So why is everyone wringing their hands?

It mostly works this way, at least on the short term, when the theoretical meets the practical reality. Owners of stocks were looking for the best outcome, not the worst. Owners of physical metals are in the same boat. So, both these asset classes are surprised when the harbinger of financial doom passes a bit too close for comfort. But take heart, the practical reality of both these markets will soon take hold like a secure anchor which has been tossed overbroad as the wind threatened old time mariners.

Many sellers have already sold, and the number of newly convinced sellers grows smaller each day. That is how a bottom is reached and bargain hunting begins. The cheaper stocks become the better the pickings, the same holds true for the metals. In the meantime, hold on to your hat, the winds are blowing, and may get stronger. Keep in mind two important aspects of this market in transition. First, all the Fed has to offer is a short-term fix which it hopes will tap down the US inflation problem. World inflation, complicated by the Balkan war is a different reality with its own set of problems and unstable currencies. Physical gold here in my view is indispensable. And second once the Fed reaches the coming standoff between interest rates and economic growth the dollar will move considerably lower. Reinventing the gold bullish scenario.

I would not be surprised to see gold find support between $1800.00 and $1850.00 through the FOMC rate hike next month. But suppose it does not? The Asian market thinks gold is still overpriced even at a 10% discount from highs. A 15% discount ($1700.00) is too cheap. So, we may be approaching a defendable bottom. One that can live with higher interest rates and represent value in an inflationary world. More importantly one that can wait patiently for the expected reversal in the dollar as the Fed realizes it must settle for half a loaf of bread.

On the day gold closed down $24.10 at $1857.10 and silver closed down $0.55 at $21.78.

Grant on Gold (Zaner) – (1) Gold closed down 0.7% last week. It was the third consecutive lower weekly close as yield and dollar strength continue to pose significant headwinds. (2) Silver extended lower on Monday to set a 20-week low at $21.60. (3) Platinum posted a 1.7% gain last week. While the market faded into the weekend, platinum managed a second consecutive higher weekly close. (4) Palladium remains defensive in the lower half of its COVID-era range as the market awaits a return to more normal conditions in the global automobile sector.

On Tuesday gold held up fairly well in early trading but eventually pushed below Monday’s close as rhetoric builds that the Fed has the tools necessary to deal with rising inflation and our economy will hold up as interest rates rise. This is an important central theme the bears will embrace until the dollar gives up its recent strength. High Treasury yields strengthen the Green Back – a wonderful bearish fact of life. This past month the Dollar Index has moved from 100.00 through 104.00 a barrel. This past week crude oil has dropped 10%. Tough to make a bullish case for gold during these kind of headwinds.

At the same time, this market remains nuanced. Traders are looking carefully at how these large jumps in interest rates will be handled by Wall Street. For now, stocks are wobbly and Treasury yields have dipped below 3%. I’m surprised gold did not hold up better this morning.

Today’s weakness might be a technical bear raid given paper traders sense weakness. Which could suggest we are approaching an oversold position. I don’t think professionals expect a big turnaround in this “interest rate” transition. They are looking for better footing. And perhaps a short covering rally. Which will produce a more stable pricing envelope, giving them time to adjust their thinking to the June interest rate hike.

The key to this transition will be how heavy handed the Fed will become to attain their inflation goals. Some hawks are looking at a whopping 3% interest rate by the end of this year. According to bankrate.com that would be the most active the Fed has been since 2005. Many however question whether the Fed needs such a bazooka blast to slow down the inflation numbers. This remains one of the best bullish arguments, especially for the physical gold and silver markets.

But one thing is sure. We are approaching the halfway point in this year, so you won’t have to wait long to understand what Jerome and his lieutenants have in mind. Also keep in mind that a heavily sold or bearish market quickly runs out of sellers. So again, patience is needed.

On the day gold closed down $17.20 at $1839.90 and silver closed down $0.39 at $21.39.

Jim Wycoff (Kitco) – “Technically, June gold futures prices hit a three-month low today. A two-month-old price downtrend line is in place on the daily bar chart. Bears have the firm overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at $1,900.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at today’s high of $1,864.70 and then at $1,875.00. First support is seen at $1,835.00 and then at $1,825.00.

July silver futures prices hit an eight-month low today. A steep price downtrend is in place on the daily bar chart. The silver bears have the solid overall near-term technical advantage. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $23.00 an ounce. The next downside price objective for the bears is closing prices below solid support at the December low of $20.00. First resistance is seen at today’s high of $22.085 and then at this week’s high of $22.395. Next support is seen at $21.25 and then at $21.00.”

On Wednesday gold was firmer in the overnight Hong Kong and London markets, sold off in the domestic trade, touching $1835.00 and then recovered into the $1850.00 range. The Dollar Index and crude oil were relatively steady. Traders were confused because the latest inflation numbers came in hot, but gold’s reaction was at least muted. Reuters – “U.S. consumer price growth slowed in April as gasoline prices eased off record highs, suggesting inflation has probably peaked, though it is likely to stay hot for a while and keep the Federal Reserve’s foot on the brakes to cool demand.” “The market saw the print and went ‘SELL, SELL, SELL.’ But gold has since bounced back with the thinking that the data is higher than expected, but not horrifying,” said Tai Wong, an independent metals trader in New York. “The Fed won’t get more hawkish with this report, but definitely won’t ease off either. But the sentiment (in gold) might be close to max bearish at the moment, which is why we could get a significant rebound”.

While gold remains under pressure it is worth noting that our friend is fighting for the $1850.00 level. Why? You may be seeing minor seeing short covering in a bearish market coupled with uncertainty relative to crude oil and inflation, as the Balkan war gets more complicated.

Has inflation peaked? Probably not but the so-called “sticky” argument has returned. Economicshelp.org – “Inflation is often sticky and difficult to reduce when people expect higher inflation. When people expect higher inflation, it can be more difficult to reduce it.”

The professional inflation model is so complicated it allows for too much interpretation. The public uses common sense and weekly visits to the market or gas station. I would guess that the real inflation number lies somewhere between the two extremes. But you will never sell that idea to a truck driver making a living or a housewife pressured to stretch the family food budget.

Finding even basic inflation numbers can be problematic. A coin dealer noted on the teletype today that plain white rice is a food staple that feeds half of the world’s population. Prices have risen 63% in less than a year. I checked it out – the information is correct, but I had no idea.

My take on whether we are ahead or behind the inflation curve is not academic. Anyone could argue that putting a number on inflation encourages carelessness because the accepted government tools exclude the very things consumers buy on a regular basis. They are then sold the idea that we are actually better off because of efficiency gains made in consumerism.

I’m not raining on the good economists making a living, but it all gets too vague. I have come to see inflation rather as a malicious threat which has robbed the American middle class for generations. Now couple this with the growing post-World War 2 notion that big government can solve all our problems. And it should be easy to see we are heading down the wrong road.

On the day gold closed up $12.70 at $1852.60 and silver closed up $0.16 at $21.55.

Zaner (Chicago) – “Obviously, gold reached a moderately oversold condition into the overnight low, with prices forging a low to high bounce of more than $20.00. Perhaps some shorts decided to take profits rather than risk the volatility of the upcoming US CPI report. However, Chinese inflation readings overnight were hotter than expected, indicating the capacity for expanding inflation in an economy perceived to be slowing. Unfortunately for the bull camp, gold ETF sales continued yesterday with a large 266,007-ounce liquidation. Yesterday’s decline in gold ETF holdings was the 4th straight day and the largest one-day outflow since March 18th. While not a tight correlation, gold prices have followed bitcoin prices lower recently, but now bitcoin appears to have found a measure of value above the $30,000 level. Similarly, the dollar index has faltered on its charts as if the 104.00 level is an overvalued level and a trade in the dollar index down to 103.23 today could shift the currency impact on gold from negative to positive. Certainly, the uptick in Chinese inflation suggests today’s US CPI could post a reading above trade expectations, especially with projections of a 0.2% gain in CPI a “low bar”. However, it is not a given that higher than expected CPI will lift gold from a flight to quality perspective, as a hot CPI will likely push up interest rates again and lift the dollar and in turn equities are likely to come under noted pressure. Therefore, a hotter than expected US CPI could result in a rekindling of overly aggressive US interest rate hikes which in turn likely results in risk off selling of equities and commodities. Seeing equities and commodities dive from hotter than expected inflation could exacerbate a recent tide of commodity selling from long-term holders like indexers, CTAs, and hedge funds. Even though gold and silver failed to fully embrace inflationary signals over the last 2 1/2 months with commensurate upside action, we suspect prices have retained some minimal inflation premium and that premium will likely be extracted with a sweep of “as expected” or “weaker than expected” US CPI data. From a technical perspective, June gold’s failure at the psychological pivot price of $1,850 yesterday provides the next downside target of $1,825, and perhaps even $1,800 if today’s CPI causes initial declines in gold and silver prices. While the silver market also rejected initial selling overnight the market lacks a credible bullish fundamental case, with the biggest hope of the bull camp flowing from the extreme oversold technical condition.”

On Thursday gold opened steady but dipped by midday as the Dollar Index threatened 105.00 which approaches an amazing 20-year high. Reuters – “Gold and other precious metals dropped on Thursday, with palladium shedding more than 8%, as investors flocked to the dollar driven by bets the U.S. Federal Reserve will stick to aggressive rate hikes. “Dollar is rallying as things potentially look negative in the U.S., which is hurting gold. Also, the market is realising the likelihood of seeing pretty aggressive interest rate increases,” said Bart Melek, head of commodity strategies at TD Securities. Rival safe-haven dollar climbed to fresh 20-year highs – making gold less appealing for other currency holders driven by concerns tighter monetary policies to tame surging inflation will hurt the global economy. Although it is considered a hedge against inflation and a safe bet during economic and political turmoil, gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion. “However, gold is holding relatively better when compared to the industrial precious metals,” the demand for which could be hurt in a recession environment. Declines in gold were capped by a slide in the benchmark 10-year Treasury yields, which hit the lowest level in two weeks.”

Today’s producer price index rose to 11% again confirming investor fears that the Fed will continue with half point rate increases. The CME FedWatch Tool is pricing in a 93% chance of an additional 50-point interest rate hike in June and a 90% chance of another 50-point hike in July. That is real firepower so expect stocks and the metals to remain left footed until the Fed either takes a breath or there is some slowing in the rate of inflation. I don’t think any of this is a big surprise but confirmation that the Fed is serious about taking away the punch bowl always creates a bit of panic in a market which for years grew accustomed to government largess. And the psychology of this market continues to favor the bears. Powell said today that it would have been better if the Fed had raised the benchmark rate “a little sooner”.

Still, I’m looking for a relief rally perhaps by early next week as the bears take profits and move to the sideline to count the money they made in this surprisingly fierce “short panic”. We sold the house down today, so the physical market is alive and well. As usual live product for immediate delivery remains a challenge. Waiting time for new product from world mints is growing longer and, in some cases, premiums are moving higher.

Which should leave you scratching your head in a world turned upside down with supply restrictions, renewed Russian tariffs, physical liquidation to cover stock market losses, big losses in the crypto currencies, and the renewed interest in the dollar as a safe haven. The last point is important. When investors hit the “panic button” the dollar become unbeatable as a place to park funds and weather the storm. Still, the smart money considers a real global recession unlikely, which should help support gold prices in the short to medium term.

Barrons – The CPI’s year-over-year gain was 8.3% for April, below the March result, but higher than expected. Markets are having to grapple with the fact that inflation is not declining very quickly, which could force the Federal Reserve to lift short-term interest rates faster than currently expected. The ultimate result? A recession. Now, “another risk off day is here,” wrote NatAlliance Securities’ Andrew Brenner. The losses come following inflation-induced declines on Wednesday, which caused all three indexes to sell off, with the Nasdaq down more than 3%. Overall, the stock market has made one thing clear in the last few trading days: it isn’t finished reflecting the economic risks. Now below 4,000, the S&P 500 has fallen beneath key levels at which it had previously found buyers to bring it higher. That opens the door for the index to potentially fall to below 3,700 soon, wrote Frank Cappelleri, chief market technician at Instinet.”

On the day gold closed down $28.80 at $$1823.80 and silver closed down $0.79 at $20.76.

On Friday gold hit a 13-week low but US stocks rallied, shaking off some losses from earlier this week after concerns over persistent inflation and the resilience of the US economy stirred up further volatility in recent sessions (Emily McCormick / Yahoo! Finance).

There was light short covering going into the weekend and the bulls are hoping the bears are getting tired in a perhaps oversold market. But what the bulls really need here is fresh news to recharge that longer term inflation scenario. And time to gather themselves in what has turned out to be an unrelenting price downtrend for the past 4 weeks.

Still the longer-term scenario for gold and silver bullion should encourage because while prices remain weak, they are still a primary, value driven choice in a world of uncertainty. Especially as world currencies and crypto trading are fundamentally shaken. I’m also encouraged that world stocks and Wall Street are settling down. This suggests that even though US consumer confidence is looking at 11-year low, positive aspects of recovery are helping clear some of these rain clouds which will eventually refocus the bullish inflation scenario.

Finally, buying in the physical market remains solid in this downtrend. And while availability is improving manufacturers remain behind the production curve. For now, 2022 US Gold Eagles and Buffaloes are a week or two out – a big improvement. 2022 Krugerrands and Philharmonics are hit or miss but available. The 2022 Canadian Gold Maple Leaf is delayed. Any year, new fractional gold remains delayed even though premiums are high.

Boxes of the 2022 Canadian Silver Maple Leaf are delayed. Boxes of 2022 US Silver Eagles are 30 to 60 days out. Boxes of new Silver Philharmonics and Krugerrands are two weeks out. Private manufacturers of silver 1 oz rounds, 10 oz and 100 oz silver bars are 2 weeks out.

I’m growing more worried about the US commitment in the Ukraine. The Associated Press noted that the House approved a fresh $40 billion Ukraine aid package beefing up President’s Biden initial request.  The new legislation would bring American support for the effort to nearly $54 billion, including the $13.6 billion in support Congress enacted in March. That’s about $6 billion more than the U.S. spent on all its foreign and military aid in 2019, according to a January report by the nonpartisan Congressional Research Service, which studies issues for lawmakers. It’s also around 1% of the entire federal budget.

On the day gold closed down $16.40 at $1807.40 and silver closed up $0.22 at $20.98.

Platinum closed down $0.50 at $936.40 and palladium closed up $57.10 at $1918.10.

My Brothers and Sisters, thank you for your business, friendship, and patience. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and many now have the booster! We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variant remains dangerous and accounts for most world infections. At the same time trust that God will get us back to normal and our traditional business model.  Richard Schwary

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Gold – Inflation or Stagflation?

Gold – Inflation or Stagflation?

Commentary for Friday, May 6, 2022 (www.golddealer.com) – Gold closed up $7.20 at $1881.20 and silver closed down $0.07 at $22.33. The bulls are not happy about gold closing down on the week, but it’s time to consider the cup half full. Powell’s half point interest rate hike Wednesday could have created greater damage. It is too early to claim this market is stable, but the rather tepid drop in gold’s price this week would suggest the first big attempt by the Fed to slow inflation has not staggered the bullish scenario. A volatile Wall Street only added light safe haven demand for the metals and treasury yields of more than 3% should cap premature bullish rallies. For now, range bound would be a good outcome as traders begin to focus on what will certainly be another half point hike next month. Last Friday gold closed at $1909.30 / silver at $23.04 – on the week gold was down $28.10 and silver was also lower by $0.71.

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 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 bulls were hiding under the bed again, so last week’s hope of short-term bottom is out the window. Gold has not traded in the $1860.00 region since February. And with the Dollar Index now approaching 104.00 traders believe Jerome will have something powerful to say this week. The FOMC will meet Tuesday and Wednesday and their decision on interest rates will be made public either Wednesday or Thursday.

This week will be tense for sure but will finally provide traders with something besides speculation. Professionals have feared higher rates since inflation proved to be non-transitory. Keep in mind that inflation numbers are published at the end of the month and are subject to adjustment. Last month the Fed claimed that inflation was 8%. Others think their standard is junk and provide their own data, suggesting that inflation approaches 15%.

The point here is that even the Fed governors believe inflation is too high and so everyone expects a very hawkish decision this week. A single quarter point hike used to be the standard, now governors talk about more than one half point hikes. The real question here, at least as far as the metals are concerned has not changed. How aggressive will the Fed be in slowing down this perhaps post pandemic economy?

My recent notion that the price of gold has held up because rate hikes are already “priced in” is now out the window. Not that gold is in a free fall, trading just remains defensive, and that is useful information. The model is more “step oriented” and computers suggest only possible outcomes. Traders feel their way around in these “transition” periods. Like I said last week, being “slow on the draw” might prove rewarding if you are a buyer.

You will soon know what the Fed has on its mind in the short-term – more important information. Any type of bounce to higher ground in the next few days should be considered with caution. It could mean today’s swoon was overdone but I’m not persuaded. One thing is sure, bear traders panicked at the last minute. Finally convinced Powell was serious.

On the day gold closed down $47.50 at $1861.80 and silver closed down $0.50 at $22.54.

Grant on Gold (Zaner) – May 2, 2022 – (1) While gold caught a bid late last week, intraday gains on Friday back above $1900 could not be sustained. The yellow metal eked out a higher close on Friday but was down 1.8% for the week and notched a 2.1% monthly decline in April. (2) Silver has been hammered in recent weeks, falling to a 12-week low on Monday at $22.12. Through Monday’s close, there have been eight consecutive lower daily closes. (3) Platinum set a 4-month low at $895.38 last week but managed to hold the important $885.35 low from December. (4) Palladium closed down 2.6% last week and continues to trade close to the midpoint of the COVID-era range.

Bullish and bearish factors from Forex.com provide a more nuanced picture.

Gold and Silver Bullish Factors – Silver supply deficit frames bullish outlook. – Possibility of Fed’s tightening cycle leading to a recession is good news for gold. – War in Ukraine to pose a new demand factor for silver. – The battle of Ukraine goes on, good for gold. – Prices are still extremely high and will continue to contribute to sky-high inflation around the world. – Deeply negative real rates combined with geopolitical shock to energy markets, a perfect storm for gold and silver. – Fed-rate-hike cycles marks the beginnings of significant precious metal rallies. – Commodity supply crunch to keep prices elevated. – Inability of higher rates and tapering to reduce inflation to fuel gold up. – There is a big buyer who considers gold a long-term hold. Early stages of a Fed-hiking campaign tend to be favorable for precious metals. – Evidence is mounting that a new commodity super cycle is underway. – Many forward balances are showing draws in many commodities.

Gold and Silver Bearish Factors – Copper to fall lower on slowing global growth. – Fundamental implications of Russia’s financial plight support lower gold prices. – Bitcoin’s fresh appeal is drawing money away from gold. – Gold may experience a harsh moment when inflation peaks. – Potential buyers of gold would rather wait for assets with any yield. – Fed’s big hawkish wave to sink gold bulls. – Inflation should reach its peak in the first half 2022. – Prospects of the Fed’s tightening cycle to put downward pressure on gold. – Return to normalcy to support risk appetite while hitting gold. – Revenge of supply and inflation to knock gold. – Bond tapering will cause bond yields to rise, weighing on the price of gold. – Fed policy might spell trouble for gold. – Omicron is negative for gold.

On Tuesday gold drifted lower in overnight Hong Kong trading but bounced nicely off the $1850.00 support. An updraft which carried the New York trade through $1878.00 before mild profit taking set in and gold finished the day modestly higher. Normally I would discount this kind of move given the bearish circumstances because it looks like mild short covering.

But $1850.00 is something around gold’s 200 day moving average and that number represents significant support which goes back to November of last year. Traders will also consider the possibility of price stabilization within a longer-term pricing channel ($1800.00 and $1850.00). Even if gold moved to the lower end of this trading channel it would be down 10% from recent highs – better than equities even considering the bulls have been dealing with bad news on several fronts for more than a month. Still “feeling your way around in this defensive market” is more like “hoping”. As opposed to “optimism” which would appear if the “fear factor” was recreated and driven by expected inflation. It is true that rising interest rates are not good for the gold business, but this should be taken with a grain of salt. Interest rates and gold have an elastic relationship – relative to each other. A 3% interest rate looks feeble when compared to 8% inflation, but neither is fixed for long. Transition between the two becomes more important.

On the short-term inflation is out of focus. Traders are worried about rising interest rates. Without a shift in this dynamic – the metals and Wall Street are left footed. Given gold’s recent erratic pricing it makes sense that volatility will settle down by Friday. But remain edgy until this time next month. When the next FOMC gathering will likely offer up a second half point interest hike, and the bears will again be eager to test price support. Good grief Charlie Brown.

On the day gold closed up $7.00 at $1868.80 and silver closed up $0.08 at $22.62.

Zaner (Chicago) – “While the uncertainty from the war is likely to continue to inspire demand softer jewelry demand, the first quarter demand highlights the negative demand impact from surging consumer prices (less disposable income) and declining consumer sentiment. In a surprise development, Indian dealers reported an increase in demand ahead of a festival and as a result reduced discounts in place over the prior weeks. Furthermore, according to a private consultancy gold jewelry demand in India is likely to recover in the 2nd quarter after seeing the 2nd most auspicious gold buying day in the Hindu calendar tomorrow. Fortunately for the bull camp, the latest positioning report showed a very significant liquidation of 34,000 contracts and then the market declined by $36 into last week’s lows. Therefore, the net spec and fund long is reduced, and the threat of aggressive stop loss selling is also reduced. The Commitments of Traders report for the week ending April 26th showed Gold Managed Money traders net sold 25,524 contracts and are now net long 99,443 contracts. Non-Commercial & Non-Reportable traders are net long 267,827 contracts after net selling 34,344 contracts. Our sense is the bear camp retains an edge even though a fresh support point level around $1,875 was rejected last week and could cushion prices temporarily. With a very disastrous range down extension at the end of last week the July silver contract is unlikely to see bargain-hunting buying step up. In retrospect, the Silver Institute report released over the past 2 weeks had little capacity to support prices. On the other hand, the most recent positioning report showed a significant long liquidation and with prices into the low this morning sitting $0.50 below the level where the positioning report was measured, the net spec and fund long in the report is significantly overstated. Silver positioning in the Commitments of Traders for the week ending April 26th showed Managed Money traders net sold 14,748 contracts and are now net long 26,534 contracts. Non-Commercial & Non-Reportable traders net sold 15,936 contracts and are now net long 48,500 contracts. As in the gold market the bear camp retains the edge and silver appears headed to $22.00. Apparently, the significant setback in the dollar at the end of last week, combined with the full take-away of the World Gold Council first quarter outlook spurred the significant recovery rally off last Thursday’s low on Friday. However, June gold surrendered $25 from the Friday high and has been pummeled this morning producing clearly negative charts. The gold and silver trade are also undermined because of expanding economic concerns toward China, as lockdowns in China and “other cities” and are hammering economic activity. Clearly, sentiment in the gold and silver trade is starting to shift to the FOMC meeting with rate hike fears rekindling. Adding into the negative outside market influence is a sharp recovery in the dollar and higher rates thrown off by treasury futures. Not surprisingly, gold ETF holdings were reduced for 3rd straight session on Friday, with gold holdings last week in total reduced by 383,684 ounces. Furthermore, silver ETFs reduced their holdings last week by a significant 4.1 million ounces. However, underpinning prices going forward is the World Gold Council global demand surge of 34% in the 1st quarter on a year-over-year basis. Apparently, consumption was inspired by the Ukraine war and strong demand for ETFs. In fact, the ETF inflows lifted gold demand in the first quarter by 1,234 tonnes, which is the highest quarterly reading since the 4th quarter of 2018. Furthermore, the WGC indicated the first quarter demand was above the five-year average! Adding further into the demand function, global central banks added 84 tons to official gold reserves, but that amount was down 29% compared to year ago levels, but double the purchases seen in the 4th quarter.”

