Richard, Author at GoldDealer.com

Posted on May 12, 2023May 12, 2023 by Richard

Gold – Interest Rates Cap New Highs

Commentary for Friday, May 12, 2023 (www.golddealer.com) – Today gold closed down $0.20 at $2014.50, and silver closed down $0.27 at $23.99. The price of gold caught a small updraft this morning as worries about US debt default kept bullion’s safe haven demand intact according to Reuters. While this rally sold off ($2020.00) gold clawed its way back to about unchanged on the day, which nicely tells the story of gold prices this entire week. The bulls unsuccessfully challenged the $2020.00/$2030.00 range as the bullish momentum seen in early May ($2050.00) fizzles over the fear of higher interest rates. Last Friday gold closed at $2017.40 / silver at $25.74 – on the week gold was down $2.90 and silver was down $1.75.

Please note that FedEx is no longer asking for delivery signatures. They are scanning IDs. We have complained to FedEx, but they remain resolute. Scanned identification is safer, but if you have a problem with this decision, please make your feelings known to FedEx. Unfortunately, the present delivery time for the USPS alternative is 2-3 weeks.

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 price of gold continued a rather choppy but supportive trading pattern between $2018.00 and $2029.00. The Dollar Index appears rangebound between 101.00 and 101.50 since last Thursday so the gold trade this week may remain “quiet and waiting”. This will require patience because the next “big event” is not scheduled to take place until June 13^th and 14^th. The FOMC will have a meeting associated with a Summary of Economic Projections.

Today’s “bounce” in the price of gold from last Friday’s significant drop was not exactly enthusiastic. Which emphasizes the notion that gold may be settling into a less dramatic trading mode perhaps further encouraged by improving inflation data. The problem with inflation is that it is difficult to come up with a definition which makes everyone happy.

But there is enough evidence to at least question the theory that inflation continues to rise. Data gathering companies (I:US Inflation Rate) claim that inflation has moved from over 8% last year to 4.99% through March of 2023. It is still a big problem at 4.99% but we may be moving in the right direction. And a “cooling” is all the Fed needs to slow down rising inflation rhetoric.

Reuters (Deep Kaushik Vakil) – Gold claws back on softer dollar; US inflation data on radar – “Gold rose on Monday as the dollar eased, with bullion regaining ground after a sharp retreat in the previous session ahead of inflation data that could shed light on the outlook for U.S. interest rates. “Markets are really just discounting the aftermath of last Friday’s payrolls report,” which came on very strong and knocked gold off its highs, said Daniel Ghali, commodity strategist at TD Securities. Prices are about 3% lower from near record levels reached last week, pressured after data showed U.S. job growth accelerated in April, pointing to persistent labor market strength. Still, “the gravitational pull for gold is higher … as we approach an upcoming recession, the market pricing for Fed cuts on the horizon is set to grow and in turn, that should support discretionary traders to deploy their capital in gold,” Ghali added. Markets saw a 91% chance of the Fed holding rates at their current level in June, and a 33% chance of a rate cut in July, according to CME’s FedWatch tool. The dollar index dipped for a second straight session, making bullion more attractive to overseas buyers. Later on Monday, the Fed’s loan officer survey might show whether and how hard banks are tightening up on credit after three U.S. lenders failed over recent weeks. “If the woes among regional banks are thrust back into the spotlight, that could trigger another leg up for this safe-haven asset,” said Han Tan, chief market analyst at Exinity. Along with the U.S. consumer price index (CPI) due on Wednesday, traders are also keeping a tab on developments surrounding the debt ceiling.”

On the day gold closed up $8.90 at $2026.30, and silver closed down $0.10 at $25.64.

Zaner (Chicago) – “While today’s economic report slate is benign, data in subsequent sessions will likely produce significant reactions in gold and silver with China releasing import and export figures tonight and the US releasing key inflation readings later in the week. Overnight China apparently raised its gold holdings by 8.09 tons last month, resulting in October through April gold reserve additions of 120 tons. The overall Chinese gold reserves is pegged at 2,076 tons, but we suggest that number is an unsubstantiated figure likely to be strategically understated by the Chinese central bank. Last week gold ETF holdings increased by 138,847 ounces but those holdings remain down 0.2% on the year. On the other hand, silver ETFs reduced their holdings by 1.2 million ounces last week with year-to-date gains in silver holdings 0.2%. With the big range down failure at the end of last week, the bias in gold is down and to a lesser degree down in silver. Clearly, the strong US nonfarm payroll reading and the downtick in the unemployment rate reduced economic uncertainty interest in gold and at the same time provided a very minimal lift in the US dollar. However, with the June gold contract into the Friday high trading $60 an ounce above the level where the last COT positioning report put the net in spec long at the highest level since last April, the net long in gold is likely approaching the highest levels since the beginning of the pandemic! The Commitments of Traders report for the week ending May 2nd showed Gold Managed Money traders were net long 147,816 contracts after increasing their already long position by 14,642 contracts. Non-Commercial & Non-Reportable traders had 247,048 contracts net long after increasing their already long position by 10,241 contracts. Even the fundamental side of the equation favors more downside action in gold as Indian buyers are showing signs of high price sensitivity, the World Gold Council posted softer 1st quarter demand readings, and the Chinese economy has failed to show positive traction following the removal of activity restrictions. The path of least resistance is down with initial targeting in June gold seen at $1,982 and a breakout below that level seen if the dollar manages to regain 102.00. In our opinion, the dollar lacks bullish buzz as evidenced by the failure to range sharply higher Friday despite patently strong monthly jobs news and because of a slight shift against a Fed “pause” because of the jobs data. As in the gold market, the silver market also saw reversal action from last week’s high but the damage on the charts was not as significant as in gold and in retrospect did not appear to damage the charts. We suspect better economic news from the US will provide support to silver as a physical/industrial commodity and think silver ETF investment patterns will remain positive. However, a measure of back and fill balancing of a large net spec and fund long would not be surprising, especially with July silver into the high Friday trading $0.80 above the level where the last positioning report was measured. Therefore, adjusting for the post report gains the net long in silver is likely the largest in 13 months. The Commitments of Traders report for the week ending May 2nd showed Silver Managed Money traders were net long 27,131 contracts after increasing their already long position by 1,964 contracts. Non-Commercial & Non-Reportable traders net long 47,448 contracts after net buying 4,411 contracts. Initial and perhaps unreliable support is seen at $25.355 with the $25.00 level solid support unless the dollar soars and or gold falls precipitously.”

On Tuesday gold surprised with a mild upward bias, touching lows of $2024.00 on two occasions but climbing, and settling at session highs between $2034.00 and $2037.00. Some insiders consider this pattern simply “treading water” but it helps encourage the bullish gold scenario at a time when positive or negative speculation is jumped on by traders looking for something more tangible in this transition. Anything relating to an impasse over the US debt ceiling will cause gold to yawn. Neither the Democrats nor Republicans will take the steps necessary to balance the American checkbook. I would have more respect for Washington if they simply told the public a balanced budget has always been a myth and stopped this pretense.

Wednesday we will see April’s consumer price index which may move the trading needle. At the same time CNN cites the “The April 2023 Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS)” addressed changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months. Much lending remains unchanged, but some in consumer areas is tightening. Which cuts both ways for the gold trade.

Reuters (Deep Kaushik Vakil) – Gold gains on economic risks with US inflation in focus – “Gold gained on Tuesday as investors sought cover from economic uncertainty while also positioning for the U.S. inflation print for cues on the trajectory of interest rates. Equities markets fell on concerns about China’s domestic demand recovery after weak Chinese trade data, and the impasse over the U.S. debt ceiling. “It’s going to be a risk-off day” as markets await U.S. consumer price index data on Wednesday, said Phillip Streible, chief market strategist at Blue Line Futures, in Chicago. Fed Governor Philip Jefferson said the U.S. economy is slowing in an “orderly fashion” allowing inflation to decline even as growth continues. New York Fed chief John Williams said inflation remains too high, but tighter credit should slow the economy, blunting how far the Fed might need to go. Markets are pricing in an 82% chance of the Fed keeping rates on hold in June and a 33% chance of a cut in July. Commerzbank analyst Carsten Fritsch, however, wrote in a note that there is no scope for the Fed to implement rate cuts this year. Investors were also monitoring developments in the U.S. banking sector after a Fed survey released on Monday showed banks tightened credit standards over the first months of the year. Hotter-than-expected CPI would bolster bets for rate hikes, but much weaker data could cause “a big rush into commodities across the board and further liquidation in the dollar”. While gold is considered a hedge against inflation, rising interest rates dull non-yielding bullion’s appeal.

On the day gold closed up $9.90 at $2036.20, and silver closed up $0.06 at $25.70.

Zaner (Chicago) – “In retrospect, the gold market has held up better than we anticipated following the major reversal action last week. While gold spent nearly the entire Monday trade in positive territory, it forged a much tighter trading range relative to the action last week, perhaps because the trade is looking ahead to the uncertainty of the US CPI report on Wednesday morning. However, a portion of the trade sees the US CPI report as potentially supportive of the idea that consumer inflation will remain elevated. The gold market is likely seeing pressure from disappointing Chinese commodity import data this morning which has fostered a risk off view toward many physical commodities. On the other hand, Chinese exports increased last month which should provide stimulus to that economy going forward. An issue that could provide fresh flight to quality buying in gold today, is a debt ceiling meeting at the White House as we expect the meeting to yield a quick stalemate as the President has made it clear he will not negotiate. The gold market clearly derived a significant amount of buying on the October through early May rally of $400 off the inflation theme and the threat inflation is not slayed yet could result in a June gold rally above $2,100 later this week. In today’s action gold should see minimal residual support from the 85,362-ounce inflow to gold ETF holdings yesterday but holdings year-to-date are nearly flat. While we do not want to be seen as offering conflicting advice, it is possible that a hotter than expected inflation reading Wednesday could in addition to the strong nonfarm payroll reading from last Friday could result in the markets removing the “hope for a pause” by the Fed from the equation thereby creating a series of headwinds for gold, silver, and many physical commodity markets. In other words, a market decision that the Fed will shift back into a rate hike posture could revitalize the dollar and create problems for gold and silver. At least into the Wednesday US CPI report we expect June gold to hold above $2,000 with closer in pivot point support seen at $2007. Unfortunately for the bull camp in silver ETF holdings saw an outflow yesterday of 1.3 million ounces, leaving the year-to-date change in holdings at zero. While the silver market spent a large portion of the Monday trade in negative territory, the market basically held near the Friday close which represented the middle of a very wide $1.02 daily trading range. Silver posted a significant setback and aggressively rejected a large portion of the washout potentially indicating value above $25.41. Despite the divergence in gold and silver prices on Monday we think silver will correlate tighter with gold in the coming 72 hours.”

On Wednesday the price of gold moved higher on the CPI news, but the rally was short lived, and pricing settled on the day in the red, suggesting a mild profit taking round. Which should tell you traders are worried about that “sticky” inflation which remains high and provides the necessary justification for the Fed to continue raising interest rates.

I have moved back on forth on this issue but lately I see the Fed more in the hawkish light – which may eventually place the bulls in a more defensive position.

There are professionals, however, who believe it is time to prepare for the so-called “soft landing”. Which implies falling interest rates and less financial drama, both on Wall Street and in our banking system. If this is the case, it would at least support gold and silver prices.

The basic argument for bullion ownership during this period of adjustment is the notion of “value”. The amount of fiat money sloshing around in the world is gigantic and growing. Which suggests the prices of both gold and silver are cheap in relative terms.

This past month gold has challenged the $2050.00 overheard resistance twice and failed both times. The secure fallback position during this consolidation falls between $1990.00 and $2000.00, so it’s reasonable to assume that this tight range will continue in the short term.

On the day gold closed down $5.70 at $2030.50, and silver closed down $0.24 at $25.46.

Jim Wycoff (Kitco) – “Technically, June gold futures bulls still have the solid overall near-term technical advantage. Prices are in a 2.5-month-old uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at the record high of $2,085.40. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,980.00. First resistance is seen at today’s high of $2,056.00 and then at $2,063.40. First support is seen at this week’s low of $2,022.00 and then at $2,007.00. July silver futures prices were scoring a bearish “outside day” down. The silver bulls have the solid overall near-term technical advantage. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $27.00. The next downside price objective for the bears is closing prices below solid support at $24.00. First resistance is seen at $26.00 and then at the April high of $26.435. Next support is seen at today’s low of $25.455 and then at $25.25.”

On Thursday the price of gold dipped in early trading, falling to $2010.00 as the Dollar Index moved to weekly highs reflecting mildly dovish jobs and inflation data. Traders bought the dip, but the bounce lacked conviction. And recession worries may be coming back into focus.

Gold remains defensive, closing on lows for the day. And the recent downward drift remains in place. Our shiny friend’s pricing range was around $30.00 this morning as this trade turns into the classic “Goldilocks” situation – not too hot and not too cold.

Today modest selling increased across our trading desk, so the public is considering profit taking. But a few very large hitters have reappeared and will buy physical products if gold trends lower. So, sentiment is mixed as usual, which makes sense in these troubled times.

In an important outside event, the Bank of England raised its interest rate to 4.5%, the highest level in 15 years according to The New York Times. This should be noted because at the same time one of their governors said the British economy was stronger than expected. Their economy is similar to ours, suggesting that our Fed will also continue to raise interest rates to fight inflation. This scenario does not favor higher gold prices during this unwinding process.

Reuters (Deep Kaushik Vakil) – Gold stalls as dollar bounce counters economic risks – “Gold eased into a tight range on Thursday as a stronger dollar countered support from weaker-than-expected U.S. economic data, which reinforced bets for a pause in the Federal Reserve’s rate hikes and added to wider economic risks. The number of new U.S. jobless claims jumped last week to the highest level since late 2021, while U.S. producer prices posted the smallest annual increase in April in more than two years. The data wiped out expectations the Fed will raise rates again in June and also fueled bets for rate cuts later on. With inflation still sticky amid slow deterioration in the U.S. economy, “the Fed’s less likely to feel the need to increase rates further,” keeping gold in a sideways to higher trend, said David Meger, director of metals trading at High Ridge Futures, also buoying safe-haven bullion was concerns surrounding the U.S. debt ceiling and weak Chinese data. On Wednesday, data showed the annual increase in U.S. consumer prices slowed to below 5% in April for the first time in two years but remained well above the Fed’s 2% target. While gold jumped after the U.S. inflation report supported the market’s view of a Fed pause, “the fact it fueled further rate cut bets during the second half, currently around 80 bps, may end up being gold’s biggest short-term challenge,” wrote Ole Hansen, head of commodity strategy at Saxo Bank, in a note.”

On the day gold closed down $15.80 at $2014.70, and silver closed down $1.20 at $24.26.

On Friday I would not exactly call the gold trade tired, but it continues to struggle with tough overhead resistance. Without fresh bullish information we may eventually fall back into the $1950.00 / $2000.00 channel which was established in early March of this year.

For now, we are clearly in a short term downtrend which began in early May ($2050.00). But this downtrend is already significant, which suggests an oversold position. Do not be surprised if we see volatility next week so keeping your seat belt fastened is still great advice.

On the day gold closed down $0.20 at $2014.50, and silver closed down $0.27 at $23.99.

Platinum closed down $38.00 at $1070.10, and palladium closed down $40.20 at $1521.80.

Brothers and Sisters, thank you for your friendship. If you have unusual circumstances, need cash or a special favor – talk to Harry or Eric. We are now back to our traditional business model. Thank you for your patience. Have a blessed day. Richard Schwary

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Posted on May 5, 2023 by Richard

Gold – Buckle Your Seat Belts

Commentary for Friday, May 5, 2023 (www.golddealer.com) – Today gold closed down $30.60 at $2017.40, and silver closed down $0.30 at $25.74. The price of gold dropped from $2035.00 to $2000.00 Friday morning in the domestic New York cash market. Traders bought the dip but the bounce to higher ground lacked conviction. This sudden fall from grace was the result of factors, which include profit taking, and a better-than-expected jobs report. I also suspect a general trader’s suspicion that gold has moved “too high, and too fast” considering the upcoming FOMC intentions. We move into the weekend a bit left-footed. The fact that gold is still holding above $2000.00 is a bullish plus, but such a large drop may take some of the heat out of the physical demand. Traders usually welcome this kind of settling as reasonable caution at these higher levels pays dividends and gold ponders its next move. Last Friday gold closed at $1990.10 / silver at $25.00 – on the week gold was up $27.30 and silver was up $0.74.

On Monday the price of gold drifted lower in the overnight Hong Kong market but caught a solid bottom at $1978.00 as the trend turned higher through the London market. And, not surprisingly moved quickly higher ($2005.00) in New York before the paper trade sold the rally and gold once again turned defensive on both sides of $1985.00.

The Reuters headline will point you in the right direction – Gold gives up gains as robust US data counters banking woes – “Gold gave up all of its gains in volatile trading on Monday after better-than-expected U.S. manufacturing data in the run-up to the Federal Reserve’s rate hike decision this week. U.S. manufacturing pulled off a three-year low in April as new orders improved slightly and employment rebounded, while construction spending increased more than expected in March, boosted by investments in nonresidential structures. Heading into the U.S. session earlier, gold prices had rebounded to touch $2,005 as traders took stock of news that JPMorgan Chase & Co (JPM.N) would buy most of First Republic Bank’s assets after regulators seized the troubled lender over the weekend. “The move was definitely premature… We used some of that opportunity to try and capitalize on taking some positions off on that move upwards,” said Phillip Streible, chief market strategist at Blue Line Futures, in Chicago.

The Federal Open Market Committee (FOMC) will meet on May 2-3, and markets largely expect a 25-basis-point interest rate hike. Investors will also focus on Fed Chair Jerome Powell’s press conference to assess if the commentary pushes back market expectations of rate cuts before the year-end amid the recent banking turmoil and threats of an imminent recession.”

It is fair to say that “robust economic data counters banking woes” because “banking woes” in my opinion serves a purpose. They underline weak points in our banking system that need correction before they can turn into something more serious.

The fact that gold once again ran into tough overhead resistance above $2000.00 should not be surprising. We have seen this pattern many times in the past few months. And even with all this “trading noise” gold is still holding out at the higher end of its recent trading range.

The theoretical crosscurrents in this trade are well known and threatened to upset the apple cart on a regular basis. But there are two factors which should especially hold your attention. Will the Fed continue to raise interest rates and will those rising interest rates push the US into recession?

On the day gold closed down $6.70 at $1983.40, and silver closed up $0.01 at $25.01.

On Tuesday gold prices were rather flat in the overnight Hong Kong and London markets but pushed dramatically higher in the New York domestic trade as job openings data “missed”, prompting some to suggest that March may be the beginning of an economic slowdown. This information comes from the JOLTS report (Job Openings and Labor Turnover Survey) and the numbers were weaker than expected but I think it may be premature to call this a “trend”.

Most in this industry expect a quarter point hike by the FOMC this Wednesday, which will likely put gold back on the defensive as traders expect further rate hikes. On the other hand, if this potential “economic dip” shows signs of development and inflation cools the Fed may decide a heavy hand with interest rates is not necessary. This is the “dream” scenario for the bulls.

But this “daydream” is better known as the “slowing scenario” in the gold market and has been around for some time. And each time it seems to gain momentum the Fed rains on the parade by reminding everyone that inflation is “sticky” and is not going away anytime soon.

