Richard, Author at GoldDealer.com

Posted on October 14, 2022 by Richard

Gold – Working Interest Rate Numbers

Commentary for Friday, Oct 14, 2022 (www.golddealer.com) – Today gold closed down $28.30 at $1641.70 and silver closed down $0.84 at $18.02. Gold is looking at its worst week since Mid-August as the dollar firms and traders worry over rate hikes. Today’s losses were not unexpected as aggressive inflation reports this week refocus negative sentiment. And while gold’s technical picture remains bearish there are traders who claim that the 10-year Treasury note which topped 4% today is running out of gas. This may sound like wishful thinking, but some believe today’s interest rate region is what the Fed had in mind when they began to slow down an overheated economy and rising inflation. Last Friday gold closed at $1700.50 / silver at $20.19 – on the week gold was down $58.80 and silver was down $2.17.

Important Notice – FedEx is no longer having people sign for packages, 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 gold was weaker in the overnight market, both in Hong Kong and London. And the New York cash market continued lower touching $1666.00 before the selling moderated. The price drop was likely created by a Dollar Index pushing to new weekly highs (113.00+).

Trader fear of upcoming Fed interest rate hikes is moving into high gear. Safe haven demand is being ignored even as the war in the Ukraine escalates and crude oil bounces to higher ground.

The improving US economic picture has taken away shorter-term gold optimism. Which suggested the Fed is less likely to raise interest rates dramatically if the economy faltered. This theory has supported the gold bulls in the past. And will likely come in and out of focus again as the world ponders the possibility of a soft economic landing.

Today’s renewed economic optimism is a red flag for gold traders. As they become convinced that the Fed will raise interest rates as high as 4.5% to quell rising inflation. This bearish gold scenario has again refocused gold’s pricing picture. Traders are now forced to reconsider recent September lows ($1620.00). In other words, we are back to where we started in late September.

Gold is again defensive, ignoring the war and other inflationary factors. Choosing instead to concentrate on the short-term Fed inflation hammer which some believe is necessary to tame inflation. Even the mood of Fed insiders seems to waver. (Reuters) – “The Fed may still be able to lower inflation without a sharp rise in unemployment even as it continues raising interest rates, Chicago Fed president Charles Evans said on Monday, a rebuttal to arguments the U.S. central bank is pushing the world and the United States towards a potentially sharp downturn.”

It remains to be seen if the Fed can accomplish its goal of taming inflation without creating recession. But this argument was the driving force behind gold’s push to $1720.00 a week ago and will likely be reinvented if the economy begins to show signs of recession. So further volatility may simply be part of this equation on the shorter term.

Gold’s technical picture remains bearish and can be better appreciated with the 60-day gold pricing chart. In early August our shiny friend topped $1800.00 but slowly declined through late September. The reinvented “line in the sand” will likely be a channel trade between $1600.00 and $1650.00 depending on several factors. Fed aggressiveness will play a large role but keep in mind that this lower channel is appealing to bargain hunters in the physical market. Look for an oversold condition, perhaps this week or next. The price of gold and silver between now and the first quarter of next year is still a fluid question. But one thing is sure, in the physical market the cheaper gold and silver bullion becomes the more interest it creates to bargain hunters.

On the day gold closed down $33.20 at $1667.30 and silver closed down $0.63 at $19.56.

Zaner (Chicago) – “An extension of anxiety from the equity markets resulted in another intervention in the Guilt market by the Bank of England and that in turn has pushed the dollar to a fourth consecutive higher high. However, declines in gold and silver prices this morning are more than simple currency market influences. It appears that the world has revived recession fears in the wake of surging crude oil prices which have already posted October gains of $13.00. Therefore, the world sees consumers disposable income squashed especially in Europe thereby stoking recession and perhaps even deflation fears. While the most significant impact on the Fed’s decision in the early November meeting will likely be focused on classic inflation signals from later this week, the US September jobs report ratcheted up the potential of a 75-basis point follow-through hike by the Fed. In fact, given the strength of the nonfarm payroll report, some market participants have suggested jumbo rate hikes may continue beyond the November hike. Furthermore, it should be noted that gold and silver ETF holdings continue to slide with gold holdings last week declining by 198,056 ounces and silver holdings declining by 8.8 million. In short, the gold and silver bears have regained the edge with surging energy prices into the monthly US PPI/CPI report window should leave outside market influences bearish. In fact, with the favorable US jobs report rekindling rising treasury yields (the 2nd test highest yielding close of the contract on Friday), treasuries are likely to add to selling interest in precious metal markets. However, China returns to work after an extended holiday and the latest net spec and fund long in gold early this week will likely register the most bearish spec and fund reading since April 2019. The October 4th Commitments of Traders report showed Gold Managed Money traders went from a net short to a net long position of 4,941 contracts after net buying 46,241 contracts. Non-Commercial & Non-Reportable traders were net long 98,358 contracts after increasing their already long position by 41,359 contracts. With the December gold contract last week stopped cold on 3 occasions at a 7-month-old downtrend channel resistance line, trend signals remain down. Therefore, we suggest traders get short December gold on a return to downtrend channel resistance which is $1,730.10 today. With silver ETF holdings flowing out at a moderate pace and the recent net spec and fund positioning jumping from a net short to a modest net long a bounce to downtrend channel resistance at $21.12 should be sold. The Commitments of Traders report for the week ending October 4th showed Silver Managed Money traders went from a net short to a net long position of 7,159 contracts after net buying 15,246 contracts. Non-Commercial & Non-Reportable traders added 12,502 contracts to their already long position and are now net long 19,005.”

On Tuesday gold opened tepid but moved higher in the New York domestic trade, pushing toward $1678.00 in what looks like a short covering rally. Investor mood is typically quiet in a defensive market especially because investors and traders are hunkered down waiting for Thursday’s inflation number. Most expect no slowing of inflation and little change in record Treasury yields and the strong dollar. The Dollar Index remains strong (113.00) but dipped in the morning helping the short covering rally. Today’s gold close was on daily highs creating a mild updraft in pricing. But in typical fashion the paper market sold this small rally in the aftermarket, as the Dollar Index bounced higher recovering early losses. Gold quickly lost $12.00, and silver moved lower by $0.27, reminding everyone that hawkish FOMC sentiment still rules.

Still, while gold and silver pricing remains capped by higher interest rate expectations the possible downside at these discounted levels is likely exaggerated. Pricing is still supported by increased bargain hunting. Our across the counter trade has slowed, which is typical for the summer months, but large gold bullion buyers have reappeared.

Silver traders are questioning its failure to hold $20.00 on yesterday’s close. I’m fond of pointing out that the paper market and the physical market are different animals. And the consistent manufacturing premiums seen on new silver bullion support current pricing levels. But the paper market is suspicious of silver’s recent weakness. There is talk that silver has become more of an industrial metal than an investment. This is an old argument which I can’t get my head around but is back into focus. Encouraged by the growing threat of recession both here and worldwide.

On the day gold closed up $11.40 at $1678.70 and silver closed down $0.13 at $19.43.

Grant on Gold (Zaner) “(1) Gold ended last week with a gain of just over 2%. It was the second consecutive higher weekly close. (2) Silver posted a 5.8% gain last week. It was the second consecutive higher weekly close. (3) Platinum closed 6.7% higher last week, notching a second consecutive higher weekly close. (4) Palladium has retreated into its range after failing to sustain gains to 6-months highs last week.”

On Wednesday gold opened choppy, drifting lower as New York reflected yesterday’s aftermarket weakness. The metals remain defensive as the Dollar Index surges again above 113.00. Still, gold and silver could be doing worse considering inflation news. Today’s US PPI (Producer Price Index) was hot and tomorrow’s US Consumer Price Index will likely also reflect troubling numbers. Today’s Fed minutes contained no surprises, so traders remain resolute – expecting higher interest rates from the FOMC as they battle inflation.

There are also a few things which may lift bullish spirits. Today’s aftermarket made up half of today’s losses – suggesting indecision even by the bears. A few insiders are making the case that while higher prices in gold will be a continuing challenge through this interest rate rollout, our shiny friend is creating a solid, rising bottom. Which may prove important for those looking to get back in as sentiment improves. Finally, many old-time physical players are buying most anything we have for live and delayed delivery. So, the physical market is alive and well.

Reuters is a mixed bag ending on a mildly positive note – “Federal Reserve Bank of Cleveland President Loretta Mester on Tuesday said the central bank had yet to get surging inflation under control and would need to press forward with tightening monetary policy. On the physical front, Standard Chartered said in a note that with festival-wedding buying starting in India, demand would continue to firm, but was not expected to be as strong as in the fourth quarter of 2021.”

On the day gold closed down $8.40 at $1670.30 and silver closed down $0.55 at $18.88.