On Wednesday gold pricing consolidated – ranging between $1862.00 and $1872.00. Traders got the big news early, the largest interest rate hike in two decades. The Fed would raise rates a half point and continue to reduce their balance sheet monthly. This was a watershed moment in that the DOW rallied 600 points after the announcement as the Chief said the central bank was not considering three quarters of a point hike. Powell also hailed a strong economy – well positioned to handle this tightening. He is anticipating a soft landing but will leave open the many options still available to the FOMC in the coming months.

The uncertainty of the Ukrainian conflict is supportive of gold but less important than rising interest rates hikes on the short term. The shelling continues to create human and financial misery, which will have far reaching consequences. CNN points out that European Union is proposing a ban on all oil imports from Russia by the end of the year. This would likely supercharge Europe’s already problematic inflation and refocus safe haven demand.

I now believe the first half point hike was factored into the longer-term consolidation of gold prices ($1800.00 and $1850.00) before the politicians began talking. Today however traders will focus on how this first jump is presented by Chief Powell. And importantly what the other governors have to say about the process in the coming months. Traders and economists will be looking for nuanced suggestion – that is the only thing left in their “guessing tool bag”.

Do not mistake this for the usual dog and pony show – this is important business. And the process of putting on the economic brakes will last through next year.

What traders are hoping for is less aggression on the part of the FOMC through this long process. Slowing down the economy creates economic pain. Higher interest rates and a reduction in the balance sheet slows down the number of “goodies” everyone become dependent on during pandemic. Considering the massive economic engineering that goes on during the “expansion” and “contraction” of the business cycle, this Rube Goldberg is still working surprisingly well.

The FOMC decision and Powell’s live comments, while initially feared helped the price of gold in the aftermarket. It pushed from a close of $1867.00 through $1883.00 – higher by $17.00. Whether this will hold remains to be seen. Perhaps this, like the stock market surge was a relief rally. On the short term, traders may work with the supposition that rising gold prices and rising interest rates are not mutually exclusive. A notion that just a few weeks ago would be considered unlikely. Unwinding – is a long process, and a “soft landing” not guaranteed. Be hopeful of a good outcome but expect to see reversals along this bumpy road. Keep in mind that Powell said Fed policies are “famously blunt tools”.

The problem I have is an old one in the physical metals’ community. The government creates this monetary expansion by fiat (a noun meaning formal authorization or decree). Uncle Sam prints as much legal tender as necessary by decree. And promises to pay the money back as the economic cycle improves. The Federal Reserve is in some ways a political surrogate of the White House. The President chooses leadership which will support the current political agenda. Blessed be God that George Washington declined to run for a third term. As Presidents come and go paying back the debt becomes the problem of the next President, not the one who spent the money. And I have never seen a new President or Congressional hopeful that did not promise a free lunch to get elected. Google (USDebtClock.org) and ask yourself how long we can get away with this massive spending binge before rising interest rates on the debt create an economic disaster or indenture our grandchildren, who will certainly question stewardship.

On the day gold closed down $1.80 at $1867.00 and silver closed down $0.26 at $22.36.

On Thursday gold settled somewhat – likely because of the realization that yesterday’s jump in prices was more of a relief rally than a substitutive statement. The promise of another half point jump in interest rates next month is the cold reality. So, traders were punching around in the dark looking for something that makes sense. Yesterday’s fresh rumor – there may now be a positive correlation between gold and stocks since they both moved higher as the FOMC raised rates.

Today stocks reversed direction, moving dramatically lower. And gold gave up half of yesterday’s aftermarket. The old problems are back, or better stated they never went away. Can the Fed hold inflation in check without creating a recession? Bond yields are still above 3%, crude oil is back to monthly highs ($107.00) and housing is slowing down. It won’t be long before traders are talking stagflation, a term first used in the 1970’s to describe an economy experiencing rising inflation and stagnant economic output.

The Conversation – “The history of engineering soft landings is not encouraging,” Domash and Summers write. “We found that every time the Fed has hit the brakes hard enough to bring down inflation in a meaningful way, the economy has gone into recession.” Economist Veronika Dolar “The problem is that the ways to fight either one of those two problems – high inflation, low growth – usually end up making the other one even worse,” she writes. “And that means solving the problem may simply depend on circumstances out of U.S. policymakers’ control, such as an end to the crisis in Ukraine or finding ways to immediately increase oil supply – which is tricky. It’s too soon to say whether the U.S. economy will experience stagflation, but it’s certainly on the minds of Fed policymakers.”

I believe physical dealers have stepped back, taken a breath, and asked themselves a series of difficult questions about rising interest rates. This process takes time and reflection. The uncertainty factor and rising inflation helps support the metals. But an aggressive Fed is a wet blanket to the bullish gold scenario. And threatens an economy subject to pandemic problems.

If you are looking for an outside the box option, consider that if rising interest rates create too much economic drag the FOMC could slow the process. Claiming that growth and employment are threatened. This would be very bullish for the metals. Regardless of what the Fed claims, cheap money must eventually be part of the deal, or they won’t be able to pay interest rate bills. If you look at bullion from this traditional longer term viewpoint ownership is not an option.

On the day gold closed up $7.00 at $1874.00 and silver closed up $0.04 at $22.40.

On Friday gold was firm yet choppy, likely because the Dollar Index dipped even though the Bureau of Labor Statistics posted solid employment gains. So, what are dealers talking about this morning? A few are whining that gold has not recovered its vaulted $1900.00 price tag.

I’m dancing in the streets that gold still is still holding its ground. If you stop to think about Fed options after the half point jump in interest rates, it will either scare or encourage. Significantly rising interest rates should scare everyone – stocks are already hiding under the bed.

But gold is still fighting for higher ground. That is not to say that significantly rising interest rates would not stop gold in its tracks. The Fed could easily send the bulls to the woodshed, but a more important question would be at what cost to the economy?

Gold traders in their heart of hearts are technically driven and the charts point to lower gold prices. Unfortunately, a fact of life for now, just like higher interest rates. Gold will finish lower this week, not revelation considering the hawkish jump in interest rates. Our shiny friend has also posted lower highs and lower lows since its recent top ($2050.00) in early March. All these indicators obviously support the bearish scenario.

The most recent bullish gold market began in 2018 around $1200.00. Prices moved steadily higher, topping $2000.00 in 2020. This rather dramatic rise was helped by worldwide inflation, safe haven demand, the Ukraine war and pandemic fears.

To one degree or another all these classic bullish arguments are still with us, but gold is now grappling with dramatically higher interest rates. Because traders can’t resolve old problems pricing has channeled between $1800.00 and $2000.00 for two years.

My classic bullish argument throughout this mess has not changed to any degree. The Fed is running out of realistic options. To significantly stop inflation the FOMC at least risks recession. It is likely they will look for a compromise, slowing inflation but supporting continued growth enough to produce a “soft landing”. This realistic yet slightly dovish approach will support gold prices and is another reason gold has channeled. Finally, demand in the physical market remains solid as gold approaches its 200-day moving average.

Reuters – “But Saxo Bank analyst Ole Hansen wrote in a note that overall, the outlook for gold was positive, “driven by the need to diversify from volatile stocks and bonds as inflation becomes increasingly imbedded and the ongoing geopolitical concerns.”

On the day gold closed up $7.20 at $1881.20 and silver closed down $0.07 at $22.33.

Platinum closed own $17.29 at $954.60 and palladium closed $154.10 at $2021.20.

Zaner (Chicago) – “We are not sure how to justify the strong range up extension in gold and silver this morning, except for relief buying. The 50-basis point rate hike by the Fed yesterday was expected, but apparently a portion of the markets expected more hawkish forward dialogue than was presented. However, the Fed did indicate they would likely raise rates in each of the next two meetings and begin to reduce their balance sheet and would accelerate the reduction in their balance sheet with time. We think the Fed’s steady incremental stance will temporarily stem the rise in the dollar which in turn could provide support to gold and silver. On the other hand, the new focus of the precious metal trade could be the action in crude oil and energy prices which posted significant gains in the Thursday action and that in turn could revitalize inflationary expectations. In fact, both gasoline and diesel futures prices jumped by more than $0.16 yesterday alone thereby sending a price pressure wave throughout the economy. Unfortunately for the bull camp, the initial “relief rally” in gold was disappointing yesterday suggesting the bulls are not likely to sustain control ahead. We do suspect the trade will see fewer negative impacts going forward from the in-motion cycle of higher interest rates at least until the nonfarm payroll result from the US is posted Friday.

In general, the PGM markets have “delinked” with the gold market in a sign that the focus of the trade is drifting back to classic physical supply concerns. Some traders think Russia will find a way around sanctions and establish new willing importers but switching normal marketing channels could take time. The bulls maintain a technical edge with the market solidifying consolidation support at $2,200 and the net spec and fund positioning likely remaining “net short”. Despite a lack of material developments, the platinum market continues to extend the rally off the April lows. In fact, into the high yesterday platinum prices gained nearly $90 an ounce and now solid resistance is not seen until $1,000. If one is suspicious of the bull case in palladium, one should be even more suspicious of ongoing gains in platinum.”

My Brothers and Sisters, thank you for your business, friendship, and patience. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and many now have the booster! We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variant remains dangerous and accounts for most world infections. At the same time trust that God will get us back to normal and our traditional business model.  Richard Schwary

Risk Disclosure – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisors. The precious metal and rare coin markets are random and highly volatile so they may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

 

 

Posted on

Gold – Lower Highs and Lower Lows

Gold – Lower Highs and Lower Lows

Commentary for Friday, April 29, 2022 (www.golddealer.com) – Gold closed up $20.60 at $1909.30 and silver closed down $0.09 at $23.04. Gold surprised in the early domestic trade offering a mild price rally on what looks like paper short covering going into the weekend. A mild dollar retracement and higher crude oil prices also helped brighten the bullish trading mood. But this has been a tough week for the metals in general. Gold’s technical picture remains bearish as it continues to make lower highs and lower lows since its peak in early March. Still, uncertainty rules for both the bulls and bears. Traders must cobble together a strategy that considers shorter-term negative factors like rising interest rates. And longer-term bullish factors like rising inflation numbers in a troubled world. Last Friday gold closed at $1931.00 / silver at $24.26 – on the week gold was $21.70 higher and silver was down $1.22.

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 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 rising concerns over Covid restrictions in China, falling crude oil prices and continued fears of rising interest rates hammered the price of gold. The slowing of the Chinese economic picture over these virus shutdowns has already created a large downdraft in the price palladium. This is turn creates collateral damage for other precious metals but the surge in the Dollar Index is the primary reason gold continues weak. Since last Thursday the index has risen nearly 2 full points as the 10-year Treasury yield approaches 3%, which is a bad omen for stocks according to Barons. It also suggests the latest from Chief Powell is not rhetoric. The Fed is ready to raise interest rates in a dramatic fashion. What they ultimately have in mind is still in question, but Jerome has accomplished his first goal – slowing down inflation expectations. Traders are now even worried that the Fed may “overreact” and so the metals remain defensive. I believe there is no chance of an overreaction. It’s popular today to claim that Powell and the FOMC are over their heads – that they created an out-of-control mess in their effort to defend against the pandemic. They have created a mess, but they understand the old English proverb well – that killing the goose that laid the golden egg makes no sense. The dramatic drop in the price of gold today has unnerved the equity market – but I still suspect this is temporary. The technical damage however is the real thing so expect further rocky days until traders confirm a short-term bottom. It’s good that traders bought this dip in the aftermarket as gold reversed direction. And it seems to be holding around $1900.00. But this market remains dangerous for the bullish scenario because if $1900.00 breaks down it would introduce the 8th woe (for you that are biblically inclined). The next channel of price support being between $1800.00 and $1850.00. But we have been here before and the resilience of the physical metals is encouraging. The fact that gold and silver bullion are real money and represent cash on the barrel head under any circumstance is a bigger deal than most realize.

On the day gold closed down $37.80 at $1893.20 and silver closed down $0.59 at $23.67.

Zaner (Chicago) – “As in many markets, the unrelenting buzz of higher interest rates has finally unnerved equity markets which in turn tempers economic hopes and deflates inflationary expectations. As if rising rates were not enough for the bear camp to seize control, persistent contract highs in the dollar index adds another element of selling pressure to gold and silver. While the markets have been presented with many rate hike predictions by Fed members for several months, seeing the US Federal Reserve chairman indicate a 50-basis point rate hike was on the table for the next meeting pulled the rug out from under markets that were already sliding. Even the flight to quality angle has been lost with a top Russian general indicating Russia’s objective was to capture southern Ukraine and for some that reduces the scope of uncertainty. However, military experts suggest Western military aid is beginning to strengthen the Ukrainian cause. Therefore, the war looks to continue but could produce smaller amounts of flight to quality interest ahead as the fight settles into a war of attrition. In addition to a clean sweep of negative outside market influences, both gold and silver damaged their charts last Friday and set prices up for downside follow-through today. Last week gold ETF holdings increased by 416,695 ounces to finish the week up 9.4% year-to-date. While silver ETF holdings declined on Friday by 1.1 million, silver holdings last week increased by a very significant 7 million ounces leaving holdings 2.3% higher on the year. The most recent COT positioning report showed a moderate liquidation of the net spec and fund long in gold, positioning clearly highlights a market capable of further stop loss selling. Gold positioning in the Commitments of Traders for the week ending April 19th showed Managed Money traders were net long 124,967 contracts after decreasing their long position by 19,697 contracts. Non-Commercial & Non-Reportable traders were net long 302,171 contracts after decreasing their long position by 14,484 contracts. Like gold, the silver market continues to damage its charts in action that is very discouraging to the bull camp especially with the silver Institute last week predicting record demand for silver. The April 19th Commitments of Traders report showed Silver Managed Money traders reduced their net long position by 1,535 contracts to a net long 41,282 contracts. Non-Commercial & Non-Reportable traders net sold 679 contracts and are now net long 64,436 contracts.”

On Tuesday gold enjoyed a short-term price bounce which reflected yesterday’s stronger aftermarket, some short covering – professionals claiming Monday’s drop in prices was “overdone”. And perhaps light bargain hunting. I believe the jury is still out as to whether this week will produce a short-term bottom in either gold or silver. There are plenty of headwinds to chill higher prices. And the bulls are looking for fresh news to gather themselves.

The Dollar Index is still trading comfortably above the whopping 102.00 level. And traders still expect two half point rises in interest rates by the summer months. The technical damage to both gold and silver yesterday was significant and the pros claim that neither the bulls nor bears can now claim an advantage. Which is obviously discoursing to the bulls who not long ago were considering $2000.00 + gold as world inflation roared and Ukraine safe haven was featured.

But that bullish scenario has turned into yesterday’s newspaper as traders refocused their attention and their dollars. First to the likely threat of an unexpectedly strong jump in interest rates and the obvious fallout as Wall Street dips further into the red. Second, the uncertain economic outcome of China locking down over yet another pandemic surge. And third, the collateral damage as the Balkan war turns into a miserable stalemate.

Obviously, none of the above is new insight. These factors have however turned into a revolving door. And the rising and falling metals prices a broken record. Unfortunately, both the physical and paper markets are prone to bullish or bearish scenarios which come in and out of focus on the short term. The fact is that since gold again made highs two years ago it has traded sideways, between $1800.00 and $2000.00. Trying to figure out the importance of rising inflation and safe haven demand. It strayed within these relatively narrow limits because these concerns remain unanswered. The physical trade, for the most part tries to ignore this elephant in the living room. Choosing instead to talk about the more benign fact that the price of gold in 2018 was $1200.00 and the price of gold today is something around $1900.00. This sounds better but does not explain why our shiny friend cannot seem to hold ground approaching $2000.00.

The biggest reason is rising interest rates. That is why it is difficult to say if today’s bounce is a short-term bottom. No one really knows how crazy the Fed might get so it is smart to expect continued volatile markets. Not the end of the world, it is in this region of pricing that bargain hunting can be rewarding, but like I’m fond of saying “Be slow on the trigger but ready”.

There are other collateral issues at work as well. Gold at $2000.00 represents a nice profit to those who have been accumulating it over time. Profit taking makes sense, especially when the market has turned choppy and defensive. During times of trouble the dollar is always a great “safe haven” to preserve wealth. The world turns to the good old greenback because of its unquestioned liquidity. Today is no different. And finally, when interest rates are low people are willing to experiment with ideas which compensate them for money invested. They consider the price record of gold over the last decade and figure their savings are not producing much so why not put that money to work. Today, as bond yields rise, this dynamic reverses itself. Investors sell physical gold and decide to take advantage of higher interest rates and guaranteed income.

On the day gold closed up $8.20 at $1901.40 and silver closed down $0.13 at $23.54.

On Wednesday gold continued weak as gold unfortunately failed to hold $1900.00. There are turbulent cross winds at work here as trader fear an increasingly hawkish FOMC and analysts argue about how much red ink Wall Street can produce before the deep thinkers declare a recession. This is of course what everyone is worrying about and there is still a surprisingly wide difference in opinion. Some professionals claim the economy can handle rising interest rates, no problem. Others are preparing for the next recession. I believe a “soft” Fed landing will put the US somewhere between the extremes. But if rising interest rates pushes the US into recession, it would obviously be another problem for the bullish scenario.

Today’s sudden drop may have been a small surprise, but I think most gold bullion players know that rising interest rates present more challenges. The good news is that gold found some support around $1880.00. But that bounce too might be suspect. From a technical point of view the 6-month pricing chart suggests that the channel between $1800.00 and $1850.00 is more defensible. It is also important to keep in mind that when pricing is generally moving lower the public usually takes a breath, which is natural. So, step aside and be patient. You will recognize legitimate bargain hunting when the “short paper” covers. I’m first looking for a stable market, and second a discounted price in gold large enough to withstand a few months of rising interest rates. Once this level of moderation is achieved the world will again consider the still not solved problem of rising inflation and gold’s bullish scenario will recover. The story of rising gold prices is not over, it is just adjusting to another government fiat reality.

On the day gold closed down $15.50 at $1885.90 and silver closed down $0.08 at $23.46.

Reuters (Seher Dareen) – Gold falls to two-month low as dollar surge hurts appeal – “Gold prices slipped to a more than two-month trough on Wednesday as the dollar rallied on expectations of an aggressive monetary policy tightening by the U.S. Federal Reserve.

“There’s a flight to safety right now out of other currencies into U.S. dollar… Gold is going to struggle to rally between now and the Fed meeting,” said Bob Haberkron, RJO Futures senior market strategist. The dollar index charged to its highest level since January 2017, fueled by expectations that the U.S. central bank will be more hawkish than peers and safe-haven flows fanned by concerns over slowing growth in China and Europe. The Fed is expected to increase rates by 50 basis points at its May 3-4 policy meeting. Rising U.S. interest rates increased the opportunity cost of holding non-yielding gold, while also boosting the dollar, in which it is priced. The greenback is also seen as a rival safe-haven asset to gold during economic and political crises. “While the yellow metal’s prices have remained extremely resilient against an aggressively hawkish Fed, as a protracted war in Ukraine simultaneously raised both geopolitical uncertainty and inflation risks and thereby fueled demand for havens, we see few participants left with appetite to buy gold,” analysts at TD Securities said in a note.”

On Thursday gold pushed mildly higher, recovering from overnight lows in Hong Kong. The London and domestic market also showed interest, perhaps light short covering, mild bargain hunting, and a semi-bullish inclination on the surprising news that the US GDP (Gross Domestic Product) dopped 1.4% in the first quarter. This negative growth information might create some concern and perhaps temper growing FOMC hawkishness. Although I’m doubtful.

It looks like the bulls are trying to stabilize this volatile market. Today’s pricing was not spectacular, but an active aftermarket (+$8.00) pushed gold towards $1900.00 and will confirm that for now gold traders are not hiding under the bed.

I would also say that recent gold weakness has not created subsequent interest in shorting this market. Not with German inflation numbers approaching 8% and crude oil firm at $103.00. Still today’s trading feels halfhearted, which might mean the bearish scenario is getting tired.

Still my hope for short-term bottom this week is fading in the absence of fresh information. Our physical volume numbers are moving lower as long-time physical gold bulls wait for better prices, but this is typical for savvy investors.

Again, there are not many big sellers at these lower levels. Which highlights an interesting point in our little corner of the world. We are almost always net sellers not net buyers. Which means our average customer is almost always a net buyer and not a net seller. There may be something to learn here which is not obvious. The US customer is turning into stronger buyer than most would have you believe. Physical gold and silver bullion have become a kind of private and perhaps a permeant savings account. Which helps support longer term pricing trends.

There are also particular bullion products which for reasons I don’t understand hold special status to certain groups. The Asian community favors a particular type and brand of gold bar. There are big local buyers who appear on a phone call, with cash in hand, regardless of relative price. Hot market or cold market, it makes no difference. What is interesting is that this group of specialists never sell these bars back to us regardless of pricing. I have mentioned this before but cannot piece together a realistic answer as to where this gold bullion product is going?

Still, the US market for precious metals is developing slowly. Which suggests untapped potential as the inflation problem is stubborn and busy destroying the middle class.

The big players in the physical bullion world remain China and India which account for 50% of the current world gold demand. Both have a strong historical and psychological attachment to gold which has been in place for centuries. And both are off their usual physical game these days. Chinese demand is down because of the reinstated Covid restrictions. And Indian demand has slipped 18% because of rising prices according to the World Gold Council. The WGC also notes that consumers expect prices to fall after there is a resolution to the Russia-Ukraine war.

On the day gold closed up $2.80 at $1888.70 and silver closed down $0.33 at $23.13. Silver is drifting lower. It is worth mentioning that our physical sales explode as prices approach $22.00. Producers are still behind the manufacturing curve. New live product is a challenge.

On Friday gold was surprisingly active overnight in Hong Kong, settled somewhat in the domestic trade but still finished nicely in the green for the day. Did we get that bottom I wasn’t looking for? Still not likely in my mind but this welcome bounce in a rising interest rate market at least gives us some fresh perspective.

I would not read too much into this happy bounce, it is likely the result of a modestly weaker dollar. It does however lift the trading mood considerably in suggesting that dollar strength is not invincible. Especially if our economy slows and the Fed begins to worry about recession.

It might also be valuable to rethink the notion of “a short-term bottom” in this cloudy trading weather. Is it possible that gold has already factored these rising interest rates into its current pricing range? Not a new idea but one that would suggest less price volatility which is good in dispelling a rising bearish scenario. I may only be punching around in the dark but there is something, perhaps less obvious at this stage which has created a small, short covering rally. And even though the gold and silver technical picture remains bearish I would consider today a psychological plus for the bulls going into the weekend. You may have to deal with a sideways market until the FOMC actually begins to raise interest rates and reduce its balance sheet.

On the day gold closed up $20.60 at $1909.30 and silver closed down $0.09 at $23.04.

Platinum closed up $27.20 at $937.60 and palladium closed up $94.20 at $2302.80.