A better measure of higher gold prices will be the results of the next FOMC confab, held on June 13^th and 14^th. If Jerome and colleagues “pause” in their interest rate cycle because they believe further increases will damage economic recovery the price of gold will move dramatically higher. If they raise a quarter point (my expectation) it will cap higher prices in gold but likely will not create drama because this hike is already baked into the cake. If they bring their “inflation hammer” down with a half point rise in interest rates the gold bulls will not be happy.

Keep in mind that this “view” is limited. There are many reasons for gold to move higher, perhaps dramatically higher which are outside the control of the FOMC. But that story is one for another day and if these cross currents develop, they will be easily identified.

On the day gold closed up $30.90 at $2014.30, and silver closed up $0.39 at $25.40.

Zaner (Chicago) – “While the gold market is showing very little direction this morning and is also exhibiting very little in the way of volatility that is likely to change within the next 36 hours with the Fed decision tomorrow likely to set a near term trend for prices. However, we think the silver market will diverge with gold with classic physical commodity market fundamentals driving silver prices. Unfortunately for the bull camp in gold, the dollar index appears to be poised to breakout to the upside of a 3-week sideways consolidation pattern today perhaps because of signs of negotiating in Washington to avoid a government shutdown. On the other hand, the US Treasury Department surprised the trade with news that the US could default earlier than expected on June 1st without a debt ceiling hike. Obviously, both gold and silver see some pressure from the Australian interest rate hike overnight and from chatter overnight that factory activity in the euro zone weakened and rekindled recession chatter. Yesterday gold ETF holdings rose by a scant 6,300 ounces while silver ETF holdings fell by a consequential 919,524 ounces. Even though the trade is largely anticipating the US Fed to raise rates Wednesday afternoon, anticipation of that action is likely to lift the dollar today off a buy the rumor argument. A minimally supportive development overnight came from somewhat muted inflation readings from Europe. In the end, once the Fed raises interest rates, the bull camp in gold and silver will have to show they can regain control or corrective action could become quite aggressive with gold potentially falling to $1,950 over the coming week and silver prices potentially sliding down to $24.73.”

On Wednesday the price of gold was flat last night in both Hong Kong and London and the domestic New York trade was choppy, but with a mild upward drift. This is somewhat surprising considering everyone is hunkered down and waiting for the promised interest rate hike later in the day. It is not so much that rates are moving higher, the hike will likely be small, but traders are eager to see if a small hike creates much ruckus. In this case traders have made such a big deal about this next FOMC move that it will likely be a non-event.

It usually works that way, those seismic shifts which can create large trading waves are rarely seen in advance because traders are great at taking early positions which factor change into the pricing model. Exciting in the surprise sense is not something the paper trade embraces well. Wall Street trading rarely “swoops” – it trends nicely because panic threatens stability.

There really are two pieces to the “will gold move significantly higher” puzzle.

The first piece was the expected rate hike of a quarter point made public today. This was bullish for gold in that it suggests the Fed may be turning a bit more cautious relative to higher interest rates. That is good news for bullish gold sentiment today.

It is the second puzzle piece that has me worried. Chief Powell’s live comments today remain hawkish. Jerome stated, “We have a long way to go to bring down inflation”. This kind of talk does not hint at a slowdown in interest rates. It remains difficult to see gold reaching new highs, especially if the Fed feels that inflation is still a serious problem.

Reuters (Howard Schneider) – Fed likely to hike rates, hint at pause in tightening cycle – “The Federal Reserve is expected on Wednesday to raise interest rates and perhaps signal a pause in its 14-month tightening cycle, as policymakers balance the need to slow inflation against a pressing set of risks ranging from bank failures to the possibility of a U.S. debt default as soon as next month. Investors anticipate the U.S. central bank will follow through with a quarter-percentage-point rate hike at the end of its latest two-day policy meeting. The policy statement is due to be released at 2 p.m. EDT (1800 GMT), with Fed Chair Jerome Powell scheduled to speak to reporters half an hour later. But the new statement, and Powell’s elaboration on it, will have to reconcile a set of risks that have grown more into conflict.

Inflation has been falling only slowly, leaving some Fed officials unconvinced that interest rates have moved high enough to truly control it; yet the economy itself appears to be weakening, a trio of recent bank failures has raised concern about broader trouble in the financial sector, and the unsettled nature of debt limit talks between Republicans in Congress and the Democratic-controlled White House could trigger an acute crisis if the U.S. government is forced to stop paying its bills. As of March, 10 of 18 Fed policymakers indicated they were likely ready to halt the rate hikes after one more increase, expected at this week’s meeting, lifts the Fed’s benchmark overnight interest rate to the 5.00%-5.25% range. Between that consensus and other problems that have intensified in the meantime, the Fed is likely to at least open the door to the prospect that this hike will be the last of the current tightening cycle, absent a future inflation surprise.

Just as the central bank had to grapple at its March 21-22 meeting with the fallout from the failures of Silicon Valley Bank and Signature Bank, policymakers this time had to assess the collapse of First Republic Bank and determine if the financial sector faces broader turmoil or is likely to make credit even less accessible and more expensive than the Fed feels is necessary to cool inflation. The tradeoff for moving forward with a rate increase this time “may be that Powell has to adopt a less forward-leaning tone in terms of prospects for additional tightening at the following meeting,” Krishna Guha, a former New York Fed official who is now vice chairman of Evercore ISI, wrote in a note ahead of the policy decision.

Hints about the Fed’s direction will come first from the rate-setting Federal Open Market Committee’s new policy statement, which as of March said that the central bank “anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive” to lower inflation. That phrase is consistent with what officials outlined in economic projections issued at the March meeting, when they saw at least one further rate increase in the cards.

In 2019 and 2006, when the Fed shifted gears in an environment when it had been raising borrowing costs, it swapped language leaning towards higher rates for more neutral guidance – saying in June 2006 for example that “the extent and timing of any additional firming … will depend on the evolution of the outlook for both inflation and economic growth.”

With rate increases hardwired into the Fed’s statement since January 2022, “we think the FOMC is likely to soften its forward guidance on additional rate hikes,” HSBC analysts wrote, particularly now that the policy rate after this meeting will hit the peak most Fed officials had projected. Doing otherwise might hint that those projections had changed, a hawkish tilt towards more rate hikes that the Fed won’t want to close off but also won’t want to guarantee.”

On the day gold closed up $14.30 at $2028.60, and silver closed up $0.08 at $25.48.

On Thursday the price of gold drifted lower on the open but reversed direction and quickly moved to new recent highs ($2060.00). Safe haven demand may be getting a boost this morning as banking fears reenter the trading picture. PacWest’s stock fell 85% since the bank failures in early March as investors feared it could be the latest bank to collapse. PacWest said that unlike the recently shuttered First Republic Bank, it has not “experienced out-of-the-ordinary deposit flows (The Hill). This kind of story makes the gold trade jittery even though Chief Powell went out of his way to assure the faithful that our banking system is “sound and resilient”.

Is our banking system in trouble? Please, there is nothing wrong with our banking system – but this story is the mother of all conspiracy hacks. Expect increased volatility and profit taking.

On the day gold closed up $19.40 at $2048.00, and silver closed up $0.56 at $26.04.

Zaner (Chicago) – “In our opinion, the gold market has probably forged an intermediate top with a major blowoff range up reversal overnight. In other words, optimism about the potential for an end to the US rate hike cycle has been embraced and perhaps overdone. From a fundamental perspective, Indian gold prices posted a record high overnight and in the past Indians have been very price conscious which in turn could result in a near term demand void. However, the gold market should be supported by another inflow to gold ETF holdings of 24,688 ounces yesterday as that narrows the year-to-date decline in holdings to only 0.2%. Furthermore, the ECB is poised to raise interest rates for a 7th time in their rate hike cycle this morning, but unlike the US Fed yesterday, the ECB could raise by 50 basis points and suggest more hikes ahead which should catch gold and silver prices overdone. Despite assurances from both the US Fed and the ECB they are nearing the end of their rate hike cycle, both central banks are definitive in their views that inflation remains too high. Unfortunately for the bull camp in silver yesterday ETF holdings saw an outflow of 808,656 ounces cutting the year-to-date gain in holdings to a minuscule 0.2%. Another slightly negative overnight development came from a softer than expected Chinese manufacturing PMI reading which dampens gold demand hopes from the world’s largest consumer. Unfortunately for the bull camp, the aggressive post Fed announcement rallies have dissipated quickly as if the markets fully priced moderating hawkish intentions from the Fed especially with the rallies early this week robust ($100 in June gold and $1.34 in July silver). Traders should expect more back and fill profit-taking weakness today.”

On Friday gold was turbulent and moving to the downside. But this is a great example why it pays to ignore short-term headlines and speculation about more bank failures. It is easy to get caught up in the “daily buzz” which usually stokes the physical world. But historically this “end of the world scenario” is designed to sell newspapers. Can you imagine the public’s reaction to comments which describe the failure of Silicon Valley Bank as no big deal? They would not sell many newspapers, but the fact is that there have already been 3 large bank failures this year. Which is a drop in the ocean compared to the numbers of functioning banks in America.

This is not commentary which might suggest gold will move higher or lower. The factors needed to produce these changes are still in the “unknown bin”. But such down drafts will not seriously discourage the physical possession of gold and silver bullion in these troubling times.

Reuters (Deep Kaushik Vakil) – Gold sheds 2.5% on US jobs growth as Fed-led rally fizzles – “Gold beat a fast retreat on Friday after above-forecast U.S. payrolls data that tempered expectations of interest rate cuts from the Federal Reserve. Spot gold lost 2.5% to $2,000.70 per ounce by 10:08 a.m. EDT (1408 GMT) but was up 0.6% for the week after surging to $2,072.19 on Thursday, just shy of a record high of $2,072.49 after the Federal Reserve hinted its hiking cycle may be ending. U.S. gold futures shed 2.3% to $2,008.30. But those gains were quickly unwound as U.S. employers boosted hiring in April while raising wages. “The data will not lead the Fed to hike rates in June, but it will likely remind the rate-cut fanciers to settle a bit,” and this is pressuring zero-yield gold, said Tai Wong, a metals trader based in New York. Also weighing on gold, the dollar jumped on the jobs data, making bullion more expensive for overseas buyers. Looking ahead, any economic data “that points to a cooling U.S. economy – and therefore to rate cuts in the mid to long term – is likely to support the price of gold. Conversely, positive surprises are likely to weigh” on prices, said Zumpfe, a precious metals dealer at Heraeus. Also on the radar were developments surrounding the U.S. banking sector and the U.S. debt ceiling. Economic uncertainty and lower rates boost demand for zero-yielding gold. “If we see further panic around the debt ceiling or U.S. banks, hold on to your hats as I fear price action could get nasty around these highs and punish bulls and bears,” said Matt Simpson, analyst at City Index, warning that in “times of severe stress, all markets, including gold, can fall.”

On the day gold closed down $30.60 at $2017.40, and silver closed down $0.30 at $25.74.

Platinum closed up $18.00 at $1066.40, and palladium closed up $45.20 at $1494.80.

Posted on April 28, 2023 by Richard

Gold – Remains Firm

Commentary for Friday, April 28, 2023 (www.golddealer.com) – Today gold closed up $0.20 at $1990.10, and silver closed up $0.02 at $25.00. The price of gold remained firm this week, trading on both sides of $1990.00. Supported by mild safe haven demand, the Dollar Index, which lost a half point this past week, and a favorable technical picture. Good enough short-term news to suggest higher prices may be in the making but not good enough for the bulls to get out the champagne. Gold is trading around April’s price support and looking for momentum in the bargain. Without fresh information gold will continue to “channel” trade between $1980.00 and $2000.00. Last Friday gold closed at $1979.50 / silver at $25.05 – on the week gold was higher by $10.60 and silver was off $0.05. Prices remain firm but unexciting.

On Monday the price of gold was surprisingly steady today considering the $30.00 pitch to the downside on Friday. This apparent support does not have much to do with significant or fresh news from the Fed regarding interest rates. And the lack of continued downward momentum today should not be considered bullish in any sense of the word. It simply reflects the existing fear that the Fed believes it has enough latitude to continue raising interest rates.

Everyone already knows the interest rate puzzle has made gold pricing a highly nuanced effort based almost entirely on the direction of interest rates. This creates a cloudy trading picture and introduces confusion between the bullish and bearish scenario – because the economic stakes could not be higher. The bulls, however, should find some encouragement in this confusion.

In March of 2022 Fed interest rates were near zero. By March of 2023 the Fed rate had climbed above 4%. A substantial change – still the price of gold remains at the higher end of its current trading range. And the physical delivery market remains hot even though these higher prices have prompted increased selling of gold and silver bullion.

Reuters (Deep Kaushik Vakil) – Gold slips into tight range as traders brace for fresh economic cues – “Gold prices eased into a tight range on Monday as traders turned their attention from a weaker dollar to this week’s upcoming economic data that may influence the Federal Reserve’s next policy decision. “This market is treading water in the short term, waiting on its next piece of economic data that could potentially jolt it in one direction or the other,” said David Meger, director of metals trading at High Ridge Futures. Gold dropped below $2,000 last week on Fed officials’ hawkish remarks and after surveys showing U.S. and euro zone business activity gathered pace in April. Markets now see an 88% chance of a 25-basis point Fed hike at its May 2-3 policy meeting, according to the CME FedWatch tool. Higher interest rates raise the opportunity cost of holding non-yielding gold. “While it will take a fresh catalyst to see the price return back above $2,000 an ounce, gold is unlikely to fall below $1,950 any time soon,” Kinesis Money analyst Rupert Rowling said in a note. Investors wait for a key Fed-favored inflation gauge, the core PCE (personal consumption expenditures) index, as well as the U.S. GDP quarterly growth rate, due later this week. “If the US enters a recession later in the year, the Fed is likely to cut rates, reducing US bond yields and dollar strength. This could push the gold price higher above $2,000/oz,” Heraeus analysts said in a note.”

On the day gold closed up $9.60 at $1989.10, and silver closed up $0.26 at $25.31.

Zaner (Chicago) – “At least to start today gold and silver are tracking positive partially off a slight downside breakout in the dollar. With a range down move on Friday, the path of least resistance remains down in gold. In retrospect, the silver market shows significantly less liquidation potential than gold. However, last week, silver ETF holdings saw significant outflows indicating a moderation of investment interest and/or liquidation by “traders” possibly for short-term purposes. In fact, seeing silver falter last week in the wake of an extremely bullish Silver Institute assessment of supply and demand in the world silver market should be disappointing to both short-term and longer-term investor bulls. The latest Silver Institute survey indicated record demand of 1.2 billion ounces last year and indicated that tally was likely restricted by the unrelenting lockdowns in China. Against the record demand growth of 18%, the Silver Institute also predicted last year’s deficit at 237 million ounces, which was also pegged as a record. The forward forecast from the Institute projects a slightly lower 2023 deficit of 142 million ounces than in 2022 (because of the rate hike cycle), but they also concluded that consistently expanding investor interest could result in unending world supply and demand deficits. In fact, in the first quarter 2022 silver ETF holdings rose from a January low of 830 million ounces to an all-time high of 859 million ounces and then one month later plummeted to the 2022 lows in March. However, current ETF holdings of 841 million ounces is 300 million ounces above the 2016 low of 500 million ounces which indicates investors have remained upbeat since the middle of 2019. Translating the impact of silver ETF holdings on the market, the addition of 100 million ounces back to the all-time highs is the equivalent of 20,000 futures contracts with the silver market on Friday trading 81,741 contracts. The latest positioning report showed the net spec and fund long in silver at 41,275 ounces, which a return to the 2020 pre-pandemic net long of 104,000 contracts would mean the net addition of 80,000 futures longs! The April 18th Commitments of Traders report showed Silver Managed Money traders were net long 21,753 contracts after increasing their already long position by 2,522 contracts. Non-Commercial & Non-Reportable traders net-long 41,275 contracts after increasing their already long position by 2,691 contracts. However, to see investors go “all in” on silver would require a very strong economic outlook or extreme flight to quality interest. With silver ETF holdings last week declining by 7.2 million ounces, it is clear investment sentiment at present is in a state of rebalancing. Therefore, on a return to $24.00 we suggest traders consider implementing far out of the money long dated September bull call spreads. With the negative chart action at the end of last week, more fears of recession than growth and a split view on inflation (abating in the US and building in Europe?), the bull camp currently has fewer bullish arguments than was present at the April highs. Nonetheless, we see the uptrend from last September’s low resuming after further balancing of the nearly longest net spec and fund long position in silver in 13 months. Gold positioning in the Commitments of Traders for the week ending April 18th showed Managed Money traders are net long 134,253 contracts after net selling 3,310 contracts. Non-Commercial & Non-Reportable traders net-long 241,735 contracts after increasing their already long position by 1,726 contracts. Last week gold ETF holdings declined by 38,851 ounces. Depending on the magnitude of risk-off this week and the prevalence of rate hike chatter, June gold could retest $1,950 which in our opinion would be a significant buying opportunity.”

On Tuesday the early New York domestic trade bought the overnight London dip in gold prices ($1976.00), pushing the US market to highs on the day ($1994.00) before settling midrange on the close. This $20.00 spread in the gold pricing has repeated of late as both rallies and dips are short lived, and traders hunker down waiting for something tangible from the Fed.

This “back and forth” pricing provides tension in the metals but can tire the physical trade and may yet take its toll on domestic safe haven demand. Gold yawned today as April consumer confidence fell to below the March reading.

The public is worried about both inflation and recession. Which is the reason gold remains in the fight for $2000.00 – a plus for the bullish scenario. It remains to be seen if the gold bulls can resolve the problem of likely higher interest rates. A few months ago, traders just assumed higher interest rates equaled lower gold prices. But a few insiders are rethinking that scenario.

On the day gold closed up $4.90 at $1994.00, and silver closed down $0.43 at $24.88.

On Wednesday the price of gold pushed as high as $2008.00 in the New York cash market, but this rally was again sold by traders who still fear higher interest rates in the near term. Still gold seems to be consolidating at these higher numbers which adds necessary encouragement to what could easily turn into a flagging bullish scenario. Reuters’ notion that this latest jump in gold prices is the result of resurfacing bank worries is a stretch in my opinion. It is just hard to believe that the average bank customer still questions their local bank’s liquidity.

Still, a “banking crisis” is the granddaddy of reasons to hide your money under the bed. Today’s headline concerning First Republic Bank’s falling earnings and customer withdrawals got the ball rolling, but the resultant weakness in the banking sector really underscores the problem. If the FDIC must step in to resolve this problem, it will enhance the bullish gold scenario.

It is worth noting that by the end of the trading day gold still finished mildly in the red and our phones are not exactly ringing off the hook. So, it is hard to tell if this ruckus is a real developing problem or another common “flash in the pan”.

Reuters (Deep Kaushik Vakil) – Gold flirts with $2,000 as U.S. banking worries resurface – Gold briefly broke above the key $2,000 level on Wednesday as fresh worries surrounding U.S. banking turmoil drove investors to the safe haven. First Republic Bank’s (FRC.N) shares hit a record low after a report said the U.S. government was unwilling to intervene in the rescue process, adding to concerns about the troubled lender’s plans to turn around its business. “That was the catalyst for gold prices to revisit slightly higher levels,” keeping U.S. yields lower, said Daniel Ghali, commodity strategist at TD Securities. Benchmark U.S. Treasury yields hit a near two-week low, reducing the opportunity cost of holding zero-yield bullion, while the dollar shed 0.7%, supporting demand from overseas buyers. “Further weakness in yields should be positive for gold as long as $1,960 holds on the downside,” said Michael Hewson, chief market analyst at CMC Markets. Traders were now focused on U.S. quarterly gross domestic product data due on Thursday, followed by the core personal consumption expenditures index on Friday, the Fed’s preferred inflation gauge. Markets had priced in about a 3-in-4 chance of the U.S. central bank raising rates by 25 basis points at its May 2-3 meeting. Those odds were lower due to “resurgent fears that there is always more than one cockroach when it comes to the U.S. regional banking crisis,” Ghalli added. Gold, which is considered a safe-haven investment during economic uncertainty, scaled an over one-year peak at $2,048.71 by mid-April as the U.S. banking crisis unfolded. On the physical side, data showed Swiss gold exports to China rose in March while shipments to India and Turkey fell.”