Zaner (Chicago) – “Today could be a major trend setting session with the US PPI number expected to provide information on the status of US inflation. As it currently stands the markets largely expect another jumbo US rate hike in the first week of November and expectations for further aggressive rate hikes could begin to build if PPI and CPI over the next two sessions fail to show progress on shutting down inflation. However, with expectations of a gain of 0.2% the markets might not get a definitive signal on the direction of inflation. On the other hand, the markets are likely to take slight deviations from expectations as definitive only to see those reactions burn out quickly. In taking a step back the US Federal Reserve has made it clear they want to “definitively reverse” inflation and therefore without a significant downside miss in the form of a contraction in inflation, rate hike expectations will live on, the dollar continues to rise, and gold resumes its current slide. Traders should not discount the excluding food and energy reading today as the main driving force as retail gasoline prices declined sharply throughout the month of September. On the other hand, the vice chairman of the Fed yesterday seemed aggressive with her categorization of inflation as a continuing problem even though later comments from the 2nd in command Fed member tempered hawkish fears as the Vice chair acknowledged there were signs of trouble in the US economy. Unfortunately for the bull camp, the focus of the gold and silver trade will remain fixated on the action in the dollar and given an as expected or higher US PPI report the dollar should recover aggressively and spark a wave of speculative selling in gold. In the end, the gold market today is likely to behave in a fashion completely contrary to historical patterns with signs of ongoing inflation causing gold prices to plummet. Given the divergence between gold and silver prices recently, we expect silver to show less volatility and perhaps less downside than in gold. In fact, silver ETF holdings yesterday saw a big inflow of nearly 5 million ounces in a development that could signal a bullish silver bet on today’s PPI reaction. With the likelihood of significant gyrations in prices today, traders could utilize just out of the money November gold puts or calls as those options have 14 days until expiration (relatively cheaper) and they could easily be in the money by the close.”

On Thursday gold again moved lower as today’s US Consumer Price Index confirmed that inflation remained hot, and traders braced for continued hawkish FOMC interest rate hikes. The New York cash market settled between $1645.00 and $1655.00. The Dollar Index initially surged (114.00) but drifted back towards 113.00 and traders bought the dip. This is not so much bargain hunting but another small, short covering rally. Early losses were pared back, and the market closed almost unchanged on the day. But most traders consider this a false flag in a generally deteriorating market. Still, both gold and silver remain oversold in my opinion.

The DOW initially dropped 500 points but recovered supporting the Biden position that the economy is strong. Investors however worry that today’s initial DOW weakness, and Washington spending foreshadow a new deteriorating economic reality. One in which the world goes into the soup and takes the US along for the ride as the Fed continues to stoke up the interest rate furnace. This dynamic is worth questioning: How much economic damage can the FOMC inflict on the stock market before the Fed inflation “mandate” goes out the window?

Reuters – “Russian missiles pounded more than 40 Ukrainian cities and towns, officials said, as NATO allies meeting in Brussels unveiled plans to beef up Europe’s air defenses after committing more military aid to Kyiv. The new pledges prompted Moscow to renew warnings that Western states’ help made them “a direct party to the conflict” and that admitting Ukraine to Western military alliance NATO could trigger World War Three. A Russian nuclear strike would change the course of the conflict and almost certainly provoke a “physical response” from Ukraine’s allies and potentially from NATO, a senior NATO official said. The United Nations General Assembly overwhelmingly condemned Russia’s “attempted illegal annexation” of four partially occupied regions in Ukraine and called on all countries not to recognize the move, strengthening a diplomatic international isolation of Moscow.”

On the day gold closed down $0.30 at $1670.00 and silver closed down $0.02 at $18.86.

On Friday gold continued lower over unrelenting fear that higher FOMC interest rates will remain in place until inflation is under control. Today’s trading range was again confused, gold opened higher testing overhead resistance ($1665.00) and then dipped significantly, finally catching a solid bid range at $1646.00. Like I said earlier in the week I believe the “line in the sand” for gold will be the trading region between $1600.00 and $1650.00. Today’s gold weakness was not unexpected considering the mounting negative sentiment.

But the reality here is that we are back to September 26^th lows. Gold is looking for that “realistic price” in a marketplace already using higher interest rates to attract new investors to Treasuries. In the meantime, fresh bargain buying is already in place for physical bullion veterans.

For true speculators the silver market, while extremely volatile this week is attracting bargain hunters. I do not see much downside in the $18.00 silver range, considering the long delay from manufacturers. Expect a price circus in platinum and palladium because there are big players, and big believers (probably more important) on both sides of these rare commercial metals.

On the day gold closed down $28.30 at $1641.70 and silver closed down $0.84 at $18.02.

Platinum closed down $1.50 at $905.30 and palladium closed down $119.90 at $1987.50.

Zaner (Chicago) – “The temporary flare in gold and silver prices yesterday sets markets up for a resumption of the downtrend. Apparently, the Takeaway from this week’s avalanche of US inflation data is the Fed still has significant work to do and that should set the stage for a decline below $1650 in December gold and below $18.00 in December silver. In fact, the US CPI report clocked in at a 40 year high last month prompting the trade to expect “more aggressive” interest rate hikes by the Fed. While not as significant as CPI and PPI in the eyes of the Fed, US import and export prices for September today could also have some influence on the need to continue jumbo rate hikes. The gold market will also be presented with a Fed index of common inflation expectations for the 3rd quarter and a University of Michigan five-year consumer inflation expectation report for October (preliminary). In short, additional inflation news today will likely add to the hawkish environment. Countervailing the prospect of surging global inflation are reports that up to 14% of China remains under lockdown which some feel will yield deflationary pressure. Overnight gold ETFs continue to see outflows with year-to-date holdings now down by 1.3%. However, silver ETF holdings saw a 2nd significant daily inflow of 4.4 million ounces! In a minimally supportive development, Barrick Gold Corp. said that it expects full-year gold production to be at the lower end of the range it forecast earlier. Its preliminary third quarter output reading was 988,000 ounces versus 1.04 million in the second quarter.”

My Brothers and Sisters, thank you for your business and friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and have the booster! 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 soon get us back to normal and our traditional business model. As always, thank you for your patience. Richard Schwary

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Posted on October 7, 2022 by Richard

Gold – Remains Defensive

Commentary for Friday, Oct 7, 2022 (www.golddealer.com) – Today gold closed down $11.20 at $1700.50 and silver closed down $0.41 at $20.19. Gold dipped in price Friday on a solid jobs report which suggests the Fed will implement a 0.75% interest rate hike at the early November meeting. The market will also focus on key inflation data next week as well as Fed minutes (Reuters). Sentiment remains defensive and the trade generally falls into two trading categories. Those who believe the next rate hike (November) will do the inflation trick. And those who believe the Fed is behind the inflation curve and will continue with higher rates to the very edge of recession before pivoting. This is a big Fed gamble and will take months to sort out the details because it remains a work in progress. Expect a jittery trade in gold and silver until there is better clarity as to FOMC intension. Last Friday gold closed at $1662.40 / silver at $18.96 – on the week gold was up $38.10 and silver was higher by $1.23.

On Monday gold opened with significant buzz for several reasons. Treasury yields are moving lower, and this was reflected in the Dollar Index which moved from 112.5 through 111.5 in the early morning trade. Somewhat lower interest rates might suggest a less aggressive Fed, and today’s ISM (Institute of Supply Management) missed, hinting at an economic slowdown. But the “slowdown” scenario still looks like a reach.

It’s likely we are seeing increased world safe haven demand, led by the European Union. It is difficult to classify this $1700.00 push as a classic reversal, even with a $6.00 aftermarket. The Fed interest rate threat still holds the cards. Traders could sell this rally, capping further gains.

Buying the “dips” and selling the “rallies” is the normal these days. But this kind of trading could develop into a momentum trap for the paper trade. This Wednesday OPEC meets in Vienna for the first time in 2 years. The buzz is that they will cut oil production by a million barrels a day to stem declining crude oil prices. Such a serious move by the ministers could push crude towards $100.00/barrel, reinventing one of gold’s most bullish inflation scenarios.

Today’s price rise is significant as a reminder that problems in Europe and other hot spots should not be ignored. Still, the story of the world coming apart is an old hack in the gold business.

It’s better not to assume that everything is falling apart, because historically this has not been the case. But an aggressive Putin and China and now OPEC are “strange bedfellows”.

This idiom comes from William Shakespeare and is found in the Tempest. “Misery acquaints a man with strange bedfellows.” It is spoken by a man who has been shipwrecked and finds himself seeking shelter beside a sleeping monster. The word “bedfellows” is always plural, suggesting another idiom – “if it is not one thing it is another”. This wisdom seems ageless but is relatively new. It was first used by J.E Lawrence in the Nebraska State Journal in 1949!