Reuters (Ashitha Shivaprasad) – Gold gains over 1%, but on course for monthly fall – “Gold prices rose more than a percent on Friday, driven by a retreat in the dollar, although the yellow metal was set to post a monthly drop on bets of aggressive policy tightening by the U.S. Federal Reserve. “Gold market has seen consistent sell-off in the past weeks as the dollar rallied. Currently, the dollar index has declined, which is lifting gold prices,” said Edward Meir, an analyst with ED&F Man Capital Markets. The dollar index fell 0.4% after touching a 20-year high on Thursday, making gold less expensive for those holding other currencies. Further lifting bullion’s appeal, data showed the U.S. economy unexpectedly contracted in the first quarter amid a resurgence in COVID-19 cases and drop in pandemic relief money from the government. U.S. labor costs surged by the most in 21 years in the first quarter, pointing to rising wage inflation and supporting the Federal Reserve’s aggressive monetary policy stance. “The GDP data and the cost index for employment data showed that inflation still running fairly hot, this is generally supportive for gold,” Meir added. Gold is considered a hedge against soaring inflation and uncertainties, but rising interest rates dampen its appeal by increasing the opportunity cost of holding the non-interest-bearing asset. Markets participants’ focus now shifts to the U.S. central bank’s two-day policy meeting starting on May 3, when officials are expected to increase the target policy rate by half a percentage point.”

My Brothers and Sisters, thank you for your business, friendship, and patience. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and many now have the booster! We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variant remains dangerous and accounts for most world infections. At the same time trust that God will get us back to normal and our traditional business model.  Richard Schwary

Risk Disclosure – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisors. The precious metal and rare coin markets are random and highly volatile so they may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

Posted on

Gold – How Serious is Powell?

Gold – How Serious is Powell?

Commentary for Friday, April 22, 2022 (www.golddealer.com) – Gold closed down $13.90 at $1931.00 and silver closed down $0.36 at $24.26. Gold settled this week moderately lower and still defensive, as traders remain focused on interest rate hikes after Chief Powell’s comments Thursday.  WASHINGTON (AP) — “The Federal Reserve must move faster than it has in the past to rein in high inflation, Chair Jerome Powell said Thursday, signaling that sharp interest rate increases are likely in the coming months, beginning at the Fed’s next policy meeting in May.” This Fed hawkishness has been in place for months now, so these comments are not a revelation. But this latest talk from the boss was a hyper as analysts are now counting on several half point jumps in the coming months. There is a plus and minus here to the bullion buyer. The minus – a number of half point rises will stagger an already tired looking gold pricing model. The plus – Powell has seriously committed himself. If the Fed “only” raises rates a quarter point they will seem dovish. And that is all the bulls need to refresh their flagging bullish scenario. Last Friday gold closed at $1941.60 / silver at $24.82 – on the week gold was down $10.60 and silver was off $0.56. This was another one of those weeks in which precious metal analysis had a lot to say – most of which was ignored judging by the pricing swings.                 

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 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 I was surprised that gold challenged $2000.00 overnight and it figures that traders took profits in another round of “buy the dip sell the rally”. But it is extraordinary that gold seems to be holding up against a monstrous Dollar Index, now trading over 100.00 with perhaps even higher expectations as the interest rate hammer is about to fall. Our European brothers don’t seem too worried as the euro touched a 2-year low because the ECB is moving at a “snails pace” to normalize rates (MarketWatch). I just can’t figure out how these two opposites will “work together” as they must – to avoid further chaos in the currency world. So, for now, I’m stuck with my original thought that overhead resistance at recent highs for gold will eventually win the trade as this market settles under the reality of higher interest rates. If gold continues higher, a possibility considering the Ukraine tragedy you might see that final beak between gold prices and higher interest rates which is popular in recent commentary. But talking about the break and seeing it happen is a horse of different color as they say.

Reuters – “Gold rose more than 1% to a one-month high just shy of the $2,000 an ounce level on Monday as concerns around the Russia-Ukraine conflict and rising inflationary pressures increased safe-haven bids for the precious metal. “The little step-up in tension due the Russia-Ukraine war with inflationary pressures across the board boosts safe-haven demand for gold,” said David Meger, director of metals trading at High Ridge Futures. Gold advanced despite a jump in benchmark 10-year U.S. Treasury yields to the highest since December 2018, and a strong dollar, which usually dulls appetite for gold among overseas buyers.

Concerns over the economic hit from COVID-led restrictions in China also supported the metal, Meger said. Although concerns of soaring inflation boost gold’s safe-haven appeal, interest rate hikes to temper higher prices could hurt demand for the metal because of the higher opportunity cost of holding non-yielding bullion. U.S. Federal Reserve policymakers are expected to accelerate their pace of policy tightening when they next meet in May.

“From a technical perspective, spot gold may face little resistance once it goes north of $2,000… However, gold’s ability to keep its head above $2,000 may be strained once real yields break into positive territory,” Han Tan, chief market analyst at Exinity.”

On the day gold closed up $12.00 at $1982.90 and silver closed up $0.44 at $26.14.

Zaner (Chicago) – “While some press outlets overnight label the sharp rally in gold this morning as the result of “deflation”, the inflation set up is very broad and strengthening. Unfortunately for the bull camp in gold and silver, US treasury yields have broken out to the upside again, the dollar is stronger and energy prices are slightly lower to start. Last week gold ETF holdings increased by 507,766 ounces to finish the week up 9% year-to-date! Silver ETF holdings last week reduced their holdings by 2.5 million ounces, but those holdings remain 1.5% higher on the year. While the primary headline coverage has not presented views that Chinese lockdowns are rekindling widespread supply chain problems, evidence is stacking up in favor of further downstream price shocks. On the other hand, the press is suggesting further sanctions involving Russian oil is likely to inspire more energy inspired inflation pressures ahead. Apparently, the trade thinks the EU is drifting toward a total ban on gas and oil from Russia after weeks of debate. From a technical perspective, the high overnight in June gold obviously shifts the charts in favor of the bull camp with the psychological $2,000 level likely to be regained today. In possible bullish demand developments reports overnight have the discount of gold in India declining to the lowest level in 2 months and with the discount following in an upward track of flat prices, Indian buyers are not showing price sensitivity and demand appears to be improving. With the net spec and fund long in gold increasing last week, sitting at lofty levels, and June gold since the last report was measured trading $28 higher, the net spec and fund long in gold could be rivaling the highest level since March 2020! The Commitments of Traders report for the week ending April 12th showed Gold Managed Money traders are net long 144,664 contracts after net buying 21,993 contracts. Non-Commercial & Non-Reportable traders are net long 316,655 contracts after net buying 18,037 contracts last week. With silver also breaking out to the highest level since March 14th, the charts have turned bullish with near term targeting up at $26.35 and key support to start today at $25.80. Like gold the net spec and fund long in silver has been growing with gains since the report mark off $0.56 putting the silver market near the longest levels since the beginning of the lockdowns in the US. Silver positioning in the Commitments of Traders for the week ending April 12th showed Managed Money traders added 3,496 contracts to their already long position and are now net long 42,817. Non-Commercial & Non-Reportable traders are net long 65,115 contracts after net buying 4,271 contracts.”

On Tuesday gold traded flat in the overnight market but broke down in the domestic trade in what looks like another round of profit taking as traders continue to “buy the dips and sell the rallies”. Today’s close in the $1950.00 range coupled with another $7.00 loss in the aftermarket would obviously suggest a weakening market. If you are looking for a place to take advantage of these lower prices. I like the $1920.00 / $1930.00 range better and would guess gold is oversold at these support levels. But look for that confirmation bounce and be lazy on the trigger.

Most trader talk, yesterday and today suggested higher prices for gold as it again challenges $2000.00. But I’m wary of the talk about continued higher prices in gold regardless of its solid technical picture and the worsening of the Ukrainian war. When everyone is looking for higher gold, at these escalated levels – it is time to consider the latest concerns of Fed insider James Bullard (Reuters) – “U.S. inflation is “far too high,” St. Louis Federal Reserve Bank President James Bullard said on Monday as he repeated his case for increasing interest rates to 3.5% by the end of the year to slow what are now 40-year-high inflation readings. “What we need to do right now is get expeditiously to neutral and then go from there,” Bullard said at a virtual event held by the Council on Foreign Relations. But with economic growth expected to remain above its potential, he added, the economy won’t fall into recession and the unemployment rate, now at 3.6%, will likely drop below 3% this year.”

Don’t get me wrong, gold has plenty of support in the longer term. But it is a mistake to be too optimistic on the short term. Yes, inflation is a problem, but there are classic economic arguments that may eventually work against higher gold prices. Goldman Sachs for example suggests a growing possibility of recession. Caution might prove rewarding.

Lyn Alden (Kitco) – “In terms of more interest rate hikes for the year, Alden discussed how high she believes the Federal Reserve can go. “The Fed can continue to raise rates until they break something. Going back, I have been on the inflation side for a few years now. But I am still surprised by the speed of inflation we got,” Alden stressed. “When you add a war to the mix that wasn’t necessarily anticipated by me or a lot of people not in this timeframe or scale, this adds an inflationary force to it. Alden spoke about how higher interest rates will impact this economy, which has high debt levels and high inflation. “One of the worst things for reelection is high inflation and low consumer sentiment, which is what the Biden administration and Congress are facing. On the one hand you want the government to control inflation, but you can’t always get what you want,” Alden emphasized. “If you have this high a debt level, and structural problems with the supply chains in your commodities and your economy, you are stuck between a rock and a hard place.”

For now, look for price consolidation as gold and silver mark time waiting to see how rising interest rates will change the Wall Street dynamic. And therefore, be reflected in the metals. We won’t have long to wait. You could see changes in May and June. But the most likely months will be June and September which feature Fed press conferences.

On the day gold closed down $27.20 at $1955.70 and silver closed down $0.75 at $25.39.

On Wednesday gold continued sluggish, not reacting much to a minor selloff in the dollar. And traders failed to buy Wednesday’s dip. On one hand this suggests a lack of bargain hunting which detracts from the bullish scenario. On the other, hedge funds have been active gold buyers.

There is some weakening in bond yields but not enough to move the bullish needle when you consider that they reached 3-year highs yesterday. This feels like a lackluster market, losing buzz and not being able to gather itself, likely fearing the coming interest rate surge.

You might make a case that the bullish gold trade is waiting for that weaker dollar. But I would not hold my breath considering the hawkish FOMC. The Dollar Index in January was trading around 95.00. Today there is some weakening at 100.00 but not enough to discourage the growing ranks of dollar bulls. There are some who expect the dollar to eventually trade like the Japanese yen, down and down again. But unlike the US, Japan is facing decades of no growth which forces the Bank of Japan to keep interest rates at zero.

Where to from here? The same mixed bag which suggests longer-term consolidation. Higher interest rates likely cap higher gold prices on the shorter term. Fears of the continuing disaster in the Ukraine support safe haven demand but at this point are not the dominant force driving the price of gold. Inflation understanding remains confused. Inflation is a real threat here, for us and the world but Wall Street sees no immediate danger and stocks are settling down. Why? Because they believe that Chief Powell still holds the keys to the kingdom of free money.

Gold and silver bulls believe the Fed is behind the inflation curve. And the FOMC attempt to slow down pandemic spending will end in tears. They might be right, but it could take a few drawn-out years for the dollar to pay the price for this massive fiat expansion. And we will need a similar time frame to understand the world damage created by the Russian invasion of the Ukraine. Which could have serious implications for the physical gold market.

This story grows more complicated as the divide between the superpowers grows. Fundamental discord makes a stronger case for physical ownership of the metals. But will require patience. Buy weakness if you are so inclined. Consider bullion ownership a way of protecting rather than creating wealth. Especially if you believe they can’t put Humpty Dumpy back together again.

I invariably get called too cautious when it comes to the price direction of gold or silver. This is probably true – all things considered. The result of many boom or bust periods in the past 40 years. There are professionals however who see this current back-and-forth pricing action as a kind of underlying strength and remain surprisingly bullish in spite of rising interest rates.

Neils Christensen (Kitco) – “Bank of America still sees gold price hitting record highs and silver price pushing to $30 – “The gold and silver are seeing some solid technical selling pressure after gold tested resistance at $2,000 an ounce at the start of the week. However, technical analysts at Bank of America Securities said that any dip in the price could be seen as a buying opportunity for both precious metals. The gold market is currently trying to hold support at around $1,960 an ounce. But the analysts at BofA aren’t too worried if that level breaks. In a report published Tuesday, the bank said that the precious metal remains on course to record all-time highs as long as prices stay above the trending average at $1,888 an ounce. “We think the daily, weekly and monthly timeframes still indicate higher gold prices this year. Therefore, we like longs/buying dips near $1,940/50 for tactical trades and if above $1,888/oz for medium-term trades. Our measured move targets suggest $2,175/oz can still be seen,” the analysts said.

Looking at gold’s technical picture, the analysts said that the precious metal is forming a bullish cup and handle pattern. In the near term, the price action looks a little exhausted. However, they added that they expect support to hold between $1,940 and $1,950 an ounce. The analysts added that the precious metal sector could be on the cusp of being one of the best-performing commodities for the year. Gold holding critical support as USD hits two-year high and bond yields rise to nearly 3%. “Gold vs. copper and gold vs. silver look like they are forming bottoms in favor of gold outperforming this summer. They just need one break higher to confirm. Gold vs. bonds and silver vs. bonds are breaking out to new highs suggesting precious metals are preferred, instead of bonds,” the analysts said. “Silver vs. oil and silver vs. copper look supported and may start to form bottom patterns to indicate silver outperformance in 2Q-4Q22.”

Looking at silver prices, BofA reiterated its call for prices to push to $30 an ounce this year. The bullish outlook comes as silver prices fall nearly 3% on the day, with May silver futures last trading at $35.39. “Tactical views need to hold support at $24.80 while medium-term views need to hold $24.00/oz. A trend line in upper $23s is a last resort,” the analysts said in the report. Bank of America remains bullish on gold and silver, the analysts said that there is a risk that the yellow metal forms a double top at the 2021 record high of $2,078. However, they noted that risks are still low. “Gold would need to start selling off in the next 1-2 months, such as below the last breakout point of $1,840, to entertain the possibility of a double top and large decline,” the analysts said. Although gold prices have room to move against the U.S. dollar, BofA said that the precious metal looks stretched against currencies like the euro and the Japanese yen.”

On the day gold closed down $3.40 at $1952.30 and silver closed down $0.12 at $25.27.

On Thursday gold continued left-footed as higher interest rates come into focus. Lower prices however always increase business across our trading desk, so the American public is taking advantage of this most recent sell-off. Live, new product for immediate shipping or pickup is especially prized. But our Delayed Delivery Program is still one of the most popular ways to buy new bullion product for those willing to wait on the US Mint’s delivery table. Our volume numbers at these discounted levels are typical but not record setting. And again, the number of sellers is small relative to the number of buyers.

On the day gold closed down $7.40 at $1944.90 and silver closed down $0.65 at $24.62.

Reuters (Seher Dareen) – Gold retreats 1% on elevated yields as Fed rate hikes loom – “Gold slipped 1% to a two-week low on Thursday, pressured by elevated U.S. Treasury yields and firmer risk appetite, with investors expecting aggressive policy tightening by the Federal Reserve. San Francisco Fed President Mary Daly on Wednesday said she believes the case for a half-percentage-point rate hike next month is “complete” and “solid,” with the Fed’s rate hike path this year broadly seen as appropriate in the face of high inflation.

Gold is seeing a correction since the market is expecting the Fed to be more aggressive in hiking rates, while yields are also moving up, said Bart Melek, head of commodity strategies at TD Securities. While gold is considered a hedge against inflation, rising interest rates increase the opportunity cost of holding non-yielding bullion.

U.S. 10-year Treasury yields edged towards the more than three-year peak scaled on Wednesday, as bond markets suffered another sharp sell-off amid bets for aggressive rate hikes.

“The chart postures of the U.S. stock indexes have improved this week, to pull some money away from the safe-haven metals,” Kitco’s senior analyst Jim Wycoff said in a note. Investors also took stock of U.S. weekly jobless claims, which fell to their lowest in 52 years, improving risk appetite further. Gold rallied to within striking distance of the $2,000 level on Monday as concerns around the Russia-Ukraine conflict and rising inflation spurred safe-haven demand.

Zaner (Chicago) – “The bear camp has the edge in gold and silver this morning as a precipitous decline in the dollar has had little cushioning influence for prices. However, gold ETFs saw another inflow yesterday of 80,778 ounces and are now 9.3% higher on the year. On the other hand, silver ETFs saw an outflow of 2.6 million ounces but are still 2.1% higher on the year. Obviously, this week’s chorus of hawkish Federal Reserve comments and a return to positive real rates have reduced the appeal of both gold and silver. Unfortunately for the bull camp, a slight uptick in treasury yields this morning has had a larger than usual negative impact on precious metal prices. While a story on Bloomberg suggests a tightening of gold supply from increased investment demand could support prices with the Russian embargo and the potential for money to rotate from the dollar and treasuries with some money landing in gold. The article suggests that the massive size of investment in dollar and treasury markets is massive relative to gold supply. Another fresh pressure on gold and silver is a downward adjustment in Chinese growth forecast driven by expectations of a decline in Chinese export growth. In the end, seeing gold and silver prices fail to benefit from a very significant downside reversal in the dollar highlights a serious lack of buying interest on the sidelines. Even though the odds that the Russians would use tactical nuclear weapons in the event they look to lose the war are low, the mere mention of that potential by an anonymous high level Russian official should have stoked flight to quality buying interest in gold. While the silver market has not benefited as much as gold in the rising inflationary environment, it could become the leadership market from a classic fundamental perspective. In fact, the Silver Institute in its most recent report projected 2022 silver demand at a record with a 19% gain versus 2021. The Silver Institute also pegged the 2022 deficit as the largest in recent history. Looking back over the last 2 years, investment demand in silver has been the biggest disappointment for the bull camp. Surprisingly, the trade remains bearish toward silver investment demand even though silver ETF holdings at 940 million ounces are approaching the record high level of 956 million ounces. Silver ETF holdings recently saw a single day inflow of 6.6 million ounces and silver ETF holdings year-to-date are 2.4% higher!

On Friday both gold and silver pricing remained lackluster reflecting Powell’s renewed hawkishness. These are the storm clouds forming over higher gold prices. But the news is not as dire as the press would have you believe. In fact, today’s pricing is a classic study in how markets adjust to a given set of facts. Efficient Market Hypothesis is a controversial but basic tool used by today’s pricing wizards. It posits that neither fundamental nor technical analysis can give you an edge in searching for future investment value. In other words, today’s price of gold or silver always represents everything that is currently known. The marketplace is always efficient, adjusting prices on what Powell may do in the future is well, a waste of time.

This may be the reason that today’s price of gold is holding up rather well considering all the transitory shifts in pricing theory. It is doubtful that this obscure view is of much help to buyers or sellers today because divining the future is human nature.

The other side of this coin might however be seen as useful. As gold pricing ebbs and flows, these patterns are carefully recorded and used to make all kinds of decisions. If gold pricing finds support between $1920.00 and $1930.00 after Chief Powell comments, it encourages the bullish scenario. At least on the short term. Which is the best anyone can do in the middle of the mess given all central banks are in unchartered waters. The bullish thinking – in place for some time now is that the Fed will be cautious – they do not want to induce recession.

On the day gold closed down $13.90 at $1931.00 and silver closed down $0.36 at $24.26.

Platinum closed down $40.20 at $925.10 and palladium closed down $43.90 at $2373.00.

This from Anna Golubova (Kitco) – Here’s what latest gold price pattern tells investors about the metal’s next move – “After touching $2,000 an ounce at the beginning of the week, gold tumbled more than $70 as the U.S. dollar climbed alongside the U.S. Treasury yields. With the latest trading pattern, analysts see some undeniably bullish signals. “Gold has been reaching new highs and consolidating. Right now, it is liquidating because of the higher dollar. But how can you be short gold in this market? Any dips in gold and silver are buying opportunities,” Walsh Trading co-director Sean Lusk told Kitco News. At the time of writing, June Comex gold futures were trading $1,937.90, down $64 from the highs seen early Monday. This pattern in gold has been pretty dominant over the past few months, said Gainesville Coins precious metals expert Everett Millman. “Every time gold hits the upper resistance level, it tends to sell off. Similar dynamics happen when it falls to its support levels. Given that part, I’m turning bullish on gold, and I expect a bounce-back,” Millman said. A very encouraging sign this time around is gold being able to hold above $1,900 an ounce at the same time as the U.S. dollar and bond yields advance. “As bond yields rise, gold is supposed to be less attractive. The fact that gold is holding its ground is a good sign,” Millman said. The recent selloff in equities is also expected to boost gold as more investors diversify, noted Lusk. “People are starting to see the light in regards to what the aggressive hikes will do to the economy,” he said. “And that’s on top of the inflationary overtone in the market here.” Federal Reserve Chair Jerome Powell telegraphing two or more half-point rate hikes in the next few months put additional pressure on gold at the end of the week. But again, the encouraging news is that the Fed’s hawkish rhetoric might give the central bank some room to be less aggressive when it comes to actually raising rates and reducing its balance sheet, said TD Securities head of global strategy Bart Melek. “The latest core inflation numbers were a bit below expectations, which brings us to believe that the Fed might not be as aggressive as people anticipate. Markets are pricing in 50 bps in May. That’s a given. And maybe have another 50bps rate hike after that and then see if inflation will start turning lower,” Melek told Kitco News. Even if the Fed proceeds with six more rate hikes based on the dot plot, it is still pretty low relative to where inflation is, added Melek. This is why the market is starting to wonder how serious Fed is about getting restrictive.”

My Brothers and Sisters, thank you for your business, friendship, and patience. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and many now have the booster! We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variant remains dangerous and accounts for most world infections. At the same time trust that God will get us back to normal and our traditional business model.  Richard Schwary

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Gold – Rangebound with Potential

Gold – Rangebound with Potential

Commentary for Thursday, April 14, 2022 (www.golddealer.com) – Gold closed down $10.10 at $1970.90 and silver closed down $0.32 at $25.70. Gold remains “stuck” at the upper end of its trading range. Threatening higher prices as inflation, the Ukraine war, and rising crude oil prices support the bullish gold scenario. As central bank hawkishness and a surging Dollar Index today hold further gains in check. But obviously, there is a positive gold bias as uncertainty grows worldwide. Fresh money continues to move into the domestic physical bullion trade. And public dissatisfaction rises. President Biden’s highest approval rating (63%) is now approaching lows (33%). Because of the short trading week, stubborn overhead resistance, and gold’s momentum failure after Wednesday’s high close we suspect this market will remain rangebound – with potential.

Last Friday gold closed at $1941.60 / silver at $24.82 – on the week gold was higher by $29.30 and silver was higher by $0.88. Discouraging considering the pulse up in gold on Wednesday as some traders thought $2000.00 was right around the corner.      

Just a reminder – we will be closed for Good Friday (April 15th) – commodity markets and Wall Street will be closed, banks and the post office open.        

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” on 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. Unless God has blessed you with patience, ask for other options. Thank you for understanding.