On the day gold closed down $8.30 at $1985.70, and silver closed down $0.01 at $24.87.

Zaner (Chicago) – “While part of the gains this morning in gold and silver prices are attributable to a slightly positive track in all physical commodities, we think flight to quality buying continues because of growing signs that First Republic Bank might not survive. Apparently, a first quarter deposit outflow of $100 billion surprised the trade and shares in the bank fell precipitously which revitalizes bank contagion fears. Adding into the bull case is the prospect of a slight tempering of fear of next week’s FOMC meeting as the pattern of soft US scheduled data this week has extended and is expected to continue today. Yesterday gold ETF holdings saw an inflow of 52,589 ounces but holdings are still down 0.4% year-to-date. While China posted a 1.9% first quarter increase in gold production, the country also reported a larger gain of 12% in gold consumption. The increase in Chinese first quarter gold output resulted in 85 tonnes of extra production while overall gold consumption was at 291.6 tonnes dwarfing the increase in supply. In retrospect, seeing gold waffle around unchanged yesterday in the face of strong demand signals from China and in the wake of a noted decline in US treasury yields should be disappointing to the bull camp. Near term resistance is $2020.30, uptrend channel support in June gold is now $1,990.70 and a pivot point failure is seen with a trade today below $1,982. Seeing silver break sharply yesterday was not surprising given the ongoing negative view toward most physical commodities. However, July silver rejected the washout and closed more than $0.50 above the spike low in a possible sign of a technical bottom. It should be noted silver ETF holdings yesterday saw a massive single day 8-million-ounce inflow reversing significant outflows over the prior 5 sessions and lifting the year-to-date gain in silver holdings to +0.7%. Limiting silver on the upside is a 5.1% increase in 1st quarter Fresnillo PLC silver production to a total output level of 13.1 million ounces. We see silver remaining vulnerable unless the early positive commodities vibe is accentuated by a surprisingly strong equity market rally. A key pivot point in July silver today is $25.05 with resistance today pegged at $25.65 and $25.53.”

On Thursday the price of gold held the important $2000.00 level in the overnight Hong Kong and London markets, but the New York domestic market experienced a profit taking swoop to the downside ($1975.00) before light bargain hunting steadied daily business. Gold finished mildly in the green for the day – a plus for the gold bulls.

But this market remains nervous over the possibility of still higher interest rates, which continues to hinder higher gold prices based on rising inflation.

The next possibility of fresh FOMC news is not far away (May 2^nd and 3^rd) but I believe that the Chief will hold everyone’s hand until the following FOMC meeting (June 13^th and 14^th). The May meeting is the one associated with a Summary of Economic Projections and has a much greater possibility of creating “fresh information” which could move gold one way or the other.

Traders are expecting a small interest rate hike at the June meeting, which is enough to keep the price of gold defensive but not so much that Wall Street becomes more nervous. The outcome here will likely define gold’s short-term direction. If the Fed boys raise a quarter point gold will likely remain rangebound. If they get crazy (not likely) and raise interest rates a half point, gold will likely test recent lows. If they decide to stand pat, gold will likely test recent highs.

There is nothing new or particularly informing about the above comments. This is the exact same scenario the metals have been dealing with since last year. And it will likely not change until everyone is satisfied that interest rates are generally moving lower.

On the day gold closed up $4.20 at $1989.90, and silver closed up $0.11 at $24.98.

On Friday the gold trade looked sleepy, but the good news is that traders still “bought the dip” and our shiny friend finished the day almost unchanged in price. The technical picture remains positive, but the lack of buzz is distracting and suggests this “sideways” trade will remain in place until traders become more comfortable with Fed interest rate policy.

Jim Wycoff (Kitco) – Technically, the gold futures bulls have the firm overall near-term technical advantage. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at the April high of $2,063.40. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at the April low of $1,965.90. First resistance is seen at $2,000.00 and then at this week’s high of $2,020.20. First support is seen at last week’s low of $1,980.90 and then at $1,965.90. The silver bulls have the overall near-term technical advantage. Silver bulls’ next upside price objective is closing May futures prices above solid technical resistance at the April high of $26.235. The next downside price objective for the bears is closing prices below solid support at $23.50. First resistance is seen at this week’s high of $25.435 and then at last week’s high of $25.71. Next support is seen at this week’s low of $24.53 and then at $24.25.”

Reuters (Deep Kaushik Vakil) – Gold holds losses as inflation data reinforces rate hike bets – “Gold eased on Friday after a rise in U.S. inflation in March buoyed the dollar and reinforced bets for an interest rate hike next week, but banking sector concerns kept bullion on course for a small monthly gain. The U.S. core personal consumption expenditures (PCE) index, the Federal Reserve’s preferred inflation gauge, rose 0.3% in March, the same as in February and in line with expectations, with traders adding to bets for a rate hike next week. Elevated rates dull zero-yielding bullion’s appeal. Gold seemed to largely ignore the last key piece of data ahead of next week’s meeting, but “a 25-bps hike next week is now certain though it remains in question whether the Fed will signal a pause”, said Tai Wong, an independent metals trader based in New York. “Gold seems likely to remain in its tight recent range for now, though a weekly close under $1,965 could trigger further losses, while bulls would welcome a push back above $2,000.” The dollar held gains after the inflation data but is headed for a monthly decline. A weaker dollar makes bullion cheaper for overseas buyers. Bullion consolidated this month due to “growth concerns sending U.S. rate cut expectations higher, softer bond yields and a continued lingering banking sector concern”, said Ole Hansen, head of commodity strategy at Saxo Bank. Gold had scaled a one-year peak of $2,048.71 in mid-April as the banking crisis unfolded.”

On the day gold closed up $0.20 at $1990.10, and silver closed up $0.02 at $25.00.

Platinum closed down $3.10 at $1088.20, and palladium closed up $17.50 at $1517.90.

Posted on April 21, 2023 by Richard

Gold – Mixed Sentiment Continues

Commentary for Friday, April 21, 2023 (www.golddealer.com) – Today gold closed down $28.10 at $1979.50, and silver closed down $0.32 at $25.05. The bullish trade must be disappointed at this week’s gold prices as they continue to see-saw with a negative bias. This trading pattern will likely continue if traders believe interest rates are moving higher in the short term. The physical market is alive and well as our trading volume continues steady at these elevated prices. And higher premiums on popular bullion products suggest lagging mint production and solid investor interest. Still, waiting for some finality on the next Fed interest rate decision creates confusion in the physical market so we are seeing an increase in both buy and sell orders. Last Thursday gold closed at $2002.20 / silver at $25.42 – on the week gold was down $22.70 and silver was down by $0.37.

Please note and thanks – FedEx is no longer asking for delivery signatures. They are scanning IDs. We have complained to FedEx, but they remain resolute. Scanned identification is safer, but if you have a problem with this decision, please make your feelings known to FedEx. Unfortunately, the present delivery time for the USPS alternative is 2-3 weeks.

On Monday the price of gold dipped below the $2000.00 support, which is not surprising considering Friday’s weakness. The New York cash market pricing spread was $15.00 so not a big deal in my mind. It is however another hint that even bullish traders remain wary of the higher interest rate scenario. The next FOMC meeting will be in 15 days, and this market will remain pensive until that outcome is better understood. Still, there is so much going on both domestically and in the overseas market that it is difficult to see serious downside in the metals especially if the coming interest rate hike is modest. And if the Fed throws in the interest rate towel, which is not likely, the bulls will have the “fresh” information needed for higher prices. On the day gold closed down $8.00 at $1994.20, and silver closed down $0.37 at $25.05.

Zaner (Chicago) – “With a 3-day high in the dollar and signs of noted weakness in Italian consumer prices, outside market influences are negative for gold and silver to start the new trading week. Therefore, we see gold and silver in corrective postures to start the new trading week. In fact, several bullish fundamentals have reversed course and we expect a mini downtrend to unfold. Obviously, a dampening of inflationary expectations removed a primary pillar of the bull case, but seeing a reversal of a downside breakout in the dollar combined with talk that the Fed will “go ahead” with a rate hike in May provides a lot of bearish ammunition. On the other hand, Citigroup raised its gold price forecast by nearly 8% pointing to a “dovish pivot” by the Fed, rising emerging markets gold demand and ongoing economic uncertainty as fuel for an upcoming rally to $2,100 in the next 3 months, with projections of $2,300 pricing in the next 6 to 12 months. Furthermore, the recent surge in gold and silver prices apparently resulted in a significant pullback in Asian demand reportedly because of price sensitivity. Last week gold ETF holdings increased by 164,805 ounces but remain 0.3% lower year-to-date. Even the technical picture is negative for gold and silver with both markets holding burdensome net spec and fund long positions as of early last week. In fact, in the gold market the net spec and fund long position was the highest since May of last year and that reading was likely understated given the post COT report rally of $44.00. Gold positioning in the Commitments of Traders for the week ending April 11th showed Managed Money traders reduced their net long position by 7,423 contracts to a net long 137,563 contracts. Non-Commercial & Non-Reportable traders are net long 240,009 contracts after net selling 2,025 contracts. While silver showed signs of diverging with gold, Friday’s sweeping reversal on significant volume combined with deterioration in classic fundamentals projects silver prices to fall sharply directly ahead. The Commitments of Traders report for the week ending April 11th showed Silver Managed Money traders are net long 19,231 contracts after net selling 262 contracts. Non-Commercial & Non-Reportable traders are net long 38,584 contracts after net buying 4,149 contracts. Last week silver ETF holdings increased by 2.1 million ounces and are now 0.7% higher year-to-date.”

On Tuesday gold traders bought the dip in what looks like mild bargain hunting and a bit of safe haven protection in a world of continued financial confusion. The fact that gold again closed above $2000.00 is a plus for the bullish gold scenario. But many traders I talk to claim the bears are just waiting for the right moment to take advantage of further weakness.

I would not say we are a spinning top hoping for further momentum, which was my opinion not too long ago. Things look like they are improving but I still do not see any improvement in spending – either here or in Europe.

There are enough signs of “slowing” to at least reconsider the “inflation scenario”. But the growing debt balloon is completely ignored these days. And I think this may soon turn into a more compelling argument for the private ownership of gold and silver bullion.

Reuters (Seher Dareen) – Gold climbs back above $2,000 on dollar retreat – “Gold prices climbed back above the $2,000 level on Tuesday, buoyed by a weaker dollar, while investors looked for more clarity on the U.S. Federal Reserve’s rate hike path. “Gold’s near-10% year-to-date climb has been largely predicated on its role as a safe haven as markets kept a wary eye over recession and financial instability risks,” said Han Tan, chief market analyst at Exinity. However, bids for a fresh record high may be curtailed until there is greater certainty to Fed rate cuts later this year. The CME FedWatch tool shows that markets are pricing in an 83.5% chance of a 25-basis-point hike in May, followed by increased expectations of a pause later in the year. Gold is considered a hedge against inflation and economic uncertainties, but higher interest rates dim the non-yielding bullion’s appeal. With the majority of U.S. data over the past few days pointing to an economic slowdown and a weakening dollar, the background influences remain supportive for gold, said StoneX analyst Rhona O’Conell in a note. Focus will now be on comments from Fed officials this week before they enter a blackout period from April 22, ahead of the central bank’s May 2-3 meeting. Gold will remain supported if investors remain of the view that the scarring from the banking crisis will lead to tighter credit conditions, said Craig Erlam, market analyst at OANDA in a note. The dollar edged lower, making bullion cheaper for overseas buyers.”

On the day gold closed up $13.20 at $2007.40, and silver closed up $0.20 at $25.25.

On Wednesday gold saw lows of $1970.00 in the overnight Hong Kong and London markets so the fear of rising interest rates is growing. The domestic New York cash market bought the dip and gold pushed nearly $20.00 higher but still finished the day in the red. While the technical picture still favors the bullish scenario, recent losses have insiders wondering if they are looking at technical pricing damage driven by increased profit taking. It is hard to argue with this bearish assessment because a month ago gold was $100 higher and today, we are looking at less than half that number. The persistent chatter by Fed insiders that higher interest rates are still necessary to quell inflation continues to worry the metals trade. These factors and gold’s inability to show strength above $2000.00 have insiders wondering if, at this point, we are looking at a trend reversal and not technical consolidation in a still bullish trend.

Reuters (Deep Kaushik Vakil) – Gold prices slide as traders assess Fed rate path – “Gold prices retreated below the key $2,000 level on Wednesday as the U.S. yields marched higher, with investors turning more skeptical over potential U.S. rate cuts likely later this year in the face of persistent inflation. “Once gold breached that $2,000 mark, there were a lot of stop losses that were triggered,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago. “Anytime you get earnings, you get a lot of people chasing individual stocks and that could also cause them to not invest so much in metal.” The dollar strengthened, underpinned by U.S. yields climbing to a near one-month peak, with markets now pricing in an 85% chance of a 25-basis-points rate hike at the Federal Reserve’s May 2-3 meeting, according to CME’s FedWatch tool. St. Louis Fed chief James Bullard said on Tuesday that the Fed should continue raising interest rates as recent data shows inflation remains persistent while the broader economy seems poised to continue growing, even if slowly. A stronger dollar weighs on overseas demand for the greenback-priced gold, while higher rates blunt non-yielding bullion’s appeal. The correction was due to the markets readjusting their expectations of the Fed’s rate-hike path, but gold’s rally has only been delayed, said Ole Hansen, head of commodity strategy at Saxo Bank. Markets will scan more upcoming remarks by Fed officials this week, ahead of a blackout period that starts on April 22 before the central bank’s May 2-3 meeting.”

On the day gold closed down $12.20 at $1995.20, and silver closed up $0.12 at $25.37.

Zaner (Chicago) – “Clearly, a much hotter than expected 10.1% annualized inflation reading from the UK has whipped up rate hike fears again and that in turn has fostered a surprisingly significant risk off reaction throughout the markets. Therefore, the slide in gold and silver prices is not surprising but the magnitude of the decline feels over exaggerated. However, in addition to the bearish fundamental catalysts both gold and silver violated key chart support levels likely adding a cascade of stop loss selling orders. Fortunately for physical commodities markets the catalyst driving prices down overnight is likely to dissipate later this week but is likely to present follow-through selling until solid chart support levels are encountered. However, with China posting favorable economic readings the most important physical commodity market is recovering from the extended Covid lockdowns and Chinese buyers are likely to begin bargain-hunting buying once prices become deflated. Going forward, traders should realize that Chinese gold demand has dominated over Indian demand, but both the Chinese and Indian economies are outperforming the world economy. Citigroup released a bullish gold price forecast earlier this week predicated on improving jewelry and physical demand in emerging economies, with 2023 gold price projections of $2,100 in the next 3 months and $2,300 in the coming 6 to 12 months. In conclusion, we remain bullish for intermediate and longer-term prospects but see both gold and silver remaining vulnerable to even lower action. However, even though the dollar is trading higher this morning fundamental signals and the Dollar charts are not signaling a sustained reversal of the March through April downtrend which should be of some consolation to gold and silver bulls. Yesterday gold ETF holdings increased by 31,028 ounces while silver ETF holdings fell by nearly 3 million ounces in a development that should add selling pressure to the early washout in silver. Near term targeting and support in June gold is $1,981.70 and then at $1,964.90. Similar critical targeting and support in May silver is $24.69.”

On Thursday the gold market was mildly higher, but I would not call this trade “firm” in any sense. Trying to interpret or explain movements in the price of gold on a day-to-day basis is difficult, some would say impossible. There are, however, shadings of sentiment which are based on the reader’s predisposition. If you are a natural bull and interest rates are moving lower, the conclusion will be that interest rate hikes will soon be halted, and gold is undervalued. If you are a predisposed bear and interest rates move higher you are eager to reestablish that short paper position. Throw out predisposition and the public would lose interest. My point here is that short term comments should for the most part be ignored because they come and go like the wind. If you are accumulating physical bullion keep the big picture in mind and avoid this noise.

Reuters – Gold firms above $2,000 on somber US economic data – “Gold prices firmed above the $2,000 level again on Thursday as the dollar and Treasury yields pulled back after soft U.S. data pointed to the economic toll of the Federal Reserve’s interest rate-hike cycle, strengthening the case for an imminent pause. Weekly U.S. jobless claims edged up last week, suggesting the labor market was gradually slowing, while a Philadelphia Fed report showed much lower-than-forecast factory activity in the mid-Atlantic region. “We saw a disastrous Philly Fed and jobless claims continuing to head higher, so the economy is weakening, some parts more than others,” said Edward Moya, senior market analyst at OANDA. The data pushed the dollar index 0.2% lower, while benchmark Treasury yields also fell. “For gold to make that run back to record highs, you need the June rate hike completely off the table,” Moya added. Markets are pricing in an 86% chance of a 25 basis-point hike in May, which a Reuters poll found would be the final one, with the Fed holding rates steady for the rest of 2023. “This week has had some aggressive Fed speak from its speakers and a continuation of that narrative could give the greenback a boost, leaving gold exposed on the downside,” DailyFX analyst Warren Venketas wrote in a note. New York Fed President John Williams said on Wednesday inflation is still at problematic levels and the Fed will act to lower it. Traders will scan further remarks by Fed policymakers this week, before their blackout period on April 22 ahead of the Fed’s May 2-3 meeting.

On the day gold closed up $12.40 at $2007.60, and silver closed unchanged at $25.37.

Zaner (Chicago) – “While gold prices waffled around both sides of unchanged overnight the charts remain bearish and are accentuated by ongoing bearish macro psychology. However, while gold and silver prices came under significant attack yesterday morning, the markets posted a very impressive rebound, which in turn should discourage some sellers today. However, the threat of rising interest rates in the US and UK continues to create headwinds for all the markets especially as that theme has lifted the dollar this week and resulted in treasury bonds reaching the lowest level since March 15th yesterday. Going forward, we see the bears holding a technical edge with the most recent COT positioning report in gold showing a net spec and fund long at the highest levels since April last year and June gold piercing the critical consolidation price level of $2,000 yesterday. On the other hand, the gold contract at times yesterday managed a $28.00 rally off the spike low potentially indicating exhaustion selling. Unfortunately for the bull camp gold ETF holdings saw a moderate outflow yesterday leaving the year-to-date holdings down 0.4%. Like the gold market, the silver market also aggressively rejected its early spike lows yesterday and at times managed to post gains off the lows of $0.74. While the charts in silver marginally favor the bull camp today and the market saw very supportive long-term fundamental information yesterday, a 2nd straight day of large outflows from silver ETF holdings (2.2 million ounces, and 5 million ounces) has resulted in holdings shifting into a minimal net decline year-to-date. Fortunately for the bull camp, the silver Institute yesterday indicated 2022 global silver demand reached a record high at of 1.24 billion ounces with a year-over-year increase of 18%. It should also be noted that the Silver Institute pegged last year’s deficit at 237.7 million ounces and projected annual deficits for several years ahead. While $25.00 could be psychological support today we see a more critical support/pivot point price today down at $24.92. Closer in support in silver is $25.13.”