On the day gold closed up $30.50 at $1692.90 and silver closed up $1.56 at $20.52.

Zaner (Chicago) – “A lack of significant reaction in gold to weekend rumors of financial trouble at credit Suisse, highlights the markets inability to embrace classic flight to quality concerns. Some talking heads this morning wonder if the European banking system is threatened with a “Lehman like moment” but if that were the case the US dollar and US treasuries would be significantly higher. Apparently, the gold market shifted its focus at the end of last week toward a slight decline in US treasury yields, and that combined with a new low for the move in the dollar last week gives gold and silver a slightly positive outside market bias to start the new trading week. In a very minimal demand benefit, the Indian government reduced the gold and silver import prices subject to importer taxes and perhaps some of that discounting will be passed on to consumers. December gold last week finished $46 above the lows last week and that might discourage bargain-hunting buying. On the other hand, with the most recent COT gold positioning report from September 27th registering the lowest net spec and fund long since early December 2018 and the market from that level into the low last week falling $24, the net spec and fund long could be approaching modern day trading lows. However, it should be noted that in October 2018 gold posted a net spec and fund short of 42,000 contracts. Last week gold ETF holdings declined by 1.1 million ounces and ended the week down 0.8% year-to-date. Gold positioning in the Commitments of Traders for the week ending September 27th showed Managed Money traders net sold 8,334 contracts and are now net short 41,300 contracts. Non-Commercial & Non-Reportable traders are net long 56,999 contracts after net selling 15,175 contracts. Similarly, the net spec and fund position in silver is fresh off a “net short”, and therefore a portion of last week’s late recovery was likely short covering/profit-taking in the wake of a 180-degree shift in outside market influences. The Commitments of Traders report for the week ending September 27th showed Silver Managed Money traders net sold 992 contracts and are now net short 8,087 contracts. Non-Commercial & Non-Reportable traders net sold 290 contracts and are net long 6,503 contracts. Unfortunately for the bull camp, outflows from silver ETF holdings last week were 5.2 million ounces a sign that investors remain cool toward silver.”

On Tuesday gold may have caught everyone by surprise as it built on yesterday’s safe haven gain. Prices in the New York cash market surged higher, touching $1730.00 as the dollar continued to weaken. The Dollar Index was significantly weaker, moving from a daily high (111.88) to a daily low (110.23). This dramatic shift may be the result of continued safe haven demand and momentum trading from yesterday due to continued international tension. It also lends credence to the theory that gold has confirmed a triple bottom in an oversold market.

This bounce also raises another possibility. Could traders be having second thoughts about Fed hawkishness when it comes to interest rates. This is an old theory that needs dusting off from time to time because it remains the center piece to bullish theory of higher gold prices.

Because the FOMC has been clear about their mandate to control inflation I remain cautious about the Fed pivot theory. But it is a possibility and who wants to rain on today’s good news. Let’s celebrate and be happy with gold at three-week highs, Treasury yields moving lower and investors hoping that the US Federal Reserve will tone down its pace of monetary tightening. But, for now let’s keep the champagne in the frig and see if gold can make new recent highs.

On the day gold closed up $28.20 at $$1721.10 and silver closed up $0.52 at $1721.10.

On Wednesday gold moved lower, the New York cash market trading between $1702.00 and $1714.00 as the Dollar Index bounced higher – moving from 110.00 through 111.5 in early trading. The larger price swings in gold and silver these last few days are reflected in these large changes (both up and down) in dollar strength and Treasury yields. Some are calling higher prices in gold and silver since Monday a relief rally. But I believe most traders see these higher prices as a combination of fresh safe haven buying and rising international tension.

This morning’s price downdraft was not unexpected. It was typical as traders continue to “buy the dips” and “sell the rallies”. For now, that still makes good sense. The Fed has not equivocated, and other world banks are taking decisive inflation action by boldly raising interest rates. The dollar appears overbought. And has been for some time but I would not expect much downside. As the Fed will likely stick with its public agenda. Raising interest rates until they believe inflation is under control or at least stabilized enough to consider other options.

This week’s sharp rally in both gold and silver continues to reflect the confusion which pervades these markets. Looking at the shorter-term it may be safe to assume that higher interest rates continue to cap further gains in gold and silver prices.

The technical picture belongs to the bears. But the price bounce in gold a week ago ($1620.00) suggests a solid floor, helped higher by an oversold market. The resultant higher prices were favorable news for the bulls. Gold’s overhead resistance between $1750.00 and $1800.00 however still presents a challenge. This story is not new, we have been in this spot a few times as the interest rate question turns from hawkish to dovish and back to hawkish.

Expect a continued nervous market, with international news becoming more important. Larger price swings, followed by “quiet trading periods” is a reasonable model. Likely though 2023. There is great potential in the metals because few of the problems which pushed prices to recent highs have been solved. The Washington deep thinkers have talked these problems to death. To the point that the bulls and bears should get Scout badges for wearing down public patience. But until gold can show strength above $1800.00 and silver above $25.00 you might be better off spending your money on one of those fancy “noise cancelling” headsets used in aviation.

On the day gold closed down $9.70 at $1711.40 and silver closed down $0.56 at $20.48.

Zaner (Chicago) – “To start the Wednesday US trading session gold and silver are facing a negative pivot in outside market action, but OPEC+ rumors of a 2 million barrel per day production cut could ignite energy prices and in turn provide a very rare inflation inspired lift in precious metal prices. Granted, broad-based “risk on” environment this week has been accentuated by new lows for the move in US treasury yields and from a massive rally in US equities. However, we remain skeptical of the bull case, especially with December gold into the high yesterday $116 above last week’s lows. On the other hand, coming into the September spike low, the net spec and fund long position in gold was near the lowest level in 4-years and therefore outsized short covering is not that surprising. As indicated in other markets earlier this week, it appears the markets are beginning to factor in a potential end of the jumbo US interest rate hike cycle. In fact, expectations that the November rate hike will be the last 75-basis point hike could be in air with the trade seeing upcoming soft US jobs data as a reason for the Fed to slow its tightening. Clearly, this week’s US scheduled economic report flow contributes to the one and done November jumbo rate hike theory, with the month over month decline in construction spending the weakest in 18 months and the month over month decline in the Job Openings & Labor Turnover (JOLTS) statistics the largest in 30 months. However, the Fed has been very clear that its primary focus is to stamp out inflation and in turn accept weakening demand. On the other hand, speculative fervor has had the dollar in a freefall and of all outside market influences weakness in the dollar has been the most reliable bullish force in gold. Even though the decline in US implied treasury yields yesterday were not significant, short-term technical and fundamental forces project further softening of US yields. Unfortunately for the bull camp, precious metal ETF holdings continue to decline with gold holdings year-to-date approaching a decline of 1%, and silver ETF holdings year-to-date down 14%! In conclusion, a decline below 110.00 in the dollar index and an extension down to 109.07 is probably needed now for gold and silver to extend higher.”

On Thursday gold firmed and then drifted lower into the $1705.00 / $1710.00 as the Dollar Index rose from 111.00 through 112.00. And traders get ready for the latest US jobs data Friday. And additional inflation numbers next week. This morning’s trading might suggest that bullish gold sentiment is fading as the dollar grows stronger. Perhaps. The possibility of a lower trading range is being considered – something between $1675.00 and $1740.00 (Reuters). But keep in mind that today’s “sentiment” is a changeable “snapshot”. Gold recovered and closed virtually unchanged on the day. Now this is no big deal, I just mention it because it illustrates the lack of conviction on both sides of this trading isle. The best I can say it that the buzz created Monday and Tuesday has gone out the window – but it may return next week if the dollar weakens.

CNN Business – “When the Bureau of Labor Statistics releases its latest monthly jobs report on Friday, all eyes will be on whether the labor market is showing signs of loosening up – one of many crucial factors that will help the Federal Reserve determine its next steps in its fight against decades-high inflation. The US economy is forecast to have added 250,000 jobs in September, which would be the lowest monthly jobs gain since December 2020. The unemployment rate is expected to hold steady at 3.7%, according to Refinitiv estimates.” A significant miss would at least open the door to a less hawkish FOMC, but a hot reading would give the Fed more latitude and perhaps reinforce its resolve to slow inflation through higher interest rates. A negative scenario for gold prices.”

As if things were not confusing enough consider the following especially if you are interested in the physical market. There is a big difference between the daily paper trade and the physical market. The paper trade is volatile and unpredictable but can be easily played by professionals. The physical market – follows along but there is a big difference in pricing.