On Monday gold pushed to $1970.00 in the overnight market on rising inflation fears but lost most of its early gains in the domestic trade. In what looks like a typical round of short-term profit taking. Gold remains well supported on several fronts. Traders look for a hot number in tomorrow’s March reading of the Consumer Price Index (Bureau of Labor Statistics). Continued failure to make peace in the Ukraine becomes more depressing and costly. Supporting the bullish physical gold trade but subject to rising interest rates. As Treasury yields move to their highest level since January of 2019, recession worries grow, declining stocks, and food shortages in the Middle East. And the impact of an isolated Russia and a stressed natural gas supply to Europe.

The West and its allies may soon be faced with a disturbing reality. There may be more behind this war than Putin making a point about Russian sovereignty. More underlining support from working people than once believed. People looking to reinvent the perceived glory days of the Soviet Union. If so, expect continued support for gold bullion within this “new” Iron Curtain.

Keep in mind that this is a short trading week. Commodity markets, Wall Street and CNI will be closed for Good Friday. I suspect the action will turn “quiet” by mid-week as traders leave early and Pope Francis calls for an Easter truce in the Ukraine.

On the day gold closed up $2.70 at $1944.30 and silver closed up $0.16 at $24.98.

Zaner (Chicago) – “With weakness in oil, and fresh new highs in US treasury yields lingering from last week, the $16 early gain in gold and the $0.34 initial gain in silver appears out of place. While we expect outside pressure from weak oil prices to abate later this week, seeing the dollar following through down from a blow-off reaction Friday is likely the biggest bullish force in the early trade today. While the war will remain a primary focus of precious metal price action, talk of improved demand in India ahead of the wedding season, sporadic inflation buying, and slightly favorable charts helps justify the June gold trade above $1,950. We are further surprised in the initial rally in metal prices this morning, especially following somewhat sedate Chinese price index reports for March overnight. In fact, Chinese consumer prices for March did not contract as expected (they were Unchanged) while Chinese Producer prices on a year-over-year basis were hotter than expected. Other issues potentially driving precious metal prices this week are US treasury auctions, Japanese producer price readings and US price index readings. From an intermediate perspective, the net spec and fund long in gold and silver indicate both markets are vulnerable to stop loss selling. Gold positioning in the Commitments of Traders for the week ending April 5th showed Managed Money traders net sold 7,455 contracts and are now net long 122,671 contracts. Non-Commercial & Non-Reportable traders reduced their net long position by 7,376 contracts to a net long 298,618 contracts. The Commitments of Traders report for the week ending April 5th showed Silver Managed Money traders net sold 3,108 contracts and are now net long 39,321 contracts. Non-Commercial & Non-Reportable traders were net long 60,844 contracts after decreasing their long position by 1,280 contracts.”

On Tuesday gold again pushed higher as the March CPI (Consumer Price Index) reached 8.5% year on year. Today’s jump in the price of gold was substantial – but surprising. Everyone expected higher numbers. The recent inflation picture in Germany was similar with similar central bank expectations for higher interest rates. So, what is up? Actually, this latest jump in inflation and today’s higher gold pricing may not be straightforward.

The traditional view – higher inflation higher gold. That is what this round is about as short-term paper traders move the market. But Reuters points out that while gold is moving higher Treasury yields are moving lower. Suggesting we are looking at an inflation peak – not a sustainable climb in monthly readings. An interesting take – but worth considering. Especially if the deep Fed thinkers are right and some of this inflation surge will resolve itself by year end.

The Ukraine conflict continues to support gold. And diminishing expectations for peace defines higher gold prices. The New York Times – Putin Says Peace Talks Hit ‘Dead End’ and Vows That War Will Go On – “Russia is pouring troops and equipment into eastern Ukraine, presaging a bloody new chapter in the conflict. The U.S., Britain and Australia said they were investigating an unconfirmed report that Russia had deployed a chemical agent.” These are significant developments. Apparently, the allies will move away from further Russian sanctions – choosing instead to supply Ukraine with what it needs to defend itself. But this shift is a double edge sword. It slows the crazy idea that further sanctions will cripple the Russian resolve to continue the war. At the same time this new tactic could turn this already tragic piece of world history into a stalemate.

The “usuals” stand in gold’s way. And promise a bumpy ride. If not a rejection that higher gold prices are assured in the shorter term. Higher interest rates are coming, there is a decreasing chance that the Ukrainian war will be resolved, and “inflation” may have peaked. To understand this “peaked” idea consider a timeframe of 12 months in which this 8.5% inflation number will eventually drift lower. And the FOMC will dovetail its monetary policy to accommodate – not too hot, not too cold, making everyone happy.

This latest push to higher ground obviously improves gold’s technical picture on the shorter term. And even the gold pessimist will be impressed with its 30-day pricing picture as our shiny friend moves above a triple top at $1960.00.

It may be time to consider the important 60-day pricing chart. Which defines overheard resistance, relative to all-time highs. Today’s push into the $1970.00 range sets up a real “test” of overhead resistance. In today’s changing world amounts to only “a good start”.

Remember we have already visited this rarified air in early March. Gold topped out between $2000.00 and $2050.00. Paper traders will be looking to take short-term profits. The rest of us will be waiting to see if inflation runs. Or the Fed inflation hammer (higher interest rates) settles this trade to something more manageable from their perspective.

Trying to guess the outcome is never a good idea. Expecting uncertainty is better and being prepared is best. Meaning it may be time to do some adjusting in your physical positions. Expect profit taking rounds as traders “buy the dips and sell the rallies”.

Still this market is a mess of contradictions so consider other wild cards. Another surge in the pandemic is creating minor panic in China and further restrictions are expected. Don’t be sold on one bullish or bearish outcome. Odds are we will see something in the middle. Keep the bigger picture in mind (a decade or longer). Under these circumstances it is difficult not to see higher gold prices as politicians continue their free lunch program.

On the day gold closed up $27.80 at $1972.10 and silver closed up $0.75 at $25.73.

On Wednesday gold was again firm ignoring a strong Dollar Index (100.00), while Treasury yields dropped for the second day, suggesting a peak in the rising inflation numbers. MarketWatch – What do analysts say? On Tuesday, “Treasuries abruptly reverse course as March inflation print falls short of consensus expectations,” said Societe Generale’s Subadra Rajappa, head of U.S. rates strategy. “While it is hard to read too much into one print, (Tuesday’s) number bolsters the narrative that inflation is possibly peaking as we head into mid-year when base effects are likely to support lower prints. Curve continues to steepen as the market prepares long-end supply and balance-sheet runoff at the May meeting.”

I think this potential “shift” in thinking is doubtful based on the rising price of gold and the obvious escalation of the Balkan war. Rising gold should also have you scratching your head when you consider a hawkish Bank of Canada. Which raised interest rates a half point and will escalate the reduction of their balance sheet at the same time. This might be a stretch, but could it be foreshadowing of our own Federal Reserve plan?

Rising interest rates would normally create trouble for gold and the stock market. But bearish stock analysts may be having second thoughts about problems for Wall Street. This still developing theory (underline theory) is that our economic recovery is so strong it will continue in many sectors, avoiding a recession. And give the FOMC wide discretion as to interest rate adjustment. In other words, the current inflation discussion could develop into a perplexing mix of higher stocks and higher gold. Proving Chief Powell was correct in his assessment that inflation would peak in the first quarter of next year. That sequence would be amazing – perhaps miraculous. But it would provide an answer to why Treasury yields are moving lower.

Reuters (Seher Dareen) – Gold scales 1-month peak as high inflation boosts appeal – Gold prices hit a one-month high on Wednesday as rising consumer prices boosted its appeal as an inflation hedge, while investors seemed to look past an impending interest rate hike by the Federal Reserve as well as a stronger dollar. Gold seems to be “ignoring the stronger dollar and rising U.S. rates and they seem to be singularly focused on inflation,” said Edward Meir, an analyst with ED&F Man Capital Markets. Data showed on Tuesday that U.S. monthly consumer prices surged in March, cementing the case for a 50-basis point interest rate hike from the Federal Reserve next month as it seeks to tackle inflation. Gold is considered a hedge against inflation and geopolitical risks. However, rising U.S. interest rates will raise the opportunity cost of holding non-yielding bullion and boost the greenback in which it is priced. Investors also boosted equities after a week-long slump amid optimism on strong growth stocks despite inflation forecasts. The dollar index touched a two-year high during the session buoyed by hawkish comments by Fed officials. “We’re importing inflation here,” said Daniel Pavilonis, senior market strategist at RJO Futures, adding there is “real scare of more inflation coming from the lack of exports, the lack of shipments and back orders and all the other shipping costs” due to the Ukraine crisis. President Vladimir Putin said on Tuesday peace talks with Ukraine had hit a dead end, in the strongest signal to date the war could grind on for longer.”

On the day gold closed up $8.90 at $1981.00 and silver closed up $0.29 at $26.02.

FXStreet – Gold hit fresh near one-month highs above $1980 on Wednesday, its sixth successive session in the green. The Gold Price is being supported amid continued demand for inflation protection in wake of the latest CPI/PPI numbers. Geopolitical tensions also remain elevated and the prospects of Russo-Ukraine peace poor, underpinning XAU/USD. Spot Gold Prices (XAU/USD) have advanced for a sixth successive session on Wednesday, and in doing so have hit fresh near one-month highs above $1980. Gold Prices and precious metals more broadly remain in demand as investors seek protection against inflation, with the latest Producer Price Inflation (PPI) figures out earlier on Wednesday not providing any reason for optimism on this front. The headline rate of YoY PPI came in above expectations at 11.2%, the highest on record (going back to 2011) and comes after the annual rate of headline CPI released on Tuesday rose to its highest in four decades at 8.5%. Geopolitics is another reason why investors are buying gold, with the most recent updates on the Russo-Ukraine war suggesting that peace remains some ways off. Russia will view US and NATO vehicles transporting weapons on Ukrainian territory as legitimate military targets, Russia’s Deputy Foreign Minister said on Wednesday, comments that will escalate tensions with the West. The latest punchy Kremlin rhetoric comes after Putin said on Tuesday that peace talks with Ukraine had hit a dead end. Also read: Russia will view US and NATO vehicles transporting weapons on Ukrainian territory as legitimate target. Instead, Putin promised that Russia would achieve all of its “noble” aims in Ukraine. “We have again returned to a dead-end situation for us,” Putin told a news briefing during a visit to the Vostochny Cosmodrome 3,450 miles (5,550 km) east of Moscow. “We don’t intend to be isolated,” Putin added. “It is impossible to severely isolate anyone in the modern world – especially such a vast country as Russia.” Gold Price bulls will be eyeing a test of the $2000 level in the near future. However, should a strong US dollar prevail amid further hawkish rhetoric from Fed speakers given their ongoing concerns about US inflation, $1930 could come under pressure again. If that were to give out, the near-term prospects of a move higher will be severely diminished.”

On Thursday gold turned choppy going into a long and uncertain weekend. And this market will likely remain defensive but well supported. The Ukrainian war is a nightmare. And the allies are slowly being drawn into this escalating mess. Which means they too are committed. Reuters – “U.S. President Joe Biden announced an additional $800 million in military assistance to Ukraine, expanding the scope of the systems provided to include heavy artillery ahead of a wider Russian assault expected in eastern Ukraine.” So, expect current gold pricing to remain firm. But its failure this week to follow through, after a nice breakout to the upside is a disappointment to the bulls. This “progressive idea” diminishes the chance of negotiated peace in the Balkans.

The metals are already subject to information overload. My suggestion – ignore transient political or economic “noise”. Gold’s price direction will likely be decided by how aggressive the FOMC will be in May and June. And even that is subject to some question as the latest from the ECB (European Central Bank) suggests no hurry on their part.

The June confab is the most important of the two meetings, but both are meaningful because expectations are already high that “something” is brewing. Probably behind closed doors. If the Fed “only” raises interest rates a quarter point, gold could easily make new recent highs as this might be seen as dovish under the circumstances. But further interest rate hikes are likely – which dampen price expectations based on inflation. The numbers of those in the US interested in physical gold and silver is expanding – a plus for the bulls. But I expect this ride to stay bumpy with perhaps less volatility.

On the day gold closed down $10.10 at $1970.90 and silver was off $0.32 at $25.70.

Platinum closed up $4.40 at $989.60 and palladium closed up $16.60 at $2355.40.

My Brothers and Sisters, thank you for your business, friendship, and patience. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and many now have the booster! We continue to enforce rigid safety standards between people and products. Be careful, the contagious Omicron variant remains dangerous and accounts for most world infections. At the same time trust that God will get us back to normal and our traditional business model.  Richard Schwary

Risk Disclosure – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisors. The precious metal and rare coin markets are random and highly volatile so they may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

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Gold – Firm – Perhaps Rangebound

Gold – Firm – Perhaps Rangebound

Commentary for Friday, April 8, 2022 (www.golddealer.com) – Gold closed up $7.80 at $1941.60 and silver closed up $0.09 at $24.82. Gold again pushed modestly higher this morning in what appears to be a combination of mild technical follow through, the stalled Balkan war solution, and rising inflation worldwide. But headwinds for this bullish gold sentiment are in place and moving forward. There is still reasonable discussion as to whether the FOMC will soon raise a ¼ or ½ point. And they have kept their options open about balance sheet reduction. My bet is that the gold trade was calm this week because the latest FOMC minutes while hawkish – were not specific enough to rock the boat. So, we continue with a market waiting for resolution. Some commentators see today’s firmness in gold as a kind of drafting – palladium prices are rising because Russian refiners have been barred from western markets. Still, there is no cigar for today’s pricing because gold is holding between $1920.00 through $1960.00. What traders are looking for is a breakout or breakdown from these limits. Which would suggest the train is once again moving. Still, firmness at the higher end of this channel may suggest another test is in order. Worth noting – 25% of the orders coming across our trading desk this week are first time buyers. This is an unusually high percentage and may suggest fresh money is coming back into the physical trade. Last Friday gold closed at $1919.10 / silver at $24.64 – on the week gold higher by $22.50 was and silver was higher by $0.18     

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 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 gold pushed higher over a combination of inflationary pressure and continued uncertainty over lack of progress in the Balkan war. And now the possibility of increased sanctions against Russia has entered the discussion. This is a typical Western reaction – already massive sanctions against Moscow for Russian aggression in the Ukraine have not produced the results these deep thinkers were expecting. So, the US and Germany are chumming the international waters ramping up support for another dish of a bad ideas, instead of standing down in an effort to really find out what is going on in the Balkan conflict.

Today’s higher prices in gold are modest, capped by the rising dollar and likely the prospect of an even larger interest rate hike next month by the FOMC. Solid US employment gains and continued signs of an improving economy have not only created a hawkish Fed, but these gains have given the Fed more interest rate power and balance sheet options.

Thinkers may find it surprising that given the developing headwinds that gold has managed to hold the $1920.00 through $1960.00 March pricing channel. But investors are aware that they are paying a high premium for this political gamesmanship. Why? Because gold bullion is real money, no questions asked in a dangerous marketplace. And this semi-red flag is supported by        the still developing problems in this world. And the difficulty in finding solutions. Technically the bulls are looking for $2000.00 gold, but there is some pessimism creeping into this trade. If under the circumstances, we continue to struggle with higher prices this current pattern begins to look more defensive than bullish. Perhaps this current pricing channel suggests the world is more optimistic of a Balkan settlement or a less harsh interest rate environment?

On the day gold closed up $10.10 at $1929.20 and silver closed down $0.06 at $24.58.

Reuters (Eileen Soreng) – Gold up as call for stronger sanctions on Russia blunts risk appetite – “Gold edged higher on Monday as the prospect of further sanctions on Russia over its invasion of Ukraine knocked stock markets and blunted appetite for risk, though elevated U.S. Treasury yields and a stronger dollar limited gains.

“We haven’t seen any progress in the peace talks and negotiations between Russia and Ukraine, so we have seen a modest return of the risk-off scenario, which is lifting gold prices,” said Carlo Alberto De Casa, an external market analyst at Kinesis. Global outrage spread on Monday at civilian killings in north Ukraine, as fighting raged on in the country’s south and east.

Germany said the West would agree to impose more sanctions on Moscow, causing share markets to turn cautious. Further gains in bullion were however capped as Friday’s solid jobs report for March cemented expectations of bigger interest rate hikes by the U.S. Federal Reserve.

The dollar index was buoyed as U.S. two-year Treasury yields climbed to their highest since early 2019. Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

Investors are looking for signs of any discussion of a 50-basis point rate hike when the Fed releases minutes from its March meeting on Wednesday.

“Hawkish Fed pricing and rhetoric to damp inflation, though a cap on gold cheer to a degree, can support the narrative for a ‘slower growth risk’ bullion bid for the time being,” (Citi Research).

On Tuesday gold opened choppy pushing towards overhead resistance at $1950.00 before profit taking and a stronger dollar pushed the early morning rally back to unchanged, and then into the red. The swing was likely created over hawkish comments by Fed Governor Lael Brainard concerning aggressive interest rate hikes and balance sheet reduction. These kinds of price swings in gold represent a jittery market at least, so it is tough for investors or speculators to stay focused on either a bullish or bearish scenario.

But the current pricing range seems solid enough, given physical gold buyers have continued to pay an elevated premium for months. Still the wild card stack grows in what appears to be a day by day estimate of short-term outcomes. The war in the Ukraine, rising interest rates, further Russian sanctions, uncertain inflation, and unrelenting strength in the dollar. The worry list is getting more complicated, which may be the reason premiums remain consistent.

Not surprisingly CNBC doubled down this morning claiming that traders are betting on a more aggressive Fed, predicting half point rate hikes in May and June. And I’m not the only one worried about an overbought Wall Street and recession if this spinning top losses momentum.

Some believe the US stock market is subject to an even larger downside. At least gold traders are beginning to worry, which will cushion the trade as problems are worked out. Wall Street on the other hand does not seem to embrace much in the way of financial storm clouds. Worry is on the back burner, which is how these financial systems get in trouble over the longer term.

Under these confusing circumstances it’s hard not to bet on gold. A settlement in the Ukraine coupled with aggressive interest rates might easily take $100.00 off the price of our shiny friend. So, this is not a market for the faint hearted or short-term investor. At the same time, today’s gold investor should question Putin’s commitment to the Balkan war. It is apparent by now that the dictator believes any potential NATO alliance in this disputed area is a real threat to Russian historical sovereignty. If his mindset is unwavering, this war will turn into a bigger nightmare.

On the day gold closed down $6.30 at $1922.90 and silver closed down $0.05 at $24.53.

Reuters (Seher Dareen) – Gold largely unchanged as Ukraine risks counter rising yields – “Gold held steady on Tuesday as safe-haven demand spurred by the possibility of new sanctions on Russia countered a rise in U.S. Treasury yields and expectations of interest rate hikes by the Federal Reserve. The European Commission proposed on Tuesday new sanctions against Russia over its invasion of Ukraine, including a ban on purchases of Russian coal and on Russian ships entering EU ports, and said it was working on banning oil imports too.

“The geopolitical risks will likely be the primary short-term driver and that would help gold widen that trading range ($1,900-$1,950), where you could see prices possibly even going to $1,975,” said Edward Moya, senior market analyst at OANDA.

“There’s still a good chance that (gold rising to $1,975) could happen, but you never know how the market will react to these (Fed) minutes.” Investors awaited the release on Wednesday of the minutes from the Fed’s last policy meeting for clues on its rate hike trajectory. Rising U.S. interest rates increase the opportunity cost of holding non-yielding gold, while boosting the dollar. Benchmark 10-year Treasury yields rose after Fed Governor Lael Brainard said she expects methodical rate hikes and rapid reductions to the central bank’s balance sheet to bring U.S. monetary policy to a “more neutral position” later this year.

The dollar index also benefited from safe-haven inflows, curbing appetite for gold from overseas buyers. “We’re seeing a new peak in the U.S. real yields, and that’s really just keeping the (gold) market fairly locked in a range,” said Ole Hansen, an analyst at Saxo Bank.

Zaner on Gold – “(1) Gold ended last week down 3.4% but closed out the month of March and Q1 with gains of 1.6% and 5.9% respectively. (2) Silver closed down 3.5% last week but managed to log a 1.6% gain in March and a solid 6.6% gain for Q1. (3) Platinum closed down 1.6% last week, its fourth consecutive lower weekly close. However, last week’s losses stalled just shy of the midpoint of the COVID-era range at 947.65. (4) Palladium closed down 2.6% last week, which marked the fourth consecutive lower weekly close. Palladium was down 8.6% for March, but up 19.7% for Q1.”

Neils Christensen (Kitco) – U.S. Mint sees strongest gold bullion demand in 23 years, sells 426k ounces in Q1 – Rising inflation and safe-haven demand resulted in extraordinary demand for physical gold in March, capping off the best start to the year in more than two decades.

In its latest sales data, the U.S. mint reported that it sold 155,500 ounces of various denominations of its American Eagle Gold bullion coins, up 73% from last month. The U.S. Mint saw its best March performance since 1999. March ended a solid quarter for bullion demand. The U.S. mint sold 426,500 ounces of gold between January and March, up 3.5% from the first quarter of 2021. Similar to its monthly says, this was the mint’s best quarter in 23 years.

According to analysts, two factors are driving demand for physical precious metals: inflation and Russia’s war with Ukraine. Analysts are focusing a lot of attention on Europe’s economy as the region faces rising consumer prices and the growing threat that Russia could weaponize its energy commodities as it faces growing sanctions against Western nations.

“People increasingly realize that high inflation is not temporary but has come to stay – and most likely get even worse, especially in Europe,” said Thorsten Polleit, chief economist at Degussa, in an email statement to Kitco News. “The war in Ukraine represents a huge risk for the eurozone. For instance, if the inflow of oil and gas and coal from Russia into Europe comes to a shrieking halt, a very severe recession with mass unemployment and the collapse of various industries would be most likely.”

On Wednesday gold continued its slow pricing grind between $1920.00 and $1930.00. The latest FOMC minutes were released after the domestic market closed. And traders found no surprises which pushed the active aftermarket mildly higher in gold. This was a bit on the anticlimactic side – which helped to settle gold. Traders were looking for confirmation of half point interest rate hikes in coming months. They did not get confirmation, but the minutes suggested a forceful Fed program on two fronts. Higher interest rates and faster balance sheet reduction. So, the other shoe will be falling, not just today.

For now, the war in the Ukraine remains the big priority with traders. Even as sanctions pile up, supposedly making Russia more uncomfortable – there appears to be little progress. But even a partial solution would help this impasse and create drag on higher gold prices.

Gold bulls likely see this current trading range as a kind of staging area. Because gold’s technical picture is solid on the short term. The last big price push was in early March but was stopped at $2050.00 over rumors that peace talks would solve the Balkan dilemma. As these hopes dimmed the paper gold trade was then stymied over FOMC hawkishness. Producing a defensive market with little buzz. Even though inflation in Europe continued to move higher.

This now confused trade was exacerbated by further Russian sanctions, no solutions to the shortage of natural gas to Europe, and China’s Shanghai lockdown over Covid variants. With these powerful cross currents in place a push to all-time highs does not seem likely. Given the Ukraine war continues, and the Fed soon raises interest rates a half point.

The peanut gallery will argue convincingly that the confusion helps to support gold prices.

On the day gold closed down $4.50 at $1918.40 and silver closed down $0.07 at $24.46.

MarketWatch – ‘It’s hard to know how much the U.S. Federal Reserve will need to do to get inflation under control. But one thing is certain: To be effective, it’ll have to inflict more losses on stock and bond investors than it has so far.’ – Bill Dudley, former New York Fed president.