On Friday the gold pricing “swing” was another $25.00 as gold pushed to $1995.00 on the open, sold off and caught a solid bid at $1970.00. This pattern has been typical of this week, as traders jump back and forth between opposing scenarios. Bearish Fed commentary from those close to Chief Powell creates volatility. Opposing economic commentary which suggests that a recession is not in the cards is usually ignored but is gaining popularity. The problem here is that this theory creates a new set of problems. It may give the Fed more opportunity to raise interest rates, capping higher gold prices. All this extra trading “noise” has not only stopped gold from rising above the $2050.00 April high, but it has also created a defensive trade. And if gold pricing does not show fresh interest below $2000.00 it is possible that $1950.00 support will be tested.

Reuters (Seher Dareen) – Gold dips as higher US rates seen in Fed’s inflation fight – “Gold prices dropped about 1% on Friday and were headed for their biggest weekly decline in around two months with markets expecting the U.S. Federal Reserve to opt for a higher for longer interest rate stance to control inflation. Gold is re-pricing based on the Fed’s rate-hike path ahead and hawkish comments by some board members, said Carlo Alberto De Casa, external analyst at Kinesis Money. The market is now expecting higher rates for a longer time, with another rate hike after May, De Casa said. Rate hikes raise the opportunity cost of holding non-interest-bearing gold. Markets are pricing in an 84% chance of a 25-basis-point interest rate rise in May, leaving the dollar on track for its first weekly gain in over a month and making bullion expensive for overseas buyers. Fed officials said on Thursday inflation remains “far above” the central bank’s 2% target. Fed Governor Michelle Bowman reiterated that more work needs to be done to bring down too-high inflation. Next week’s GDP data and the price deflator for consumer expenditures (PCE), the Fed’s preferred inflation measure, could trigger some price movement, but no clear direction is likely before the central bank’s next meeting, said analysts at Commerzbank in a note. On the physical front, elevated domestic prices muted demand for gold across Asian hubs this week, forcing dealers in India to offer discounts, with the Akshaya Tritiya festival also failing to offer much respite.”

On the day gold closed down $28.10 at $1979.50, and silver closed down $0.32 at $25.05.

Platinum closed up $31.10 at $1129.80, and palladium closed up $18.70 at $1604.10.

Zaner (Chicago) – “While we think the gold market has posted a moderately reliable low with the Wednesday washout, we also expect volatility to increase in both gold and silver ahead and we expect both markets to retest and perhaps temporarily violate recent lows. However, the gold market showed signs yesterday that it was receiving a flight to quality bid from renewed economic uncertainty and perhaps more importantly from escalating concerns of potential trouble in the financial markets from the debt ceiling situation. In fact, a significant jump in credit default swap rates has surfaced and according to Reuters those yields reached the highest levels in more than a decade, with some analysts suggesting the prospects of a technical default are no longer insignificant. Therefore, gold should see residual flight to quality buying interest but support at the $2,000 level is no longer applicable. In slightly supportive news a key Russian gold mining production region posted a 10% decline in production in their 1st quarter, while gold ETF holdings yesterday saw a large inflow of 32,740 ounces. We suspect that a wave of disappointing global PMI data today has added some economic uncertainty, but strong European Services PMI readings muted economic uncertainty from other weak PMI components. While the silver market seemingly delinked from gold yesterday, it appears to have come back into sync today with moderate declines. The weakness in silver is unfolding despite very favorable Silver Institute deficit predictions earlier this week, signaling the silver market is focused on spillover fear from big picture macroeconomic selling of physical commodities. It should also be noted that in the prior 3 days, silver ETF holdings have seen large outflows above 5 million ounces, suggesting investors might have banked profits on the recent rally and or are exiting from fear of slowing physical demand and higher interest rates.”

Posted on April 14, 2023 by Richard

Gold – Encouraged or Discouraged?

Commentary for Friday, April 14, 2023 (www.golddealer.com) – Today gold closed down $39.10 at $2002.20, and silver closed down $0.45 at $25.42. The gold trade today is a disappointment to the bulls because a promising week, based on a solid technical picture and increasing buzz failed to move above the expected $2050.00. And as the bears roared the gold dipped below its physiologically important support at $2000.00. Actually, this dip may be nothing more than a reminder that trading sentiment remains fickle in the extreme. This now common up-and-down trading pattern has been repeating itself for months and the jury is still out as to who holds the better hand. This latest dip, for my money, is not much of a worry if gold holds up between $1960.00 and $1980.00 because I suspect paper traders expected tough overhead resistance at $2050.00. Last Thursday gold closed at $2011.90 / silver at $25.03 – on the week gold was down $9.70 and silver was higher by $0.39.

On Monday gold dipped below the important $2000.00 support on a round of profit taking as the Dollar Index moved higher by ¾ of a point. A strong jobs number last Friday (April 7^th) does not suggest a dovish pivot by the Fed is in the cards in the short term.

The commodity market was closed for Good Friday. Today’s dip reflects the economic news that raised the bearish stakes during the Easter holiday.

This weakness is a disappointment to the bulls looking for a tangible reason that the Fed will become more dovish. But the drop is not the end of the world and gold will recover as the dollar comes off recent highs.

Look for some sort of price “channeling”, supported by continued troubles within the world central banking system. And expect significant support at $1950.00 with tough overheard resistance as gold approaches $2000.00.

How this all will play out in the medium to longer term remains to be seen. For the present the bulls hold the technical advantage, but higher interest rates favor the bearish scenario. With gold $100.00 in the green this past month traders will at least consider additional profit taking.

Reuters (Deep Kaushik Vakil) – Gold slides under $2,000 as jobs growth lifts dollar – “Gold slipped below the key $2,000 level on Monday as the dollar advanced on Friday’s strong U.S. jobs numbers, while traders also positioned for inflation readings this week that could offer further cues on interest rate hikes. U.S. employers maintained a strong pace of hiring in March, likely giving room for the Federal Reserve to hike rates again. Chances of a 25-basis point rate hike next month were now pegged at 69%, driving an uptick in the dollar, making dollar-denominated bullion less attractive for holders of other currencies. Higher interest rates usually dull the appeal of zero-yielding gold, despite its traditional status as an inflation hedge. “With the probability of energy inflation, rate hikes are still on the table and that can push gold back even further,” said Daniel Pavilonis, senior market strategist at RJO Futures. Gold surpassed $2,000 last week as weak U.S. economic data spurred worries of a slowdown following a surge in oil. “If interest rates are a quarter basis point here, quarter basis point there, I don’t think the stocks would react too negatively to that, but what that would do to gold is really box the market in,” Pavilonis added. The U.S. CPI print is due at 1230 GMT (8:30 a.m. ET) on Wednesday and will be followed by Fed minutes from their last meeting, later in the day. Signs that U.S. disinflation is gathering pace, allowing the Fed to pause rate hikes sooner rather than later, may restore gold to recent highs, said Han Tan, chief market analyst at Exinity.”

On the day gold closed down $22.80 at $1989.10, and silver closed down $0.18 at $24.85.

On Tuesday gold strengthened as the dollar weakened. The Dollar Index came off Monday highs (102.77) and moved lower by more than half a point. This looks like a series of typical oscillations in a confused market. But we are seeing mild bargain hunting from Monday’s drop in the price of gold. Today comments by New York Fed President Williams were not dovish but he did sound as though there is more room for a cautious approach to the still in question interest rate dilemma. This will help bullish sentiment looking for fresh positive information. That being said the price of gold seems to fade easily above $2000.00 so unless the dollar continues lower, which is not likely in the short term, traders may still be inclined to rounds of profit taking.

It is interesting that silver speculators, even at these lofty levels, are growing. Some paper traders believe the current pricing range is old-fashioned consolidation. And they expect higher prices in the near future. I’m not that bullish but these fresh thoughts are not that far away from a new development. If so, silver might become the new price leader as gold struggles to hold $2000.00. Primary silver bullion demand may already be in the early stage of shifting to China.

Reuters – Fed’s Williams says interest rate path is data dependent – “The prospect of the Federal Reserve raising its benchmark interest rate only once more and in a 25-basis point increment is a useful starting point, but the central bank’s policy path will depend on incoming data, New York Fed President John Williams said on Tuesday. The Fed raised rates by 25 basis points to a 4.75%-5.00% range at that meeting. However, it has adopted a more cautious approach following recent banking turmoil, which has raised expectations of a swifter slowdown in the economy as banks become more wary about lending. Williams repeated comments he made on Monday that he had yet to see much sign of credit conditions tightening and it would take time to see how that played out, while cautioning that inflation still remained too high. “That’s a reasonable starting place. I mean, that’s the median we saw from my colleagues,” Williams said in an interview on Yahoo Finance, referring to the Fed’s median estimate at its last meeting in March of a peak in interest rates in the 5.00%-5.25% range. “We have to be driven by the data,” Williams said. “I will say that one thing that we’re paying attention to is credit conditions, but also do we really see signs of this underlying inflation coming down?” He added that employment data for March showed the jobs market was still “very strong” and noted that while goods and commodities inflation has come down, pricing pressures in other areas remain more high. “Some of this core services inflation excluding housing hasn’t budged yet so we’ve got our work cut out for us to get inflation back to 2%,” he said. Inflation by the Fed’s preferred measure is still running at more than twice that target rate. “So the real question to me is, we’ve gotten to restrictive (on policy), what’s it going to take to be sufficiently restrictive? Do we need to do somewhat more to get there? And obviously, that’ll be driven by the data and the outlook.”

On the day gold closed up $15.70 at $2004.80, and silver closed up $0.28 at $25.13.

Zaner (Chicago) – “We are a little surprised with the strength in gold and silver prices this morning following signs of significant softening in Chinese inflation readings overnight. Perhaps the gold and silver trade see the precipitous weakness in Chinese inflation adding to global economic uncertainty. However, soft Chinese inflation data also sparked chatter of a possible Chinese stimulus effort and that could become a pillar of the bull case ahead. It is also possible that flight to quality buying has surfaced with the Chinese Navy lingering in the waters around Taiwan despite the end of military exercises! Certainly, weakness in the dollar is an additive to the bull case this morning but does not appear to be a key element given the index remains inside yesterday’s trading range. Overnight gold ETF holdings increased by 3488 ounces while silver holdings declined by a mere 137 ounces. However, the Fed’s Williams yesterday indicated American households are facing tightening credit conditions which in turn he suggested could slow the economy. Perhaps commodities are being lifted this morning by suggestions from BlackRock that the Fed will not have to raise interest rates next month in a forecast that would seem to suggest the large fund manager thinks upcoming US inflation readings will moderate. The big question for gold and silver bulls is whether the bull track will extend if inflation is found to be moderating? With the silver market avoiding significant corrective action in the face of gold declines in the prior 3 sessions and prices remaining near an upside breakout this morning, it is possible that silver is poised to take a leadership role. In fact, if risk-on becomes widespread because of softer global inflation readings, improved physical/industrial demand hope for silver could become the main feature in the trade. Key support in gold is $2008 today with a rise above a past double high at $2023.90, a potential trigger for fresh speculative buying. Critical pivot point support in May silver today is seen at $24.795.”

On Wednesday gold pricing was erratic – moving dramatically higher in the early trade, and finally settling midrange on the close. Reuters – “Gold accelerated over 1% on Wednesday as signs of cooling inflation added fodder to bets for a pause in U.S. interest rate hikes and dragged down the dollar and yields ahead of U.S. Federal Reserve’s latest meeting minutes.” Reuters references a long-term pricing chart and points out that the price of gold has broken its three major moving averages and suggests a softer US CPI print bolstered bets for a pause in Fed rate hikes. And today the dollar weakened joining this happy bullish party as the Dollar Index lost another half point (101.50).

As usual, the reality of a stubborn Fed offered the bulls another wet blanket. “The risks of not raising rates enough far exceeds over-tightening so the Fed is probably going to go forward with the quarter-point rate hike, the core justifies it,” said Edward Moya, senior market analyst at OANDA. Mr. Moya and most analysts today are not anti-gold, but they are realists. The Fed has said many times, their first concern is inflation so turning dovish in the middle of this perhaps long unwinding process is just not in the cards.

This reality, for some reason must be learned and then relearned. That reality caused gold to reverse direction and finish the day mildly in the green yet still defensive. Moya added a promising epithet – “There’s still a tremendous amount of risk on the table, so gold should still see some strong flows headed its way.” Still, no cigar for the bulls and the bears are ready to make this trade into a homecoming if the Fed continues raising interest rates.

To complicate matters, there are solid analysts which believe the signs of “slowing” are all over the place! They already buy the notion that inflation is slowing therefore there is no need for further rate hikes. A bullish conclusion supporting higher gold prices.

The latest Fed minutes will be out later today, and this may provide fresh information.

On the day gold closed $6.10 at $2010.90, and silver closed up $0.27 at $25.40.

On Thursday the gold again moved higher on the open, challenging $2050.00 before traders sold the rally. The core question, however, remains the same. Are these higher prices created by a shift in sentiment or are we looking at the same old “see – saw” trading action in place for months. There are many divergent crosscurrents here, but there are two main reasons for this fresh round of bullish sentiment. The first reason is chart based. From March through April, the price of gold has formed a significant upward trough with rising bottoms and rising tops. This draws in bullish action from the technically driven trade. In other words, it does not matter why prices are moving higher, a computer model simply creates a buy order and momentum players join the party. The second reason, and probably the more important aspect of this newly created buzz is that yesterday’s Fed minutes release indicated that several Fed insiders are now considering a halt to interest rate hikes over fear of an induced recession. Of course, the bulls are hoping that this is the beginning of an actual shift in the policy making machine. But expecting even higher prices in both gold and silver may be a stretch at this point. I’m happy enough just to say that another log has been thrown on an uncertain inflation campfire.

Reuters (Deep Kaushik Vakil) – Gold gains to one-year high as economic concerns grow – “Gold rose to a more than one-year high on Thursday as more weak U.S. economic readings bolstered bets for a pause in interest rate hikes, with prospects of a mild recession also sending investors scurrying for the safe-haven metal. Treasury yields slipped while the dollar slid after data showed a moderation in the rise in producer prices last month and an uptick in jobless claims, suggesting the Federal Reserve’s aggressive tightening over the past year was taking a toll on the economy. Further, U.S. consumer prices barely rose in March as the cost of gasoline declined, but stubbornly high rents kept underlying inflation pressures simmering. “That’s an underlying positive environment for gold where the Fed is done with their interest rate hike cycle, yet inflation overall remains higher than they would like,” said David Meger, director of metals trading at High Ridge Futures. This comes after U.S. Fed minutes on Wednesday indicated that several policymakers considered pausing rate increases and projected that recent banking sector stress would tip the economy into recession. Safe haven gold tends to gain during times of economic or financial uncertainty, while lower rates also lift the appeal of the zero-yield asset. But while gold is likely to remain bid with traders nervous about an economic recession and an extension of the banking crisis, it is likely to remain prone to profit taking on the highs, said independent analyst Ross Norman.”

On the day gold closed up $30.40 at $2041.30, and silver closed up $0.47 at $25.87.

Zaner (Chicago) – “Gold and silver bulls traversed the first US inflation report in very good stead and appear to be poised for new highs in the wake of today’s US Producer Price inflation report. Apparently, the bull camp has embraced the idea of a possible Fed pause even though there is chatter in the marketplace of “one and done”. In fact, market chatter overnight is projecting the ECB to raise rates 25 basis points next month and yet gold and silver seem unfazed. However, with the dollar breaking out to the lowest level since February 2nd it appears that gold and silver will see an additional lift from the currency markets. While the inflows to gold ETF holdings have not been significant recently yesterday saw the 6th straight daily inflow with 106,724 ounces purchased which in turn reduces the year-to-date decline in holdings to 0.3%. Silver ETF holdings also increased by 1.6 million ounces yesterday and are now 0.6% higher year-to-date. Apparently, the gold trade is unfazed by news of a decline in Indian April 2022/March 2023 gold imports which registered a value of only $35 billion versus $46 billion in the previous year. However, negative Indian gold demand news is offset by optimism toward the Chinese economy following evidence of record Chinese iron ore imports in the first quarter. Going forward, the gold market is garnering significant bullish Press with several articles overnight predicting record prices and or indicating the gold rally has only just begun. Despite a lack of significant upside action yesterday in the wake of a soft US CPI report, the bias remains up in gold and silver into the 2nd round of critical US inflation data today. Perhaps the trade failed to react to yesterday’s inflation news because the markets wanted a secondary confirmation that inflation was moderating. Therefore, it is possible that the post-US PPI report trade today will show increased bullish volatility. However, it appears the US dollar will be a steady supporter of the bull case in gold as an abatement of US inflation could result in the dollar giving significant ground relative to the euro and Swiss franc. With recent sharp gains in silver forged on surging volume and higher open interest it appears the bull camp has momentum on its side. In fact, favorable Chinese physical commodity imports and prospects of a looming end to the global interest rate hike cycle could leave silver with a near term target of $27.00.”

On Friday gold finished the week with a significant swoop to the downside after making a fresh 13-month high on Thursday – so these markets are not for the uninformed.

But it is possible that the price of gold is already in oversold territory. It will be interesting to see if traders aggressively buy this dip next week or remain defensive.

There was mild buying interest on the close which helped gold settle around $2000.00. but you will get a better indication early next week. I’m looking for something in the “middle” of the pricing range. This makes the most sense because while the bulls enjoy the short-term advantage the bears can crowd this trade just as easily with a continued shift in sentiment.

Neils Christensen (Kitco) – Gold prices slide lower as UofM consumer sentiment rises to 63.5 – “Stronger-than-expected U.S. consumer sentiment is adding further selling pressure to gold and is solidifying expectations that the Federal Reserve will raise interest rates by 25 basis points next month. Friday, the University of Michigan said the preliminary reading of its Consumer Sentiment Index rose to 63.5, down from 62.0 in March. The data beat expectations as consensus forecasts called for a roughly unchanged reading in consumer sentiment. “Sentiment is now about 3% below a year ago but 27% above the all-time low from last June,” the report said. The gold market has seen selling pressure ahead of the weekend as investors take profits after prices hit a 13-month high Thursday. The better-than-expected data is adding to gold’s correction. According to analysts, gold is seeing some selling pressure as consumer inflation expectations support calls for the Federal Reserve to raise interest rates again next month. According to the survey, consumers see inflation rising 4.6% by this time next year, up from 3.6% reported in March. “While consumers have noted the easing of inflation among durable goods and cars, they still expect high inflation to persist, at least in the short run,” the report said. “These expectations have been seesawing for four consecutive months, alternating between increases and decreases. Uncertainty over short-run inflation expectations continues to be notably elevated, indicating that the recent volatility in expected year-ahead inflation is likely to continue.” Long term, consumers see inflation relatively stable at 2.9%, unchanged for the fifth consecutive month. Five-year inflation expectations have moved in a range between 2.9% and 3.1% for 20 of the last 21 months, the report said. Markets now see a more than 85% chance that the Federal Reserve will continue to tighten interest rates. Forecasts for the Federal Reserve’s rate cut are also being pushed back until after the summer.”

On the day gold closed down $39.10 at $2002.20, and silver closed down $0.45 at $25.42.

Platinum closed down $11.50 at $1044.60, and palladium closed up $0.70 at $1493.00.