Premiums on live and delayed delivery gold and silver bullion remain high. Worse, the delay in delivery is getting longer directly from the world mints. Why this is true is not clear even between informed dealers. But it is possible that delay is related to some sort of hidden secondary market. Surprisingly the “ongoing premium” argument is seldom used to bolster the notion higher metal prices are already baked into this cake. But if you are considering the physical trade this aspect should be part of your basic planning.

I also believe that the modern “think tank” idea that inflation is not a “one and done” matter by the Fed or other central banks is getting more attention. This was once considered a radical idea but is at least being talked about in the media today. The notion here is that it took a long time for inflation to get to the point where it made the world uncomfortable. And many academics believe that it will also take a long time to unwind. This of course favors the bullish scenario but will require patience. Keeping this in mind is also good for basic planning.

On the day gold closed up $0.30 at $1711.70 and silver closed up $0.12 at $20.60.

On Friday gold dipped on the open ($1690.00), there was mild bargain hunting which created a short-term choppy trade. But the gold market remains defensive and drifted lower into the weekend. The weakness was a result of the jobs report released this morning.

The employment numbers were in line with expectations which suggests traders believe the Fed will continue down the road of aggressive interest rate hikes. In other words, the report was not bad enough to create any change in Fed hawkishness.

In a short week gold sentiment was volatile and pricing was on both sides of $1700.00. Still, the technical picture for gold remains bearish, capped by a strong dollar. It is important to note that gold did not exactly swoon for two reasons. The price of gold is already discounted, and demand of physical product remains steady. That does not mean we are out of the woods, but it might suggest continued moderation in price swings on the short term.

On the day gold closed down $11.20 at $1700.50 and silver closed down $0.41 at $20.19.

Platinum closed down $2.50 at $929.20 and palladium closed down $84.20 at $2182.30.

Posted on September 30, 2022 by Richard

Gold – To Raise or Not to Raise?

Commentary for Friday, Sept 30, 2022 (www.golddealer.com) – Today gold closed up $3.90 at $1662.40 and silver closed up $0.35 at $18.96. Gold finished the week on an up note and fresh safe haven demand as Euro zone inflation moved to a record 10%. Considering the talk of even higher interest rates, the bulls may have found welcomed shelter in this storm. Traders who do not believe the Fed can raise interest rates without moderation are in the minority. The FOMC has not equivocated a pinch in their public plan to fight inflation. Which buys them something on the front end but makes them vulnerable on the roll out. If they blink between now and the end of the year it would suggest they are worried. This would support the bullish contingent which from the beginning of this rate shift said that Powell would pivot. There is a lot at stake in this Federal gambit. On Monday, October 3, U.S. Secretary of the Treasury Janet L. Yellen will preside over a meeting of the Financial Stability Oversight Council at the Treasury Department. The meeting will consist of an executive session and a public session. The preliminary agenda for the executive session includes an update from staff of the Federal Reserve and the Commodity Futures Trading Commission on financial stability and energy market developments. This from a cynical teletype dealer calling this meeting – The Plunge Protection Team – a colorful epithet. Last Friday gold closed at $1645.30 / silver at $18.84 – on the week gold was higher by $17.10 and silver was higher by $0.12.

On Monday gold seemed to steady itself between $1640.00 and $1650.00 in the early trade. Aggressive paper traders however sold this mild rally pushing the New York cash market to daily lows ($1625.00). The problem gold has this week is nothing new. The fear of higher interest rates has created unrelenting negative sentiment for our shiny friend. Since last Tuesday the Dollar Index moved from 110.00 through 114.00, a massive rise in 5 trading days.

This strength should be enough to remind the faithful that traders remain convinced the Fed will control inflation. September’s meeting saw a 0.75% interest rate hike. Judging from Treasury yields and increased dollar safe haven the last FOMC meeting of 2022 (December 13^th and 14^th) will also have the bulls hiding under the bed.

I believe however that successive interest rate hikes will create less and less change in the price of gold. These progressively lower prices will encourage even the timid to begin thinking seriously about the fine mess world governments have created for humanity.

For those who are biblically minded warnings from the prophet Isaiah concerning unjust rulers come to mind. For others get mad and loud. Constructive help for the poor and oppressed will be rewarded. Reuters – “Almost 17,000 Russians crossed the border into Finland during the weekend, an 80% rise from a week earlier, Finnish authorities said, as the influx of people continued in the wake of Russia’s announcement of military mobilization.”

On the day gold closed down $22.00 at $1623.30 and silver closed down $0.43 at $18.41.

Zaner (Chicago) – “On the one hand, the gold market at the end of last week saw a key chart support failure and downside extension from stop loss selling, and that should leave the bear camp in control to start the new trading week. On the other hand, the gold market last week initially held up impressively in the face of an aggressive US interest rate hike and a significant upside surge in the US dollar before succumbing to the big picture broad-based commodity market meltdown. However, with foreign central banks promising to raise rates in sync with the US, the dollar expected to aggressively extend its upside breakout and reports earlier last week of slower gold shipments into China, the gold market looks to be under ongoing pressure from inside and outside market forces.

Not surprisingly, gold and silver investors continue to flee ETF instruments with gold holdings year-to-date posting a minuscule gain of 0.3% and silver ETF holdings posting a year-to-date decline of 13%. In fact, silver ETF net sales for the year are 117 million ounces highlighting an ongoing exodus from the precious metals sector. Furthermore, Goldman Sachs has reduced its Chinese growth forecast for 2023 and that should add another element of suspect demand selling interest. Yet another big picture negative for precious metals and commodities in general is a forecast from Goldman Sachs predicting the Fed will hike rates 75-basis points in November followed by 50-basis points in December and a potential final hike of 25-basis points in February for a peak Fed funds rate of 4.75%.

Fortunately for the bull camp, the net spec and fund long in gold has declined significantly from the recent peak on March 8th (at 280,000 contracts) as the net spec and fund long has reached the lowest level since April 2019. If the post COT report price decline of $22 is considered and the net spec and fund long is adjusted, the market is likely at the least net long since November 2018! Gold positioning in the Commitments of Traders for the week ending September 20th showed Managed Money traders added 22,834 contracts to their already short position and are now net short 32,966. Non-Commercial & Non-Reportable traders net sold 37,372 contracts and are now net long 72,174 contracts.

While the December silver contract showed some respect for key support at $18.77 that level becomes a critical bull bear line in today’s action especially with silver extremely vulnerable to negative overall commodity price action. However, if adjusted for the post report slide of $0.50, the silver market is likely seeing its spec position nearing the record net short position of 13,966 contracts forged back in September 2018. The September 20th Commitments of Traders report showed Silver Managed Money traders net bought 364 contracts and are now net short 7,095 contracts. Non-Commercial & Non-Reportable traders are net long 6,793 contracts after net buying 2,742 contracts. While close in support levels might hold the bear camp retains control.”

On Tuesday gold saw a choppy market trading between $1632.00 and $1641.00 as the Dollar Index remained steady at 114.00 and market sentiment continued bearish. With growing world problems, including new talk of nuclear options from Russia I’m surprised we have not seen a reasonable bounce in gold prices. Especially at these new lower levels. But the upward pulses in the New York cash market this morning are more indicative of quiet short covering rallies.

Negative sentiment continues to create a heavy trade. Reinforced by a bearish technical picture. Which has paper traders considering a bear raid on the $1600.00 support level. But these paper markets continue froggy, even uncertain for professional traders. Because the trading line between “bull” and “bear” is not easy to discern as gold and silver prices trend lower.

Still, I remain a contrarian at these levels. Gold is offered at a substantial discount from highs ($400.00). And the growing “problems list” which auger in favor of physical ownership continues to get longer. The overriding concern at this point must be the mounting debt worldwide. This argument alone should move the needle in favor of the bulls. But for the time being the interest rate safe haven demand overrides common sense. The bulls will remain hunkered down and waiting to see what the Fed has in mind their next turn at bat.

On the day gold closed up $3.40 at $1626.70 and silver closed down $0.15 at $18.26.

On Wednesday gold caught a bid in the overnight London market which accelerated in the domestic cash New York trade. There was a mild softening of the Dollar Index, but this surprising jump is more likely the result of an oversold market, short covering, and renewed safe haven buying for those sensing a certain tension in the international trade.

The word “tension” is overused, but any of these portend a “domino” effect. The euphemistic UK “tax cut” plan created a dark hurricane in their bond markets. A break in that lynch pin means real trouble for England and the EU. Italy’s latest election suggests she is considering a modified kind of fascism. This is denied but default on her massive debt could lead to radicalization. Finally, the EU is worried that the Russian controlled pipeline which delivers gas to Europe may have been sabotaged. As the war in the Ukraine grows even more dangerous.