That’s William Dudley, the former president of the powerful New York Fed, arguing in a guest column at Bloomberg that his former colleagues won’t get a handle on inflation that’s running at around a 40-year high unless they make investors suffer.

There are myriad uncertainties the Fed must navigate, he acknowledged, including the effect of easing supply-chain disruptions and a historically tight labor market. But the effects of the Fed’s tightening of monetary policy on financial conditions — and the effect that tightening will have on economic activity — is one of the biggest unknowns, Dudley wrote. Unlike many other economies, the U.S. doesn’t respond directly to changes in short-term interest rates, Dudley said, partly because most U.S. home buyers have long-term, fixed-rate mortgages. But many U.S. households, also in contrast to other countries, have a significant amount of their wealth in equities, which makes them sensitive to financial conditions. Dudley’s call for the Fed to inflict losses on investors stands in contrast to the longstanding notion of a figurative Fed put, the idea that the central bank would halt monetary tightening or otherwise ride to the rescue in the event of heavy losses in financial markets. Dudley, who ran the New York Fed from 2009 to 2018, was previously chief U.S. economist at Goldman Sachs and is now a senior research scholar at Princeton University’s Center for Economic Policy Studies.”

Zaner (Chicago) – “While the US dollar surrendered a significant portion of the overnight pulse up extension, the index remains near contract highs while US interest rates have broken out to the upside. Furthermore, a precipitous decline in a Chinese services PMI report for March overnight deflates inflationary expectations in China. Therefore, the higher initial action in gold today is very impressive against outside market headwinds. In a minimally supportive development for gold and a moderate supportive development for silver, ETFs added 55,396 ounces to gold holdings yesterday, with silver ETF holdings jumping by “6.2 million” ounces. For the year gold ETF holdings are up 8.3% while silver ETF holdings are up 1.7% on the year. In another modest positive demand development, the Perth mint saw its gold coin and minted bar sales in March post a one year high. Going forward the gold and silver markets should be undermined today by the looming release of the FOMC meeting minutes from last month. However, the carnage in Ukraine continues to spark global angst toward Russia and in-the-process that is fomenting interest in even more sanctions. In the end, we see gold and silver prices tracking sideways to lower in consolidation patterns. However, in the event a breakout of the consolidation range is seen, we expect that breakout to be to the downside. In fact, given the avalanche of hawkish central banker dialogue yesterday suggesting bankers will react sooner rather than later with respect to battling inflation, it is not surprising to see gold and silver chop without direction. Going forward, specific hawkish comments from the Fed’s Brainard yesterday regarding “methodical” US rate hikes ahead and an aggressive paring of the Fed balance sheet, should thicken overhead resistance in precious metals. In the near term, we see the top of the trading range in June gold at $1,955 with the bottom of the range projected at $1,900. Similarly, we see the top of the near-term trading range in May silver as $25.02 with the bottom of the trading range pegged at $24.02.”

On Thursday gold pushed higher as bond yields dipped but this market may be stuck with “rangebound” until either the Ukraine problem resolves itself or traders become less fearful of the coming interest rate hikes. Today’s lift is also a likely follow from yesterday’s reading of the latest FOMC minutes – which provided little specific information, choosing instead a broad-brush hawkish dialogue but allows the Fed to closely monitor for the next bump in the road.

This kind of release calmed gold’s short-term trade and encouraged mildly higher prices. But traders do fear the coming interest rate hammer. And that will keep gold from moving to new highs. At least until the public knows exactly what the FOMC has in mind. And can in some way relate that information to rising inflation numbers.

A good question at this point might be “why the disconnect between inflation and bond yields”? No one really knows for sure, and that should at least keep the gold trade primed.

But in the meantime, the reason the capital markets are not panicking is that traders believe the Fed will contain inflation with rising interest rates. In other words, they do not buy the extreme inflation case, which is sometimes common today. They tend to be Fed driven. Willing to be patient, waiting at least for now for inflation to trend lower. If this reasoning turns into a pipe dream gold will continue higher even if a solution to the Ukrainian war is found.

Reuters (Eileen Soreng) – Gold rises as inflation, Ukraine concerns lift appeal – “Gold prices gained on Thursday as inflation worries coupled with the Ukraine crisis bolstered the bullion’s appeal as an inflation hedge, but the U.S. Federal Reserve’s aggressive policy stance limited gains. “Once inflation starts to heat up again, which I think it will, it is going to work in favor (of gold), even in the face of the aggressive Fed monetary policy,” said Jim Wycoff, senior analyst at Kitco Metals. Minutes of the Fed’s March meeting showed deepening concern inflation had broadened through the economy, with “many” participants prepared to raise interest rates in hefty 50-basis-point increments in the next few meetings. Rising U.S. interest rates increase the opportunity cost of holding bullion while boosting the dollar. The dollar index hovered below a two-year high touched earlier in the session, while benchmark U.S. 10-year Treasury yields also held close to a multi-year peak touched on Wednesday. “Focus will shift to U.S. inflation data with a higher print potentially favoring gold upside,” DailyFX analyst Warren Venketas wrote in a note, adding that geopolitics will persist in influencing gold prices. Ukraine has stepped up calls for financial sanctions crippling enough to force Moscow to end the war, while NATO members have agreed to strengthen support to Kyiv.”

On the day gold closed up $15.40 at $1933.80 and silver closed up $0.27 at $24.73.

Neils Christensen (Kitco) – 187.3 tonnes of gold flows into global ETF market in March – “Geopolitical uncertainty created by Russia’s invasion of Ukraine and the growing inflation threat generated solid support for gold-backed exchange-traded funds, according to the latest report from the World Gold Council. And this is despite the Federal Reserve embarking on a new aggressive monetary policy cycle.

“March inflows were the strongest since February 2016, despite a significant rebound in equities and a strong US dollar performance,” the analysts at the WGC said in the report. “There were positive flows across all regions during the month, but most came from North American and European gold ETFs.” March represented nearly 70% of the 269 tonnes of gold that flowed into ETFs during the first quarter. Gold prices rose 8% in the first three months of 2022, its best quarterly performance since the second quarter of 2020.

“It was among the best-performing assets amid significant weakness in both equity and bond markets,” the analysts said. “In a period marked by economic uncertainty and increased volatility, gold proved a reliable source of diversification and wealth preservation.”

The WGC noted that demand for paper gold in the first quarter was able to reverse the outflows seen in 2021. Total Global holdings are down less than 2% from the all-time highs of 3,909 tonnes reached in October 2020. “Recent geopolitical events have highlighted how investors view gold as an effective and proven hedge. As evidenced by the highest level of monthly inflows since 2016, gold-backed ETFs have served as a safe haven for investors amid the current, volatile market conditions,” said Adam Perlaky, Senior Analyst at World Gold Council.

“While geopolitical events are not the main or even secondary reason for owning gold, historical analysis suggests gold has kept gains made in the months following an initial tail risk event, such as the war in Ukraine.” Looking at regional flows, the ETF market saw broad-based gains, the WGC said. North American-listed funds saw gold holding increase by 100.6 tonnes in March. Meanwhile, European-based funds saw inflows of 82.7 tonnes. Funds in Asia saw inflows of 2.6 tonnes last month. This is the first time Asian funds saw their gold holding grow; year-to-day holdings are down 10.5%.”

On Friday gold opened firm in a still confusing trade of opposing bullish and bearish trends. Reuters this morning warns of slowing growth in the banking sector and possible US recession. The recession scenario has been around for a while and is gaining momentum as traders consider rising interest rates and Wall Street develops a cold. This kind of talk is generally considered bad for gold prices. But the opposite might be true in the upside-down world of hyper modern finance and the proverbial free lunch. If the FOMC turns even somewhat dovish to moderate recessionary forces gold would likely make new all-time highs.

In the meantime, the war and higher interest rates hold traders’ attention and it’s likely the paper trade will continue to “buy the dip” and “sell the rally” holding gold and silver pricing to these familiar and narrow ranges.

It appears that Russia will opt out of the United Nations. Another wonderful example of a broken political system. I was never a big supporter of the U.N., but it was better than nothing. Sanctions against Russia will be very expensive and inflationary for the West and for Europe. And to what end? Most academics agree that sanctions as a political tool are better suited to a democratic regime and are ineffective against a dictatorship. In other words, we are shooting ourselves in the foot because we can’t figure out a better way to handle a political problem.

On the day gold closed up $7.80 at $1941.60 and silver closed up $0.09 at $24.82.

Platinum closed up $17.30 at $972.20 and palladium closed up $197.00 at $2420.00.

Zaner (Chicago) – “With a fresh contract high in the dollar and a fresh contract high yield in bonds, the outside market impact on gold and silver is negative to start the last trading session of the week. In retrospect, yesterday’s Federal Reserve dialogue was mixed to slightly bearish, with one hawkish Fed member countervailed slightly by a relatively dovish member. Minor supportive outside market influences of higher oil and higher grains looks to have a limited impact on prices. However, there are reports that Russia is preparing for a massive “offensive” and that could increase interest in flight to quality tools like gold and silver. We suggest traders monitor the action in the palladium market, as palladium is likely to be the commodity market most impacted by events in Ukraine. In a development that is less important than normal (given sanctions) Russian January gold output increased to 19.6 tons from 18.9 tons in the year-over-year comparison. Silver production from Russia declined from 68.3 tons in January 2021 to 64.2 tons in January 2022. While not a significant change, gold ETF holdings on Thursday posted an inflow of 10,674 ounces putting the year-to-date gain in holdings at 8.3%. Unfortunately for the bull camp silver ETF holdings yesterday declined by 416,013 ounces but that follows several days of +1-million-ounce inflows earlier this week. As indicated earlier in the week, we see gold and silver prices likely to remain within sidewise trading ranges. However, in the event a significant Russian offensive is started that should provide gold and silver with a moderate wave of fresh speculative buying. Fortunately for the bull camp, fresh sanctions continue to surface, the Ukrainians are at a minimum holding their ground, while portions of the market think interest rate hikes will not be able to control inflation. While the net spec and fund long in gold last week pulled down significantly from the multiyear peak 3 weeks ago, the net spec and fund long is still very significant at 305,000 contracts. Similarly, the net spec and fund long in silver has come down from 12-month highs two weeks ago but remains lofty at 62,124 contracts. We see consolidation support in June gold today at $1,915.50 with resistance at $1,957. Similar support in May silver is pegged at $24.20 with the top of the range anticipated at $25.11.”

My Brothers and Sisters, thank you once again for your business and friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and many now have the booster! We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variant remains dangerous and accounts for most US infections. At the same time trust that God will soon get us back to normal and our traditional business model. Richard Schwary

Risk Disclosure – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisors. The precious metal and rare coin markets are random and highly volatile so they may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

 

 

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Gold – Steady / Considering the Storm Clouds

Gold – Steady / Considering the Storm Clouds

Commentary for Friday, April 1 25, 2022 (www.golddealer.com) – Gold closed down $30.10 at $1919.10 and silver closed down $0.48 at $24.64. Gold drifted lower today, catching up with yesterday’s selloff in the aftermarket. It was helped along as Treasury yields rose and the dollar got stronger. President Biden also released crude oil from the US reserve. Not a big deal, he is again making a political point. Some traders believe any dip in oil prices is a longer-term buying opportunity considering the mess in the Ukraine. While gold lost steam this week its technical picture remains static, trading between $1920.00 and $1960.00. It could settle lower with a resolution to the Balkan war, but for now that seems elusive. Our shiny friend is holding up rather well considering the talk of a half point interest rate hike in April. And perhaps again in June. The physical market is also steady Eddy, which is a bit surprising in this new era of rising interest rates. Popular gold bullion for immediate delivery still lasts only a few days across our trading desk. And for reasons which escape me, large orders of new 1 once silver rounds and 10 ounce silver bars are still delayed and “backorder only”. Last Friday gold closed at $1953.80 / silver at $25.60 – on the week gold was off $34.70 and silver was lower by $0.96     

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 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 gold was weaker in the overnight Hong Kong and London markets but turned choppy in the domestic trade, struggling against a strong Dollar Index which eventually settled somewhat before the trading close. China also shut down its financial hub (Shanghai) to control surging Covid cases. This may ease crude oil demand, lowering prices which have recently fueled the bullish inflation scenario. There may also be a chance of progress in the Balkan war peace talks if you believe Kiev’s claim that battlefield momentum has shifted in their favor.

I see these last few days of weakness in the metals as a combination of common sense reasons. The jump in treasury yields Friday led to short term profit taking, especially in the hedge funds. This refocused the paper trade already getting ready to take advantage of the next round of interest rate hikes by the FOMC. This conversation has grown increasingly hawkish as informed commentators now talk about consecutive 50-point hikes in interest rates this year as we settle into the 3% range by 2023. And finally, the growing realization that the Ukraine war in not sustainable for either party. And will eventually find a solution, diminishing safe haven demand.

In this “near term” view we are seeing gold and silver move lower. They are looking for old and more sustainable support lines post Ukraine. That does not mean gold and silver are out in the cold. In fact, the end of the Balkan war might present powerful reasons for gold and oil to trend higher. Such are the dangers encountered in a collective world view controlled by politicians which have their own agenda. Inflation is a serious matter, but the Fed has managed to keep this fiat system afloat through the pandemic – my hat is off. Still there are other, perhaps bigger problems which may present themselves as world governments attempt to bring interest rates back to “normal”. The adage “There ain’t no such thing as a free lunch” saw common colloquial usage in the 1930’s and suggests that it is impossible to get something for nothing in this world.

While we are always hopeful of that free lunch watch for that price “bounce” on weakness as traders feel around for support. This “buy the weakness and sell the rally” concept is useful when looking for an oversold market but is not always reliable. Today is a good example, traders got the “bounce” but hawkish commentary was so prevalent the aftermarket reversed direction and moved lower by another $20.00, so look for a lower open in tomorrow’s trade.

On the day gold closed down $14.20 at $1939.60 and silver closed down $0.42 at $25.18.

Zaner (Chicago) – “From a fundamental perspective, the gold and silver markets continue to see modest investment and flight to quality demand, but also some buying interest off the potential for inflation buying. Obviously, the war in Ukraine continues to provide a steady flow of flight to quality buying interest, but another layer of sanctions on Russia likely infuriates the Russian leader and that could lead to more volatile actions from Russia and more volatility in gold and silver. However, the latest sanctions involve efforts to isolate Russia from selling gold to the world market, and for some that moderates a fear of sudden physical supply wave of availability in the world bullion market. Estimates on amount of Russian gold reserves range from $140 billion to as high as $220 billion. Certainly, Russia will find some outlet for sales to buyers willing to buck sanctions but tightening restrictions should reduce the net amount of gold flowing from Russia. Unfortunately for the bull camp, the upside breakout in treasury yields on Friday will undermine some longs this week and discourage some fresh would-be buyers (treasury yields last Friday reached the highest level since April 2019!). With a week over week gain in gold and silver prices, the short-term charts still favor the bull camp. In fact, with last Thursday’s upside breakout forged on a pickup in volume, the bull camp appears to have “capacity”. A limiting force for gold and silver bulls is seen from signs that the dollar index might be poised to extend the 2022 uptrend pattern. Unfortunately for the bull camp, the most recent COT positioning net spec and fund long (adjusted for the gains since the COT report was measured) is near the largest level since March 2020. The March 22nd Commitments of Traders report showed Gold Managed Money traders are net long 133,992 contracts after net selling 13,509 contracts. Non-Commercial & Non-Reportable traders were net long 314,689 contracts after decreasing their long position by 17,756 contracts. While the most recent COT report understates the net spec and fund long in silver (due to the rally of $0.80 following the report) the net spec and fund long is near the highest level since February 2020! The March 22nd Commitments of Traders report showed Silver Managed Money traders reduced their net long position by 4,225 contracts to a net long 44,242 contracts. Non-Commercial & Non-Reportable traders were net long 66,536 contracts after decreasing their long position by 2,950 contracts. As of the most recent gold and silver ETF holdings readings, gold holdings were 7.7% higher on the year while silver ETF holdings are a mere 0.8% higher.”

On Tuesday the overnight Hong Kong and London markets moved lower. And this weakness was carried into the domestic trade. New York broke down at $1910.00, falling to $1890.00 as bargain hunting capped losses. Gold finished the day above the psychologically important $1900.00 level. Gold’s recovery from daily lows is likely the result of an erratic Dollar Index which lost nearly a full point in early trading. Two days of losses in the price of gold reflect diminished safe haven interest as Ukrainian peace talks gather momentum. And improvement in the latest consumer confidence numbers. Even as Reuters warns of further pandemic trouble – “A sub-variant of the highly transmissible Omicron version of coronavirus known as BA.2 is now dominant worldwide, prompting surges in many countries in Europe and Asia and raising concern over the potential for a new wave in the United States.”

The bullish gold scenario is also harmed by the growing threat of much higher interest rates. Although I believe some of this latest hawkish rhetoric is an overreaction to speculation by Fed insiders. This is encouraged because it gives Powell the ability to “test the waters” at a fluid time during this transition without stressing the hoped-for Fed outcome. The Chief is in charge for a reason, he is an obvious academic, but he is also a strong leader with a story to sell.

It is likely insiders expect gold to move sideways with a negative bias. In the at least confused crude oil trade prices have moved lower by $15.00 since last Friday. And traders adjust in a world of rising interest rates and perhaps a kind of tacked together truce in the Balkans. Adding to this drag – CNBC notes 5-year and 30-year Treasury yields invert for the first time since 2006, fueling recession fear. Still, the point today is straightforward. The dip in prices was met with bargain hunting, even as the number of bears in the woods appear to be growing.

On the day gold closed down $27.60 at $1912.00 and silver closed down $0.46 at $24.72.

Zaner (Chicago) – “With gold and silver starting the week under pressure from looming Ukraine/Russian peace talks and periodic strength in the dollar the path of least resistance today remains down. In a minimally supportive development, gold ETF holdings yesterday increased for the 13th straight session bringing this year’s net purchases to 7.9 million ounces. The inflows to total gold ETF holdings are 1.39 million ounces while silver holdings last week declined by 2.1 million ounces. Going forward, the prospect of a cease-fire has improved following reports of Ukrainian soldiers taking the offensive against certain Russian positions and additional waves of sanctions. At least in the near-term inflationary psychology is likely to take a backseat to the latest attempt at diplomacy. While the absolute number of infections in China would not seem to be concerning the Chinese have taken a very strong control stance which continues to threaten port operations which in turn could produce another wave of inflationary supply chain shocks. Even though treasury yields have not broken out to the upside overnight they remain near multi-year high levels in a fashion that could add additional pressure to gold and silver prices later today. From a technical perspective, the April gold contract overnight failed at a key support point of $1909.80 and the contract could be headed down to the next lower support point of $1895.20. Similarly, the silver market also made a small failure on its charts and is seemingly headed to the next lower support point down at $24.78.”   

On Wednesday gold once again surprised – this time to the upside as the Dollar Index continued to lower and the possibility of peace talks between Russia and the Ukraine fade. At this point, the direction of gold pricing will depend on the success or failure of these so-called peace talks. But consider in the process that they too have become an arbitrage and part of this human tragedy.

It defies comprehension that the unprepared and outgunned Ukrainian army has managed to hold out and, in some cases stop the modern, aggressive, and ruthless Russian army. Of course, there are other factors which support higher gold prices like inflation and erratic crude oil prices. But even these take a back seat to the Ukrainian war and its solution or consequence.

If you are piecing together some sort of strategy it may help to view the larger picture. Gold’s latest push higher began in January ($1800.00). And topped out in March ($2050.00). These higher prices were helped by the Balkan war, but this was an initial overreaction. Gold settled – waiting for a resolution and pricing was underpinned by uncertainty over the conflict.

Gold is turning into a jittery market capped by promised higher interest rates. Yet supported by rising demand for physical gold bullion as the world ponders an increasingly complex and divided financial system driven by political agenda. No one wants the financial division that was common during the cold war, it was expensive and inflationary. But the clock is ticking as the world drifts towards a reality that just a few months ago would have seemed unlikely.

The bigger hope is that a Balkan resolution will send all parties back to the good old days. Few liked the Russians, but détente provided a kind of magic mask which allowed everyone to trade with Moscow for mutual advantage. This rather naïve approach worked well until the recent and amazing world response against Russian aggression began to close traditional financial doors. It remains to be seen how committed the world will remain to this punitive Russian action and I’m hoping for a course correction, the sooner the better. And to make matters more complex gold faces further headwinds as the FOMC is faced with the delicate problem of interest rate adjustment. And the world worries over yet another rise in the pandemic numbers.

Still gold must play an important role in any of these possible outcomes. For now the bulls will need further patience. Given the complexity of this mess it’s possible that we have entered the beginning of a long consolidation in the price of gold – between $1800.00 and $1900.00. Look for breaks toward the lower end of this range as financial tension moves lower. And breaks above $1900.00 as tension increases. Any breakdown during adjustments back to “normal” would highly favor gold. But this is unlikely. Central banks will decrease the pandemic largess but fear recession more than inflation. And so will avoid being too aggressive, I hope.

On the day gold closed up $21.50 at $1933.50 and silver closed up $0.38 at $25.10.

Zaner (Chicago) – “We suspect that part of the recovery bounce in gold and silver prices this morning is the result of short covering from yesterday’s large range down, with additional lift coming from an 8-day low in the dollar index. Holding back the gold and silver trade are unrelenting forecasts of recession based on yield curve signals. Another minor impediment to higher gold prices today is a decline in ETF holdings yesterday of 81,022 ounces which pulls down the year-to-date gain to 8%. We are surprised that gold and silver have not come under sustained pressure because of indications from Russia that they would slow their attack of the Ukraine capital and specifically stating the pause was a good faith contribution to the negotiations. However, reports from Ukrainian mayors overnight suggest some cities have been bombed relentlessly by the Russians! Fortunately for the bull camp, the Russians have been anything but forthright in their dealings with Ukraine and the West and given Putin’s personality, the charge of war criminal could make it difficult for Russia to “settle” without gaining territory. In retrospect, the precious metal trade drained a portion of the flight to quality premium from gold and silver prices over the prior 24-hours even though US interest rates have declined this week. However, central banks like the Bank of Japan are fighting against significant gains in interest rates in a sign that upward pressure on rates is building around the world. In retrospect, the gold and silver markets should be disappointed in the moderation of inflation expectations especially after the US posted several “hot house price measures” yesterday. However, a large portion of inflation expectations flow from energy price action and early action today in energy price action favors the bull camp in gold and silver.”

On Thursday gold pushed higher – reflecting the continued uncertainty over the Balkan war but gains were stymied as the Dollar Index steadied after early weekly losses. And while gold finished the day in the green, most of the gains were reversed in a lower aftermarket. Short term traders are always quick on the draw – there is not much grass growing under their feet.

And crude oil adds to the confusion as the US considers the release of 180 million barrels from its Strategic Petroleum Reserve, the largest in its 50-year history – according to Reuters.

Gold’s higher numbers this morning suggest an improving technical picture, but professional traders will remain cautious. Today’s rise also hints at momentum trading from yesterday’s gain. And the realization that Ukrainian peace talks have once again stalled. If you consider the 30-day gold pricing chart you will see challenges to the bullish scenario in the short-term picture. Gold has lost $130.00 as the Russian Ukraine problem was reassessed but serious problems in other areas have created a short-term floor in place since the middle of March at $1920.00.