Brothers and Sisters, thank you for your friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry or Eric. We are now back to our traditional business model. Thank you for your patience. Have a blessed day. Richard Schwary

Posted on April 6, 2023 by Richard

Gold – Fresh News Required

Commentary for Thursday, April 6, 2023 (www.golddealer.com) – Today gold closed down $9.00 at $2011.90, and silver closed up $0.07 at $25.03. The gold trade today reflected trader indecision, which was typical this week, even though gold touched yearly highs on Wednesday. Today gold touched $2020.00 but traders sold the rally and bought the dip at $2000.00. Still this market looks like a tired bull, although some analysts believe this kind of pricing is typical of reasonable consolidation. The jobs report will be out tomorrow, and this would ordinarily create cross currents in commodity markets, but they are closed for Good Friday. So, reaction will not be seen in the US trade until the Monday after Easter. Trading is further slowed down by Passover which began at sundown on Wednesday and ends on Thursday in the United States. My bet – this long weekend will be quiet, but there is considerable underlying tension so analysts will be looking for any shift in trading sentiment. Both the commodity markets and Golddealer.com are closed for Good Friday. Last Friday gold closed at $1969.00 / silver at $24.08 – on the week gold was up $42.90 and silver was higher by $0.95.

On Monday gold opened choppy but quickly moved to session highs as the latest information from the Institute for Supply Management (ISM) suggests a further slowdown in the economy. If you are predisposed to the “recession” scenario this latest information will help increase that disposition. The fear of recession is of course the driving force behind the FOMC strategy.

The views of professional economists differ widely, but the most likely scenario is that modest interest rate increases will continue. If this is the case, these smaller hikes will continue to challenge the bullish scenario. If the Fed does “pivot”, for whatever reason gold would likely challenge all-time highs. While this argument is intuitive, it may be helped along this bumpy road in a world that requires continued safe haven demand, created by uncertainty and war.

From a short-term view traders sold this latest pricing surge at $1990.00, setting up another possible “see/saw” trade. Which may encourage short-term profit taking considering the price of gold is higher by $125.00 this past month.

On the other hand, the recent spike in crude oil prices helps the bullish gold scenario. These past three weeks the rise in crude oil has been significant, moving from $67.00 to $80.00. And there is new evidence suggesting that even the mighty hedge funds are rethinking gold ownership.

And it may be significant that these crosscurrents are happening in the usually thin, quiet, and short Easter trading week. The commodity markets are closed on Good Friday.

Reuters (Seher Dareen) – Gold rebounds as dollar trims OPEC+ cut-led gains – “Gold prices bounced back on Monday as the dollar trimmed its initial gains that were driven by bets that OPEC’s surprise output cuts could jack up global energy prices and force central banks to hike interest rates. That seemed to be a “knee jerk reaction” to the dollar’s initial rise, also triggering some bargain hunting around the $1960-$1965 levels, said StoneX analyst Rhona O’Connell. “You’d have thought in the longer term, it might be supportive because OPEC has introduced some uncertainties or fresh uncertainties into the marketplace,” she added. The dollar trimmed its initial gains, making gold cheaper for traders holding other currencies, as investors focus on diverging central bank policy, with the impact of oil production cuts complicating the inflation outlook. While gold is traditionally considered a hedge against inflation, higher interest rates to rein in rising price pressures dim appeal for the asset since it pays no interest. CME’s Fedwatch tool showed markets see a 59.3% chance of the Federal Reserve hiking rates by a quarter point in May, while markets see a 66% chance of a further 25 bp hike by the Bank of England in May. “Gold is now vulnerable to a move down to $1,900, given the potential for a higher terminal Fed rate that markets are currently pricing in,” said Matt Simpson, senior market analyst at City Index. Bullion rose by nearly 8% last quarter after the global banking turmoil drove bets that the Fed would slow its rate hikes.”

On the day gold closed up $14.90 at $1983.90, and silver closed down $0.14 at $23.94.

Zaner (Chicago) – “We are little concerned of a loss of upside momentum in gold especially relative to silver. Furthermore, we are concerned that the sharp jump in energy prices will prompt hawkish central bank dialogue which in turn could weigh on gold and silver prices. In fact, last week’s very modest hard-fought gains in gold were forged on a distinct softening of trading volume and that action was accompanied by falling open interest! Therefore, we suspect flight to quality longs are becoming impatient and/or recognize a pause in global economic uncertainty. In other words, gold interest is waning while silver as a physical commodity likely to benefit from better economic activity is in vogue. Last week gold ETF holdings increased by 284,798 ounces but remained 0.6% lower year-to-date. However, it should be noted that gold ETF holdings from the early March low of 66.6 million ounces reached a high last month of 68.3 million ounces. While gold ETF holdings have retrenched from that March high, seeing total gold ETF holdings rise above 69 million ounces could signal an upside breakout in investment interest, particularly if “risk on” sustains. Gold is also vulnerable from a technical perspective with the latest COT positioning report showing a net spec and fund long of 219,000 contracts which is the highest since May 2022. Gold positioning in the Commitments of Traders for the week ending March 28th showed Managed Money traders added 23,359 contracts to their already long position and are now net long 130,314. Non-Commercial & Non-Reportable traders have a net long of 219,293 contracts after net buying 20,430 contracts. In retrospect, the silver market’s low to high rally last week of $1.27 suggests a temporary leadership role and a slightly overbought status. Evidence of the leadership position by silver is its ability to gain on gold for 9 straight sessions! In conclusion, silver looks to benefit if global equities and treasuries continue to rally while gold appears vulnerable to a setback to $1962.70 and possibly to $1,950. In contrast, the silver net spec and fund long position as of early last week was half the size of the net spec and fund long in January! The March 28th Commitments of Traders report showed Silver Managed Money traders had a net long 10,832 contracts after increasing their already long position by 9,946 contracts. Non-Commercial & Non-Reportable traders added 9,131 contracts to their already long position and are net long 23,684 contracts. In the silver investment quadrant total silver ETF holdings at 841 million ounces are only 19 million ounces below a critical upside breakout. While current silver ETF holdings are well below all-time highs of 994 million ounces it should be noted that holdings last Friday saw an influx of 5,036,577 ounces with inflows last week gaining 7.31 million ounces! Uptrend channel support in May silver is $23.61 with a close above $24.00 needed today to avoid a wave of profit taking.”

On Tuesday both gold and silver made 12-month highs as US economic data and the media in general whipped up the “continued jobs weakness” theory.

Today’s Labor Department data reported that February job openings fell to two-year lows – in other words demand for workers is easing. This for now supports the notion that recessionary forces are growing, and the Fed will reconsider its current hawkish interest rate program.

Whether they will or not remains to be seen. But I believe this news was “today’s trigger” in a raging market already primed for higher prices from a technical viewpoint.

To say the metals are hot would be an understatement. But unless you believe the world is coming to an end, the run from $1800.00 to $2000.00 has likely created more sellers than buyers.

Jim Wycoff (Kitco) – “Technically, April gold futures prices hit a 12-month high today. Bulls have the strong overall near-term technical advantage. Prices are in an uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at the all-time high of $2,078.80, scored in March of 2022. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,945.00. First resistance is seen at $2,035.00 and then at $2,070.00. First support is seen at $2,000.00 and then at today’s low of $1,979.00. May silver futures prices hit a 12-month high today. The silver bulls have the strong overall near-term technical advantage. Prices are in a steep uptrend on the daily bar chart. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $27.50. The next downside price objective for the bears is closing prices below solid support at $23.00. First resistance is seen at today’s high of $25.12 and then at $25.50. Next support is seen at $24.50 and then at $24.00.”

Reuters (Deep Kaushik Vakil) – Gold races past $2,000/oz after weaker U.S. data – “Gold extended gains on Tuesday and crossed the key $2,000 level as the dollar and yields fell, while weaker U.S. economic data emboldened bets for slower rate hikes despite mounting concerns over oil-led inflation. “We’re in this very positive backdrop for gold in which we have the slowing of economic data along with inflationary pressures remaining elevated,” said David Meger, director of metals trading at High Ridge Futures. Burnishing gold’s appeal, especially amongst traders holding other currencies, the dollar added to its losses after data showed U.S. job openings in February dropped to a near two-year low while factory orders also dipped. A surge in oil prices this week after a surprise output cut by OPEC+ has helped zero-yield gold, traditionally considered the preferred inflation hedge, shake off the usual pressure from the likelihood of interest rate hikes that could be implemented to rein in rising price pressures. “From a technical perspective, the gold price is likely to remain strong and stabilize at its current level or even higher. The $2,050 mark could act as an important resistance level, and if breached, prices could quickly soar towards its all-time high,” said Alexander Zumpfe, a precious metals dealer at Heraeus.” Markets now see about a 40% chance of the Federal Reserve hiking rates by a quarter basis point in May, with a roughly 60% chance of a pause. But Han Tan, chief market analyst at Exinity, said more rate hikes could cause gold to unwind some of its recent gains.”

On the day gold closed up $38.30 at $2022.20, and silver closed up $1.08 at $25.02.

On Wednesday both gold and silver held these higher pricing levels nicely, a plus for the bullish scenario which builds confidence in the still developing theory that the Fed may pause interest rate hikes in May. The much-watched CME FedWatch Tool counts the days before the next meeting (May 3^rd) and statistically sees a 60% chance that US rate hikes will pause in May.

I’m not sold on the idea that the Fed will abandon its program of interest rate hikes. But I suppose it is possible they will “pause” next month. As churning in the banking industry, uncertainty on Wall Street and growing world confusion push the anxiety button. And a simple “pause” will continue to stoke the increasingly bullish technical picture.

At the same time, “anything” that detracts from this optimistic picture will accelerate and encourage the selling of both gold and silver bullion. Today’s New York market will become more typical as gold moved to $2032.00 in the early trade and just as quickly dropped to $2010.00 before settling in the $2020.00 range. Expecting volatile trade, in either direction, will continue to be a reasonable precaution. Make sure your seat belts are fastened.

On the day gold closed down $1.30 at $2020.90, and silver closed down $0.06 at $24.96.

On Thursday the gold market was choppy, and in my opinion subject to further profit taking unless the Fed turns a bit more dovish towards interest rates. Chief Powell has already talked about this possibility, but the proof is in the pudding. An old saying which notes that value is judged on direct experience. Or the proof of the pudding is in the eating.

We continue to be a net seller to the public this entire week. Any quality bullion product which came in over the counter was sold in a matter of days. There is plenty of buzz still left in this trade but using a “step-down” approach if you are a new buyer is a consideration because of the expected volatility. Under these circumstances a buyer with $100,000.00 (common these days) would split this action into 4 units of $25,000.00 each. And spread them out – using a time frame which includes several FOMC meetings.

Reuters (Deep Kaushik Vakil) – Safe-haven gold set for weekly rise on economic woes – “Gold slipped on Thursday as the U.S. dollar and yields firmed, but prices were still on track for a weekly rise as weak U.S. economic data spurred worries of a slowdown. Pressuring prices, the dollar index came off two-month lows, while benchmark Treasury yields also ticked up for the day. Safe-haven bullion has risen about 2% so far this week, surpassing the key $2,000 level, as oil prices surged after the shock OPEC+ output cuts, while data showed a slower U.S. services sector and fewer job openings. The U.S. Federal Reserve is in a bind, as higher interest rates could trigger a recession but a pause in the monetary tightening risks embedding inflation, with either scenario positive for gold, said Paul Wong, market strategist at Sprott. “It is a long weekend for most major markets, so I would expect low volume, not meaningful price action today.” Gold is seen as an inflation hedge, while lower interest rates decrease the opportunity cost of holding zero-yield bullion. More data reinforcing the need for rate cuts “could keep gold above $2,000 and perhaps propel it into uncharted territory,” said Craig Erlam, senior market analyst at OANDA. Traders are awaiting the U.S. jobs report on Friday for cues, but their reaction will only become apparent next week due to the Good Friday market holiday. “With a U.S. recession still on the cards, growing systemic risk adds to gold’s case,” the World Gold Council said, adding that gold exchange-traded funds (ETFs) saw their highest monthly inflows in March since 2019.”

On the day gold closed down $9.00 at $2011.90, and silver closed up $0.07 at $25.03.

Platinum closed up $9.40 at $1006.90, and palladium closed up $37.10 at $1459.10.

Brothers and Sisters, thank you for your friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry or Eric. Most employees have been vaccinated – if this is a concern ask for more information. We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variants remain dangerous. At the same time trust that God will get us back to normal and our traditional business model. Thank you for your patience. Richard Schwary

Posted on March 31, 2023 by Richard

Gold – Inflation – Cooling or Intransigent?

Commentary for Friday, March 31, 2023 (www.golddealer.com) – Today gold closed down $11.30 at $1969.00, and silver closed up $0.18 at $24.08. The gold trade early Friday was interesting in that the price of gold challenged the familiar $2000.00 level as the release of the Personal Consumption Expenditures (PCE) came in a bit cooler than expected – a plus for the bullish gold scenario. But traders sold the rally at $1988.00, pushing prices as low as $1976.00 before some mild bargain hunting steadied the day’s trading. Still, gold closed on lows for the day and mildly in the red. What happened to the conviction that the Fed may be turning dovish? First the PCE was only mildly cool, the inflation beast is still alive and well. Second, and probably more importantly – over the past month gold is higher by $150.00. Traders decided to take profits today. And will continue to sift through fresh talk by the Governors as to what they make of the current inflation picture. Is inflation cooling or intransigent? Everyone has an opinion. Next week is a short week with Easter on Sunday. The markets will be closed on Good Friday so my bet is that trading will be thin and quiet. We will also be closed on Good Friday. Last Friday gold closed at $1982.10 / silver at $23.25 – on the week gold was down $13.10 and silver was higher by $0.83. There is still plenty of turmoil and not many large sellers.

On Monday gold market swooned in the overnight Hong Kong market ($1944.00) but the dramatically lower prices were bought both in the London and domestic New York market. Still gold finished the day solidly in the red on what looks like another round of profit taking.

There are at least two factors to consider. First, this weakness in gold, despite a soft dollar, detracts from the bullish “inflationary” scenario. And second, it suggests the domestic trade still believes the Fed will not abandon its aggressive interest rate policy against rising inflation.

The Fed’s overall plan, however, offers them many options. And timing should not be overlooked. The next FOMC meeting will take place May 2^nd and 3^rd – far enough away for the financial markets to settle down. Yet close enough for the Fed to release customized statements if our own Powell cohorts disagree with the latest economic or political input.

Look for another round of “ups and downs”, likely based on day-to-day conjecture. The current interest rate threat did not go away but it has stopped being an uncertain present threat.

This remains a tough work in progress. And unfortunately, we are not guaranteed the hoped for and now famous soft handing. But interest rates are higher, and all markets are adjusting accordingly. The sun is still shining and most everyone will enjoy less drama.

Reuters (Bharat Gautam) – Gold loses over 1% as investors seek riskier assets – “Gold prices fell more than 1% on Monday as worries over a crisis in the banking sector subsided, prompting investors to scale back safe-haven trades in favor of riskier assets like equities and crude oil. There is a sense of calm in the markets and a flight back into some of the risk-on assets, and all the safety trades like gold are starting to sell off, said Phillip Streible, chief market strategist at Blue Line Futures in Chicago. A buyer for Silicon Valley Bank’s deposits and loans helped Wall Street’s main indexes open higher, sending gold further below the $2,000 mark breached last week. “Much of the rally on the gold market was really short-covering,” Streible said, adding that prices were likely going to continue to come under pressure. Recent banking sector stress and the possibility of a follow-on credit crunch bring the U.S. closer to recession, Minneapolis Fed president Neel Kashkari said. However, U.S. Federal Reserve officials said there was no indication financial stress was worsening. “After kissing the psychological $2,000 level last week, bears exploited this resistance to attack. Appetite for the precious metal has also been dampened by a stabilizing dollar and mixed signals on monetary policy from the Fed,” said Lukman Otunuga, analyst at FXTM. Last week, the Fed indicated it was on the verge of pausing further increases in borrowing costs, boosting non-yielding gold’s appeal. On the physical front, China’s February net gold imports via Hong Kong nearly tripled from the previous month.”

On the day gold closed down $29.70 at $1952.40, and silver closed down $0.20 at $23.05.

Zaner (Chicago) – “With reports of buyers stepping forward for some assets of the Silicon Valley Bank and a regional Fed Pres. suggesting the US economy is drawing closer to recession because of the bank sector turbulence, a measure of corrective action in gold and silver is justified. However, a demand underpin for prices was seen overnight following reports that Chinese February imports of gold via Hong Kong rose to 64.8 tons versus only 22.2 tons in January. In a suspect but supportive development at the end of last week, the Russian central bank also indicated it has added 1 million ounces of gold to its reserves since the beginning of the Ukraine war. While the Russian bank indicated their gold holdings were 74.9 million ounces (worth $135 billion), sanctions reportedly froze $300 billion worth of Russian reserves outside of Russia. Furthermore, according to several different global entities, total Russian energy receipts continue to be robust, and financing of the war will continue. However, some analysts suggest the Russians may have switched a large portion of their dollar and euro holdings into the Chinese currency and that may justify some of the dollar weakness over the last several months. Fortunately for the bull camp, investors continue to push money toward gold ETF instruments, with Friday posting a net inflow of 48,594 ounces and in turn fostering potential early signs of a trend of investment. Silver ETF instruments also saw an inflow of 836,096 ounces on Friday, but those holdings remain 1% lower year-to-date. Clearly, a moderation of global angst over bank sector issues has moderated and without a fresh bank victim or a rumor of a fresh victim we expect some flight to quality premium to drain from both gold and silver prices. At least to start this week the markets do not appear to be overly interested in news of Russia potentially moving tactical nuclear weapons into Belarus nor is the trade sensitive to the intense fighting between Ukraine and Russia in the East. It should be noted that gold in certain currency prices has already reached record levels which could be a disincentive for some would-be buyers. While June gold failed to hold a minimal upside breakout on Friday, the market was obviously overbought from a 2-day surge of $70, and the new high for the move was forged on strong trading volume and an uptick in open interest and that makes the downside reversal this morning significant and likely to extend. Critical support in June gold is $1,964.40 with similar key support in silver pegged at $22.825. The Commitments of Traders report for the week ending March 21st showed Gold Managed Money traders added 21,593 contracts to their already long position and are now net long 106,955. Non-Commercial & Non-Reportable traders are net long 198,863 contracts after net buying 30,180 contracts. Silver positioning in the Commitments of Traders for the week ending March 21st showed Managed Money traders went from a net short to a net long position of 886 contracts after net buying 4,648 contracts. Non-Commercial & Non-Reportable traders net bought 3,659 contracts and are now net long 14,553 contracts.”

On Tuesday gold market seemed to have caught a short-term bottom bounce in Hong Kong last night ($1950.00). And this firmer price structure was reflected in the New York cash trade in a rather choppy but upward trend before turning flat between $1970.00 and $1980.00. But is rather remarkable that gold finished nicely into the green for the day.

Some physical traders believe this market remains shaky and safe haven buying is no longer in the “emergency” stage. I will leave that decision up to the new buyers. But there is still plenty of residual banking angst around the corners of this trade and more than mild bargain hunting considering the rather strong finish to the upside today.

The reason can be seen in the wide range of accusations coming from the congressional investigation into why “warning signs” were ignored in the collapse of Silicon Valley Bank and Signature Bank. This is the typical politicized spectacle when “after the fact” information is used to connect the dots and make accusations. I guarantee Congress will take no responsibility in their role of providing crazy amounts of fiat cash to all the banks. And in fact, will not modify the crazy fractional banking system which rolls over and covers up bank problems.