I believe this rally will be sold simply because traders fear even higher interest rates. But the reasonable jump in prices out of virtually nowhere is instructive. Typically, when sentiment is the most negative, the trade is the most negative. It is easy to lose your sense of perspective, in a large downdraft in pricing. But this world is pretty much the same, today, and tomorrow when it comes to government practices which eventually devalue their currency. Just keep in mind that devaluation is not a one-to-one occurrence. It is not easy to pinpoint graphically. Expect times when inflation is high and gold is low, or when inflation is low, and gold is high.

Analysts have also shown that there are periods when there is no relationship at all between gold and inflation. Insiders affectionately call this “trading the grind”. Which makes markets like we now have on our hands volatile and exasperating even to professionals.

On the day gold closed up $33.70 at $1660.40 and silver closed up $0.54 at $18.80.

Grant on Gold (Zaner) – (1) Gold fell 1.9% last week, dropping to a new 29-month low of $1639.74. (2) Silver slid 3.6% last week, retracing all of the previous week’s gains. While the white metal extended lower on Monday, the September 1 low at $17.56 remains well protected. (3) Platinum ended last week with a sharp loss of 5.8%. More than 61.8% of the gains notched in the previous 3-weeks have now been retraced. (4) Palladium remains consolidative within the broad range. The market is looking ahead to next week’s report on September auto sales, which are expected to be little changed versus August.

On Thursday the gold looked confused, with a choppy early trade between $1664.00 and $1658.00, making new lows – then gathering strength and moving towards $1670.00. A promising start but by the end of day the rally fizzled, and gold closed near unchanged. Yet, a promising aftermarket pushed prices higher by $6.00, again hinting at an upward trend.

Considering yesterday’s significant jump to higher ground the bulls were disappointed in momentum. This was troubling because the Dollar Index favored the bulls today. The index reached a trading high of 113.75 and out of nowhere collapsed into the 112.21 by noon. This should have rallied the bulls producing a second higher trading day. I looked for a stronger market because of my belief that yesterday “pop” was not “a relief rally” or “short covering”.

Yesterday’s strength could just as likely been an oversold reversal. Based on physical demand which is looking at $1650.00 support. In place and tested three times since 2020.

But I fear traders are likely to abandon reasonable pricing strategy if Fed officials offer hawkish interest rate comments. I refer specifically to Bank of Chicago President Evans. Reuters – Fed’s Evans: expect to reach top Fed policy rate by March – “The Federal Reserve is raising interest rates expeditiously to address very high, persistent inflation, and will likely get U.S. short-term borrowing costs to where they need to be by early next year, Federal Reserve Bank of Chicago President Charles Evans said Wednesday. Most Fed policymakers are penciling in a top Fed policy rate of 4.5% to 4.75% by end of next year, based on their projections published last week, and “by March we will be at that point,” Evans said at an event on current economic conditions hosted by the London School of Economics. Benchmark U.S. 10-year Treasury yields rose to their highest level in about 12-1/2 years on Tuesday as investors girded for higher interest rates that could possibly remain for longer than anticipated as Federal Reserve officials held firm in their hawkish stance. Since August 2, the 10-year yield has surged by 145 bps. The Federal Reserve has aggressively hiked interest rates by 3 percentage points this year, taking its target range to 3.00%-3.25%. It carried out its third consecutive 75 basis point increase last week and signaled that rates are likely to rise to the 4.25%-4.5% range by the end of the year.”

When traders hear “4.5% by year end” from an official source, their default position is to assume the Fed will send the US economy into the drink in their fight against rising inflation. My money is still on an alternate and moderate path because sector slowdown is already a reality.

The Fed will pivot but not abandon a sensible approach to higher interest rates. Which means we will have this interest rate conversation through next year and perhaps into 2024!

What makes this “transition” confusing is a strong argument against a change in the Fed’s interest rate plan. It claims that the Fed has no trouble driving the country into recession while taming inflation. Perhaps. But the same Fed would quickly and privately reverse direction if 4.5% interest rates began to crater the US stock market!

On the day gold closed down $1.90 at $1658.50 and silver closed down $0.19 at $18.61.

Zaner (Chicago) – “With the dollar index aggressively recoiling from a 20 year high and action in the dollar still “the primary driver of gold”, the aggressive short covering rally in gold and silver yesterday was not surprising. However, the source of the dollar rally does not appear to be the result of sustained change in fundamentals and instead is likely the result of an attempt by the Bank of England to prevent further slowing from inflation headwinds. On the other hand, the sudden 180-degree shift in Bank of England policy action might be a sign that at least one major central bank is poised to pause their aggressive rate hike efforts. Therefore, gold and silver were justified in noted “relief rallies yesterday”, but there does not appear to be enough evidence to suggest the bear trend in precious metals has come to an end. In fact, investors continue to be negative toward gold and silver with gold ETF holdings yesterday declining by 183,784 ounces which pushes the year-to-date outflow to 0.4%. Investors also cut silver ETF holdings by 656,652 ounces and those holdings are now 14% lower year-to-date. Certainly, gold and silver drafted support from the gas line explosions under the Baltic Sea as that increases the potential of a European winter disaster and dramatically increases tensions throughout the region. Unfortunately for the bull camp, gold has simply not displayed the capacity to consistently benefit from flight to quality developments and therefore the market will likely need further flight to quality gains to consider a shift in focus away from the dollar. In our opinion, we suggest selling December gold on a rally to $1,701.10, but the odds of a return to that level are now extremely low as the relief rally has likely ended.”

On Friday gold was choppy in early trading between $1662.00 and $1668.00 but quickly moved to highs on the day ($1676.00). Traders sold the rally in typical fashion, but support for the trading range remains intact and reflects Thursday’s firm aftermarket. These higher prices in gold are worth noting because the Dollar Index, trending lower since Wednesday bounced higher this morning. Yet gold remained firm. Safe haven demand is coming from the Euro zone, encouraged by record high inflation. International tension continues as war in the Ukraine grows darker and no one is offering a humane resolution.

On the day gold closed up $3.90 at $1662.40 and silver closed up $0.35 at $18.96.

Platinum closed down $1.30 at $870.00 and palladium closed down $28.90 at $2173.20.

Technical expert Jim Wyckoff (Kitco) – The December gold futures bears have the solid overall near-term technical advantage. Prices are in a downtrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at $1,700.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,600.00. First resistance is seen at the overnight high of $1,682.90 and then at $1,700.00. First support is seen at Thursday’s low of $1,649.30 and then at this week’s low of $1,622.20.

September silver futures bears have the firm overall near-term technical advantage. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $20.00. The next downside price objective for the bears is closing prices below solid support at the September low of $17.40. First resistance is seen at the overnight high of $19.185 and then at $19.50. Next support is seen at $18.465 and then at $18.00.

Posted on September 23, 2022 by Richard

Gold – Struggling Against Rising Rates

Commentary for Friday, Sept 23, 2022 (www.golddealer.com) – Today gold closed down $25.50 at $1645.30 and silver closed down $0.71 at $18.84. Gold dipped again this morning as the dollar continued to gain strength and safe haven demand may be hiding under the bed. The two-year Treasury yield tops 4.2% (15-year high) the DOW moves below June lows. And Wall Street is not happy. Today’s weakness in the metals may also reflect the latest US economic snapshot. Which suggests our economy is growing despite higher interest rates. Negative sentiment still rules, which might suggest a short-term bottom is in place. Traders obviously fear gold’s negative technical picture, but this market turned choppy going into the weekend. With gold at 2 ½ year lows traders may look for a tired bear. The Asian physical market is already active at these lower levels. Large sellers of physical bullion are scarce at current levels, content with waiting out this interest rate storm. Last Friday gold closed at $1671.70 / silver at $19.30 – on the week gold was higher by $26.40 higher and silver was lower by $0.46.

On Monday gold moved between $1664.00 and $1668.00 in the overnight Hong Kong and London markets. Caught a bid in early New York trading, pushing into the $1675.00 range but the minor rally was sold, and it closed virtually unchanged on the day. Here is an interesting twist. The Dollar Index lost ¾ of a point in the aftermarket, pushing gold up $10.00 ($1675.00).

Still, this market remains defensive and anticipating a large interest rate hike later this week. The latest FOMC decision will likely be released after market close on Thursday. Most traders are looking for a three-quarter point hike. Some believe there is a 20% chance that the Fed will move interest rates higher by a full point. The good news is that one way or the other the market will have confirmation as to how hawkish the Fed has become on the short term. The bad news that this “higher interest rate” scenario will then simply recycle.

Traders will again begin to again worry about what might be in the cards the next time around. The Fed has two “meetings” remaining on their 2022 calendar. The November 1^st and 2^nd is the less important of the pair. But these days any small piece of information may confirm preconceived ideas. So, a minor press release or public comment can create trading waves.