Since that time gold has moved between $1920.00 and $1960.00 in a typical defensive pattern waiting for the other shoe to fall. For now, this channel suggests that traders will buy weakness at the lower end and sell rallies at the higher end. As you can see these paper sharpies are looking to sell gold as it approaches $1960.00. Playing the short-term price game is fraught with danger but these up and down short-term patterns can be instructive for the longer-term physical buyer.

And it can offer a kind of early warning if either side of the channel is violated. For example, if gold continues higher pushing past the overhead resistance at $1960.00 the computer traders will be watching carefully for something is afoot. If the $1920.00 floor is crossed to the downside it may suggest progress in the Ukraine or rising fear over higher interest rates.

I’m a coin dealer not schooled in technical analysis but here is where an educated technical approximation of pricing action can help the physical buyer or seller make better decisions. No method is infallible, but some recognized science is better than a Ouija board.

On the day gold closed up $15.70 at $1949.20 and silver closed up $0.02 at $25.12.

Zaner (Chicago) – “We suspect that part of the recovery bounce in gold and silver prices this morning is the result of short covering from yesterday’s large range down, with additional lift coming from an 8-day low in the dollar index. Holding back the gold and silver trade are unrelenting forecasts of recession based on yield curve signals. Another minor impediment to higher gold prices today is a decline in ETF holdings yesterday of 81,022 ounces which pulls down the year-to-date gain to 8%. We are surprised that gold and silver have not come under sustained pressure because of indications from Russia that they would slow their attack of the Ukraine capital and specifically stating the pause was a good faith contribution to the negotiations. However, reports from Ukrainian mayors overnight suggest some cities have been bombed relentlessly by the Russians! Fortunately for the bull camp, the Russians have been anything but forthright in their dealings with Ukraine and the West and given Putin’s personality, the charge of war criminal could make it difficult for Russia to “settle” without gaining territory. In retrospect, the precious metal trade drained a portion of the flight to quality premium from gold and silver prices over the prior 24-hours even though US interest rates have declined this week. However, central banks like the Bank of Japan are fighting against significant gains in interest rates in a sign that upward pressure on rates is building around the world. In retrospect, the gold and silver markets should be disappointed in the moderation of inflation expectations especially after the US posted several “hot house price measures” yesterday. However, a large portion of inflation expectations flow from energy price action and early action today in energy price action favors the bull camp in gold and silver.”

On Friday gold opened weak reflecting yesterday’s loss in the aftermarket as investors deal with rising bond yields and a stronger dollar according to Reuters. “Gold is on course to end the week about 1.5% lower, having slipped to its weakest since late February earlier this week on signs of progress in peace talks between Russia and Ukraine. Negotiations aimed at ending the five-week war between the countries were set to resume even as Ukraine braced for further attacks in the south and east. “While geopolitical crises do not last forever, we expect the secondary impacts of the Russia-Ukraine crisis to provide a strong level of support for gold prices this year,” analysts at ANZ said in a note. The broader isolation of Russia will see a structural shift in the energy sector, which will be inflationary, while there is also a higher risk of weaker economic growth, particularly in Europe.”

There is growing concern over an induced recession as the FOMC ramps up interest rates to slow growing inflation numbers – this is the so-called “yield-curve” inversion and could also present problems for gold on the shorter term. MarketWatch – “Curve flattening often occurs later in a cycle when central banks raise short-term policy rates to restrain growth and inflation. Short-term yields can rise to reflect these hikes, while long-term rates may fall as expectations for inflation and growth moderate. This time, the flattening occurred quickly and well ahead of the first Fed hike. Inflation could continue to overshoot expectations, which could spur the Fed to further accelerate its hiking pace.”

On the day gold closed down $30.10 at $1919.10 and silver closed down $0.48 at $24.64.

Platinum closed down $7.50 at $985.00 and palladium closed up $11.90 at $2267.40.

Zaner (Chicago) – “The war in Ukraine and inflation worries appear to have overcome hawkish Fed commentary this week and driven safe haven buying into gold and silver. Both markets broke out of their recent consolidation zones on Thursday and traded to their highest levels in over a week. News that the US is taking steps to limit Russia’s ability to sell gold was a supportive factor. The US Treasury issued a notice yesterday that gold transactions with Russia are prohibited, and overnight there was a report that the G-7 nations had agreed to crack down on any gold transaction involving Russia’s central bank. Somewhat dovish comments yesterday from the Fed member seemed to walk back some of the hawkish comments from earlier in the week, and this may have traders more comfortable buying gold. Minneapolis Fed President Neel Kashkari said that he is expecting seven rate hikes this year, but he added that we may not need them all if imbalances are sorted. Chicago Fed President Charles Evans said that he is open to a 50-basis point hike but wants to be careful. The Ukrainian president has accused Russia of using phosphorous bombs against civilians, which are particularly cruel weapons. If true, this marks another disturbing escalation and could spark additional buying in gold and silver. ETFs were net buyers of 28,830 ounces of gold in the last trading session, for the 11th straight daily gain, according to the Bloomberg. This is more evidence of strong investor interest.”

My Brothers and Sisters, thank you once again for your business and friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and many now have the booster! We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variant remains dangerous and accounts for most US infections. At the same time trust that God will soon get us back to normal and our traditional business model. Richard Schwary

Risk Disclosure – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisors. The precious metal and rare coin markets are random and highly volatile so they may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

 

 

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Gold – At the Ready

Gold – At the Ready

Commentary for Friday, March 25, 2022 (www.golddealer.com) – Gold closed down $7.80 at $1953.80 and silver closed down $0.30 at $25.60. As US Treasury yields hit fresh two-year highs this morning it is not surprising to see gold settle somewhat from an aggressive week pushed by Ukraine uncertainty and continued inflation fears. Reuters – “If interest rates do continue to rise at a quick pace that could limit the upside in precious metals,” said Chris Gaffney, president of world markets at TIAA Bank. “However, overall tone of the market is still supportive of precious metals. There is safe-haven buying and also as an inflation hedge on the retail side. We’re seeing clients coming in wanting to add the diversification of gold to their portfolios,” Gaffney said. The Fed raised borrowing costs for the first time in three years last week, while traders are pricing in a probability of a 50-basis points rate hike during the Fed policy meeting in May. Gold, seen as a safe investment during times of political and financial uncertainty, has risen about 1.6% this week as investors try to shield against the impact of the war in Ukraine and higher oil prices that threaten global growth.” Last Friday gold closed at $1928.20 / silver at $25.06 – on the week gold closed down $25.60 and silver was off $0.54     

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 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 gold opened flat but firmed on pessimistic war news and rumors of a stalemate. Equities moved lower and the inevitable interest rate climb remains a drag on the bullish gold scenario. Consider the pounding our shiny friend took last week and today’s quiet opening even though shelling continues in the Balkans. This “lack of interest” in the early gold trade is worrisome. But later news that the Russians are using more powerful missiles, issuing deadlines for surrender and warning of higher civilian casualties created a mild short covering rally, improving gold’s technical picture while the world weeps.

Even with today’s bounce higher there is a lack of buzz which may suggest a negative bias is creeping in around the edges, regardless of the mayhem in the Ukraine. Still as this war ebbs and flows the list of fundamental reasons for owning physical gold gets longer. And the notion of a stalemate grows more unlikely. It is a miracle this small country is still holding out.

But even with this escalation the US market runs hot and cold. Normally only a market which is momentum and price motivated, the extreme on both ends acts as a kind of day-to-day governor across our counter. If we are looking at the front end of a long price consolidation, I would expect safe haven demand to move lower. At the same time, inflation will likely remain a difficult problem as the Fed works to manage interest rate balance. So, there are enough cross winds to support gold prices and enough headwinds to hold prices in check. It is too early to claim that gold’s primary bull market has stalled, there is too much going on. Resting may be a more accurate description especially from a world perspective.

On the day gold closed up $0.40 at $1928.60 and silver closed up $0.22 at $25.28. Certainly not impressive on the day but I don’t know anyone who would short this market.

Reuters – “Gold prices edged up on Monday as fighting in Ukraine raged on with no sign of a ceasefire even as diplomatic efforts continued according to Reuters. At the same time bond yields pushed higher (2.2%) capping the gains in gold. Last week gold lost more than 3% as optimism over the Russia-Ukraine peace talks and a US interest rate hike dented demand for the metal.  Atlanta Fed President Raphael Bostic said on Monday he has penciled in a total of six interest rate hikes this year and two for 2023, fewer than most of his colleagues, on worries about the effects of Russia’s invasion on the U.S. economy. “Gold now looks to have seen its bullish surge fade for the time being,” Rupert Rowling, market analyst at Kinesis Money. Gold is seeing pressure from the Russia-Ukraine talks, which are slowing the rush to safe-havens, and as interest rate hikes by the Federal Reserve and the Bank of England confirm the hawkish trajectory central banks globally are adopting to tackle inflation.”

Zaner (Chicago) – “A lack of progress towards peace in Ukraine leave the possibility of further escalation, which could spark a resumption of flight to quality buying in the metals. Fed tightening should be negative for the metals, but the ongoing war counters that. Despite talk of negations, many are arguing that the Russia/Ukraine war could be head towards a stalemate. Ukraine holding its ground militarily, but Russia is mercilessly shelling cities. If the EU comes through with restrictions on Russian crude oil imports, we could expect another move higher in crude oil and possibly more buying in gold and silver. Friday’s Commitments of Traders report showed managed money traders were net sellers of 28,193 contracts of gold for the week ending March 15, reducing their net long to 147,501. Noncommercial & non-reportable traders were net sellers of 20,338, reducing their net long to 332,445. In silver, managed money traders were net sellers of 781, reducing their net long to 48,467. Noncommercial & non-reportable traders were net sellers of 2,896, reducing their net long to 69,486. ETF gold holdings increased 317,109 ounces on Friday to 104.4 million, for the seventh straight day of increases. They are up 6.6% this year. Silver holdings increased 2.09 million ounces to 897.7 million, up 1.3% year to date. The buying trend is supportive. Spot silver’s 50-day moving average crossed the 200-day on Friday, which is a bullish technical indicator, known as the “golden cross.”

News that Shenzhen, China will lift several COVID restrictions offers support to the PGMs, as a recovery of computer chip production brings a sigh of relief to automobile manufacturers and supports auto catalyst demand. The Ukraine war had spiked palladium prices because Russia is a big exporter of that metal, but then the Covid shutdowns in Shanghai and Shenzhen threatened demand, so the Shenzhen news should support palladium if other cities can avoid shutdowns. June palladium has seen wild action over the past month, and the market has already corrected more than 50% of its rally from the December low to the March 7 high. ETF palladium holdings increased 1,271 ounces on Friday to 545,300, up 1.4% year to date. The buying trend is supportive. Friday’s Commitments of Traders report showed managed money traders were net sellers of 401 contracts of palladium, reducing their net long to 494 contracts. Non-commercial & non-reportable traders were net sellers of 783, which took them from a net long position to a net short 214. These positions are basically “flat.” April platinum has followed a similar trajectory to palladium, as it too is sitting at roughly the half-way point of the December-March rally. Managed money traders were net sellers of 10,597 contracts of platinum for the week ending March 15, reducing their net long to 15,479. Noncommercial & non-reportable traders were net sellers of 9,710, reducing their net long to 27,733. The selling trend was short-term negative. Resistance for June palladium comes in at $2,735.90, with support at $2,310. Resistance for April platinum comes in at $1,063.60, with support at $981.20.”

On Tuesday morning gold moved lower on the open reacting to Chief Powell’s hawkish comments yesterday regarding coming interest rate hikes. Jerome went out of his way to promise a swift response to rising US inflation numbers suggesting the FOMC had the tools to control inflation and will use them as necessary. I think today’s lower prices are also helped by typical paper traders who know how to trade a choppy market – buying the dips and selling the rallies.

While gold’s technical picture is still in the green, its recent 30-day chart looks like there is trouble brewing in River City. A month ago, gold was trading firmly at $1900.00 when the Ukraine war pushed prices as high as $2060.00 before peace talks began to unwind these gains. This market flattened out in a trading range between $1920.00 and $1940.00 supported by stalled peace talks and threatened by rising interest rates.

Today paper traders are testing support in place since February at $1900.00. The good news is that we saw mild bargain hunting at $1910.00, The bad news being there is little market buzz.

For now, gold is wandering. A $1900.00 breakdown would suggest the next stop is $1850.00. My guess is that bargain hunting is just beginning and will refocus the bulls. In the meantime, analysts will focus on whether the Fed can orchestrate a “soft landing” for our economy. This task is risky and difficult even for the powerful FOMC took kit as world debt soars, Putin decouples Russia from western influence and NATO is put to the test. The notion that the dollar will be replaced as a world currency is fiction but even a small shift in its hegemony will support gold and silver bullion in the coming decades.

On the day gold closed down $7.90 at $1920.70 and silver closed down $0.39 at $24.89.

Zaner (Chicago) – “Gold and silver held up surprisingly well overnight in the face of sharply higher Treasury yields and a stronger dollar, which came in the wake of yesterday’s comments by Fed Chair Powell that the Fed would turn more aggressive on rate hikes if necessary. The conflict in Ukraine continues to provide support to the metals. There have been hints of movement towards an agreement between the two sides, but no progress has been announced. Ukraine seems more resolved than ever as Russia accelerates their bombing of civilian targets. Lacking a cease fire, events in Ukraine have the potential to drive more waves of flight to quality buying in gold and silver. However, the emergence of some sort of agreement could bring sellers into the metals, especially with the threat of more robust action by the Fed. ETF gold holdings increased 376,640 ounces on Monday to 104.7 million, for the eighth straight day of increases. They are up 7% this year. Silver holdings were increased by 367,800 ounces to 898.1 million, up 1.4% year to date. The buying trend is supportive.

Platinum and palladium were mixed overnight after closing higher on Monday. Reports that Shenzhen, China would relax some of its Covid restrictions were supportive, as a recovery of computer chip production would bring a sigh of relief to automobile manufacturers and support auto catalyst demand. Palladium and platinum sold off early last week after the China Covid shutdowns were announced. Both markets have traded in huge ranges over the past couple of weeks as they corrected their rallies off the Ukraine war. Fed Chair Powell’s comments seemed to have only a minor effect, as the market were confined to yesterday’s ranges overnight. June palladium is currently trading around the 50% retracement of the December March rally, and it seems like it could be heading towards a period of consolidation. Look for support at $2,435.70 and $2,369.70, with resistance at $2,369.00 and $2,735.90. Look for support in April platinum at $1,023.20 and $1,015.20, with resistance at $1,052.00 and $1,063.60.

Gold and silver are caught between support off flight to quality and pressure if higher rates send investors to interest-bearing instruments. If the selloff in Bonds and Notes accelerates, gold and silver could see steeper declines. Look for resistance in April gold at $1,951.00 and $1,965.30, with support at $1,895.20 and $1,879.50. Resistance for May silver comes in at $25.75 and $26.02, with support at $24.55 and $24.25.”

On Wednesday gold pushed higher as the Balkan conflict steadied safe haven demand, inflation worries grow, crude oil rises ($115.00) and world’s largest gold-backed ETF holdings hit their highest level since March of 2021 (Reuters). Further gains in gold today were likely capped because of a strong Dollar Index. And warnings from Mester (Cleveland Fed) that the FOMC must do more about inflation – half point hikes in interest rates with a reduction in the balance sheet are in order. The idea of an orchestrated “soft” economic landing is being questioned by the Wall Street Journal. This will carry weight with traders looking to hedge financial risk coming out of the pandemic. Today’s aftermarket in gold was relatively strong. Up $10.00 from the close and challenging overhead resistance ($1950.00). Considering the growing call for larger interest rate hikes from the Federal Reserve our shiny friend remains surprisingly resilient.

On the day gold closed up $15.90 at $1936.60 and silver closed up $0.28 at $25.17.

Anna Golubova (Kitco) – Gold price to end the year at $2,200 as stagflation fears take hold, says UOB – “When it comes to the gold price action, stagflation fears outweigh the expectations of a more aggressive Federal Reserve, said Singapore’s United Overseas Bank (UOB). The bank’s latest outlook on the precious metal also comes with new price projections for the year. The key drivers for gold will continue to be inflation fears, slower economic growth, and increased demand for safe-havens. “This mounting stagflation fear, coupled with strong safe haven in-flows, have now taken over as the dominant drivers for gold price, muting the negative impact from the anticipated rate hikes from the U.S. Federal Reserve,” said UOB head of markets strategy Heng Koon How. Two weeks ago, gold made a run for record highs, testing the $2,070 an ounce area. The move came after the U.S. announced additional sanctions against Russia, including an oil import ban.

“Amidst the ongoing rally in energy and commodities prices since the onset of Russia’s invasion of Ukraine, there is a mounting stagflation fear amongst global investors,” Heng said. Investors are also more inclined to allocate more towards gold. Increased demand for gold has been in the form of both ETFs and physical, the report noted. “There are renewed in-flows to gold ETFs. Purchases of gold jewelry from individual investors will likely intensify alongside global central bank diversification of their reserves into gold,” Heng wrote. “Prior to Russia’s invasion of Ukraine, gold was trading at about $1,900. In line with this latest round of strength in gold price, there was a clear return of in-flows to gold ETFs. This renewed in-flows to gold ETFs is likely the return of safe-haven buying into gold.” There will also be more demand from central banks, the report added. “Various central banks, particularly in the Emerging Market space, continue to diversify their reserve holdings into gold. It is likely that this onset renewed geopolitical risk due to the Russia-Ukraine conflict will reinforce this diversification trend.”

Inflation will stay at 6% to 9% until 2024, Fed’s rate hikes won’t stop that now – Steve Hanke

The UOB’s updated price forecast sees gold trading at $2,100 an ounce in Q2, $2,150 an ounce in Q3, and $2,200 an ounce in Q4. This is an upward revision to the previous year-end price target of between $1,900-$2,000. The UOB added that it was “reluctant” to raise its gold outlook in February because of the Fed’s upcoming tightening cycle. “Back then, we left our forecast at neutral … That view is now outdated,” said Heng. “The ongoing rise in energy and commodities prices will be keenly felt in economies across the world in the months ahead as inflation rise further and growth slows down concurrently … There is now an increasing fear of stagflation by global investors and safe-haven inflows to gold now take over as a key dominant driver.”

Zaner (Chicago) – “Gold and silver were moderately higher overnight, but they were confined to yesterday’s range. The war in Ukraine provides flight to quality support to the precious metals, but a hawkish turn in Fed commentary has been negative. Fed President Powell recently indicated that the next rate hike could be 0.5% versus 0.25% previously announced, and the Fed’s Bullard said on Tuesday that the Fed needs to move aggressively on rate increases. Even “dovish” Fed President Mary Daly is favoring robust action. The statements have sparked a sharp increase in Treasury Bond and Note yields, which makes it less attractive to hold non-interest-bearing instruments like metals. The other factor is the war in Ukraine, and despite references to ongoing negotiations between the combatants, no cease-fire agreement has been announced. In the meantime, Ukraine remains steadfast, Russia steps up its bombing campaign, the Kremlin issues more bellicose statements, and the US warns of possible cyberattacks. The situation there is fluid enough that another wave of flight to quality buying is possible. Gold continues to attract long term investment; ETF holdings increased 303,298 ounces to 105.0 million in the last trading session, up 7.3% so far this year and above year ago levels. Unfortunately for silver bulls, ETF holdings slipped 371,131 to 897.7 million, bringing their year-to-date increase to 1.3%. That combined with a reversal day on the charts could send silver lower.”

On Thursday gold pushed nicely higher for the second day in a row, ignoring rising US bond yields, increased FOMC hawkish comments, and speculation about US recession. I would discount the recession talk, there is too much money floating around. You can expect Powell to talk tough and deliver but only to the degree necessary to accomplish short term goals. Some are turning a corner in understanding. Taming inflation will likely turn into a longer-term strategy.

I’m in the minority here but believe gold’s strong push above $1950.00 today is driven by safe haven demand created over the sad realization that the Balkan war does not have a shorter-term sane resolution. But these are still early days in this tragedy. Ask yourself if it makes sense to unwind the progress made in worldwide manufacturing since the end of the cold war to isolate Russia? In other words, does anyone want to go back to the old iron curtain days when capital investment for the good of mankind was a political tool? There has to a better solution which requires less time, treasure, and blood. Keep in mind that just 6 months ago gold was trading at $1800.00 with little buzz. Pricing above $1950.00 may only suggest that answers to the war are not easy but something workable may soon develop. Look at it this way, I would be more comfortable with $1950.00 gold if there was not a war. And inflation was the only consideration.

On the day gold closed up $25.00 at $1961.00 and silver closed up $0.73 at $25.90.

Zaner (Chicago) – “Gold and silver moved higher overnight, as sharply higher crude oil prices added to concerns about inflation. The bulls can take some comfort in the fact that prices did not sell off in the face of hawkish comments by the Fed president and various Fed members this week. Treasury rates have jumped, but unlike previous moves, this did not bring a wave of selling to the metals. Now there are concerns that Fed will tighten too aggressively and spark a recession. Add in concerns about a global recession and high prices sparked by the Ukraine war, and we have “stagflation,” which is a classic bullish setup for gold. More sanctions on Russian figures and oligarchs Russia are to be announced on Thursday. ETFs added 361,288 ounces of gold to their holdings in the last trading session, bringing this year’s net purchases to 7.52 million ounces. This was the 10th straight day of increases and is the longest buying streak since January 2021. Ivory Coast gold production reached 41.85 tons in 2021, up 10% from 2020. The meeting today between NATO and EU leaders could keep things volatile today.”

On Friday gold drifted lower overnight and the small dip in early domestic trading was bought by traders supporting gold around the recent highs of $1950.00. This support could be important for traders trying to figure out if the old $1950.00 overhead resistance is turning into new support as gold works its way into another attempt at $2000.00.

Technically this is not a stretch given recent strength but fundamentally it certainly is given the uncertainty of the Balkan war. Any cooling of this conflict would then be coupled with higher FOMC interest rate hikes leading to a cap on bullish enthusiasm. This would encourage the old trading strategy of “buying the dips and selling the rallies”. At the same time, it would encourage more fundamental bullish gold scenarios which makes sense on the longer term.

The steps taken by the Western powers to limit Russia’s ability to sell gold is capitalism at its worst. All it does is further gum up a system under stress and makes it more subject to political arbitrage. It’s like telling the oil producing mid-east not to cheat on prices – gold like oil is always sellable at a small discount in the black market – no questions asked.

On the day gold closed down $7.80 at $1953.80 and silver closed down $0.30 at $25.60.

Platinum closed down $22.70 at $1007.80 and palladium closed down $136.30 at $2390.40.

Zaner (Chicago) – “The war in Ukraine and inflation worries appear to have overcome hawkish Fed commentary this week and driven safe haven buying into gold and silver. Both markets broke out of their recent consolidation zones on Thursday and traded to their highest levels in over a week. News that the US is taking steps to limit Russia’s ability to sell gold was a supportive factor. The US Treasury issued a notice yesterday that gold transactions with Russia are prohibited, and overnight there was a report that the G-7 nations had agreed to crack down on any gold transaction involving Russia’s central bank. Somewhat dovish comments yesterday from the Fed member seemed to walk back some of the hawkish comments from earlier in the week, and this may have traders more comfortable buying gold. Minneapolis Fed President Neel Kashkari said that he is expecting seven rate hikes this year, but he added that we may not need them all if imbalances are sorted. Chicago Fed President Charles Evans said that he is open to a 50-basis point hike but wants to be careful. The Ukrainian president has accused Russia of using phosphorous bombs against civilians, which are particularly cruel weapons. If true, this marks another disturbing escalation and could spark additional buying in gold and silver. ETFs were net buyers of 28,830 ounces of gold in the last trading session, for the 11th straight daily gain, according to the Bloomberg. This is more evidence of strong investor interest.”