We are seeing some increased public selling of gold bullion across our trading desk. At the same time the general public remain ready buyers of quality bullion products. Especially those which are ready for immediate delivery. Delayed delivery for large orders remains popular but, as usual, requires patience. Premiums are moving lower, a plus for the physical market. The number of new accounts continues to grow. And there is a small amount of new buzz in today’s trade.

On the day gold closed up $20.00 at $1972.40, and silver closed up $0.27 at $23.32.

On Wednesday gold was quietly moving between $1961.00 and $1971.00 as the “banking crisis” continues to dissipate. And the bulls must be somewhat disappointed that yesterday’s move into the green did not create any stir with the momentum players. The equities market this morning looks pretty good, which might suggest higher interest rates are not the end of the world for stocks but are still doing their job at keeping gold prices under pressure.

FXEmpire (Christopher Lewis) – Gold Price Forecast – “Gold markets have fallen a bit during the trading session on Wednesday as we continue to see a lot of noisy behavior, just underneath the crucial $2000 level. The $2000 level of course makes for good headlines, and it’s also an area that we have seen action at previously. If we do pull back from here, I think there are plenty of support levels underneath worth paying close attention to. Looking at this chart, the $1950 level underneath would be an area of interest, as the futures market gapped from that level, and it is of course a psychologically important figure. If we were to reach that area, I would be looking for some signs of support that we can jump on, but if we do break down below that level, then we need to start looking toward the 50-Day EMA, presently just below the $1900 level. On the upside, if we can break out to a fresh, new high, it opens up the possibility of moving to the $2050 level. The $2050 level then opens up the possibility of a move to $2100. Keep in mind that gold seems to be used at the moment for wealth preservation more than anything else, so it does make quite a bit of sense that we have seen gold rally, even in the face of a strengthening US dollar at times. That being said, the interest rate situation is all over the place, so that will more likely than not continue to cause havoc. Ultimately, as rates rise, that often can work against the value of gold, but as of late, we have seen so much havoc in the banking system that the correlation may be breaking down of it. Ultimately, we are in an uptrend, so it is worth keeping that in mind, but it’s also worth keeping in mind that we are in an area that has been massive resistance previously, so therefore you need to keep in mind that it is going to be very difficult to get above. We are going to need to see some type of fundamental reason for the market to take off, but with all of the concern that we are presently seeing, one thinks that it would only be a matter of time.”

On the day gold closed down $6.30 at $1966.10, and silver closed up $0.06 at $23.38.

On Thursday the gold market opened on the quiet side as analysts pondered the uncertain next move in the FOMC interest rate model. But the pricing woke up as the Dollar Index lost a half point in the early morning trade. Which might suggest their working model may be flexible.

Today’s fresh upward movement and bullish technical picture encourages momentum players who believe sentiment will shift toward a more dovish FOMC. This kind of optimism is not misplaced but it is a bit premature in my mind. Nonetheless gold finished solidly in the green, once again challenging tough overhead resistance at $2000.00.

This Friday traders will look at Personal Consumption Expenditures (PCE), which measures how consumers spend their money and includes their saving and buying habits. This measure is held in high regard by the FOMC, and a hot reading suggests further hawkish Fed interest rate planning. Judging sustained inflation in the short term leads to problems but has become a national pastime. If tomorrow’s PCE reading is optimistic it would indicate that inflation is slowing, and the economy is resilient. Still, I remain cautious, looking for a “middle ground” reading and another quarter point interest rate hike which will keep a lid on gold prices.

Reuters (Deep Kaushik Vakil) – Gold pares gains as higher yields limit dollar support – “Gold prices pared earlier gains on Thursday as higher bond yields dulled bullion’s shine, limiting the upside from a weaker dollar as investors waited for U.S. inflation data to gauge the Federal Reserve’s next move. The key driver is the downward move in the U.S. dollar index, combined with “markets expecting a somewhat early Federal Reserve pivot to a more dovish stance,” said Bart Melek, head of commodity strategies at TD Securities. Data showed U.S. gross domestic product rose by 2.6% in the fourth quarter. The Fed’s favored inflation gauge, core personal consumption expenditures (PCE), is due on Friday. Investors will be looking for clues about the path of the U.S. central bank’s monetary policy. According to the CME FedWatch tool, markets are pricing in about a 50-50 chance of the Fed maintaining rates at current levels at its May meeting. “Anything below expectations on the core (PCE) would imply that there is less need or requirement for tight monetary policy from the Federal Reserve,” Melek added. Wall Street’s main equity indexes opened higher while benchmark 10-year Treasury yields edged up, as fears of a banking crisis eased but investors remained cautious about the impact bank failures would have on the economy. “We expect the gold price to fall to around $1,900 per troy ounce – previously $1,800 per troy ounce – in the coming months,” Commerzbank wrote in a note.”

On the day gold closed up $14.20 at $1980.30, and silver closed up $0.52 at $23.90.

On Friday gold pricing disappointed the bulls but the losses were mild into the weekend. The hopes for a less aggressive Fed interest rate policy support what looks like the second quarterly gain in gold prices, amid banking problems and safe haven demand.

Reuters believes that the banking issues will not dissipate quickly. This also will help support physical safe haven demand for the metals. “The mini-banking crisis has seen yields fall considerably and interest rate expectations pared significantly back, which has propelled gold higher,” said Craig Erlam, senior market analyst at OANDA. “There’s likely to be significant scarring on the back of the issues in the banking sector which will slow the economy and enable central banks to do less, even cut rates this year.”

Opinions among dealers in physical metals vary widely but generally fall into two groups. Those that remain bullish and believe higher prices in gold and silver are only a matter of time. This year Goldman Sachs is looking for $2500.00 gold. And those that remain bearish because they belief the Fed will continue to raise interest rates. Both groups agree however that they have not seen this much public interest in gold and silver bullion since the 2008 real estate collapse.

On the day gold closed down $11.30 at $1969.00, and silver closed up $0.18 at $24.08.

Platinum closed up $8.90 at $994.10, and palladium closed up $1.40 at $1466.00. This week we saw a jump in buying interest in platinum and palladium. Both are too cheap in my mind.

Posted on March 24, 2023 by Richard

Gold – A Pausing Moment Perhaps?

Commentary for Friday, March 24, 2023 (www.golddealer.com) – Today gold closed down $11.70 at $1982.10, and silver closed up $0.11 at $23.25. The gold trade was somewhat weaker today as traders remained anxious over the implied threat of still higher interest rates before the end of this year. At the same time, the bullish sentiment has not particularly faded, which can be seen in the consistent ability of the bulls to buy the dips in current pricing. Still, without fresh news which will further enable bullish sentiment, the trade in both gold and silver should remain left footed on the short term. Last Friday gold closed at $1969.80 / silver at $22.35 – on the week gold was higher by a modest $12.30 and silver was higher by $0.90.

On Monday gold made new recent highs in Hong Kong ($2010.00). London sold the rally, so the domestic New York market opened lower ($1985.00) but still managed to finish the day in the green. But this tepid response was unimpressive, especially for those looking for the kind of buzz which war created over the weekend. The trading pattern should look familiar and suggests traders remain unsure about upcoming changes in the Fed interest rate policy.

The good news, if you are looking for less uncertainty is that Chief Powell and friends will meet Tuesday and Wednesday – March 21^st and 22^nd and preside over what the Fed calls a meeting associated with a Summary of Economic Projections. This rather long name does not suggest certainty – the word “projections” simply implies a best guess given the present circumstances.

The metals may tread water during this important FOMC meeting. These meeting days are called “quiet” because they are held behind closed doors. They are not trying to hide anything; they just want to make sure everyone is on the same page before the Chief starts talking.

This traditional approach does increase the drama and tension as traders wait for Powell’s insight this week. Analysts believe a modest quarter point rate hike is the right choice given the failure of Silicon Valley Bank and problems with Suisse Credit. You could see a “tension creating” half point hike in interest rates if the Fed is worried about rising inflation. Still, there are others who are so sold on inflation that an aggressive half point hike would not retire the bulls. But it would certainly keep them from thinking that $2500 gold is a cinch.

On the day gold closed up $9.40 at $1979.20, and silver closed up $0.18 at $22.53.

Zaner (Chicago) – “Needless to say, fear toward the global banking sector remains in place into the new trading week with flight to quality instruments like gold and silver clearly remaining in vogue. While the purchase of Credit Suisse by UBS for $3.2 billion calms fears slightly, in the 2008/2009 financial crisis, we did see buyers of embattled companies become embattled themselves. With a contraction in German producer prices and the prospect of a pause by the US Federal Reserve on Wednesday, interest in gold and silver should remain firm. However, investment interest in gold and silver in the form of ETF holdings showed significant outflows last Friday, perhaps in a sign of profit-taking by investors. On the other hand, despite the 78,954 ounces outflow from gold ETF instruments last Friday, gold holdings increased by 498,630 ounces on the week. Unfortunately for the bull camp in silver, ETF holdings on Friday declined by a massive 10.5 million ounces which reduced holdings on the week by 15.3 million ounces. However, some traders suggest that many gold and silver ETF holders are smaller specs and could be seen as a contrary indicator. For now, it is no longer a question if the money flowing into gold is primarily the result of uncertainty over a contagion in either the US or global banking sector. While gold and silver generally showed little response to strength and weakness in the dollar at times last week, the very poor close in the dollar last week clearly shows some market expectations for a pause in rate hikes from the US Fed later this week. Certainly, significant declines in implied Treasury futures yields have been an added source of lift for both gold and silver. In fact, the silver market has reversed its charts significantly and has come alive and begun to track with gold. Obviously, signs of trouble at any other financial institution beyond the three banks currently fostering anxiety, (Silicon Valley Bank, First Republic, Credit Suisse) will instantly inject and likely accentuate flight to quality buying of gold, silver, and US treasuries. Fortunately for the bull camp, the weekly COT positioning report was not released as the sharp gains off the early March lows have likely pumped up the net spec and fund long position considerably. From a technical perspective, seeing gold reach the highest level since March 2022 on extremely high trading volume, highlights bullish consensus in the market. In fact, trading volume on March 13th was the highest trading volume since November 9th of 2020. While we see the path of least resistance remaining up, traders should realize this is now a flight to quality issue which usually requires constant signs of worsening to extend significantly.”

On Tuesday gold weakened overnight in Hong Kong and London. And continued lower in the domestic New York cash market. This figures because of at least two reasons. Gold is higher by $100.00 this past month so a profit taking round is almost a sure thing with the next FOMC rate hike just a few days away. Traders bought initial weakness at $1945.00 but these modest gains gave way to lows on the day around 1940.00.

There is fresh news even in the real estate sector which suggests that the financial markets are becoming less apprehensive. If this turns into a trend back towards “normal” the gold and silver bullion rhetoric will cool. And be replaced with a more conservative pricing model. One which questions recent gains even if coming Fed interest rates are modest.

A fresh look at what is happening in the US may be surprising: no banking crisis and economic improvement (things are not falling apart). Under these conditions higher prices in the metals happen over the longer term as inflation continues to grind away at buying power. It was not long ago that this approach to bullion accumulation was the professional model.

On the day gold closed down $41.20 at $1938.00, and silver closed down $0.21 at $22.32.

Zaner (Chicago) – “Without a fresh bank problem added to the recent list a measure of relief in the markets should prompt long profit-taking in gold and silver. Unfortunately for the bull camp, the focus of the trade and the source of triple digit gains off the early March low in gold were primarily flight to quality and this morning the markets are “somewhat relieved” that time is passing without fresh Bank issues. However, even a very minor headline pointing suspicion at another bank would suddenly throw gold and silver prices back toward new highs for the move. On the other hand, even with the dollar showing signs of extending the March slide with a dip below psychological 103.00, gold and silver seemed to have taken little notice. Sentiment in the financial markets has shifted definitively in favor of a “pause” from the Fed tomorrow, but we are not sure gold will see a large rally if the Fed takes a pass on hiking rates. We do believe gold and silver will find some minor speculative buying ahead of the Fed meeting but the reaction in gold prices to the Fed outcome is extremely difficult to predict. In fact, a “pause” could prompt aggressive flight to quality buying off the idea that the banking situation is more threatening than the markets realize, or because inflation might be able to regain momentum because of a pause in the inflation fight. However, a more likely scenario is a pause by the Fed will at least temporarily prompt market confidence which should result in gold and silver falling back toward the recent lows. In a very disappointing development for the bull camp, both gold and silver have seen consecutive days of large ETF outflows with year-to-date gold and silver holdings both down by 1.3% year-to-date. However, a positive development for the bull camp today came from a 32% increase in Swiss gold exports last month with a large amount of those export going to China. In fact, Swiss exports to China increased by 122% to 58 tons while Swiss gold exports to India increased by 22.4 tons. Furthermore, Turkey continues to be a significant gold importer with the purchase of 43.9 tons of Swiss gold last month. In conclusion, traders should not underestimate the size of potential swings in gold and silver prices ahead and we suggest risk averse traders seek put protection against long gold and silver futures positions.”

On Wednesday the gold trade remained apprehensive, but it is interesting that after an initial dip to the downside, traders bought yesterday’s weakness and gold staged a small rally ($1952.00) even though today the FOMC will release information after market close. Most believe the Fed will use a light hand here with perhaps a quarter point rise in interest rates. Whether today’s firmer prices are a “relief rally” or traders did some minor bargain hunting remains to be seen.

Jerome and friends did indeed raise interest rates the expected quarter of a point, despite banking turmoil. And Chief Powell tried to answer questions regarding the failure of Silicon Valley Bank. The quarter point hike was seen as dovish, in the short term. So gold pricing in the aftermarket reached $1975.00 before paper sellers took short-term profits.

The best thing you can make of this latest move is that the FOMC unwinding process is getting more complicated. Wall Street did not like even the small interest rate increase and the public is still worried about banking liquidity. I’m still not overly worried at this point, but the possibility of a mistake, intentional or unintentional is worth considering.

As far as our trading desk is concerned – we continue to sell everything that is not nailed down. A few large sellers have been asking questions, but no has pulled the trigger yet.

On the day gold closed up $8.80 at $1946.80, and silver closed up $0.36 at $22.68.

Zaner (Chicago) – “While financial market uncertainty remains just under the surface, this morning’s newswires are devoid of fresh incendiary developments. However, gold is tracking slightly higher this morning anticipating an expansion of uncertainty following what will be a very critical and perhaps historical decision by the US Federal Reserve later today. The Federal Reserve needs to pause to help the economy but raise rates 25 basis points to continue the inflation battle which leaves a situation where it might accentuate uncertainty and fail to instill confidence. Either decision today will likely injure the Fed’s reputation. However, for the Fed to pause they will have to admit they were wrong, and a pause could send a signal the Fed is worried about the banking sector. Furthermore, a pause probably allows inflation to continue to percolate. Fortunately for the bull camp the dollar index in the early action today sits right on yesterday’s 35 day low and gold ETF holdings yesterday saw an inflow of 85,313 ounces and the trade was also presented with some extremely hot UK inflation readings overnight. Obviously, the uncertainty from the bank sector remains in place with the markets expected to be on high alert again today because of the FOMC meeting. Market expectations for the Fed today are mixed with many economists believing the Fed will pause, while others are thinking the Fed will follow through with a 25 basis point hike. In our opinion, the gold and silver trade reaction to the Fed decision could be extremely difficult to predict with the markets capable of shaping the outcome in a number of ways. If one looks to the recent trade and realizes the $101 gains in gold were primarily the result of the bank crisis, it is clear the bull camp in gold needs further uncertainty to regain its footing. However, if the Fed pauses, that could reduce economic uncertainty from slowing fears, but a hike could also accentuate bank problems. On the other hand, if the Fed pauses, the trade could see that as an opening for inflation to rekindle and that would re-create flight to quality interest. Unfortunately for the bull camp, even if the trade eventually interprets a pause by the Fed as an opportunity to see inflation regather momentum, we expect the initial reaction in gold and silver to be lower. With yesterday’s action, it remains clear that the gold market has detached from the trade with the US dollar, while silver seems to have a little more of a positive correlation with US equities. It will be important for the bull camp to see a significant jump in ETF holdings later this week in the event of a large washout in gold and silver prices today. The June gold contract nearly reached the first retracement of the March rally which sits at $1,954.20 today, with a 50% retracement level today projected at $1,930.35. As suggested in previous coverage this week, those preferring to stick with the long-term uptrend should implement long put and short call positions against long futures positions. The March 14th Commitments of Traders report showed Gold Managed Money traders added 61,256 contracts to their already long position and are now net long 85,362. Non-Commercial & Non-Reportable traders added 48,776 contracts to their already long position and are now net long 168,683. While the lack of significant declines in silver yesterday could indicate the market is less vulnerable than gold to this week’s events, the market was not nearly as overbought and will likely favor its physical commodity market standing in the coming 12 hours. In other words, silver should track tightly with equities. The Commitments of Traders report for the week ending March 14th showed Silver Managed Money traders net bought 14,443 contracts and are now net short 3,762 contracts. Non-Commercial & Non-Reportable traders are net long 10,894 contracts after net buying 6,529 contracts.”

On Thursday the gold bulls were again happy as prices closed on highs. And the aftermarket added another $10.00, increasing the buzz, but this happiness faded. Judging from the increase in bullish sentiment more traders must believe the Fed will at least tap the inflation brakes.

In our corner of this small world, I can say we have never seen such large changes in trading sentiment in such a short time. And for the first time in all this drama a few long-term customers sold larger positions in gold bullion. We are still net sellers by a wide margin, and product premiums have moved lower, but our shipping department is busy all day. I really don’t know how the Fed is going to make everyone happy. So, hold on to your hat, the winds of change are starting to blow harder and harder. Which at some point figures to introduce great volatility if past experience is worth anything in this still upside-down financial market.

Reuters (Seher Dareen) – Gold drifts higher as Fed hints at rate-hike pause – “Gold prices extended gains to a second straight session on Thursday, boosted by a slide in the U.S. dollar and Treasury yields after the Federal Reserve signaled an end to its monetary tightening cycle might be on the cards. The Fed raised rates by a quarter of a percentage point on Wednesday but highlighted that it was on the verge of pausing. “If they truly do pause that clearly has been a green light for the gold market, being a quintessential hedge against inflation. It’s likely that inflation would remain elevated if they’re unable to raise rates any further,” said David Meger, director of metals trading at High Ridge Futures. Gold on Monday hit a one-year high, breaching the key $2,000 level on safe-haven demand, though later ceded some ground as banking sector jitters subsided following the rescue of Credit Suisse. But the outlook remains positive if the Fed pauses or the banking crisis carries on, analysts say. Wall Street bank Goldman Sachs hiked its 12-month gold price target to $2,050 an ounce from $1,950, describing it as the best hedge against financial risks. “A combination of inflation still being at lofty levels, safe haven alternative investment demand, and the weaker dollar – all of these are significant driving factors behind gold’s recent move,” Meger added. The dollar was near early-February lows, sliding for a sixth session and making gold cheaper for holders of other currencies. Benchmark government bond yields also edged lower and improved zero-yield bullion’s allure.”

Jim Wyckoff (Kitco) – “Technically, the gold futures bulls have the solid overall near-term technical advantage. Prices are in a fledgling uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close in April futures above solid resistance at this week’s high of $2,014.90. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,922.30. First resistance is seen at the overnight high of $1,986.10 and then at $2,000.00. First support is seen at the overnight low of $1,967.30 and then at $1,950.00. May silver futures prices hit a seven-week high today. The silver bulls have the firm overall near-term technical advantage. Prices are in a steep, fledgling uptrend on the daily bar chart. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $24.00. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at $23.50 and then at $23.75. Next support is seen at $23.00 and then at $22.50.”