Their last meeting of the year, and the most important is called – “Meeting associated with a Summary of Economic Projections”.

Here everyone will get a personal look at what Chief Powell thinks and his observations relative to the most current inflation data. This last meeting of the year will give the trade a much better confirmation as to his intention. Keep in mind the public is expecting and has factored a hawkish response into the metals trade. If they get anything less, it would be bullish for the metals.

The key to current pricing is the realization that change always happens and is rarely successfully anticipated. Reuters “Just months ago, investors worried the Federal Reserve was not fighting inflation aggressively enough. Several jumbo rate hikes later, some now fear the Fed will plunge the economy into recession by tightening monetary policy too quickly.”

In the meantime, people are thinking about downside in gold and silver bullion. As opposed to higher prices on the short term. This is unfortunate because it creates a “doom and gloom” environment. When in fact selling prices of the metals are at their most attractive in years. Still, it is difficult to get excited over lower prices in the metals. But the rhetoric overshadows the truth.

The fact is that in our corner of the world, the public has no problem buying in a significantly down market. And I’m fond of reminding everyone that there are few large sellers. This is an often overlooked but almost universally true aspect of the physical market.

I am sure there are times in our 40 years of service that we were not net sellers, but these times are rare. There are exceptions but generally the public buys and keeps for the long term. This is especially true for certain ethnic sectors of the large LA marketplace.

On the day gold closed down $5.50 at $1666.20 and silver closed down $0.03 at $19.27.

Zaner (Chicago) – “Gold was weaker overnight, and the market seemed to be willing to press Friday’s lows coming into the session this morning. With the path of least resistance in interest rates and the dollar pointing upward, the path of least resistance in gold and silver remains down. The fear of a jumbo (75-basis point) US interest rate hike on Wednesday has been factored consistently since the previous FOMC meeting, and we suspect the trade is pricing in expectations of the Fed opening the door to the next rate hike. Friday’s COT report showed a minimal decline in the fund net long position, but since the report was measured, gold has declined $50, which suggest net short may have grown to its largest since mid-2019. On the other hand, even with a moderately oversold technical position, the bull camp lacks a credible argument for the market putting in a low. The Commitments of Traders reports showed managed money traders were net sellers of 11,349 contracts of gold for the week ending September 13, which moved them from a net long position to a net short of 10,132. Non-commercial & non-reportable traders were net sellers of 3,341, reducing their net long to 109,546. About the strongest argument for the bull camp is the oversold status, but it is also possible that gold could forge a temporary relief rally after the Fed decision has been released. If in its statement the Fed acknowledges some success against inflation, that could extend the “buy the rumor” recovery further than would be expected from a market without strong fundamental support. The silver market on the other hand has recently posted a spec and fund net short position and has shown periodic divergence with gold. With silver falling 50 cents since the COT data was collected, it likely enters the week with a spec and fund short net short. However, fear of recession, negative spillover from gold price action, and a higher dollar leave the bears with significant ammunition. The COT report showed managed money traders were net sellers of 17,173 contracts on the week, increasing their net short to 7,459. Non-commercial & non-reportable traders were net buyers of 8,360, which moved them from a net short to a net long of 4,051 contracts.”

On Tuesday gold traders sold yesterday’s stronger aftermarket in typical fashion as paper traders continue to “buy the dips” and “sell the rallies”. Today’s aftermarket recovered most of today’s loss and I suspect will again be sold in the morning. The coming FOMC interest rate hike just can’t seem to get out of the headings and will be used by those with a trading agenda. Fear of coming interest rate hikes is so old news that you would think a good rumor (true or not) would pop up from time to time. But no chance these days, the bears just keep banging away at those awful Fed interest rates and the calamity that is supposedly right around the corner.

Which makes me wonder if the doubters are as convinced as they sound. Considering recent declines, I would suggest that whatever the Fed does this week will be less dramatic than the bears claim. And the bulls will come out from under the bed taking advantage of lower prices. Especially if the physical dealer has quality deliverable product.

This cause-and-effect step-down in prices has been in play since higher interest rates took the sizzle out of the physical market. And it works in reverse just as easily. The cause-and-effect of a step-up market will create dramatic price increases as soon as the wider inflation driven market realizes that not having gold and silver bullion is no longer an option.

On the day gold closed down $6.50 at $1659.70 and silver closed down $0.17 at $19.10.

Zaner (Chicago) – “The precious metals markets are staying clear of their recent lows, but they are having trouble regaining upside momentum, even with the late rebound in global risk sentiment yesterday. They may have to wait until the FOMC meeting is out of the way before they can make a recovery move. Both gold and silver were able to rebound from heavy early losses yesterday, but they could not hold onto those gains and finished in negative territory. The prospects for a 75-basis-point rate hike at Wednesday’s FOMC meeting continue to weigh on the markets, but the chances for a 100-basis point hike appear to be receding. At this point, the chances remain for three more rate hikes this year, and that has made it difficult for gold and silver to sustain upside momentum. But the oversold condition of the market sets it up for a “buy the fact” rally after Wednesday’s announcement, and if the Fed appears to be softening its tone in the post meeting comments, the rally could sustain longer than just an initial reaction. However, it is hard to build a long-term case for the bulls when the Fed seems willing to risk recession to stop inflation. Platinum – It’s possible the PGMs could benefit from the rebound in global risk sentiment on ideas it would encourage light vehicle sales and paint a rosier picture for auto catalyst usage. The dollar’s inability to take continue to make new highs may spark a pullback in reaction to the FOMC meeting, which could help platinum and palladium maintain their recent upside momentum. The COT report showed both markets with generally balanced spec positions, and they could benefit from stronger global risk sentiment.”

On Wednesday gold opened firm as Russian President Putin called up 300,000 reservists to fight in the Ukraine. And said Moscow would respond with the might of all its vast arsenal if the West pursued its “nuclear blackmail” (Reuters). Biden was soon talking to the public disputing Putin’s claims and again suggesting that it was the world’s responsibility to support Ukraine’s independence. The rhetoric on both sides was strong enough to rekindle safe haven buying and pushed the price of gold as high as $1675.00. But traders sold this early rally, gold moved into the red and traders were again hunkered down over today’s interest rate hike.

Fed Chief Powell then publicly explained the reasoning behind the FOMC’s 0.75% rate hike and assured everyone that the Fed remains committed to bring down rising inflation. He also confirmed the FOMC plans for further reductions in the balance sheet.

Jerome’s feared hawkishness front and center, and the Dollar Index making daily highs (111.0) traders awaited the predicted collapse in gold prices. And then, out of the blue the aftermarket caught a bid pushing gold towards $1690.00 up $27.00. Still, even this bit of sunshine was short lived as traders “bought the rumor” and “sold the news”.

It’s possible that traders were expecting a full point interest rate increase in an oversold market and these higher prices will be called a “relief rally”. The Chief would not speculate on recession but suggested the chance of slower growth is likely.

Which may hint the Fed wants the option to be less aggressive. Perhaps stretching out their higher interest rate plan well into next year. But this seems unlikely as the FOMC is already being publicly criticized for repeating the past mistake of getting behind the inflation curve.

It is possible the latest Russian aggression is being underestimated. And regional safe haven demand is just surfacing. This coupled with an oversold market creates an interesting scenario.

Still, it is too soon to read much into this unexpected strength. It may evaporate by the end of the week. But it does hint that “higher” or “lower” gold is not completely dependent on short-term interest rates. Which may be a great first step at higher gold and silver prices.

Stay tuned, “the plot thickens”. A great and old expression which comes from a satirical play called The Rehearsal, written by the poet George Villiers, in the year 1671.

On the day gold closed down $6.50 at $1659.70 and silver closed down $0.17 at $19.10.

Zaner (Chicago) – “The trade is anticipating the FOMC’s meeting announcement this afternoon, and with an oversold technical condition and Putin announcing a “partial military mobilization,” the market may be in for some short covering after the FOMC results are released. December gold has been consolidating in a narrow range near contract lows as the world largely expects another 75 basis-point rate increase. Higher rates make it less attractive to hold non-interest-bearing assets like gold, and the strong dollar pulls safe-haven demand from gold as well. Investment interest in gold continues to decline. ETFs lowered their gold holdings another 202,578 ounces on Tuesday, down 0.2% on the day and a third straight day of declines. Fund traders have also abandoned their long bets. The Commitments of Traders managed money position has fallen from 175,694 contracts net long in March to a modest net short of 10,474 recently. This could be setting the market up for a bounce after the rate hike is announced. Anything less than a 75-basis point hike would likely spark a bullish reaction, but even if the Fed meets expectations, it may only hold the market down for a brief time. A lot of traders think it is already baked in. If the Fed sounds at all optimistic, a rally may be more sustaining. On a positive fundamental note, China’s imports of non-monetary gold reached their highest levels since June 2018 last month. But despite the oversold status, it is hard to build a case for more than a short-covering rally. Unlike gold, December silver has rejected its September 1 contract low with a modest short covering rally. It has been hugging trendline resistance since Monday, and that line falls to $19.537 today. A bullish reaction to the FOMC meeting could spark a move through resistance and a more substantial rally. The market is short term overbought, however.”

