Daily Gold Newsletter Archives

Posted on December 2, 2022 by Richard

Gold – Transition or Confusion?

Commentary for Friday, December 2, 2022 (www.golddealer.com) – Today gold closed down $5.20 at $1795.90 and silver closed up $0.40 at $23.04. Gold opened steady in early trading but dropped on a strong jobs report. Which threw a wet blanket on some of this week’s positive buzz. Traders however did buy the weakness, which is a plus for the bullish gold scenario. Consider this sudden weakness as a reminder of market uncertainty. Despite the latest upbeat FOMC comments concerning interest rates. Good Grief Charlie Brown – today the Dollar Index gained and lost a full point in three hours! A rodeo finish to what I thought was going to be a typical holiday season of “quiet” trading. Last Friday gold closed at $1744.90 / silver at $21.36 – on the week gold was $51.00 higher and silver was higher by $1.68.

Important Notice – 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 gold was higher in last night’s Hong Kong market yet sold off in the early London trade and continued mildly lower in the domestic New York cash market. This back-and-forth pricing mirrors the Dollar Index which dipped in the early trade but quickly recovered to something around 106.00 which has been typical support since last Thursday.

I believe traders will see this “after Thanksgiving week” as a continuation of a market looking for a new dynamic to gather either the bulls or bears. But with a wider view – meaning that most believe higher interest rates will cap bullish sentiment. This is not a new idea, but it has been gaining strength of late as some traders adopt a slightly dovish stance on the short term.

We pretty much have the same trading conditions in play – but there will be important insight offered at least twice this week. Traders are eager to hear Powell’s speech on Wednesday at the Brookings Institute where he is expected to speak on the outlook for the US economy and the labor market. And the US jobs data is due this coming Friday (Reuters).

Both events do carry some weight. But I suspect not to any great degree because this current information is known or suspected. The most important factor weighing on the metals in the short term continues to be the Fed’s policy move in December.

The modest half point rise in rates before Christmas is baked into the pricing cake. My bet is that traders are expecting gold and silver bullion to trade at or around current levels. This supposition is based on the notion that the Fed will have “more room” for interest rate options.

And the current FOMC hawkish plan will turn into something like “higher interest rates over a longer time period”. This is not the best outcome for the bullish scenario, but it is a good replacement “widget”. It allows time to see if fresh safe haven demand develops in a dangerous world adapting to a new geo-political paradigm.

The latest fun rumor would be a Christmas “surprise” in rising prices due to the holidays. But for some reason this notion always comes into focus this time of year!

On the day gold closed down $13.20 at $1740.10 and silver closed down $0.52 at $20.91.

On Tuesday gold remained choppy between $1750.00 and $1760.00 in the early domestic market with an upward bias after yesterday’s weakness. There is some underlying strength as traders continue to buy weakness. This subtle optimism is hinged on the belief that Powell’s comments tomorrow will become a Goldilocks scenario – being “not so hot – not so cold”.

Professionals believe the bulls have a slight advantage as far as the technical picture is concerned. But this is likely transitory and depends greatly on the now presupposed Fed “shift” in hawkish sentiment. Consumer confidence this morning is moving lower but in my opinion the drop is not large enough to influence the paper trade in the short term.

You may however be seeing mild fresh safe haven demand coming from the unrest in China. Still this week’s metals trade lacks conviction and remains stuck – in neutral. On the month gold is higher by $100.00 yet year over year is down by $33.00. Considering the inexorable rise in interest rates it figures that paper traders will continue to sell rallies – until they don’t.

On the day gold closed up $8.30 at $1748.40 and silver closed up $0.29 at $21.20.

This from technical expert Jim Wycoff (Kitco) – “Technically, February gold futures bulls have the slight overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at the November high of $1,806.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,700.00. First resistance is seen at today’s high of $1,773.40 and then at this week’s high of $1,778.50. First support is seen at today’s low of $1,752.90 and then at $1,740.00.

March silver futures bulls have the overall near-term technical advantage. Prices are in a choppy three-month-old uptrend on the daily bar chart. Silver bulls’ next upside price objective is closing prices above solid technical resistance at the November high of $22.50. The next downside price objective for the bears is closing prices below solid support at $19.00. First resistance is seen at this week’s high of $21.815 and then at $22.00. Next support is seen at $21.00 and then at last week’s low of $20.79.”

On Wednesday it was another quiet day at the ranch as the gold pricing spread moved between $1750.00 and $1765.00, turning choppy and eventually holding the middle ground. Of course, everyone is waiting to hear what Chief Powell has to say later today, but these information sessions have not been promising as far as guidance is concerned. Still, Jerome is perfect for this job, combining an academic approach with the ability to avoid a political quagmire.

What the Chief said at the Brookings Institute gathering was surprising and more dovish than expected. It borded on fresh optimism and created a mild updraft in stocks. This lighter Fed approach was not reflected in today’s gold close. But can be better appreciated with an aftermarket move of more than $20.00 for our shiny friend.

If his comments were simply nuanced it would not be a game changer. But the Chief said he did not want to “overtighten” and it’s better to move slowly than be forced to back up quickly. The Dollar Index dropped a full point after his question-and-answer discussion.

His discussion was more than a hint. The Fed will move to a flexible interest rate program. Considering how bearish the metals were a month ago this is a big plus for the bulls.