My Brothers and Sisters, thank you once again for your business and friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and many now have the booster! We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variant remains dangerous and accounts for most US infections. At the same time trust that God will soon get us back to normal and our traditional business model. Richard Schwary

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Gold Rate Hike – Short Covering – Reality

Gold Rate Hike – Short Covering – Reality

Commentary for Friday, March 18, 2022 (www.golddealer.com) – Gold closed down $13.90 at $1928.20 and silver closed down $0.52 at $25.06. Gold saw another volatile week as safe haven demand cooled when Ukrainian peace talks gained momentum and the FOMC interest rate hike increased the bearish sentiment. But after Wednesday’s ¼ point hike, traders were faced with solid bargain hunting in what had become an oversold market. This created the usual confusion and an immediate aftermarket short covering rally. The paper trade underestimated world tension over the Balkan war and developing inflation. Gold bounced surprisingly higher, and analysts focused on $2000.00. Still follow through was lacking and gold drifted lower but is still nicely supported by the world’s longer term financial problems. Last Friday gold closed at $1982.70 / silver at $26.11 – on the week gold lost $54.50 and silver was down $1.05     

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 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 gold weakened overnight in the Hong Kong and London markets. The loss was reflected in domestic trading which touched $1950.00 before mild bargain hunting appeared. But the trade remained defensive and choppy through the close. The small bounce evaporated in today’s aftermarket, down another $10.00 over news of progress in Ukraine talks. At the same time this is not a black and white story – gold pricing is never that clear cut. The fact that pricing has held up, for now at the first obvious support ($1950.00) is a plus in a still confused market. The next stop would likely be $1900.00 a bit more promising. But any weakness in war talks, safe haven demand or unexpected bargain hunting and we are off again to the races.

Reuters – “Ukraine said it had begun “hard” talks on a ceasefire, immediate withdrawal of troops and security guarantees with Russia, despite the fatal shelling of a residential building in Kyiv. Both sides reported rare progress at the weekend after earlier rounds have primarily focused on ceasefires to get aid to towns and cities under siege by Russian forces and evacuate civilians; those truces have frequently failed. People fleeing what until recently had been the relative safety of western Ukraine joined thousands crossing into eastern Europe after Russia stepped up attacks, prompting fears of an even larger exodus. One of President Vladimir Putin’s closest allies said Russia’s military operation in Ukraine had not all gone as quickly as the Kremlin had wanted, the strongest public acknowledgement yet from Moscow that things were not going to plan. U.S. National Security Adviser Jake Sullivan plans to meet China’s top diplomat Yang Jiechi in Rome today and will stress the economic penalties Beijing will face if it helps Russia in its war in Ukraine, U.S. officials say.”

At the same time the Dollar Index was steady, at least distracting from the bullish sentiment. And while worry over inflation obviously supports the price of gold, the significant drop in the price of crude oil will also diminish gold’s bullish case on the shorter term.

Traders understand the Balkan war was responsible for gold’s dramatic rise over the past month. And paper traders will be eager to book profits if they sense a breakthrough in peace talks.

This weakness may also suggest traders are adjusting their view of gold pricing as the March FOMC meeting is only days away. Some belief a quarter point rise in interest rates is already baked into the cake, but this may lead you down the wrong path. The now solid notion that the Fed will continue this process could further spook this market and solid employment gains might encourage related adjustments to balance sheet reduction. Expecting more volatility is a safe bet.

Reuters also points out that Balkan progress has lifted the stock market, despite a sharp slide in Chinese stock markets amid renewed Covid-19 lockdowns. While there is a risk-on mood across major markets, “I wouldn’t call this (the recent rally) the peak in gold just yet, because this (Ukraine) situation is still uncertain. It’s so fluid,” Julius Baer analyst Carsten Menke said.

On the day gold closed down $23.10 at $1959.60 and silver closed down $0.87 at $25.24.

Zaner (Chicago) – “The gold and silver markets start off under moderate pressure this morning in a risk off commodity session tempered only by initial strength in US equities. Clearly, there will be no compromise short of a complete takeover of the Ukraine. Apparently, the Russian military machine will grind through the capitol city with bombardment likely to leave the city unrecognizable. Therefore, uncertainty and volatility in gold and silver is likely to mirror the action seen last week which posted a gold range of $118. Countervailing flight to quality bullishness from the war will be fear of a surging US dollar and a US hike in interest rates later this week. In fact, the dollar index looks to return to parity (100.00) and the most recent COT positioning report showed the gold market with the longest net spec and fund long since March 2020. In a positive development gold ETF’s increase their holdings last week by 1.79 million ounces bringing the year-to-date gain up to 5.6%. Gold positioning in the Commitments of Traders for the week ending March 8th showed Managed Money traders are net long 175,694 contracts after net buying 7,591 contracts. Non-Commercial & Non-Reportable traders added 34,864 contracts to their already long position and are now net long 352,783. Similarly, the net spec and fund long in silver also has a net spec and fund long nearing the highest level since March 2020. The Commitments of Traders report for the week ending March 8th showed Silver Managed Money traders added 6,525 contracts to their already long position and are now net long 49,248. Non-Commercial & Non-Reportable traders were net long 72,382 contracts after increasing their already long position by 12,777 contracts. Given the potential for significant volatility, traders should utilize near to expiration April put options against established futures positions. April gold options have 15 days until expiration, and we suggest long futures and the purchase of two $1940 April puts.

We see the palladium market as the physical commodity market most impacted by the war, and therefore this week should produce volatility on the order seen last week (a $720 trading range). Obviously, seeing 40% of the world supply of palladium held inside Russia for an extended period will result in significant supply chain disruptions for the global automotive industry and that could propel palladium prices to surprising levels. However, over the weekend Russia’s Nornickel indicated they have found “alternative routes for the export of their palladium supplies”. In short, June Palladium is unlikely to finish the coming week near $2,800 with the potential for a sub $2500 price and new record highs above $3,425. With the most recent COT positioning report still showing a net spec and fund long of only 569 contracts stop loss selling could be modest. In fact, the June palladium market last week finished $172 below the level where the COT report was measured, and therefore palladium probably enters this week with a net spec and fund short again. Palladium positioning in the Commitments of Traders for the week ending March 8th showed Managed Money traders net bought 642 contracts and are now net long 895 contracts. Non-Commercial & Non-Reportable traders went from a net short to a net long position of 569 contracts after net buying 987 contracts. Critical pivot point pricing is seen at $2,600 and at on the upside at $2,690. Pushed into the market, we favor the bear camp. The platinum market will “follow” the palladium market and could see a distinct positive correlation with equities this week. Unfortunately for the bull camp, the net spec and fund long positioning in platinum leaves it vulnerable, but like palladium, the platinum market finished last week $87 below the level where the COT report was measured! The Commitments of Traders report for the week ending March 8th showed Platinum Managed Money traders are net long 26,076 contracts after net buying 10,913 contracts. Non-Commercial & Non-Reportable traders were net long 37,443 contracts after increasing their already long position by 10,459 contracts. Uptrend channel support in April platinum today was violated at $1070.50 early on, and next downside targeting is even numbers of $1,050.”

The plunge in gold prices Tuesday morning was surprising, and perhaps a bit overdone. I expected this market to be left footed and defensive as the Russian Ukraine war begins to unwind. But such a steep drop in prices suggests a shift in other dynamics as well.

With gold up more than $100.00 this past month because of safe haven demand, profit taking always plays a bigger role as sentiment shifts. The specter of more quarter point interest rate hikes is coming back into focus. The discussion of gold’s deteriorating technical picture is gaining attention. Volatility is moving higher as momentum traders pile on seeking short term profits. And finally, the collapse in oil prices subtracts from the inflationary scenario.

All these notions are overcooked, in my opinion, but so goes the short-term paper trade.

What really matters in this latest liquidation is how soon the world will embrace the longer-term picture of rising inflation and pandemic damage. The technicians will be watching for that first sign of bargain hunting. Today it looks like we caught solid bids around $1910.00 as traders bought the dip and the market settled off its lows. The aftermarket was weak however giving up some of the bounce, perhaps suggesting more settling is in order. I suspect we are oversold barring last minute FOMC surprises. But would wait for technical confirmation of a short-term bottom which will take a few more days. Pray for peace in the Ukraine, this is not a done deal.

On the day gold closed down $31.10 at $1928.50 and silver closed down $0.12 at $25.12.

Zaner (Chicago) – “Both gold and silver are under full-scale liquidation pressure with the trade more concerned about Russian threats to sell gold bars for hard currency and rising US rates than from the uncertainty flowing from the Russian attack of major Ukrainian cities. The sale of Russian gold bars is reportedly limited to Russian citizens and is therefore unlikely to dramatically impact the world bullion market. Some military experts suggest major Ukraine cities will be surrounded and cut off to force a surrender without Street-by-street fighting. Given the negative commodity vibe and spillover weakness from plummeting oil prices, today’s US PPI report is likely to have little if any impact on gold and silver prices. Apparently, the trade is discounting strong Chinese industrial production and retail sales readings overnight, as the markets do not trust the data and or the trade fears omicron will slow the economy in the future. In a minor supportive development, gold ETF holdings increased yesterday bringing the 6-day increase to nearly 2 million ounces. Year to date gains in gold ETF holdings are now 5.7%. In retrospect, the gold and silver markets yesterday came under noted pressure, primarily because of a downtick in flight to quality interest from hopes that talks between Russia and Ukraine would yield “something”. However, it is also possible some longs decided to rush to the sidelines ahead of what is likely to be a US rate hike on Wednesday. Apparently, expectations for a global recession have picked up because of the Ukraine war and because of significant infection counts inside China. Ultimately, the metals trade still thinks the US Federal Reserve can head off inflation before it becomes entrenched. Obviously, a recent surge in US treasury yields is adding to the negative environment for gold and silver and might continue to add renewed pressure in today’s action if US PPI matches expectations of a gain of 0.8%. Going forward, corrective targeting in April gold is now pegged at $1,925 and then down at $1,900. With a massive range down washout in silver yesterday, the bull camp was obviously severely injured, and many buyers have likely receded to the sidelines because of weakness in gold and crude oil. Logical downside targeting in May silver is $24.66 but $24.00 is possible if recession fears gather momentum and or the Fed surprises with a 50-basis point hike tomorrow.”

On Wednesday gold opened under pressure moving from $1926.00 through $1904.00 before turning choppy and settling off lows. While remaining uncertain traders do sense a bit of steadiness coming into focus – but remain defensive. The Dollar Index is modestly lower, which calms the waters, but if the Balkan conflict is really unwinding it would undermine safe haven demand. This is the second day of the FOMC gathering and news of the first ¼ point interest rate hike in the pandemic era was made public by Chief Powell after the market closed. The rhetoric needle was working overtime as Jerome suggested 6 more hikes before year end. I’m not denying the Fed struck an extremely hawkish tone as it begins to tighten, but to what end?

The FOMC did raise inflation expectations. But their forecast of less than 5% by year end is a plus for gold. The Fed did not elaborate on balance sheet reduction – they will revisit the subject at a future meeting – another plus. They also acknowledged economic uncertainty and misery created by the Balkan war which will help support gold pricing and safe haven demand in the coming months. Reuters makes an interesting point “A fundamental change that could take place after the Ukraine crisis ends is higher gold purchases from central banks of countries that are not aligned with the West, as they seek to diversify away from assets like the euro and dollar, said Bernard Dahdah, an analyst at Natixis.”

Before Powell’s comments we saw cooling sentiment in the bearish gold sector – as technicians suspect prices will consolidate at these lower levels, allowing the market to work off its oversold condition. But consider the important and higher aftermarket trade. Either the trade is moving away from Ukraine optimism or what the Chief had to say encouraged the bulls in the middle of a serious bear raid. Gold closed down $20.50 at $1908.00, before Powell but almost miraculously recovered the loss in an active aftermarket as the Dollar Index lost ¾ of a point!

From our trading desk point of view, we saw minor selling as gold topped $2000.00 but it was not significant. We did encounter moderate selling as gold approached recent lows ($1900.00). The rank and file were surprised, but even this latest selloff settled, and bargain hunting emerged. This trend should remain in place as gold and silver consolidate. Even considering this latest turbulence, the shelf life of premium bullion products was a week (which is average).

On the day gold closed down $20.50 at $1908.00 and silver closed down $0.45 at $24.67.

Zaner (Chicago) – “While the gold market has managed to hold above yesterday’s spike low, the charts and classic fundamentals remain in favor of the bear camp. As indicated earlier in the week, it is difficult to ascertain which force is driving gold and silver prices sharply lower with massive energy price declines, hope for Ukraine talks, fears of rising US rates, the potential for Russian gold to flow to the world market from the black market and fears of global slowing from the expanding Covid infection problem in China all adding to the downward bias. Also adding into the selling on the periphery, are discussions predicting stagflation and recession. While it is difficult to discount the prospect of slowing of the global economy, seeing Covid disrupt supply chains in China “again” and given the complications of isolating Russia economically the prospects of inflation remain bright. Despite the debacle in gold and silver prices this week, light speculative buying has been seen from gold and silver ETF funds with gold adding 64,263 ounces yesterday and silver adding 1.5 million ounces. As of yesterday, gold holdings had gained 5.8% on the year while silver ETF holdings have gained 1.5%. In another positive development, China released new policies to boost financial markets and stimulate growth to cushion its beleaguered property market and that probably added to the “risk on” psychology today. The bearishness in the gold market is highlighted by the market’s lack of interest in a South African gold miner’s strike and from news that Indian overall imports and exports jumped sharply as that should help increase retail gold demand in the country. In fact, historically high grain prices are likely to boost incomes in the massive Indian agricultural community and that historically has spurred the purchase of gold. From a technical perspective, one could argue the heart of the bear camp is not into the current slide, as volume and open interest has declined on the last 5 days trade. On the other hand, the gold and silver trade is obviously concerned about the impending US interest rate hike later today, especially if the US central bank threatens even more aggressive hikes soon. We see support at yesterday’s low of $1,908.10 and then at psychological support of $1,900. The range down reversal/rejection in May silver yesterday could signal strong value at $25.00, especially with the market into the low yesterday down $2.75 from the high just 5 days ago! As noted already gold and silver ETF’s have continued to see inflows despite the downside carnage in futures and cash prices and that suggests some traders/investors are buying the price dip. We see a near term trading range in May silver bound by $25.31 and $24.20.”

On Thursday gold’s rebound continued for several reasons. In part it was a reflection of the surprisingly strong aftermarket as Powell announced the first quarter point rise in interest rates and noted there might be 6 more hikes by year end. While this sounds aggressively hawkish today’s bounce may be a relief rally. Using his model rated would be around 2% by Christmas – enough but not too much for Wall Street. And a number acceptable to the bullish gold scenario.

Today’s weaker Dollar Index, lower crude oil prices and short covering helped the rally. There are other undercurrents worth noting. Perhaps the jump in safe haven demand is the result of increased worry about a permanent fracture in world politics over the war. Some sort of redistribution of financial hegemony between sovereign powers tired of Western domination. Even a slight tilt in this dynamic may encourage a world which only considers wealth which is not subject to government intrusion. Reuters notes “Holdings of the world’s largest gold-backed ETF, SPDR Gold Trust, have risen to the highest since March 2021 at 1,070.53 tonnes.”

Perhaps gold is closing in on something closer to its true value and is finally paying serious attention to inflation numbers. Of course, this might be all speculation. But I’m looking for new reasons why gold pushed to all-time highs over the war, dropped like a rock over uncertain peace talks, and reversed bearish sentiment overnight as traders again embrace $2000.00!

I would also suggest it is again time to consider availability of physical product, especially in this changing world view. Manufacturers have been behind the silver bullion demand curve for a long time, which is unusual – normally the free enterprise system will deliver more product as demand increases. WASHINGTON – “The United States Mint today announced it will forego the production and sales of Morgan and Peace Silver Dollars in 2022. This calculated pause is directly related to the global pandemic’s impact upon the availability of silver blanks from the Mint’s suppliers. The suspension will give the Mint time to evaluate the best way to allocate our limited supply of silver to ensure the best customer experience we can.” What do you make of the notion that even the US Mint can’t buy enough silver blanks 3 years now into the pandemic?

On the day gold closed up $34.10 at $1942.10 and silver closed up $0.91 at $25.58.

Zaner (Chicago) – “We suspect that the sharp rally in gold and silver is partly the result of risk on and hope for constructive talks between Ukraine and the Russians as a reduction in global anxiety could head off slowing/stagflation and allow inflation to gather pace. Certainly, the downside extension in the dollar, a wave of short covering interest, and a $3 plus rally in crude oil adds to the bullish equation this morning. In retrospect, gold and silver were clearly under pressure yesterday as result of the US shift to a cycle of higher interest rates, but that headwind for precious metals is at least quantified. In fact, shortly after the Fed news, economist begin to question the “dot plot” of 7 rate hikes, with predictions the economy would not support that many hikes. Even US treasury yields have fallen from recent highs adding to the outside market lift for gold and silver prices. Another supportive development this week is a pattern of gold ETF inflows with investors yesterday adding 354,730 ounces bringing the year to date gain up to 6.1%. Unfortunately for the bull camp in silver ETF holdings yesterday declined by 2.6 million ounces but remain 1.2% higher year-to-date. It should be noted that year-to-date silver ETFs have seen net purchases of 10.8 million ounces. In another positive demand development, Swiss gold exports for February reportedly increased by 4.6%, with most of the increase flowing to India, the world’s second-largest consumer. A rough estimate of a full extraction of war premium in gold produces a target of $1,882, while a rough estimate on the full extraction of flight to quality/war premium in silver, is pegged down at $23.85. In the end, gold and silver did not fully extract our estimated war premium and that is justified since the war rages on, and Putin appears to have become unhinged. From a technical perspective, the gold market likely remains vulnerable a resumption of selling ahead, with the net spec and fund long position in the last report above 352,000 contracts. On the other hand, since the positioning report was calculated, April gold prices have declined almost $150! From another technical perspective, seeing gold soundly reject a probe below $1,900 earlier in the week creates a potential value zone! However, we are highly suspicious of the gold market’s ability to climb above and sustain above $1950 and for May silver to regain and sustain above $26.00.”

On Friday gold turned choppy on both sides of $1935.00 giving up some of Thursday rather large jump in prices as the Dollar Index surged (98.50). I think the improving technical picture and of $2000.00 gold is premature given the radical trading ranges since early March. It is more probably that we are seeing transition into a pricing trough between $1900.00 and $1950.00. Which will be supported by growing financial uncertainty created by the Balkan war and rising inflation numbers worldwide. On the shorter term this will likely create solid bargain hunting on price dips and expected selling on rallies. The paper trade must now readjust its expectations in a rising interest rate world. Which suggests that volatility may become a permanent part of daily trade. But at the same time, I suspect everyone is too optimistic about the problem of inflation. The world will slowly come to the realization that it needs the kind of anchor or financial insurance only gold bullion can provide. On the shorter-term higher gold prices will depend on a combination of safe haven demand and dollar strength. In the meantime, there are dark reasons central banks continue buying physical gold in this uncertain world.

On the day gold closed down $13.90 at $1928.20 and silver closed down $0.52 at $25.06.

Platinum closed down $4.60 at $1035.20 and palladium closed up $1.00 at $2489.10.

Zaner (Chicago) – “Despite a significant bounce off this week’s lows, the gold market appears to be poised to post a big weekly decline. Fortunately for the bull camp, gold ETF holdings yesterday increased for a 6th straight session, with the addition of 167,463 ounces bringing this year’s net purchases up to 6.1 million ounces and a year-to-date gain of 6.3%! Unfortunately for the bull camp in silver, ETF holdings declined by 1.2 million ounces leaving this year’s net purchases at 9.5 million ounces. In retrospect, the precious metal markets have attempted to digest the beginning of what is becoming a global interest rate hike cycle and given the long list of central banks hiking rates over the past 30 days it appears the higher rate writing on the wall is apparent. Looking back over the last year, precious metals have tended to discount the potential for inflation because of views that the Fed could ultimately control inflation early on. However, some traders think the Fed’s gradual course of action allows for inflation to build in the near term. If precious metals were the only markets rallying sharply yesterday, we would not be as convinced the rallies were inflationary based. However, the bull camp should be further cheered by the sharp slide in the dollar this week and by the stock market’s ability to remain positive despite the Fed pivot. In other words, global growth looks to continue, commodities look to rise and in total, the Fed did not feel compelled to hike rates more than 25-basis points. On the other hand, some traders yesterday were reportedly buying into gold and silver and oil off expectations that the Russians would leave the world on an edge regarding their intentions through the weekend. Unfortunately for the bull camp, the 36-hour recovery in gold of $55 was forged on extremely low trading volume which could indicate a lack sustainable and broad buying interest. Similarly, the silver rally of $1.35 over two days was forged on the lowest trading volume since the beginning of February which could also indicate a lack of breadth in the bull camp.

Apparently, the palladium traders were taking nothing for granted as minimally negative dialogue from the Russian President (Putin indicated his label of war criminal from major world leaders is “unforgivable”) rekindled concerns that palladium supply would remain severely restrained well into the future. However, as in other markets, traders have suggested recent volatility has knocked liquidity out of the markets which in turn will allow for even more volatility. However, the bull case was given added credence yesterday by comments from Toyota suggesting that palladium prices are likely to continue to rise in the long term, but that news is partially countervailed by suggestions from Toyota that they have already diversified sourcing to cushion the company against shortages. The Toyota executive indicated their risk of procurement problems was low in “the short-term” but went on to suggest there will be procurement problems if the sanction situation last into the 2nd half of this year. In a sign of sagging investment interest palladium ETF holdings yesterday declined by 8,916 ounces for a single day decline of 1.6% and in turn posting the 6th straight outflows from. In an even bigger sign of sagging investment, platinum ETFs reduced their holdings yesterday by a very large 14,540 ounces and those holdings are now 3.5% lower on the year. We see critical pivot point support today at $2,500 in June Palladium and a key pivot point up at $2,639. Certainly, the platinum market benefited from significant gains in other precious metals and energy markets yesterday. On the other hand, the market probably saw a significant amount of technical short covering from the massive $216 dive in just 5-days. However, the net spec and fund long in platinum will become overbought easily given the most recent net spec and fund long of 37,443 contracts. A key pivot point today is $1,050 and the 100-day moving average which sits right under the market at $1013.80.”