On Thursday gold’s early morning strength ($1685.00) is again brushed off as either “transitory” or mild weakness in the dollar by analysts fearing higher interest rates. The mindset of most traders remains fixed on the notion that higher interest rates mean lower gold and silver prices. I am not a raging bull this early into the “higher interest rate game” and with negative sentiment rising we could see lower prices. But I would also like to acknowledge that there may be ether viable scenarios, waiting on the sidelines for markets to settle.

Most of these are well known but rarely cited these days because professional traders believe in the supremacy of the dollar to world trade. Which makes sense, but an overbought dollar should not be overlooked considering investors look to the dollar as an unequalled safe haven during these troubling times. And higher interest rates reinforce this well thought out perception.

It is a misconception however to believe the dollar must collapse before gold becomes supremely important. I’m not a big fan of the “end of the world” scenario. There are many good reasons to own gold and silver bullion besides relative pricing.

But it makes good sense to me to look critically at our overbought dollar. And expect the good old American greenback to lose value as the Fed deaccelerates this overheated economy. I have run these numbers before, but they are worth remembering. This last year the Dollar Index has moved from 90.00 through 110.00, a gain of about 20%.

If the dollar only loses half of the ground gained during this massive run up the cash gold market would be looking at another attempt at $2000.00. And more importantly it would regain its massive audience which has been sitting on the sidelines wondering why gold is struggling even as inflation continues in a troubling world. The idea that gold and silver bullion are no longer viable is nonsense. There is a limit to what the Fed can accomplish with interest rate leverage. And once that “limit” is better understood today’s physical buyer will better appreciate why the informed have called gold and silver bullion real money for thousands of years.

On the day gold closed up $6.20 $1670.80 and silver closed up $0.07 at $19.55.

On Friday gold once again weakened as the Dollar Index approached an amazing 113.00. The obvious conclusion is that many believe the Fed may will continue with its sledgehammer approach to rising inflation. Today’s drop is a bit surprising however considering Putin’s talk of war as the EU continues to push for further Russian sanctions. Reuters – “Russia launched referendums aimed at annexing four occupied regions of Ukraine, raising the stakes in the seven-month-old war with what Kyiv called an illegal sham that saw residents threatened with punishment if they did not vote.”

From a practical standpoint our order phones began ringing early in the day and were steady most of the day. The public committed to physical ownership of bullion are buying. We continue to be net sellers both in delayed delivery and live product. The smaller the bullion coin the larger the premium from the manufacturer, but the public remains interested. The best value remains in the larger bullion coins and bars, but live availability remains sketchy. Which supports my contention that there is a clear difference between the paper and physical market.

The 30-day pricing chart in gold will give you a good idea of recent relative support levels. In early September gold held up well around 1700.00. By mid-September that support floor looked like $1650.00. A level which has been tested three times, suggesting a solid holding pattern if such a thing is possible in light of this negative sentiment.

On the day gold closed down $25.50 at $1645.30 and silver closed down $0.71 at $18.84.

Platinum closed down $47.30 at $858.50 and palladium closed down $104.30 at $2056.40.

Zaner (Chicago) – “The US dollar was higher again overnight, as the December Dollar Index reached a new contract high, and the nearby chart reached its highest level since May 2002. December gold fell below Wednesday’s post-meeting low and could be on course for another leg down. Gold is technically oversold, and traders have been weighing this against prospects for rate hikes to extend into 2023. US Treasury markets collapsed yesterday and extended those losses overnight. This means higher long-term rates, which pulls investment away from non-interest-bearing assets like gold. US initial and ongoing jobless claims came in lower than expected on Thursday, and the KC Fed manufacturing index showed a surprisingly large recovery, back into positive territory. This gives the Fed even more leeway for raising rates. Investment interest continues to drain from gold. Bloomberg reported that ETFs reduced their gold holdings by 214,124 ounces on Thursday, for their fifth straight decline and their biggest cut since July 18. They also cut silver holdings by 1.5 million ounces. With the dollar making new highs and the Fed determined to push rates higher, it is hard to build a bullish case for gold. Even a short covering rally seems elusive. Increased tension over Russia could be a spark some safe haven buying, but that has not happened yet.”

Posted on September 16, 2022 by Richard

Gold – No Third-Party Obligation Works

Commentary for Friday, Sept 16, 2022 (www.golddealer.com) – Today gold closed up $6.30 at $1671.70 and silver closed up $0.12 at $19.30. Gold and silver prices were ambushed this week, so few are happy. But honestly the fuss being made by the bulls may be a bit of exaggeration. With negative sentiment and a negative technical picture, expecting a darker trader outlook is normal. I would say however that this stormy weather never lasts as long or is as turbulent as the bears would suggest. Today we saw some mild short covering and perhaps even a bit of bargain hunting. This kind of pricing only works well for the dedicated longer-term buyer. (CNBC) “To reduce inflation down to a benchmark target rate of 2%, the Federal Reserve has already implemented four interest rate hikes in 2022, including two consecutive “jumbo” rate hikes of 0.75% in June and July. The federal funds rate is currently 2.25% to 2.50%.” Most expect the September rate hike to be another 0.75%. I am cautious but not overly pessimistic, even on the short term. This bear market looks tired. I would not be surprised to see the bulls reinvent themselves before the holiday season. Last Friday gold closed at $1716.20 / silver at $18.66 – on the week gold lost $44.50 and silver gained $0.64.

On Monday gold moved substantially higher in the overnight Hong Kong and London markets threatening $1735.00. This rally gave up some steam in the domestic trade, but gold still finished with a nice upward bounce into the new week as the Dollar Index moved lower by almost a full point. The Consumer Price Index for August will be published Tuesday and should provide further inflation insight to traders looking for fresh information.

There was a significant rise in the price of silver today. More than a dollar an ounce which suggests some “catch-up” trade but primarily a short covering rally. Still, it is too soon for the bulls to celebrate. Higher interest rates and recession talk is not good for silver. I doubt that you will see increasing momentum or higher prices on the short term. But today was a plus for a bullish longer-term scenario. Because it reminds everyone that silver is always a “sleeper” and taking advantage of lower price trends makes good planning sense.

Some thoughts on the CPI relating to gold. If it comes in hot it would likely encourage talk of stronger Fed action in raising interest rates. Because a hot reading is expected the weekly pricing action might be small, even boring, like last week. On the other hand, if the CPI comes in weak, the price of gold could rally. This might suggest the Fed will have more latitude (time) to make sure Wall Street traders do not get too nervous. This too may create little change in the price of gold because pricing remains capped by a strong dollar. In the short term, gold pricing may remain flat, looking for fresh, actionable information. The positive side of all this confusion is that gold remains relatively stable in price, in spite of a progressing Fed policy of higher interest rates. Whether this will hold up remains to be seen but, in the meantime, I believe it is one of the bigger positives for the physical market.

Reuters – “Economists around the world, from the most liberal free-spenders to fiscal conservative deficit hawks, largely agreed the coronavirus pandemic required a go-big, go-fast policy response to avoid an outright global depression. They’ve also reached a rough consensus on another point: The hangover is real.” This too may support gold and silver prices. Even though the price swings may become larger on the short term.

On the day gold closed up $11.90 at $1728.10 and silver closed up $1.10 at $19.76.