“Gold prices pared gains on Wednesday due to an uptick in the U.S. bond yields ahead a much awaited speech from Federal Reserve Chair Jerome Powell, although a weaker dollar kept bullion on track for its best month since May 2021.” (Reuters)

“Euro zone inflation eased far more than expected in November, raising hopes that sky-high price growth is now past its peak and bolstering the case for a slowdown in European Central Bank rate hikes next month.” This fresh Reuters quote is interesting because it may hint at future central bank action. That said, predicting inflation has always been dicey – so stay tuned.

On the day gold closed down $2.40 at $1746.00 and silver closed up $0.35 at $21.55. The physical trade was quiet today, typical for a holiday season. But the aftermarket was buzzing with scenarios so let’s “keep our fingers crossed”. “Crossing fingers dates to a pre-Christianity belief in Western Europe in the powerful symbolism of a cross. The intersection was thought to mark a concentration of good spirits and served to anchor a wish until it could come true.”

On Thursday gold pushed higher on the New York open which was not surprising considering yesterday’s big price jump in the aftermarket. It was surprising however that gold continued to move higher in what is now likely a momentum driven market on the short.

Early gold pricing peaked at $1804.00 and settled between $1794.00 and $1800.00. These higher gold prices are driven by a dollar approaching 4-month lows after Chief Powell’s comments.

The Dollar Index followed, losing a full two points (105.00) since yesterday! Very turbulent trading, which suggests caution is warranted for the uninformed and new investor.

It is easy to get caught up in the “latest” headline, but a wider timeframe in this case is a better choice. Remember that the Fed has not stopped raising interest rates.

They are focused on the timing of these hikes. Which translates into being optimistic about future inflation. What cements this turbulence in the short term is that the economic jury simply cannot make up its mind as to whether the US is facing a “soft landing” or “recession”.

Gold prices peaked ($2000.00) in early 2020. They settled on both sides of $1800.00 through late 2021, before again challenging $2000.00 in late 2021. We are again at $1800.00, which looks great from a short-term perspective but simply sets up another attempt at $2000.00. Be patient with this market because it could easily move higher or lower in the coming months. I have always believed that gold and silver bullion is one good way to separate a portion of your investment dollars from the government-controlled fiat system. There is not much chance that the world is going to blow up in the coming years. But if it did, those with real bullion money in their hands will have created a versatile system with more options.

On the day gold closed up $55.10 at $1801.10 and silver closed up $1.09 at $22.64.

On Friday gold dipped in the early trade, reacting to November’s strong jobs report. These thoughts from Heather Long (www.washintonpost.com) – The employment market is still hot, adding 263,000 jobs and wage growth continues strong up 5.1%. The conclusion being that the US does not have enough workers and the labor force is not close to pre-covid levels.

This is the type of employment news which may reverse the growing bullish sentiment in place since Chief Powell talked with the Brookings Institute on Wednesday. Gold surged after his talk and the dollar weakened. The Chief seemed to see something in the economic tea leaves that prompted a less hawkish approach to his inflation/interest rate conundrum.

I’m having some fun at his expense. But his dilemma is serious as today points out that even the Washington deep thinkers are troubled. Deciding the “best course of action” as they raise interest rates and unwind years of Covid “free money” is a road filled with potholes.

For some reason today’s lesson must be relearned on a regular basis. Take whatever the informed “insiders” have to say with a grain of salt. The jobs report is a snapshot of last month’s numbers. It may be important, but it might also be quickly forgotten – so keep your options open and stay flexible in your planning. It is also worth noting that some professional traders believe future price dips may be shallow and extend over a longer time frame, perhaps even through next year.

On the day gold closed down $5.20 at $1795.90 and silver closed up $0.40 at $23.04.

Platinum closed down $28.30 at $1039.60 and palladium closed down $45.20 at $1879.40.

My 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. As always, thank you for your patience. Richard Schwary

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Posted on November 23, 2022 by Richard

Gold – Considering Options

Commentary for Wednesday, November 23, 2022 (www.golddealer.com) – Today gold closed up $6.60 at $1744.90 and silver closed up $0.33 at $21.36. Gold moved mildly into the green in the early trade this morning, but most expect a quietly defensive market going into the long Thanksgiving weekend. Everyone is paying close attention to the latest Fed minutes released after the market close today for hints about short-term interest rates possibilities. The Fed has raised interest rates 0.75% four times since June. The next hike opportunity will be in mid-December, and most are hoping for something less (0.50%). Today’s minutes, released after the domestic market was closed, seemed to suggest this possibility. The rather new idea of “higher but longer” is what makes the bullish gold scenario “tick”. Anything approaching the old hawkish interest approach along this more modest path would likely drive gold lower in the short term. Also remember that gold is higher by $90.00 this past month. Which encourages profit taking. If higher interest rates encourage traders to “buy” the dips and “sell” the rallies, this would continue to pressure the bulls. But for now, gold and silver have weathered the short-term storm at least which is a mild plus moving into the holiday season. Last Friday gold closed at $1751.90 / silver at $20.98 – on the week gold was off $7.00 and silver was higher by $0.38. These are tight spreads considering the large amount of palavering on both sides of the isle.

A reminder that our offices will be closed Thursday and Friday of this week for Thanksgiving. Our family thanks the Lord and wishes all a blessed holiday season.