On the day gold closed up $47.00 at $1993.80, and silver closed up $0.46 at $23.14.

On Friday the gold trade remained anxious but steady, which can be seen if you consider the tight pricing spreads from Friday of last week through the close today. Gold was higher by $12.30 and silver was higher by $0.90! This looks more like a very large yawn than a banking crisis. At the same time the tension in the financial community is palpable. Fresh information favoring either the bulls or bears may create trading volatility. And the more I hear that gold bulls are in the driver’s seat the more I worry about this trade. Enjoy your weekend. rs

Reuters (Ashitha Shivaprasad) – “Gold steadies, Fed pause bets brighten outlook – “Gold steadied into a tight range on Friday after a volatile week so far as support from lower U.S. yields countered a firm dollar, but bets for a pause in U.S. rate hikes brightened the outlook for zero-yield bullion. Prices gained in the last two sessions after the Federal Reserve raised rates by an expected quarter of a percentage point, but signaled it was on the verge of pausing. Lower rates burnish appeal for bullion, which pays no interest. The strong dollar is offsetting support for gold from the decline in yields, but “economic fears will result in lower interest rate expectations, which could continue to boost gold further,” said Craig Erlam, senior market analyst at OANDA. U.S. 10-year Treasury yields fell for the third straight session, while the dollar index rose 0.7%. Commerzbank raised its year-end gold forecasts to $2,000, joining similar upward revisions by Goldman Sachs, Citi and ANZ.”

On the day gold closed down $11.70 at $1982.10, and silver closed up $0.11 at $23.25.

Platinum closed down $9.00 at $982.00, and palladium closed down $18.10 at $1403.30.

Posted on March 17, 2023 by Richard

Gold – Banking Woes – Higher Prices

Commentary for Friday, March 17, 2023 (www.golddealer.com) – Today gold closed up $50.80 at $1969.80, and silver closed up $0.76 at $22.35. The gold trade was surprised by the surge in prices today. Perhaps this is misplaced because questions about banking liquidity continue, but what makes this a confusing picture is that our central bank does not seem concerned from a liquidity standpoint. Even though the Federal Reserve has lent $300 billion in emergency funds to US banks this past week. Nearly half that money went to the initial red flags, Silicon Valley Bank and Signature Bank. But there are questions about who received the rest of the money. Biden’s response was that the government would guarantee losses at Silicon and Signature. But what about further failures? And who will pick up the tab? Widespread banking failure is not likely, the government would not allow such a thing. But who else is going to pay for this cleanup besides the American taxpayer? Last Friday gold closed at $1862.00 / silver at $20.38 – on the week gold was up $107.80 and silver was up $1.97.

On Monday gold quickly moved above $1900.00 as the safe haven demand created last Friday by the failure of a large Silicon Valley bank continued to worry the banking community.

This second surge in the price of gold surprised me. I would have bet my 10-year-old car that today’s gold market settled, turning into a very quiet trade. One which continues to wait for more concrete information about the coming FOMC interest rates.

Today’s strong move is impressive because the price of gold has now shown its ability to set up a challenge of yearly highs ($1950.00). It reminds the faithful that gold bullion is most valued during a crisis. It should also remind us to avoid distractions. This is a classic Chicken Little story. The sky is not falling, and the Fed will not abandon its fight against inflation.

Reuters (Ashitha Shivaprasad) – Safe-haven gold accelerates as traders assess SVB fallout – “Gold raced towards the key $1,900 level on Monday, emboldened by bets that the Federal Reserve may now have to tone down its rate hikes as investors sought cover from uncertainty triggered by the collapse of Silicon Valley Bank. On Friday, gold gained 2% after California regulators closed tech startup-focused Silicon Valley Bank (SVB). Regulators also shuttered New York-based Signature Bank on Sunday. “Recent events show that gold remains a safe haven asset as it is able to benefit from market uncertainty. Also, market participants pricing out rate hike expectations is lifting gold,” said UBS analyst Giovanni Staunovo. Lower interest rates decrease the opportunity cost of holding zero-yield gold. After the SVB collapse, traders now expect the Fed to no longer raise interest rates by 50 basis points this month, in contrast to a 70% probability before the event. Rate cuts have also now been priced in by end-2023.”

The latest Reuters is a bit too optimistic in that assuming that bank failure will create a domino effect in the wider banking system. But the threat of such an event brought out President Joe to assure the public that their money was safe. Which I thought was interesting because your money really is safe even in our fractional banking system. But the fact that the President considered the SVB failure important enough to address it publicly suggests an underlying apprehension which has been created by the aggressive FOMC interest rate policy.

On the day gold closed up $49.70 at $1911.70, and silver closed up $1.41 at $21.79.

Zaner (Chicago) “While a lower low for the dollar and the lowest trade since February 16th certainly justifies strength in gold, some portion of the significant overnight pulse up move is likely to be flight to quality interest surrounding the California Bank failure. Furthermore, Goldman Sachs over the weekend predicted the Fed will not hike rates later this month because of the current stress in the financial sector! The flight to quality buying of gold and treasuries without purchases of the dollar highlights some concern of a US financial contagion but contagion is not widely feared as of this writing. It should be noted that Indian gold ETF holdings saw a record inflow last month, but that inflow was preceded by massive withdrawals over the prior 3 months. Apparently, Indian gold investors are attracted to gold now on price weakness! While the gains in gold last Friday were outsized and overdone, if the trade sees the upcoming wave of global inflation readings signaling inflation continues to rise the gains in gold could become surprising. However, both consumer and producer price readings for last month were highly divergent throughout the world with China posting soft inflation readings, Switzerland expected to produce soft producer and import prices, Spain expected to post a steady but still hot 1% month over month gain and the US is expecting consumer prices to tick down by 0.1%. The CFTC continues to catch up on its positioning reports with the delay now shortened to two weeks. Fortunately for the bull camp the net spec and fund long in gold has come down 64,000 contracts from the 2023 high and likely saw that net long decline further with the post COT position report slide of $34 into the late February low. The Commitments of Traders report for the week ending February 21st showed Gold Managed Money traders net sold 4,896 contracts and are now net long 52,457 contracts. Non-Commercial & Non-Reportable traders net sold 4,497 contracts and are now net long 145,018 contracts. On the other hand, the large range up rally last Friday was forged on the highest trading volume since November 15th of 2022, suggesting the bull camp does have some breadth. Unfortunately for the bull camp, the gold market will continue a lockstep inverse relationship with the dollar which in turn will fluctuate off fresh market assumptions on the magnitude of the next US interest rate hike. With the silver market showing significantly less upside action than gold from the May contract low on Friday, the silver bull camp is likely narrower in scope than in the gold trade. Furthermore, generally concerning global economic expectations look to leave headwinds hanging on physical commodities like silver. However, silver has seen consistent net spec and fund long liquidation action from the 2023 high spec long position registered early in January and the market has displayed some respect for consolidation support around $20.00. The February 21st Commitments of Traders report showed Silver Managed Money traders are net long 5,564 contracts after net buying 40 contracts. Non-Commercial & Non-Reportable traders reduced their net long position by 2,502 contracts to a net long 24,141 contracts.”

On Tuesday the early New York cash market for gold sold yesterday’s rally. Gold dipped below the important $1900.00 support. Traders then bought the weakness ($1896.00). The recovery was not convincing, and the bulls were disappointed that yesterday’s buzz did not repeat.

With gold higher by $100.00 these past 7 trading days it makes sense to approach this trade with caution. I do not disregard the latest rhetoric. But the claim that the banking crisis will force the Fed to halt its predictable interest rate program should be questioned.

Especially considering today’s rising Treasury yields. Crises usually support the price of gold. And it always pays to keep in mind that crisis also drives funds towards the might US dollar. Another powerful and safe choice held in high esteem by the financial community.

Reuters (Bharat Gautam) – Gold pauses banking-driven surge as bond yields rise – “Gold prices dipped on Tuesday as higher Treasury yields blunted a recent surge driven by the U.S. banking crisis, while a steady rise in U.S. inflation in February raised uncertainty over the outcome of the Federal Reserve’s policy meeting next week. Gold showed little reaction to U.S. Consumer Price Index (CPI) data, which showed CPI rose 0.4% on a monthly basis in February, as expected, after accelerating 0.5% in January. “There is nothing in the print to scare off gold bulls who’re searching for financial instability hedges at a time where the Fed may (indirectly) accept that inflation will stay higher for longer,” said Nicky Shiels, head of metals strategy at MKS PAMP SA. Traders are now largely expecting only a 25-basis-point interest rate hike by the U.S. central bank this month. Considered a hedge against economic uncertainties, gold becomes a more attractive bet in a low interest rate environment. Bullion prices rallied more than 2% in the previous two sessions as investors sought cover after the collapse of U.S. lender Silicon Valley Bank (SVB) spooked the market. “As long as the contagion risks stemming from the ongoing SVB saga remain, potentially ramping up recession risks along the way, safe-haven assets are set to remain well bid in the interim,” said Han Tan, chief market analyst at Exinity. “We expect a greater-than-even chance of spot gold staying above the psychologically-important $1,900 in the lead-up to next week’s FOMC meeting, provided that the US dollar remains subdued and risk-off mode remains in place,” Tan said, referring to the Federal Open Market Committee.”

On the day gold closed down $5.50 at $1906.20, and silver closed up $0.14 at $23.93.

Zaner (Chicago) – “With the gold market this morning sitting more than $100 above last week’s low, the net spec and fund long positioning signaling long liquidation potential and the dollar showing a minimal recovery effort early today, the bear camp has an edge until the CPI report release. From a technical perspective, traders are pointing to the significant jump in trading volume on the $100 rally over the prior 3-days and have concluded the core of the bull case in gold is strengthening. However, the gold bulls might see very temporary support from further confirmation of declining gold output from South Africa where their January gold output declined by 3.7% versus year ago readings. In another positive development gold ETF holdings yesterday saw an inflow of 73,629 ounces but remained 2% lower year-to-date. Silver also saw an inflow to ETF holdings yesterday of 584,134 ounces putting year-to-date gains at 1.2%. It should be noted that gold and silver over the last two decades have not typically benefited from a flight to quality developments, but both markets appear to be displaying bullish sensitivity to uncertainty. On the other hand, after the fear of contagion moderated and US equity markets recovered yesterday gold, silver, palladium, and platinum continued to hold their gains giving further credibility to the bull camp. Looking ahead today’s US CPI readings (combined with several other global inflation measures) could result in significant debate over the next week’s US rate hike size, hot readings could enhance limited concerns that inflation will not be contained by monetary policy and the outlook for the global economy could be downgraded significantly if global rate hikes are expected to become “large” again. Last month, US consumer prices increased by 0.5% and those type of month over month gains are clearly residually inflationary! Those with long gold and silver futures positions should seek protection against downside volatility with the purchase of April expiration put options (15 days to exp).”

On Wednesday gold bounced higher on another round of safe haven buying as European banking stocks moved into the red and customers asked questions about banking liquidity. This time around the perceived threat comes from problems within Credit Suisse. The timing here makes this latest information more problematic. The failure of Silicon Valley Bank on Monday has set the stage for those who believe a banking contagion is inevitable because of what they believe to be a reckless interest rate policy by the FOMC.

In my opinion there is a lot more huff and puff in the so called “banking failure” prophecy than anything else, but the media still loves to pounce on the sensational. In the early days of newspapers, a sensational headline (true or not) was guaranteed to increase circulation.

Reuters (Rachna Uppal) – Credit Suisse’s biggest backer says can’t put up more cash; share down by a fifth – The head of Credit Suisse Group’s largest shareholder, Saudi National Bank, said on Wednesday it would not buy more shares in the Swiss bank on regulatory grounds. “We cannot because we would go above 10%. It’s a regulatory issue,” SNB chairman Ammar Al Khudairy said in an interview with Reuters. The Saudi bank holds a 9.88% stake in Credit Suisse, according to Refinitiv data. Trading in the Swiss bank’s shares was halted late morning as they fell by a fifth to fresh record lows, having been pummeled earlier in the week in market fallout from the collapse of Silicon Valley Bank. Switzerland’s second-biggest bank is seeking to recover from a string of scandals that have undermined the confidence of investors and clients. Customer outflows in the fourth quarter rose to more than 110 billion Swiss francs ($120 billion). Al Khudairy said SNB was happy with Credit Suisse’s turnaround plan and did not think it would need more money, but also described his bank’s investment as an opportunistic one that was not time-dependent. The Saudi bank would exit when proper value to the shares had been acquired, he added. “We are happy with the plan, the transformation plan that they have put forward. It is a very strong bank,” Al Khudairy said on the sidelines of a conference in Riyadh. “I don’t think they will need extra money; if you look at their ratios, they’re fine. And they operate under a strong regulatory regime in Switzerland and in other countries.”

On the day gold closed up $20.40 at $1926.60, and silver closed down $0.16 at $21.77.

Zaner (Chicago) – “While the dollar index rejected a new low for the move overnight, the breakdown to the lowest level since early February provides only a minimal amount of cushion for gold and silver prices which are under an early liquidation wave. While some analysts indicate the aggressive reversal action in gold and silver this week is the result of market sentiment decreasing the prospects of a 50-basis point hike by the US Fed, it is possible the reversal was the result of a reduction in prospects that inflation might show it is immune to higher rates. With the gold and silver trade facing another inflation reading in the form of Producer Prices today and the trade expecting a minimal downtick from the prior month (which could still be considered inflationary) the bear camp looks to retain control. In our opinion, the New York Empire State manufacturing report and US retail sales will be of little impact today unless both come in uber-strong. While Chinese economic data released overnight registered “positive forward movement” many commodities market this morning are showing disappointment in the lack of even stronger recovery action. We discount overnight suggestions that gold and silver are under pressure because of rising treasury yields as yields this morning sit significantly below the levels posted at the beginning of this week. Clearly, gold is not benefiting from an ETF inflow of 300,404-ounces yesterday which was the largest single day inflow since June of last year. Unfortunately for the bull camp in silver, ETF holdings saw an outflow of 1.09 million ounces yesterday. In retrospect, the prospect of shifting into an old-fashioned inflation driven rally were dashed yesterday by mundane US CPI readings and we suspect more of the same will be seen today following US PPI. Therefore, we give the edge to the bear camp today with logical corrective targeting seen in June gold at this week’s gap which begins down at $1,892.50. Closer in support but less reliable pricing is $1,906, but we think the onus is on the bull camp to find a fresh theme capable of discouraging the market from a further corrective setback. The CFTC released another weekly positioning report yesterday reducing the number of delayed reports caused by hacking.

On Thursday gold settled mildly in the red as banking woes cooled in the US and Europe. Some reliable analysts consider this routine profit taking but I’m less sanguine and remain worried about what looks like guaranteed higher interest rates. That being said, if banking problems keep making the news the fear factor may take over, pushing gold prices higher.

The banks, these days are stressed but I can’t get my head around some type of banking contagion which will create a domino type failure of the system. The solution to banking stress, which happens on a regular basis is liquidity. The reason that the Swiss Credit liquidity issue was settled is because the Swiss National Bank made $54 billion available to Swiss Credit.

Such a large loan is unusual but not unprecedented. Bank of America had a similar credit crisis in 2008. Treasury Secretary Paulson then created the Emergency Economic Stabilization Act. The government lent Bank of America $20 billion dollars and the loan was paid back in full.

How much trouble Swiss Credit is in today remains to be seen but its stock was down 30% before its liquidity problem was solved. Of course, all this commotion created an updraft in the price of gold. Safe-haven buyers are usually anxious, especially in these troubled times.

But consider that gold’s initial rise was the result of two independent factors. Safe haven demand and short covering by the paper trade. Both may have been a knee-jerk reaction from investors already worried over higher interest rates.

The safe-haven portion could grow if the public continues to lose faith in the banking system. Short covering introduces volatile price swings. This market remains unstable because in the middle of these cross currents the ECB still raised interest rates in its fight against inflation.

Reuters – “The European Central Bank raised interest rates as promised by 50 basis points on Thursday, sticking with its fight against inflation and facing down calls by some investors to hold back on policy tightening until turmoil in the banking sector eases. A rout in global markets triggered by last week’s collapse of Silicon Valley Bank (SVB) and made worse by doubts around the future of Switzerland’s Credit Suisse had prompted some to question whether the ECB would pause its rate-hiking cycle.”

On the day gold closed down $7.60 at $1919.00, and silver closed down $0.18 at $21.59.

On Friday gold moved to its higher level since April of 2022 as financial fear grows and the public questions banking liquidity. For the present, it is the bears who are now hiding under the bed, even with the assured prospect of higher interest rates. European Central Bank President Christine Lagarde just raised interest rates a half point and is not concerned with bank liquidity. But notes that with rising uncertainty business as usual is not in the cards. This banking issue is overplayed in my book, but it does fit well into the preconceived ideas of the well-established physical bullion market. We are selling anything that is not nailed down.

Jim Wycoff (Kitco) – Technically, the gold futures bulls have the solid overall near-term technical advantage. Bulls’ next upside price objective is to produce a close in April futures above solid resistance at the February high of $1,975.20. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,875.70. First resistance is seen at $1,950.00 and then at $1,965.00. First support is seen at the overnight low of $1,922.30 and then at Thursday’s low of $1,911.50. The silver bulls have the overall near-term technical advantage. Silver bulls’ next upside price objective is closing May futures prices above solid technical resistance at $23.00. The next downside price objective for the bears is closing prices below solid support at $21.00. First resistance is seen at $22.25 and then at this week’s high of $22.525. Next support is seen at the overnight low of $21.785 and then at $21.465.”

Reuters (Bharat Gautam) – Gold sparkles in tumultuous week for markets – “Gold prices surged over 2% on Friday as a wave of banking crises shook markets in bullion’s biggest weekly rise in four months, while bets solidified for a less aggressive U.S. Federal Reserve in its fight against inflation. “Gold is surging on fears that more bad banking news could appear over the weekend and hopes that the Fed will pause its rate hikes next week,” Tai Wong, an independent metals trader based in New York, said. The collapse of Silicon Valley Bank in the U.S. has highlighted banks’ vulnerabilities to sharply higher rates, while a rout in Credit Suisse shares has added to market turmoil. “Gold is likely to shine through the chaos as investors adopt a guarded stance,” said Lukman Otunuga, senior research analyst at FXTM. The dollar and stock markets slid, making bullion a more attractive investment. While it is considered a hedge against economic uncertainties, gold’s opportunity cost rises when interest rates are increased. The Fed will raise interest rates by 25 basis points on March 22 despite recent banking sector turmoil, according to a strong majority of economists polled by Reuters who were divided on the risks to their terminal rate view. “The sudden tightening in financial conditions won’t help palladium whose usage is largely industrial though it is technically in the precious complex,” Wong said, adding that platinum “has just been a chronic underperformer and is struggling to shake its reputation.”

On the day gold closed up $50.80 at $1969.80, and silver closed up $0.76 at $22.35.

Platinum closed up $2.00 at $976.70, and palladium closed down $23.60 at $1372.20.