Zaner (Chicago) – “With the dollar extending last week’s reversal/slide and reaching the lowest level since August 26th this morning the precious metal markets clearly start the week with support from currency market action. In our opinion, the markets this morning are upbeat in anticipation of evidence on Tuesday that US inflation might be coming under control. In other words, both commodities and equities are hopeful that jumbo rate hikes from the US Fed are over or will be over after next week’s FOMC meeting. In fact, metals, equities, and other commodities are tracking positive today despite the promise of more quantitative tightening from the European Central Bank. Therefore, the bull camp in gold and silver is factoring in expectations for a decline in CPI of 0.1%. The gains in commodities this morning is impressive given the additional Chinese Covid city lockdown announcements over the weekend. While some traders suggest that gold and other metal markets might be poised to benefit from Chinese Mid-Autumn Festival demand, the economic condition inside China remains suspect and the yuan is trading at the weakest level since the beginning of the pandemic, thereby eroding Chinese purchasing power. Furthermore, Chinese August CPI and PPI readings last week weakened significantly which in turn gives credence to views that the Chinese economy is contracting. Furthermore, investor sentiment toward gold and silver remains negative with gold holdings last Friday declining for the 10th straight session and reducing holdings last week by 442,722 ounces. Similarly, silver ETF holdings on Friday declined by 711,955 ounces and reduced their holdings last week by 2.5 million ounces! With the most recent COT positioning report showing a net spec and fund gold long near the vicinity of the lowest levels since May 2019, some gold buyers saw the markets respect and ultimate rejection of the $1,700 level as a sign of fundamental value. The September 6th Commitments of Traders report showed Gold Managed Money traders net sold 19,509 contracts and are now net long 1,217 contracts. Non-Commercial & Non-Reportable traders net sold 17,752 contracts and are now net long 112,977 contracts. Under further declines in the dollar and if the odds of a jumbo US rate hike next week decline, the October gold contract might regain the $1,750 level. With the silver market in the most recent COT positioning report posting a “net short” we suspect last week’s gap higher upside extension was primarily the result of short covering. The September 6th Commitments of Traders report showed Silver Managed Money traders net sold 3,573 contracts and are now net short 24,632 contracts. Non-Commercial & Non-Reportable traders are net short 4,309 contracts after net selling 4,207 contracts.”

On Tuesday gold looked stronger in the overnight Hong Kong and London markets ($1730.00) but the domestic trade weakened over August inflation news. I think this is an overreaction – yes inflation is rising, and some traders are calling the August numbers “hot”. But I think this is a bit of an exaggeration, which has been driving this bearish scenario for months.

Barron’s most recent assessment suggests an improving inflation outlook. But traders remain fixed on Fed bearishness, so August’s CPI numbers were strong enough to push gold and silver lower. Wall Street also reacted negatively but if you look at the record, the Fed is famous for pushing stocks to the breaking point and then reversing direction.

Still, today’s drop in prices was typical of a still defensive market, looking for value. The cash New York market fell from 1730.00 through 1695.00 before bouncing higher and settling between $1705.00 and $1710.00 on the day.

This bounce was a combination of bargain hunting and short covering. Yes, cheaper prices continue to move the needle in the physical world of gold and silver bullion. For most of the last 10 trading days we have been net sellers to the public.

Surprisingly enough, what made this latest pricing action in gold noteworthy was not the inflation data. The rug was pulled out from underneath many savvy traders. Because prior to the Consumer Price Index they were growing more optimistic about higher gold prices.

On the day gold closed down $23.10 at $1705.00 and silver closed down $0.37 at $19.39.

On Wednesday the early gold trade turned choppy between $1702.00 and $1707.00 so there is some interest. But the market broke down later in the day and finished just below $1700.00, as interest faded. It is difficult to make a positive case on this dip because higher prices are capped by rising yields and a stronger dollar. And gold could be subject to follow through momentum selling if this weakness is not bought by bargain hunters.

The Dollar Index these past 5 trading days has been erratic, losing 2 full points and then jumping back to recent highs (110.00) on yesterday news of solid inflation numbers. Traders are still looking for fresh news, expecting a ¾ percent hike in interest rates by late next week. Actually, there are some who believe that a full point might is in order. Increasing the bearish tilt but the Fed should be careful here, too much inflation push equals recession.

Gold pricing on both sides of $1700.00 today is not a confidence statement it is a holding pattern. Higher interest rates are not good news, but it remains to be seen if the Fed will kill the golden goose. Wall Street is trying to recover after its worst trading day since June of 2020.

In some ways stocks and gold are interrelated. Both are suspicious of a hawkish Fed. Yet both see some advantage in lower prices. In other words, gold and stock bulls are not running for cover. Both sectors obviously dislike lower prices, but each is patient enough to see if the Fed can get lucky with this latest attempt in trying to at least control inflation numbers.

On the day gold closed down $8.50 at $1696.50 and silver closed up $0.08 at $19.47.

Zaner (Chicago) – “Gold and silver prices deserved some liquidation pressure yesterday in the wake of inflation news that is unlikely to discourage the US from a jumbo rate hike next week, but in our opinion the washout in most markets yesterday was excessive. An example of the market’s need for softer inflation to avoid a jumbo rate hike next week was seen in a Bloomberg report which labeled the +0.1% CPI result as “a shockingly hot inflation report”. Unfortunately for the bull camp, the recovery in the dollar was very impressive and could have some “legs”. In fact, if the dollar manages to take out contract highs today October gold is likely to fall below the September low of $1,689.80. Gold ETF holdings were reduced yesterday by 79,024 ounces while silver ETF holdings saw an outflow of 1.2 million ounces. On the other hand, the markets will be presented with additional inflation measures from the US later today and that could result in follow-through selling in both gold and silver. Market expectations for today’s producer price index reading matches the trades expectations for the US CPI report yesterday which increases the odds of gold and silver price posted more declines. The bias is down, with a full retracement of the September rally likely without a contraction in the month over month producer price index reading. Obviously, with silver managing a low to high September rally of $2.60, it is very vulnerable to further significant downside corrective action. The first retracement target from the September rally offers an initial target of $19.00 in December silver.”

On Thursday gold increased in bearishness even though the Dollar Index turned flat shy of 110.00. Yesterday’s breakdown encouraged the bears and today’s increased momentum selling should find the bulls hiding under the bed. Reuters – “This sell-off into September, October has really been just on rate adjustments, rates came off pretty hard and now they’re right back up again and pushing gold lower. Prices had briefly pared losses as investors took stock of data that showed U.S. retail sales unexpectedly rose in August, while separate data showed U.S. weekly jobless claims fell 5,000 to a seasonally adjusted 213,000 last week. Markets have fully priced in an interest rate hike of at least 75 basis points at the end of the Fed’s policy meeting next week, possibly even as high as 100 basis points. Although gold is considered a safe bet during economic uncertainty, interest rate hikes increase the opportunity cost of holding non-yielding bullion. Meanwhile, International Monetary Fund chief Kristalina Georgieva said on Wednesday central bankers must be persistent in fighting broad-based inflation.”

I can’t say that lower prices in gold and silver are unexpected. But it is interesting that the decline in stocks and gold were about the same this week (4%). Still, weaker gold and silver prices today are discouraging because we did not see much short-term bargain hunting.

Waiting out the rocket fire is no fun but, in the meantime, remember that the price of gold on the short term is a function of interest rates. For the time being it will not act like an inflation hedge. The origin of “a bull in a China closet” is not known but the affirmation comes to mind and was first used in Frederick Marryat’s novel Jacob Faithful (1834). The more Powell “huffs and puffs” using increased rhetoric, the more important gold and silver bullion becomes in the longer term.

The faithful were not standing in line this morning to buy the latest weakness. Sudden drops usually produce a day or two of decreased volume. But physical buyers will take advantage of this latest drop as soon as they believe gold and silver are oversold.

Look for a short-term bounce, this market is probably already oversold. The bounce will be a combination of bargain hunting and short covering. “Good Grief” Charlie Brown. I’m glad the weekend approaches. It will give these markets time to settle down, even as worry mounts.

On the day gold closed down $31.10 at $1665.40 and silver closed down $0.29 at $19.18.

On Friday we began to see mild bargain hunting across our trading desk as the Dollar Index moved lower, losing ¾ of a point in early trading. No one likes these more dramatic swings in price and frankly I’m surprised. A few days ago, I had envisioned a more stable market with less volatility. But Fed rhetoric rained on my parade. This is not to say that the FOMC is not sincere in its resolve to raise interest rates. I’m suggesting they may not have enough gas in the tank to put up with the expected economic push back. You could very well see higher inflation become their longer-term plan to move away from the pandemic model.

We are members of a national dealer network and most of the time the information and news is boring. But today I got a laugh from one of its more pessimistic dealers. HAPPY LEHMAN BROS BANKRUPTCY ANNIVERSARY! “The bankruptcy of Lehman Brothers on September 15, 2008 was the climax of the subprime mortgage crisis. After the financial services firm was notified of a pending credit downgrade due to its heavy position in subprime mortgages, the Federal Reserve summoned several banks to negotiate financing for its reorganization. These discussions failed, and Lehman filed a Chapter 11 petition that remains the largest bankruptcy filing in U.S. history, involving more than US$600 billion in assets. Got Gold? Got Silver?”

Dealers do not like lower prices any more than their customers. But the best dealers always manage to keep things in perspective. Even when it’s raining outside.

On the day gold closed up $6.30 at $1671.70 and silver closed up $0.12 at $19.30.

Platinum closed down $4.50 at $900.50 and palladium closed down $33.20 at $2098.10.

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