On Monday gold was defensive and pricing spreads moved from $1748.00 though $1738.00, with a negative bias. The reasoning here remains unchanged. The Fed pivot is being ignored and traders are fixed on short-term Fed decisions. Reuters – “Gold prices slipped to their lowest in over a week on Monday as the dollar extended gains, while the market’s attention turned to the U.S. Federal Reserve’s November meeting minutes due this holiday-shortened week. “Overall, the general macro environment still is higher interest rates, which is a negative for the precious metals as central banks continue to look to increase interest rates,” said Chris Gaffney, president of world markets at TIAA Bank. The Fed’s November meeting minutes are due on Wednesday, with most traders betting on a 50-basis point hike in the December meeting, and some seeing 24.2% chance of a 75-bps hike following recent comments by Fed officials. Investors also kept track of the economic fallout from fresh COVID-19 restrictions in top bullion consumer China, where physical gold premiums fell sharply last week as buying slowed. “China in particular is an active market for precious metals and if they continue to lock down, that’s negative for the overall economic environment and less money to spend in China for investment purposes.”

The Dollar Index has moved from 106.00 through 108.00 since last Thursday! Which presents the bulls with a recurring headache. And makes the bears more aggressive. But you have seen this inverse relationship play out several times so the likely outcome should not be a surprise. The Dollar Index will likely become overbought, and the price of gold oversold.

The Fed “pivot” theory was responsible for gold recently moving from $1640.00 through $1780.00. But bullish “insiders” moved to the sidelines when momentum went out the window. Everyone will have a better idea of what the FOMC has on its mind Wednesday. But judging from today’s continued dip in gold prices it would not surprise me to see the paper market adjust to something below $1700.00 in a “wait and see mode”.

At the same time bullion premiums in the physical market remain high, which suggests interest at these discounted levels. Both for immediate and delayed delivery. The dip in crude oil prices today is a minus for bullish scenario and suggests recession fears are again building in Europe.

This week will present a thin trade. I suspect paper traders are already in the traveling mode for the Thanksgiving weekend. Which offers a “window” for paper shenanigans. Be suspicious (discount) last-minute pricing changes, if their source is outside the United States.

On the day gold closed down $14.50 at $1737.40 and silver closed down $0.13 at $20.85.

Zaner (Chicago) – “In retrospect, both gold and silver were fortunate to avoid significant declines last week in the face of predictions that US Fed funds might need to rise above 7% to quell inflation. While the Chinese central bank left rates unchanged overnight, the closure of schools in the capital city has sent a wave of fresh economic recession fear into world markets. Obviously, a significant range up breakout in the US dollar this morning has added fresh currency related selling interest in gold and silver. Fortunately for the bull camp, it appears that treasury yields might be poised to slide lower and that might serve to cushion gold and silver against strength in the Dollar. However, this week it is possible the markets will be presented with a temporary wave of euphoria from the upcoming kickoff of the holiday shopping season, and that could firm the dollar further and pressure the Treasuries thereby setting the stage for a quick decline in December gold down to $1,725. Obviously, the December gold contract has a critical pivot point to start the week at $1,750, with the 100-day moving average today proving lower support and targeting at $1,724. The COT positioning report for November 15th showed the noncommercial and nonreportable net long in gold at 147,131 contracts which is a 50,000 contract increase in the net spec and fund long on a week over week basis. Gold positioning in the Commitments of Traders for the week ending November 15th showed Managed Money traders net bought 48,945 contracts which moved them from a net short to a net long position of 40,726 contracts. Non-Commercial & Non-Reportable traders were net long 147,131 contracts after increasing their already long position by 53,119 contracts. In short, the gold market is relatively overbought in the spec sector and therefore vulnerable to negative fundamentals. Traders pressing the short side of the silver market should be aware that the Silver Institute in its latest publication predicted global demand for silver will rise 16% this year reaching 1.2 billion ounces and in turn creating the biggest deficit in “decades”. This week’s net spec and fund long position in silver was 31,230 contracts, a net increase of about 6,000 longs from November 8th! Key support in December silver is obviously $20.00 with a key pivot point in the trade early today seen at $20.55. The November 15th Commitments of Traders report showed Silver Managed Money traders net bought 3,401 contracts and are now net long 15,894 contracts. Non-Commercial & Non-Reportable traders are net long 31,230 contracts after net buying 6,953 contracts. Last week gold ETF holdings declined by 282,207 ounces while silver ETF holdings increased by 2.2 million ounces.”

On Tuesday gold ignored the mild downtrend in the Dollar Index as traders created a weak choppy trade with a negative bias. The market finished the day close to unchanged, which is a plus for gold considering the coming long weekend. The latest FOMC minutes release may only hint at the Fed’s next December move. And will be made public after the New York market closes tomorrow. Potential volatility could be reflected in the aftermarket, but for now the metals reflect a quiet holiday attitude with tight trading ranges.

On the day gold closed up $0.90 at $1738.30 and silver closed up $0.18 at $21.03.

FX Empire (Christopher Lewis) – Gold Price Forecast – Gold Markets Drift Sideways – Gold markets have been rather quiet during the trading session on Tuesday, as we are hovering around the $1750 level. Gold markets have been quite noisy during the trading session on Tuesday, as we continue to look at the $1750 level with interest. This is an area that has been important a couple of times in the past, so it does make a lot of sense that we would see noisy and quite frankly difficult behavior in this general vicinity. Ultimately, I do think this is a situation where we are going to have to make a bigger decision, and it will almost certainly be driven by Federal Reserve expectations, and of course the interest rate market. After all, the interest rate market has a huge negative correlation to the gold market. If we break down below the lows of the Monday session, then we could drop down to the 50-Day EMA, which is at the $1710 level. Underneath there, the next major support area is at $1680. The question now is whether people are going to be focusing on central-bank behavior, or if they are going to be paying attention to the potential global slowdown, which could have people running toward gold. A break above the $1800 level would be a huge barrier to overcome, and if we do, then I suspect that gold has much further to go at that point, perhaps reaching the $2000 level over the longer term. Ultimately, this is a market that I think will be very noisy over the next couple of days, especially as Thanksgiving is coming on Thursday, that will certainly have an effect on the hours that electronic trading is available. Because of this, it’s likely that we will see chop more than anything else.