My Brothers and Sisters, thank you once again for your business and friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and many now have the booster! We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variant remains dangerous and accounts for most US infections. At the same time trust that God will soon get us back to normal living and the traditional business model. Richard Schwary

Risk Disclosure – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisors. The precious metal and rare coin markets are random and highly volatile so they may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

 

 

                    

 

Posted on

Gold – Churning for Support

Gold – Churning for Support

Commentary for Friday, March 11, 2022 (www.golddealer.com) – Gold closed down $15.40 at $1982.70 and silver closed down $0.09 at $26.11. Gold pushed lower on the open today, likely reacting to a combination of technical selling, Putin’s suggestion that peace talks are making progress and trader certainty that a quarter point rate hike will happen next week. The FOMC favors several quarter point hikes this year to combat rising inflation. And will make decisions based on employment numbers meeting by meeting. So, they have options, but their intention is clear. Today’s dip also suggests that traders are adjusting the price of gold to the coming higher interest rates. The optimistic upside psychology here may be that as the FOMC proceeds there will be no surprises and less volatility. Interest rates still take a back seat to the Balkan war which will dictate the price of gold and the general direction of equities. Finally remember the US press and Europe have always been myopic when it comes to Russia. Putin may believe that isolation from Western influence is what Russia needs as the world ponders the emergence of a new Iron Curtain. Last Friday gold closed at $1965.10 / silver at $25.78 – on the week gold was higher by $17.60 and silver was higher by $0.33. Surprisingly steady pricing range for both metals consider the huge cross currents likely to stay in place.        

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 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 gold moved above $2000.00 in London overnight trading, but quickly sold off reaching $1960.00 before again moving towards $2000.00. Volatility in gold will likely continue as peace talks move in and out of focus, the third round now being held in Belarus. Traders also continue to sell rallies and buy dips – this works until it doesn’t. Inflation from the US point of view is less important on the short term because Wall Steet believes the FOMC will be able to tap down and hold these rising numbers to an acceptable limit. But I don’t like seeing silver, platinum and palladium close down as gold hovers around $2000.00.

The world however has a much wider inflation audience and safe haven buying will remain in place, helping to underpin gold’s most recent gains. But not necessarily stoke higher prices. The higher the short term gain the more I worry about the possibility of profit taking. Professional traders likely believe gold has more “huff and buff” but their certainty is always thin. Any fresh news that detracts from the bullish scenario can threaten these higher prices. But for now, the momentum players win – but don’t throw caution to the wind in this enthusiasm.

Reuters – “The severity of the war in Ukraine and the uncertainty around its future trajectory have fueled broad-based gold buying from safe-haven seekers, pushing prices towards $2,000 per ounce,” Julius Baer analyst Carsten Menke wrote in a note. “A further escalation would likely lift prices further. The latter would likely have a more lasting impact, as it could push the world economy towards a stagflation scenario, which we see as very bullish for gold.”

Stagflation is not a new idea, but its possibility is not often raised these days. Which of course is the perfect time for it to come crashing through the front door.

It’s true that traders see higher gold prices on an escalation in the Balkan war, and lower gold prices on a de-escalation. Mr. Baer however raises another and perhaps more important specter. Stagflation happens when a government prints currency (which would increase the money supply and create inflation), while raising taxes (which would slow economic growth) – the classic example being the 1970’s run in gold to all-time highs. For now, hold on to your hat, as they used to say in the old days. This is already turning into a wind west shootout.

On the day gold closed up $28.80 at $1993.90 and silver closed down $0.07 at $25.71.

Zaner (Chicago) – “With gap up new high in April gold, strength in physical commodities, ongoing fighting in Ukraine and a 5th straight day of gold ETF inflows (last week gold ETF holdings increased by 1.3 million ounces) and finally many traders expecting only a 25-basis point rate hike from the US, the bull camp has solid control. In fact, gold ETF holdings are now 3.8% higher on the year and we suspect surging prices will bring on even more consistent inflows into gold ETF holdings. Like the energy complex, the bull camp retains control and should continue to retain control with the Ukrainian situation remaining at a boil. Another bullish demand item released overnight came from China where their gold reserves were reported to have increased by 6.4% on a month over month basis which in turn brings the year-over-year gain to 9.6%. To start the week, the gold market appears to be capable of rallying in the face of a surging US dollar, calls for a 50-basis point rate hike in the US later this month and from the threat of Russian gold sales on the world market. However, for Russia to sell significant quantities of gold will be very problematic as buyers and clearinghouses are unlikely to accept the supply. On the other hand, Russia did offer significant discounts to global oil buyers and some likely took advantage of the opportunity. Therefore, Russia will have to offer steep discounts to overcome those looking to contribute to the economic isolation of the country. Also like the petroleum complex, the gold market retains significant speculative buying fuel with the net long adjusted for the gains after the report was measured well under the high of the past year. The March 1st Commitments of Traders report showed Gold Managed Money traders were net long 168,103 contracts after increasing their already long position by 7,121 contracts. Non-Commercial & Non-Reportable traders were net long 317,919 contracts after increasing their already long position by 10,679 contracts. From a technical perspective, seeing April gold rally above $2,000 puts the next upside target at $2,010.10. The all-time high in gold of $2069 is within reach for this week. With May silver breaking out to the highest levels since August of last year, the silver market appears to be tightening its correlation with gold and palladium. Furthermore, the net spec and fund long has remained small relative to recent history. The Commitments of Traders report for the week ending March 1st showed Silver Managed Money traders added 16,633 contracts to their already long position and are now net long 42,723. Non-Commercial & Non-Reportable traders were net long 59,605 contracts after increasing their already long position by 13,624 contracts. Near term upside targeting in May silver is $26.40 and then again up at $26.69.

The palladium market retains the “most bullish” fundamental set up of the precious metal markets, with lost Russian supply nearly impossible to quantify its impact on prices. In fact, palladium ETFs last Friday added 7,163 ounces, they increased their holdings on the week by 33,773 ounces and the holdings are now 5.6% higher year-to-date. According to UBS the airspace closure has disrupted the flow of physical palladium with Russia accounting for 40% of all global mined palladium supply and that is certainly justification for new all-time highs. Certainly, the market is short-term overbought, but is not overbought from intermediate and longer-term perspectives. In fact, the palladium market retained a net spec and fund short of only 696 contracts, prior to the rally of $450 after the COT report. The Commitments of Traders report for the week ending March 1st showed Palladium Managed Money traders went from a net short to a net long position of 253 contracts after net buying 266 contracts. Non-Commercial & Non-Reportable traders reduced their net short position by 696 contracts to a net short 418 contracts. Near term upside targeting from the weekly charts is difficult to ascertain given fresh record prices this morning. The rally in palladium prices has become so significant that the platinum market is now being “pulled up” by palladium. While the substitution of platinum for palladium has been anticipated for the last 2 years, we suspect speculative futures buying will have a greater near-term impact than increased substitution demand. Furthermore, the net spec and fund long in platinum also remain small relative to recent history. Platinum positioning in the Commitments of Traders for the week ending March 1st showed Managed Money traders were net long 15,163 contracts after decreasing their long position by 434 contracts. Non-Commercial & Non-Reportable traders were net long 26,984 contracts after increasing their already long position by 622 contracts. The next upside target in April platinum is $1,175 with little in the way of support until $1,124.40.”

On Tuesday morning gold surged to all-time highs, surpassing the 2020 but settled somewhat before the close. As world concerns continue to mount over the escalating war in the Balkans, soaring oil prices and rising inflation numbers. Britain now claims it will support Polish air power but warns Poland it could face Russian reprisals. President Joe announces a ban on Russian energy exports, and the number of fleeing refugees doubles (2 million) with experts suggesting this number might eventually be 5 times that number.

There was however interesting news late in the day. Which could develop into the path both countries are looking for – a way out of this disaster before it’s too late. This fledgling idea might also take some of the steam out of the gold market. Afterhours gold trading was up another $10.00 today and ignored this new information but the possibility is at least encouraging. The Business Standard – “Ukraine President Volodymyr Zelenskyy has said he has “cooled down regarding the question of a NATO membership for his country”, which was a key reason why Russia went to war with its neighbor, the US’ ABC News reported on Tuesday. The leader of the war-torn nation was also reported to have gone a step ahead in mending fences with Vladimir Putin, stating that he was open to discussing the status of the two breakaway pro-Russian domains of Donetsk and Lugansk which Moscow insists are independent republics.”

On the day gold closed up $46.20 at $2040.10 and silver closed up $1.18 at $26.89.

Reuters – “The combination of roaring energy prices, grain prices, base metal prices is culminated in dramatic inflationary pressures that continue to be the major underlying support behind gold moves higher,” said David Meger, director of metals trading at High Ridge Futures. “In addition, we’re seeing significant amount of safe-haven bids in the gold market as equity markets have come under pressure due to major concerns on the geopolitical front.”

Zaner (Chicago) – “While many markets this morning are consolidating from recent excessive volatility the gold and silver markets continue to thrust higher on the charts. In fact, overnight April gold breached the $2025 level putting the contract back up to the highest level since August of last year. While not a significant bullish development, gold ETFs saw a 6th straight day of inflows with holdings year-to date now up by 4.3%. Even though silver ETF holdings contracted yesterday, they remain 2% higher on the year. According to overnight press reports the rally has become partly the result of “inflation”, but we suspect that has only been a recent phenomenon. Goldman Sachs has raised their gold targeting by 18% to $2,300 and that comes on top of a 5% rally from the beginning of this month! Gains in the LME nickel contract spiked 250% overnight and the exchange had to suspend trading as many brokers were left insolvent with a major Chinese bank involved in the incident. Therefore, inflationary psychology is surfacing from several unrelated fronts and that combines with the ongoing flight to quality influence for a dual bullish condition. In a very minor but supportive development Sibanye Stillwater LTD has indicated its biggest union (at its gold mines) gave notice of strike action starting Wednesday following failed wage discussions. Another impediment to obtaining supply from Russia was seen from the London Bullion Market Association which is suspended all Russian refineries from their preferred delivery list. That ban effectively reduces Russia’s ability to put gold bars on the world market. Altogether, the London Bullion Market Association banned 6 different refineries in Russia! With Russia plowing back significant foreign currency and gold reserves, it is critical to block their ability to sneak gold onto the world market. Obviously, new contract highs in the US dollar are holding back gold, but many analysts expect gold to forge new all-time highs despite headwinds from the Dollar. Given inflation and flight to quality influences some analysts expect gold to shoot significantly through all-time highs! From a technical perspective, the April gold contract soared above the $2,000 level and managed that action on healthy gains in open interest and trading volume yesterday. While May silver also managed an upside breakout and the highest price since last July, the market initially failed to hold $26.00 but this morning prices have launched through that level as if the trade is poised to fill an old gap left between $26.92 and $27.18. Adding into the upward fundamental tilt is news that analysts had expected Russia to become the 4th largest silver producer this year, with 2022 output projected to rise toward 45 million ounces! Therefore, that additional and important supply is unlikely to come to the world market.”

On Wednesday gold dropped sharply as paper speculators sold the rally which pushed gold prices higher by $200.00 this past month. I don’t think anyone believes this rather dramatic dip in prices represents a fundamental change in the longer-term bullish gold perspective. It is rather a combination of profit taking and less safe haven interest. In an otherwise overheated market, which has been stressed by the Russian Ukrainian war and rising inflation fears worldwide. To put this in perspective, consider today’s dollar (also an important safe have asset). It too moved dramatically lower. In my mind, both the dollar and gold moving lower as the DOW rebounds suggests a typical “risk on day” in which some steam is coming off the hard asset market, also helped by a 12% drop in the price of crude oil.

This dip was large enough to get everyone’s attention. And supports the rising trader suspicion that dramatically higher commodity prices bring with them increased and sudden volatility.

Especially when you have world governments playing with crude oil distribution trying to “fix” this higher price syndrome. And imposing Russian financial sanctions pell-mell without forethought as to the cost of this diplomatic reckoning. Or the likely blowback from Russia and her allies which only add to the all the troubles created during the pandemic.

This nationalism and world unity sounds good to the globalist but there is a hidden price to be paid by the consumer and the innocent. As Reuters warns of a radiation risk at Chernobyl and scant progress evacuating Ukrainian civilians despite the Russian ceasefire.

The gold market’s real strength can be measured, as usual by how soon traders begin bargain hunting. It looks like there was some interest today at $1980.00 but my guess is that the informed will wait to see what new mischief might present itself next week.

Reuters – “There was a big risk premium added to gold and some of it is unwinding now,” said Bart Melek, head of commodity strategies at TD Securities. “Do we think this will continue? Probably. We got a little carried away with gold, but we’re at a much firmer footing than before this conflict, mainly because I still think the Federal Reserve and other central banks are going to be very cautious about how they reduce liquidity. At the same time equities rebounded as oil prices eased and investors snapped up stocks hammered by concerns over Western sanctions on Russia following its invasion of Ukraine.”

On the day gold closed down $54.20 at $1985.90 and silver closed down $1.13 at $25.76.

Zaner (Chicago) – “A noted correction in gold and silver prices this morning is not surprising considering yesterday’s very significant gains. However, there is a slight letdown in flight to quality interest following reports that Russia will allow humanitarian corridors for refugees to leave the Ukraine. Some buyers of gold think Russia will see a financial collapse as official and unofficial sanctions pileup, but news that China will continue to buy energies from Russia certainly pushes back any collapse of the Russian economy. According to one Russian gold mining company they are being supported by the Russian central bank decision to resume gold purchases in the domestic market. Seeing the Russian central bank buy domestic gold production without an international outlet to sell the gold amounts to direct support of the mining industry at the expense of the national treasury. Cushioning the gold market today is weakness in the dollar which this morning reached nearly 100 points below the Monday high! With gold ETF holdings rising for 7th straight session yesterday and those holdings up 5% year-to-date, investors are beginning to recognize the potential in gold and silver. In fact, investors might be cheered by extremely hot Chinese February CPI readings which met expectations but are still a sign of hot inflation at +0.9%. A further sign of Chinese inflation was seen from PPI which rose by 8.8% versus an expectation of 8.6%. Like several other markets, the gold and silver markets saw significant range up action and then fell back significantly from those highs in a fashion that speaks of a temporary top. Obviously, gold, and silver prices have become linked to the ebb and flow of crude oil prices, and part of the setback from the highs yesterday in gold coincided with the crude oil $10.00 setback from the highs. Gold should derive support going forward from Congressional efforts to make it more difficult for Russia to access its gold reserves. Certainly, the bull camp could see flight to quality buying return, but in the near term, we see the ebb and flow of inflation as the primary driving force for precious metal prices. Fortunately for the bull camp, the aggressive range up action this week has been forged on strong volume and rising open interest! Furthermore, the silver market has also forged its gains on increased trading volume and higher open interest. Some technical analysts are suggesting that the chart in silver has become more powerful than the chart in gold. With the precious metals trade seemingly shifting from a flight to quality focus to an inflationary focus, the daily ETF inflow could become more important. While the trend is up, the easy money has probably been made in the long side of gold and silver for now.”

On Thursday the price of gold saw some overnight bounce in the Hong Kong and London markets – a bit of firmness which carried into the domestic open. Good enough to confirm that the Russian Ukraine peace talks are not going anywhere – thus the continued support for gold. And initially not good enough to create much buzz over yesterday’s big loss (-$54.20), as gold ran into overheard resistance ($2010.00). But this market gathered itself later in the day as traders both covered and bought weakness. Stocks were also weaker with talk that yesterday’s bounce was overdone. Make no mistake about this – failure to resolve the Balkan conflict will eventually create more drag in equities here and in Europe. Worth noting – the Dollar Index developed an upward bias this morning (98.00 +). Yesterday’s surprising weakness did not develop further – helping to cap today’s gain in gold. Crude oil has turned steady ($110.00) after yesterday’s loss, continuing to support the inflationary scenario. And perhaps further undermine Wall Street optimism. So, you have the typical mixed bag today, with gold still left footed, but not falling out of bed. The close was mildly higher – disappointing when you consider the Consumer Price Index (inflation) came in hot – almost 8% year on year. But all things considered the bulls could be doing worse. I’m very satisfied considering this was a rough week and the first rate hike is right around the corner. Technically gold retains the short-term advantage. But I don’t see buzz returning until the overhead resistance ($2000.00) turns into longer term support.

On the day gold closed up $12.20 at $1998.10 and silver closed up $0.44 at $26.20.

Neils Christensen (Kitco) – Stagflation risks grow: ECB lowers growth and raises inflation forecasts as Russia wages war on Ukraine – Gold prices are holding above $2,000 an ounce, but the price action remains volatile as the European Central Bank acknowledged the growing risk of stagflation as it significantly lowers its growth forecasts and increases its inflation outlook.

Christine Lagarde, President of the ECB, said that Russia’s war with Ukraine is having a material impact on Europe’s economy as energy and commodity prices continue to rise. “The risks to the economic outlook have increased substantially with the Russian invasion of Ukraine and are tilted to the downside. While risks relating to the pandemic have declined, the war in Ukraine may have a stronger effect on economic sentiment and could worsen supply-side constraints again. Persistently high energy costs, together with a loss of confidence, could drag down demand more than expected and constrain consumption and investment,” said Lagarde in her opening remarks. In its latest economic projections, the ECB said that Gross Domestic Product is expected to expand 3.7% in 2022, down from the previous forecast of 4.2% growth. Economic activity is expected to increase 2.8% next year, down from the prior forecast of 2.9%. The economy is expected to grow 1.6% in 2024, unchanged from the previous forecast.

“The prospects for the economy will depend on the course of the Russia-Ukraine war and on the impact of economic and financial sanctions and other measures. At the same time, other headwinds to growth are now waning,” Lagarde said.

Looking at consumer prices, the ECB sees inflation rising 5.1% this year, up significantly from the previous forecast of 3.2%. Next year, inflation is expected to rise 2.1%, up from December’s projection of 1.8%. Consumer prices are expected to rise 1.9% in 2024, up from the previous estimate of 1.8%. Lagarde noted that inflation is currently being driven by rising energy prices, which jumped 3.17% in February. Due to seasonal factors and rising fertilizer prices, she added that food prices are also increasing. Although inflation is expected to remain elevated, Lagarde said she doesn’t see a paradigm shift in consumer prices. She added that the ECB doesn’t see a wage spiral that would lead to long-term inflation. “Price rises have become more widespread. Most measures of underlying inflation have risen over recent months to levels above two%. However, it is uncertain how persistent the rise in these indicators will be, given the role of temporary pandemic-related factors and the indirect effects of higher energy prices,” she said.

Some economists have noted that the ECB is prioritizing rising inflation over economic growth as it looks to end its monthly bond purchases by the third quarter, highlighted in the ECB monetary policy statement. Lagarde said that the move to end its quantitative easing measure will be data-dependent and if inflation rises in line with expectations. However, she pushed back on the idea that the action is seen as tightening. “We are not talking about tightening,” she said. “We are talking about normalizing. We acknowledge the fact that in the present environment, which is that of high inflation… the support that net asset purchases can give to policy rates is getting close to conclusion.”

Zaner (Chicago) – “With choppy action early today and a higher US dollar the onus is on the bull camp to prove they can hold prices up. While the market has not paid significant attention to physical supply news lately South African gold output in January increased by 7% versus year ago levels and that adds a measure of fundamental pressure to gold prices. In another bearish development gold ETF holdings broke a chain of inflows yesterday with an outflow of 4,376 ounces, but holdings remain 5% higher on the year. Silver on the other hand saw an inflow to ETF holdings of 2.1 million ounces and holdings are now 2.1% higher on the year. Countervailing the bearish South African production news is a strike at a South African Sibanye gold mining operation. In our opinion, the primary force yanking the rug out from under gold and silver yesterday was the historical reversal of oil prices following talk of additional production from OPEC plus members. Also undermining oil and therefore precious metal prices is the growing reality that Russia might not be economically crippled by ever expanding sanctions. There were also rumors that the Ukraine might be open to a compromise which would likely result in them surrendering part of their sovereign territory. However, we doubt the Russian president will settle for a partition of the Ukraine even though he has already captured a main waterway/transportation source and a significant amount of the country’s agricultural land. In the event the dollar turns up without oil prices recovering, that could send April gold down to $1,950. On the other hand, the markets will be presented with US CPI today which is expected to be up 0.8% thereby leaving extremely hot annualized inflation in place. Unfortunately for the bull camp, the looming US FOMC meeting next week is largely expected to produce a rate hike which many feel will temper inflationary pressures. Therefore, it is not a given that a hot US CPI reading today will translate into a bounce in gold or silver. Certainly, crude oil prices well above $110 and US retail gasoline prices at all-time highs keeps the potential for spiraling inflation in place regardless of near-term market gyrations. In the end, gold prices are likely to be generally supported from the war and the avalanche of inflation evidence.”

Gold pushing lower on Friday was not a surprise given the weak response to Thursday’s red ink – so today you are seeing follow through bearish momentum. Bargain hunting was not missing in action, but it was tepid – the bulls lack conviction. The Dollar Index has been moving higher since Wednesday, anticipating next week’s interest rate hike, adding to the gold headwind.

Consider however that while gold faces strong headwinds like rising interest rates and progress towards peace in the Balkans, it is not at all clear just where the world is heading even though the pandemic is improving. Yes, employment is strong, but the Fed will likely use a light hand in adjustments – that now turns into a plus for gold. And veteran traders suggest storm clouds even as peace talks progress. The damage is already done. New and powerful alliances are being formed between Russia and China looking for the common good. Something that may already be suggested in a DOW heading for its fifth straight week of losses. In the beginning the Russian Ukraine conflict was underestimated by the West and its allies. When both sides started shooting it was still just considered trouble in a far-off land. While this may be hard to believe, over the next decade it may be seen as the beginning of a significant shift in world politics. One that does not support the democratic model, but still suggests physical gold ownership is wise.

On the day gold closed down $15.40 at $1982.70 and silver closed down $0.09 at $26.11.

Platinum closed down $6.60 at $1087.80 and palladium closed down $124.10 at $2792.90.

Zaner (Chicago) – “While a significant inflow of ETF investment from small traders can signal the tail end of an investment wave, we think the inflows have only just begun off the inflation story. Obviously, the flight to quality angle has been a force longer than the inflation and investment force in gold and silver and given frequent confirmation of surging inflation and daily fresh reports of Russian attacks focused on civilians, the gold and silver trade look to have many bullish forces working in their favor into the last trading session of the week. In fact, according to Bloomberg, global gold backed ETFs have seen inflows of almost 1.5 million ounces so far this week. However, gold ETF holdings remain relatively low relative to the last 18-months, with gold holdings in September 2020, 85 million ounces compared to just 71.4 million ounces at present. While treasury prices are tracking higher (yields falling) treasury action has been limiting of gold recently and the dollar has forged a 7-day high in the early going today. Today, the inflation story will pause from the scheduled report slate perspective but will resume on Tuesday with US PPI which initial expectations pegged at +0.8% with an annualized rate of +9.1% expected! Even though the gold and silver markets have not tracked classic physical supply news recently, a 7% year-over-year jump in January South African gold production should discourage some would-be buyers. Offsetting the increase in South African gold production is confirmation that Indian 2021 gold imports increased by 27% over 2020 with 1,067 tonnes flowing into the country. Some analysts are suggesting the jump in Indian imports is a one-off result of “pent-up demand”. However, given an avalanche of inflationary signals and high farmgate prices in India it would not be surprising for Indian gold imports to remain strong. In the silver market, prices rejected a lower low yesterday and at times were trading $0.75 above the low of the day which could indicate the market found solid value. In fact, some might suggest value targeting in May silver is at the $26.00 level with uptrend channel support today raised to $25.78.”

My Brothers and Sisters, thank you once again for your business and friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and many now have the booster! We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variant remains dangerous and accounts for most US infections. At the same time trust that God will soon get us back to normal living and the traditional business model. Richard Schwary

Risk Disclosure – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisors. The precious metal and rare coin markets are random and highly volatile so they may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.