Zaner (Chicago) – “The action in the gold market this week has been very impressive as the bull camp has seemingly managed to shift fundamental focus away from bearish influences and embrace fundamentals that are supportive. In our opinion, the ability to shift focus to embrace positive themes is a hallmark of a “bull market”. However, the bull case in gold is still tentative because fundamental headwinds of rising rates, periodic fears of global slowing and a lack of consistent investment inflow to ETF holdings. Fortunately for the bull camp, gold ETF holdings this week have reversed the early pattern of outflows and have now posted two large back-to-back daily inflows. Yesterday gold ETF holdings saw 175,788 ounces flow in which narrowed the year-to-date contraction to 1.4%. Unfortunately for the bull camp in silver, ETF instruments yesterday saw another massive outflow of 5.1 million ounces which reduces the year-to-date gain to a mere 0.5% Obviously, gold will remain responsive to financial developments flowing from equities, treasuries, currencies, and central bank dialogue. Furthermore, it seems that gold and silver will continue to see money flows from residual global bank contagion fears but a significant slide in implied US treasury yields this week adds a secondary supportive force for the bull camp. While we saw yesterday’s nearly unchanged close as a possible sign of a temporary blowoff top from the Wednesday rally, seeing prices rally significantly this week on what is likely to be the largest weekly trading volume since the days leading into the US Covid lockdown indicates the market can attract fresh buyers. While not a definitively supportive development the latest release of delayed CFTC positioning reports showed further reductions in the net spec and fund long position thereby putting the net spec and fund long position at the lowest level since December earlier this month and that should have resulted in significant money sitting on the sidelines, part of which might have fueled the recovery rally this week. Obviously, critical resistance is this week’s high at $1959.10 with a failure price today seen with a trade below $1928. Gold positioning in the Commitments of Traders for the week ending March 7th showed Managed Money traders are net long 24,106 contracts after net selling 15,802 contracts. Non-Commercial & Non-Reportable traders were net long 119,907 contracts after decreasing their long position by 12,567 contracts. Clearly, the silver charts are definitively less positive than gold but still favor the upward tilt. Unfortunately, as mentioned already investors have turned cool toward ETF instruments and silver is mostly missing out on flight to quality buying interest. However, the latest positioning report showed the net spec and fund long in silver at the lowest level since September last year, thereby leaving silver less vulnerable to massive stop loss selling and potentially holding some additional buying potential.”

Posted on March 10, 2023 by Richard

Gold – Surges on Growing Bank Fears

Commentary for Friday, March 10, 2023 (www.golddealer.com) – Today gold closed up $32.70 at $1862.00, and silver closed up $0.35 at $20.38. Traders got the Full Monty this week as hawkish Fed rhetoric was overshadowed by bank failure, which focused safe haven demand and created higher gold prices. The Dollar Index joined the chaos by moving down from 105.83 to 104.00 since Wednesday. A drop of almost 2 points, as traders scratched their heads and wondered if this was the beginning of another round of safe haven buying. Reuters (Seher Dareen) – Gold climbs on safe-haven rush as banking rout grips markets – “Gold prices jumped more than 1% on Friday, driven by a slide in U.S. Treasury yields and broader financial markets as worries over a fallout in the banking sector eclipsed a strong U.S. jobs report and drove safe haven flows into bullion. U.S. tech lender SVB’s troubles rippled through global markets and hit banking stocks, shoring up interest in bullion often seen as a safe store of value during uncertain times. “I think the main focal point is yields and with yields dropping today, that is a boost for the gold market,” said David Meger, director of metals trading at High Ridge Futures. Gold, which does not yield any interest, benefited as Treasury yields slid amid the financial market turmoil and after U.S. jobs data showed hourly earnings rose by less than expected last month. That gave hope that the Fed can be less aggressive in its path of interest rate hikes, even though job creation was strong. “As the marketplace sees it, the wages component of the U.S. jobs report was tamer than expected, which has apparently mitigated the higher-than-expected rise in non-farm payrolls,” wrote Jim Wyckoff, senior analyst at Kitco Metals. “There is keener risk aversion in the marketplace to end the trading week, and that is likely prompting some safe-haven demand for gold and silver.” Last Friday gold closed at $1847.70 / silver at $20.09 – on the week gold was higher by $14.30 and silver was higher by $0.29. Don’t let the tight spreads fool you, this market turned into a whipsaw trade which caught everyone by surprise.

On Monday gold opened choppy, trading between $1845.00 and $1853.00 – likely a nervous trade waiting for Powell’s testimony to Congress scheduled for Tuesday and Wednesday. And the February US jobs report is due on Friday (Reuters). The jobs report is always a big deal and stronger data would suggest the Fed has less wiggle room on their interest rate decisions.

“San Francisco Fed President Mary Daly on Saturday said that if data continue to come in hotter than expected, interest rates will need to go higher and stay there longer. “Currently, gold is in a wait-and-see mode,” said UBS analyst Giovanni Staunovo. “There’s unlikely to be a change of script from Powell, reiterating the need for further rate hikes to bring inflation under control.”

In typical fashion today’s stronger opening was sold because of this long-standing worry. It is a “plus” for gold that traders bought the “dip” in prices. But this conviction is thin, and pricing uncertain – gold finished the day on “lows”, almost unchanged.

Will we see a repeat of last week’s tight trading ranges in gold? Not likely, with the Chief’s speech on deck and perhaps better jobs data. The bears are patiently waiting on the sidelines.

This latest “information package” does not contain enough new information to change the already “heavy” Fed sentiment. Traders are bracing for higher interest rates and an aggressive FOMC – prices will head south if the Fed remains resolute, and Powell does not suggest options.

But if the Chief sounds a bit more “dovish” tomorrow traders would believe current gold pricing already reflects these fears and there would be little downside in the near term. This bullish “optimistic view” flies in the face of repeated Fed dialogue stating that inflation is a threat, and they will act accordingly. Many analysts see higher interest rates and lower gold prices.

On the day gold closed down $0.20 at $1847.90, and silver closed down $0.11 at $20.98.

Zaner (Chicago) – “While the initial high in April gold this morning failed to take out the Friday high, prices remain significantly above last week’s low and near the highest level since February 15th. Both gold and silver could have been undermined because of the Peoples National Congress meeting in China failed to present a major stimulus package. While there was a lack of definitive flows in gold ETF holdings last week, holdings increased by 49,406 ounces, while silver ETF holdings increased by 998,372 ounces. In a negative overnight psychological headline, gold demand was questioned by a survey in India which indicated 65% of Indian women think housing investments are more important than gold investments. In retrospect, gold and silver bulls were extremely fortunate last week that bearish outside market influences did not send prices reeling to the downside. In fact, the gold market showed extremely impressive strength in the face of growing interest rate adversity and recent signs of a deterioration in investment interest. However, evidence of very strong buying from the Turkish central bank and news from the IMF that global central bankers purchased record gold for reserves last year should provide gold with a strong injection of important internal fundamental support. In other words, gold may be less of a hostage to fluctuations in the dollar and perhaps even less sensitive to further gains in US interest rates. While a very unlikely development at present, market chatter suggesting rate hikes are not containing inflation could be a “switch” capable of turning on classic inflation, speculation and flight to quality buying of gold. Unfortunately for the bull camp, the sharp range up rally in gold at the end of last week was done on very low trading volume and a very minimal uptick in open interest. While the COT reports continue to be delayed by several weeks, the most recent positioning report showed Gold reducing its net spec and fund long further from the 2023 highs and with the market at last week’s lows $75 per ounce below the level where the report was measured the net spec and fund long in gold today is probably the lowest in 4 months. Gold positioning in the Commitments of Traders for the week ending February 7th showed Managed Money traders net sold 32,701 contracts and are now net long 78,839 contracts. Non-Commercial & Non-Reportable traders reduced their net long position by 37,075 contracts to a net long 172,696 contracts. Near term support in April gold is $1,840 and upside targeting/resistance is $1,871. The silver market action has been significantly less impressive than gold action since the late February low, but the bull camp has regained a slight edge. Unfortunately for the bull camp, the large range up move last week was forged on softening trading volume and declining open interest. However, silver ETF holdings remain 1.7% higher year-to-date and have seen a developing pattern of very large daily holdings change, potentially indicating increased investor activity or simple attention to the asset class. While the most recent COT positioning report remains outdated because of technical issues, the latest net spec and fund long in silver adjusted for the post report slide of $1.90 should put the net spec and fund long near the lowest level since early December. Silver positioning in the Commitments of Traders for the week ending February 7th showed Managed Money traders were net long 6,064 contracts after decreasing their long position by 18,782 contracts. Non-Commercial & Non-Reportable traders net sold 13,620 contracts and are now net long 29,878 contracts. We see a thin resistance line at $21.52 with higher resistance at $21.81. To start the new week, key pivot point support in May silver is pegged at $20.76.”

On Tuesday a shaky gold market opened at $1840.00 and quickly tumbled to $1815.00 as Chief Powell spoke to Congress and reaffirmed the Fed commitment to taming inflation. Why Jerome’s hawkish resolve seems to be a revelation is hard to understand. In the recent past Powell and the FOMC have been consistently hawkish. But left the interest rate door open in the hope that inflation rates would continue to decrease. Today the Chief delivered the bad news. Inflation rates continue to rise, and the Fed will raise interest rates accordingly.

Reuters (Bharat Gautam) – Gold down after Powell’s hawkish testimony boosts dollar – “Gold prices fell more than 1% on Tuesday, as the dollar jumped after Federal Reserve Chair Jerome Powell indicated rate hikes could come at a faster pace from the U.S. central bank in his testimony to a congressional committee. The Fed will likely need to raise interest rates more than expected in response to recent strong data and is prepared to move in larger steps if the “totality” of incoming information suggests tougher measures are needed to control inflation, Powell told U.S. lawmakers on Tuesday. “This direct reference to ‘faster tightening’ even if mitigated by ‘if warranted’ is more of a shove than a nudge, putting the precious metals complex under pressure as the dollar surges,” said Tai Wong, a senior trader at Heraeus Precious Metals in New York. The dollar index gained almost 1% following Powell’s comments, making bullion less affordable for overseas buyers. “Gold had already retreated from Friday’s strong close, but so far Powell is more direct and aggressive than the market had anticipated.” U.S. stock indexes also fell after the remarks. The U.S. jobs report for February is due on Friday. If Friday’s jobs data shows significant resilience in the U.S. labor market, it would pave the way for even higher U.S. rates and could unwind the month-to-date gains garnered so far by gold, said Han Tan (Exinity).”

The dip in prices today should not surprise us. We have experienced dramatically changing bullish and bearish sentiment several times in the past 12 months. Look at this latest turn to the bearish side as an opportunity to meaningfully test support. Gold will quickly turn into a value trade if the cash market approaches $1700.00.

At that time, we will likely see a nice bounce to the upside if the Fed does not get crazy with interest rates. During this process keep in mind that as much as Powell claims political independence, he owns the problem if Wall Street crashes. This threat alone will help stabilize both gold and silver prices as this dog and pony show continues to unwind. The big question is not how much the price of gold will be this summer – it is how much it will be next summer.

On the day gold closed down $34.00 at $1813.90, and silver closed down $0.93 at $20.05.

Jim Wycoff (Kitco) – “Technically, April gold futures bulls have lost their slight overall near-term technical advantage. The Bulls’ next upside price objective is to produce a close above solid resistance at this week’s high of $1,850.50. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at $1,835.00 and then at $1,850.00. First support is seen at the February low of $1,810.80 and then at $1,800.00. May silver futures prices hit a five-month low today. The silver bears have the firm overall near-term technical advantage and gained fresh power today. Prices are in a steep five-week-old downtrend on the daily bar chart. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $21.50. The next downside price objective for the bears is closing prices below solid support at $19.00. First resistance is seen at $20.50 and then at $21.00. Next support is seen at $20.00 and then at $19.50.”

On Wednesday gold managed to steady itself, waiting for Powell’s second day of testimony, as traders look for further FOMC clues and speculate as to the Fed’s next rate hike. Analysts believe we will see a half point rate hike the next FOMC meeting (March 22^nd and 23^rd). If this is the case, it would obviously be a negative for the gold bulls. But Powell, even in testimony today claims that no decision has been made on the next rate hike.

And there are cross currents which support the bulls. The Bank of Canada displayed caution last night, halting the rise in their interest rates (4.5%), helping to stabilize this downdraft. Today’s bounce to the upside in the price of gold was insipid – the market closed almost unchanged. Still, the bounce may suggest a short-covering rally or the early stages of an oversold market.

Reuters – “There are still several more event-driven risks the gold market needs to absorb – Powell today, jobs data on Friday, CPI on Tuesday,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago, adding prices had near-term support around $1,800. The Fed will likely need to raise rates more than expected in response to recent strong data and is prepared to move in larger steps if the “totality” of incoming information suggests tougher measures are needed to control inflation, Powell said on the first day of his semi-annual two-day testimony before Congress. U.S. private payrolls increased more than expected in February.”

On the day gold closed down $1.20 at $1812.70, and silver closed down $0.04 at $20.01.

Zaner (Chicago) – “Both gold and silver face a 2nd day of US Federal Reserve Chairman testimony to the US Congress where discussions of more aggressive and longer in duration tightening policy are expected to flow again. Unfortunately for the bull camp the dollar index has forged a higher high extension this morning following yesterday’s sharp range up move thereby pulling currency-related pressure on gold and silver into another session. Not surprisingly, expectations for the March 21st/22nd FOMC meeting have boosted the odds of a 50-basis point rate hike and that should leave gold and silver in a general downward motion. In what might be a delayed reaction to recent declines in prices, both gold and silver ETF holdings continue to plummet with gold holdings yesterday shedding 226,383 ounces for a 6th straight daily decline and silver posting the biggest one-day decline (5.1 million ounces) in holdings since last September. In another minimal negative demand development, the Perth Mint indicated February gold sales declined while the sale of silver coins and minted bars increased. Apparently, the gold trade has a different opinion on what constitutes a noted amount of Chinese central bank gold buying, as a bullish story on Bloomberg yesterday regarding a 25-ton purchase from the Chinese Central bank had little supportive impact on gold which fell by more than $35 per ounce yesterday. Nonetheless, seeing the Chinese central bank buy 25 tonnes of gold last month and with that purchase the 4th straight month in a row of purchases that looks to be the beginning of a trend of reserve building by the central bank representing the world’s largest gold consuming nation. In our opinion, reports that Chinese central bank gold reserves are roughly 2,100 tonnes are a wild guess, with the Chinese central bank likely building gold reserves consistently over the last several years in a bid to raise Chinese status in global financial markets. It should also be noted that the World Gold Council recently indicated that 2022 saw record central bank gold purchases and we see no reason to expect the “trend of buying” to come to an end as many central banks liquidate extensive bond portfolios. However, in the near term a strong dollar and talk of even higher rates should leave the bear camp in gold and silver with the edge.”

On Thursday gold traders created that oversold bounce and short covering rally suggested in yesterday’s commentary. This modest underpinning was also encouraged by “calm and collected” Chief Powell, in a second day of commentary Wednesday. He did not equivocate but displayed that professional expertise which engenders the Wall Street faithful – and that is all he needs for the present. Wall Street and the metals are not out of the interest rate woods by a long shot, but the Chief managed to calm the waters for today.

Another round of anxiety, however, is right around the corner. The US jobs report for February will be out tomorrow. Analysts are expecting a solid gain in the number of people employed. This employment dynamic was one of Powell’s talking points yesterday.

More people working creates competition and higher wages. Which in turn fuels higher inflation. If the jobs number tomorrow comes in hot, the Fed will double down on its hawkish sentiment. And the gold bulls will struggle to hold this psychologically important $1800.00 floor. If this is not the case, you could see gold rising in the shorter term.

One way or the other I expect this “grind” toward higher interest rates will hinder short term gold prices. At the same time, the possibility of a Fed induced crisis underpins physical demand. The physical bullion trade also holds the wider view that world inflation is more than troubling – and will fuel higher gold/silver prices over the longer term.

On the day gold closed up $16.60 at $1829.30 and silver closed up $0.02 at $20.23.

Zaner (Chicago) – “While the US Federal Reserve Chairman this week indicated the Fed is data dependent and undecided on the magnitude of the March 22nd rate hike, the pendulum continues to swing toward a 50-basis point hike. However, despite Fed insistence that they are not targeting jobs, today’s US economic report slate will be limited to jobs data and therefore the gold and silver markets will be especially sensitive to interest rate and US dollar action. According to some economist’s strong jobs readings are threatening to the Fed and gives them the latitude to be more aggressive without increased threats of recession. Nonetheless, the path of least resistance remains down in gold and silver with inside and outside market factors expected to pressure prices again today. Certainly, the passage of 2 days of very hawkish US Federal Reserve testimony provided significant pressure to gold and silver prices, especially with higher US rate talk resulting in a upside explosion in the dollar. In retrospect, given US jobs-related data released so far this week, we expect today’s US jobs data to show lingering strength which in turn should add to chatter of a 50 basis point March US Fed funds rate hike. Furthermore, solid jobs data is likely to add to Fed inflation concerns and add to the ongoing movement to raise the terminal rate target. Unfortunately for the bull camp, gold, and silver ETF holdings this week have seen outflows indicating that bargain hunting investment buying has not surfaced yet on the recent slide in prices. Therefore, in today’s action we see a further slide in gold toward $1,800 and a decline in May silver to an old gap down at $20.045/$19.715. The silver market should see added pressure from news of higher-than-expected Chinese February silver production with a 2.6% month over month rise and a 17% year-over-year silver production increase. The CFTC yesterday released positioning data as of February 14th and is continuing to “catch up” to the hacking shutdown delay of positioning reports. Gold positioning in the Commitments of Traders for the week ending February 14th showed Managed Money traders were net long 57,353 contracts after decreasing their long position by 21,486 contracts. Non-Commercial & Non-Reportable traders net sold 23,181 contracts and are now net long 149,515 contracts. The Commitments of Traders report for the week ending February 14th showed Silver Managed Money traders are net long 5,524 contracts after net selling 540 contracts. Non-Commercial & Non-Reportable traders reduced their net long position by 3,235 contracts to a net long 26,643.”

On Friday the move of gold prices to weekly highs was very surprising. Most traders were looking for a strong jobs report (which they got today) and this should have left gold struggling at $1800.00. It might be a bit early to claim the “fear factor” has again come crashing through the front door. That will take price confirmation, and a new bullish technical picture.

This looks like an overreaction to a failed Silicon Valley bank which was seized by regulators after failing to raise needed capital. Still, it was a big deal. The bank had 17 locations, and this was the largest bank failure since the Great Recession.

It has unnerved even the wider world market. Those presupposed to the “disaster theory” will claim that gold is ahead of the curve. Throwing up a red flag and providing a warning about how much fiat money has been created worldwide since the onset of the pandemic.

I remain suspicious and believe this rally will be sold, sooner than later. The metals will then revert to the usual back and forth pricing action we have seen for months, as everyone waits for further Fed clarification as to its interest rate intensions.

Investor’ Business Daily – Dow Jones Dips, Tech Stocks Pressured; First Republic Plunges 60% As Contagion Fears Hammer Financials. Yahoo! Finance – Stocks sink amid jobs beat, bank jitters. CNN – Fear overtook Wall Street Thursday after SVB Financial Group, a bank that lends primarily to tech companies, told investors it had to sell $1.75 billion in shares at a loss in order to cover rapidly declining customer deposits. That triggered losses across the banking sector and concern that the Federal Reserve’s interest rate hikes are preventing banks from raising capital. Bank stocks fell by their largest levels in nearly three years on Thursday, bringing all three major indexes down with them.

On the day gold closed up $32.70 at $1862.00, and silver closed up $0.35 at $20.38.

Platinum closed up $12.90 at $959.70, and palladium closed down $11.30 at $1348.10.