Zaner (Chicago) – “At least to start today gold and silver have been “saved” by a moderate setback in the US dollar. In another minimally supportive development, gold ETF holdings yesterday increased by 153,789 ounces for the largest single day ETF inflow since June 17th. It should also be noted that silver ETF holdings increased yesterday by 1.38 million ounces! While the path of least resistance has shifted down in gold, prices are showing some strength early this morning, but that strength is likely to be temporary. In other supportive news, the IMF announced Kazakhstan, Turkey, UAE, India, and Cambodian central banks increased their gold holdings. Apparently, central banks in India and Turkey continue to add significantly to their gold holdings with recent monthly data showing both countries adding roughly 25.2 million ounces and 23.6 million ounces respectively. Relatively speaking the silver market held up to the big picture broad-based physical commodity market selling wave significantly better than gold! Clearly, the silver trade is cheered by recent Silver Institute projections that global demand for silver will rise 16% this year and surpass 1.2 billion ounces! The Silver Institute also predicted the market will have the largest deficit in decades potentially reaching 194 million ounces! The silver deficit in 2021 was 48 million ounces, with total silver ETF holdings at the end of last week at a very significant 754 million ounces. However, silver ETF holdings have continued to decline, with holdings at the end of last week 15% lower year-to-date. In the near term, expectations for strong silver demand and a large jump in the silver deficit are unlikely to be embraced by traders. Therefore, both gold and silver look to remain vulnerable to further dollar strength and might not be cushioned by declines in US treasury yields. On the other hand, there has been dovish Fed dialogue recently with many analysts beginning to predict a 50-basis point US hike in the December FOMC meeting, and yet traders are waiting for confirmation of the dovish stance from the upcoming release of Fed policy meeting notes on Wednesday. From a technical perspective, the gold market remains vulnerable to spec and fund stop loss selling with the latest COT positioning report producing the longest spec positioning since early August! Key support in February gold today is at the 100-day moving average of $1,736.25 with downside targeting for later this week seen at $1,720. Near-term support in December silver today is $20.57 but we doubt the market will fall to its 100-day moving average to $19.55 this week.”

On Wednesday gold prices in the early trade were typically choppy but mildly higher. The spread was something between $1732.00 and $1748.00 which is a plus, perhaps helping the bulls. But the entire market is muted waiting for a look at last month’s Fed minutes. Most professional trades believe that what is “known” about coming interest rate hikes in the short term is already factored into current pricing. Today’s “preview” look into what is becoming a confused group of Fed officials will not calm the waters. It is safe to consider this market tenuous. Smart money will be guarded as trading could move in either direction. But my guess is that price swings will not be large unless the Fed goes back to being more aggressive.

On the day gold closed up $6.60 at $1744.90 and silver closed up $0.33 at $21.36.

Platinum closed up $1.10 at $1014.50 and palladium closed up $18.40 at $1873.30.

Zaner (Chicago) – “Technical and fundamentals continue to diverge between gold and silver, with silver shifting bullish and gold shifting bearish. In fact, overnight February gold failed at close in support and reached the lowest level since November 10th while December silver continued to respect and build consolidation support around the $21.00 level. Obviously, silver continues to draft off the very bullish deficit forecast from the Silver Institute from earlier in the week and gold remains hostage to the fear of higher interest rates. With the New Zealand central bank raising interest rates by 75-basis points last night and the US Fed releasing its meeting minutes later today the gold market is facing the potential for fresh knock-on selling. However, the US economic report slate today is full of reports normally scheduled for Thursday and brought forward because of the holiday. The most critical readings today are initial claims (which are expected to increase slightly) and durable goods which are expected to repeat last month’s gain of 0.4%. Even more divergence between the 2 markets was evident in daily ETF flows reports yesterday with gold holdings declining by 27,195 ounces and silver ETF holdings increasing by a very significant 4.9 million ounces! The increase in silver holdings was the largest increase since September 19th. While we expect tight trading ranges until the release of the US FOMC meeting minutes later today, modest dovish dialogue in that release could save and then launch gold above the $1,775 level, but we think the most likely outcome is evidence of broad support for even higher ultimate US rate target levels. Therefore, initial downside targeting this afternoon in February gold is $1739.90. On one hand, the silver market flared sharply higher yesterday and at times reached $0.78 above its Monday low, but the trade was unable to hold the probe higher and ultimately fell back to psychological support of $21.00. Therefore, it appears that the bull camp currently lacks significant resolve, but the market should be able to respect support following very favorable forecasts of a global silver deficit ahead. Key pivot point support in December silver today is seen at $20.785, while a trade back above yesterday’s high of $21.37 could spark gains to $22.00 from short covering.”

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

Posted on November 18, 2022 by Richard

Gold – Fed Pivot – Yea or Nay?

Commentary for Friday, November 18, 2022 (www.golddealer.com) – Today gold closed down $8.90 at $1751.90 and silver closed up $0.02 at $20.98. Gold looked defensive this morning going into the weekend. And the premiums for physical product fell sharply in China as buying slowed, according to Reuters. This figures, the Asian market has a great price feel and they are patient, long term buyers. Since early November gold has surged, moving from $1630.00 through $1780.00. But this latest bullish drive looks to have peaked, with a tight channel trade, supported at $1760.00. With traders refocusing on the negative aspects of coming interest rates hikes, the possibility of a Fed pivot may be losing some of its bullish trading mojo. Last Friday gold closed at $1766.00 / silver at $21.65 – on the week gold was down $14.10 and silver was off $0.67. We are selling any live physical product which is not nailed down and volume numbers are increasing for delayed delivery, even at these elevated levels.

On Monday gold steadied itself from last week’s gains, supported by a significantly weaker dollar as traders anticipate a shift in the still hawkish Fed interest rate sentiment. The Dollar Index these past 5 trading days has moved from over 110.00 to approaching 106.00 as the paper trade scramble to the possibility of lower interest rates. Still the Fed plays this new scenario to their advantage as Fed Governor Waller suggests inflation remains a primary concern.

Market Watch (Saefong – Adinolfi) – “Still, prices on Monday did touch an intraday low at $1,755.80. That followed “cautionary comments from Federal Reserve Governor Christopher Waller that policymakers had a “ways to go’ before ending interest-rate hikes,” said Rupert Rowling, market analyst at Kinesis Money, in daily commentary. The remarks “served as a reminder that gold’s huge gains last week were driven by sentiment that the Fed will be less aggressive with its future upcoming interest rate decisions rather than on any firm fact,” he said. Rowling pointed out that pace of last week’s gains, “in which gold climbed more than $100 an ounce, leave gold open to some profit-taking this week as investors reassess where the true value of the precious metal lies.” “While the latest inflation figure out of the U.S. was undoubtedly encouraging, rising consumer prices remain an issue that the Fed looks determined to get back under control through interest rate rises,” said Rowling. Given all of that, “gold’s current price looks dangerously high, and it would only take a slight shift in sentiment on where the Fed will go with its December rate move for the price to come quickly crashing back to $1,700 an ounce.”

I would make a less bearish case for the price of gold both in the short and longer term. There are no guarantees the Fed will slow its interest rate policy. This new “pivot” scenario emboldens the bulls but is only a plausible theory. The fact is that gold is supported by world inflation and rising fundamental tensions between the world powers. But the completely bullish gold scenario also does not work well even in today’s troubled world. Interest rates are not returning to near zero anytime soon. The low interest rate mode, in place for years was a powerful reason gold did so well as the FOMC battled the pandemic. Today, higher interest rates cap higher gold prices because they compete for investor dollars. At this point professional traders anticipate a sideways, but closely watched market. I’m in the “rather bullish” category which believes gold and silver are undervalued. Because central banks, even with their bombast over controlling inflation with higher interest rates, have no plan as to how this massive amount of borrowed money will be repaid. Unfortunately, they still operate on the “free lunch principle”.

On the day gold closed up $7.60 at $1773.60 and silver closed up $0.44 at $22.09.

On Tuesday gold was choppy in the New York cash market, trading between $1768.00 and $1786.00 and managed to finish the day almost unchanged. Trading was a mixed bag reacting to a cooler than expected October inflation snapshot. The producer price index came in lower than expected supporting the theory that the Fed may indeed moderate its coming rate hikes. A “hot” aftermarket was created over an aggressive Russian missile strike in the Ukraine which also hit neighboring UN member Poland. The markets quickly settled back to being unchanged, but this is another reminder of how unstable this region has become as world tension rises.

The Fed “pivot” theory has moved Treasury yields lower this week and the Dollar Index continues weaker but choppy, pointing toward 105.00. With the index off an amazing 5 points since last Thursday I would not be looking for an “overbought” condition. And subsequent bounce to higher ground, creating headwinds for our shiny friend.

Still gold’s technical picture is improving, and the bulls are coming out from under the bed. But are they out of the woods? The key question still to be answered is whether inflation has peaked? The price of gold is holding around 3-month highs and while the Fed may slow rate increases, inflation is still a number one priority. This uncertainty may suggest that the price of gold will continue to struggle against a slower yet steady rise in interest rates into 2023.

Jim Wycoff (Kitco) – “Technically, the gold futures bulls and bears are on a level overall near-term technical playing field but the bulls have momentum. Bulls’ next upside price objective is to produce a close above solid resistance at $1,800.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at last week’s low of $1,667.10. First resistance is seen at $1,800.00 and then at the August high of $1,824.60. First support is seen at the overnight low of $1,770.20 and then at this week’s low of $1,755.80.

The silver bulls have the firm overall near-term technical advantage. A choppy, 2.5-month-old uptrend is in place on the daily bar chart. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $23.00. The next downside price objective for the bears is closing prices below solid support at $20.00. First resistance is seen at the overnight high of $22.38 and then at $22.80. Next support is seen at this week’s low of $21.37 and then at $21.00.”

On the day gold closed up $0.20 at $1773.80 and silver closed down $0.59 at $21.50.

Zaner (Chicago) – “Gold firmed overnight and the dollar weakened, as the market seems to be forging through some occasionally hawkish Fed commentary without too much damage. It helps that Fed Vice Chair Lael Brainard commented that she thinks it will be appropriate soon to move to a slower pace of rate increases. This contrasted with a statement by the Fed’s Waller earlier in the session that seemed to downplay the significance of last week’s CPI report. The PPI report today will provide another look into inflation prospects, with the trade looking for a slightly lower headline number than September. In another sign that inflation may be easing, Walmart’s

CEO reportedly warned its suppliers that his company is “through” with paying higher prices. Amazon and Target are said to be taking a similar approach. The flare-up in risk anxiety in the cryptocurrency sector following the FTX bankruptcy has diverted investment flows towards precious metals as well. The PPI report today offers the next volatility event. A softer than expected number would add confirmation to last week’s soft CPI number and could inspire more gains in gold and silver. The Commitments of Traders report showed managed money traders were net buyers of 30,659 contracts of gold for the week ending November 8, reducing their net short to 8,219. Non-commercial & non-reportable traders were net buyers of 25,368, increasing their net long to 94,012. In silver, managed money traders were net buyers of 15,961, which moved them from a net short position to a net long of 12,493. Non-commercial & non-reportable traders were net buyers of 13,137, increasing their net long to 24,277. The buying trend in both markets is positive, and neither is overbought.”

On Wednesday gold had a virtual repeat of Tuesday’s pricing action. The early trade dipped in the morning (1772.00) and pushed higher in the afternoon (1784.00) but by market close it came in about unchanged. Yesterday and today, you saw a combination of short covering and mild safe haven buying with some promise of the Fed “pivot” for extra bullish measure. But you can see from the basically “back” and “forth” action. In a short time, the technical picture moved from bearish to a kind of “push” between the bulls and bears. With the momentum in the bull’s favor. But that buzz is now out the window. This market now needs something fresh and more substantial to provide a dominant trade, one way or the other.

On the day gold closed down $0.80 at $1773.00 and silver closed unchanged at $21.50.

(Zaner) Chicago) – “December gold was higher overnight, and it seems capable of taking out Tuesday’s three month high today. The market got another boost on Tuesday from the October PPI report that came in was well below expectations. This came after last week’s soft CPI number. December gold traded to its highest level since August 17 after the report was released but closed near unchanged on the day. This kind of anemic reaction has the bulls concerned that the market is getting a bit toppy. PPI came in at +8% year over year versus expectations for +8.4%. It was the smallest increase since July 2021. Core PPI was +6.7% year over year versus +7.2% expected and +7.1% in October. Having two milder than expected inflation numbers in a row has boosted talk that the Fed could be ready to pull back on its monetary tightening, but comments from Fed members have been mixed. Atlanta Fed President Bostic said on Tuesday that he sees little evidence that the aggressive monetary policy is slowing inflation and that more hikes would be needed to get inflation down to the 2% target. He said that goods price increases have slowed, but we need to see the service price increases slow as well. A report that a missile hit eastern Poland near the Ukrainian border sparked geopolitical jitters and seemed to attract buyers into the metals late in the session yesterday. Later, President Biden commented that it was unlikely that the missile was fired from Russia, which soothed market anxiety. Central bank purchases of gold could hit an all-time high of 750 tonnes in 2022 after a surge to nearly 400 tonnes in the third quarter. The average if the past 10 years is 513 tonnes. ETFs were net sellers of 153,620 ounces of gold on Tuesday, a decline of 0.2% on the day and 3.8% on the year. They were also net sellers of 658,179 ounces of silver, down 0.1% on the day and 15% on the year.”

On Thursday gold pricing was likely the result of what I suggested this past Tuesday. The Dollar Index was indeed oversold early in the week and figured to bounce higher. Creating a downdraft for the gold bulls. Today’s pricing spread was modest – $1755.00 through $1764.00 which is semi-good news. The bullish scenario may have some legs into year end.

Next week will be a short trading week because of the Thanksgiving holiday. And we will be closed on the 24^th and 25^th. I expect a continued “sleepy” trade if such a thing is possible in this unwinding mess. Russian world tension remains an underrated plus for safe haven support.

But in the shorter-term traders will focus on the FOMC. It is old news that the oddsmakers are suggesting a half point hike for the December 13^th and 14^th meeting. The next FOMC meeting will be held on March 21^st and 22^nd and is the more interesting of these two seminal gathers.

The Fed interest rate choices made at the March meeting are more definitive. And may even set the stage for 2023 as to what the Fed has in mind. Stay tuned as they say, the question of how liberal the Fed can be and still stay on the right side of this political football remains to be seen.

On the day gold closed down $12.20 at $1760.80 and silver closed down $0.54 at $20.96.

On Friday the gold and silver trade looks like it’s settling into a quiet weekend. And the anticipation of a short trading week for the coming Thanksgiving holiday. There is something to the notion that traders are beginning to worry about an aggressive Fed interest rate policy. But this may be an overaction if you consider today’s tight pricing range between $1750.00 and $1764.00. Still the price of gold technically must push through tough overhead resistance between $1750.00 and $1800.00 before the computer trade will ring the bell. And the overhead resistance between $1800.00 and $2000.00 is ferocious going back to 2020. The bullish sentiment has improved considerably as the Fed pivot is considered. And this is the big bullish plus to take away from this week’s trading. But until the world focuses on long term debt, and recognizes gold is undervalued I suspect making new real highs will remain challenging.

Reuters – “The slight pullback in gold after the recent rally has been through a technical retracement in the gold market, said David Meger, director of metals trading at High Ridge Future. The pullback could continue going into next week’s December option expiration, which could cause a further consolidation in gold, Meger added, and that the market overall seems focused on interest rate expectations from the Fed. Federal Reserve Bank of Boston leader Susan Collins said on Friday the central bank has more rate rises ahead of it as it seeks to lower inflation, adding that a 75-bps hike was still on the table. The dollar index firmed, making gold more expensive for other currency holders, while benchmark U.S. Treasury yields also edged higher. While gold has shed 15% since its March peak after the Fed began tightening monetary policy, it has gained about 7% since the beginning of November as markets started pricing in a slower pace of rate hikes. Markets currently see an 87% chance of a 50-basis point hike at the Fed’s December meeting.”

Platinum closed up $1.20 at $1002.00 and palladium closed down $71.10 at $1936.30.

Posted on November 10, 2022 by Richard

Gold – Hopeful – Less Cautious

Commentary for Thursday, November 10, 2022 (www.golddealer.com) – Today gold closed up $40.20 at $1750.30 and silver closed up $0.38 at $21.68. I am traveling this week so a short newsletter. We are closed this Friday for Veteran’s Day. Keep in mind however that the commodity markets are open, while the banks and USPS are closed. This week was a big one for metals, as gold moved above one-month highs, offering bullish hope in a rising interest rate environment. This morning the Consumer Price Index (CPI) for October missed, meaning it came in under the expected numbers. Reuters (Brijesh Patel) Gold climbs 2% as U.S. inflation data cements Fed slowdown bets – “Gold prices jumped 2% to a more than two-month high on Thursday as data showed U.S. inflation cooled off a bit in October, lifting hopes that the Federal Reserve would adopt a less aggressive approach on rate hikes. “When we start to see inflationary data showing that inflation is coming down, there is an expectation that the Fed is going to begin to slow the pace of those interest rate hikes,” said David Meger, director of metals trading at High Ridge Futures. “Hence you could argue that the dramatic pressure that has been applied to the gold market over the last several months has been released and gold now has the ability to move higher.” Following the U.S. data, the dollar dropped more than 1% to a near two-month low, making gold less expensive for other currency holders. Benchmark U.S. 10-year Treasury yields slipped to a one-month low.” Last Friday gold closed at $1672.50 / silver at $20.79 – as of Thursday gold was higher by $77.80 and silver was higher by $0.89.

On Monday gold settled after Friday’s jump to higher ground on speculation that the Fed might ease its aggressive interest rate policy. This idea comes and goes but this time around higher prices were large enough to get focused attention. And trouble in the crypto markets, while in my opinion not related to gold, always brings an unnecessary safe-haven comparison.

Grant on Gold (Zaner) – (1) Gold posted a gain of 2.2% last week after the cycle low at $1614.92 (29-Sep low) withstood another challenge. Arguably there is now a formidable triple bottom in place. (2) Silver posted an impressive 8.2% gain last week. While modest upside follow-through was seen on Monday, the $21.24 high from October 4 remains intact, but vulnerable at this point. (3) Platinum jumped 1.9% last week, its third consecutive higher weekly close. (4) Palladium remains defensive within the broad range, well below the midpoint of the COVID-era range.

On the day gold closed up $4.00 at $1676.50 and silver closed up $0.11 at $20.90.

On Tuesday gold, not surprisingly, again surged, moving convincingly towards $1720.00. In my opinion the power of computer trading momentum was on display. This encouraged gold’s rather damaged but improving technical picture. And gave credence to the perhaps dovish Fed “pivot”.

On the day gold closed up $35.60 at $1712.10 and silver closed up $0.58 at $21.48.

On Wednesday gold settled as the excitement of higher prices faces the reality of the Dollar Index once again rising above 110.00. (Reuters) – “Gold steadied near a one-month peak on Wednesday, although prices were stuck in a tight range with gains curbed by an uptick in the dollar and investor caution ahead of the release of U.S. inflation data.”

Zaner (Chicago) – “Gold and silver eased back overnight as the markets awaited the election results and started to focus more on Thursday’s CPI release. The trade is looking for a monthly increase of 0.7% in headline CPI and a 0.5% increase in core. Those are “hot” numbers, and if they come in that way, it could reignite talk of another jumbo rate hike in December, which would support the dollar. Trader polls have been favoring a less-than-jumbo hike, with 2:1 in favor of a 50 basis points versus 75. The CPI number could change that. The likelihood of significant volatility today and tomorrow leaves both metals vulnerable to additional long liquidation and a possible pullback to the bottom end of Tuesday’s ranges. The dollar extended a three-session downdraft to a seven-week low Tuesday, which lent support to the metals, but it appeared to find some safe-haven inflows overnight due to uncertain US election results and the problems with a cryptocurrency bank. Chinese PPI showed a 1.3% year over year drop overnight. This was a smaller decline than was expected, but it does suggest that global inflationary pressures could be easing, at least from a commodity perspective. Chinese CPI eased but was still positive at +2.1% YOY versus 2.8% in September. At the end of October, the World Gold Council pegged ETF gold holdings at 1.639 tonnes, their lowest month-end reading since March 2020. In contrast, central banks have been acquiring gold. The WGC estimates that central bank holdings increased by 186.0 tonnes during the second quarter of this year and by a record 399.3 tonnes during the third quarter. This compares to 90.6 tonnes during the third quarter of 2021. Prior to then, the previous record was 240.5 tonnes in the third quarter of 2018. While central bank gold holdings have only had one net quarterly decline in the past 11 years, their record increase in the third quarter was more than double the 145.2 tonnes in gold ETF outflows between March and October.”

On the day gold closed down $2.00 at $1710.10 and silver closed down $0.18 at $21.30.

On Thursday the bulls were smiling as a cooling in October inflation numbers suggests a Fed pivot is more likely. The next FOMC meeting is 34 days away and surprisingly the oddsmakers are looking for a modest half point rise in interest rates. Just a few weeks ago this obvious pivot was unthinkable, but it serves well in reminding everyone how uncertain these markets remain.

It appears the Fed will have wiggle room in its interest rate policy. It is always too early for FOMC assumptions. Their game plan can change by the hour considering their decisions must fit into a still confused world. But this is worth noting. The cooling of inflation is what Powell said would happen initially. He later blinked because the numbers were getting hotter, but his initial view was accurate. Which is encouraging from a consumer’s point of view.

The bullish scenario remains optimistic, and the technical picture improves. Charting experts have moved from extremely bearish to perhaps a “push” between the bears and bulls. Improved bullish sentiment however should be taken with a grain of salt. Today’s close ($1750.30) is a great improvement but gold gets no “cigar” until it shows strength above $1800.00. Overhead resistance remains fearsome so look for volatility and a continued battle for higher ground.

On the day gold closed up $40.20 at $1750.30 and silver closed up $0.38 at $21.68.

Platinum closed up $57.70 at $1064.30 and palladium closed up $95.00 at $1951.60.

Posted on November 4, 2022November 4, 2022 by Richard

Gold – Friday’s Surprise!

Commentary for Friday, November 4th, 2022 (www.golddealer.com) – Today gold closed up $45.20 at $1672.50 and silver closed up $1.35 at $20.79. This was another week of dramatic price swings in both silver and gold as the paper traders “ponder the reality” of the Fed’s next interest rate move. Early in the week it appeared that the Fed might modify its intentions over recession fears the metals remained on a steady footing. But after Fed Chief’s Powell comments on the facts of inflation life both metals tanked, testing $1600.00 support. Then, out of the blue gold surged into the weekend. Reuters – “Gold prices jumped more than 2% on Friday as the dollar fell after data showing an uptick in the U.S. unemployment rate in October raised optimism that the Federal Reserve would be less aggressive on rate hikes going forward.” While this jump in price is noteworthy gold’s overhead resistance between $1670.00 and $1680.00 is significant. If our shiny friend cannot build on this momentum above $1680.00 the technical picture will remain bearish, and traders will sell this rally in typical fashion. If the Fed equivocates in December with a less than expected rate hike it would be a very Merry Christmas for the bulls. Last Friday gold closed at $1639.50 / silver at $19.15 – on the week gold was higher by $33.00 and silver was higher by $1.64.

Spring Forward – Fall Back! Most will turn your clocks back one-hour late Saturday night.

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.

On Monday gold again opened choppy, trading between $1634.00 and $1642.00 while traders brace for the upcoming FOMC meeting this week. The group will begin Tuesday and release information likely Wednesday after the markets close. A 0.75 of a point interest rate hike is expected yet some analysts believe that this market has put in a solid bottom, supported by rising inflation and geopolitical problems worldwide.

Reuters – “Euro zone inflation surged past expectations yet again this month to hit a record high, pointing to further interest rate hikes from the European Central Bank as price pressures appear to be broadening. U.S. central bankers are expected to keep their inflation fight in high gear this week, even as they intensify a debate over when to downshift to smaller interest rate hikes to avoid sending the world’s biggest economy into a tailspin.”

While this does not change the bearish technical picture it does at least suggest that further downside in gold pricing may be limited. I would not say this is a majority opinion but for now let’s call it a positive “stirring” that has potential.

On the other hand, bearish sentiment is encouraged by the stronger dollar. The Dollar Index this past 5 trading days has been all over the place, which increases trading tension. It topped out at 112.00 last Tuesday, bottomed out at 109.50 that following Thursday and today is pushing back towards 112.00. This is because traders still cannot pin down exactly what the FOMC has in mind, even though their forward guidance has been extremely hawkish.

On the day gold closed down $3.70 at $1635.90 and silver closed down $0.02 at $19.13.

On Tuesday gold pushed higher in the overnight Hong Kong market on a weaker dollar but the New York domestic market sold this rally as the dollar suddenly reversed direction. The Dollar Index in early trading topped out above 111.00, dropped to daily lows 110.74 and reversed direction pushing back to daily highs. Still, gold managed to hold on to that “Goldilocks” range around $1650.00 while finishing mildly higher which is a plus for the flagging bulls.

According to FX Empire the silver market is rallying because of fresh interest from China. And even higher prices may be in the cards if Covid restrictions are relaxed.

Still both gold and silver reflect a jittery paper trade trying to anticipate sentiment not guidance. This “false flag” is also reflected in the stock market which rallied today on the notion that the Fed would moderate its interest rate policy.

Perhaps they will but on the short term I look for a bumpy ride. The confirmation of the promised 0.75 of a point interest rate hike will likely be made public after the markets close on Thursday. I don’t expect much fanfare because this outcome is expected. It is what the Fed might do at their next opportunity that has traders worried. If the Fed follows through with its hawkish promise gold, silver and stock market may become highly defensive and move lower.

This “back and forth” tide of positive and negative sentiment highlights uncertainty on the short term. Because even if the US can dodge the recession bullet on the short term the “informed” computer model predicts eventual trouble in River City.

The computer expects a recession one year or two years out – based on relative timing. We have not had a recession for a long time, and one is due assuming a typical cyclical rotation. Ironically the traditional factors like oversupply and unnecessary speculation may not even come into play.

Economists are also worried about England – a primary target for recession. Because of its EU relationship it may be the first of falling dominos. Reuters – “Everyone in Briton will need to pay more in tax in the coming years to fix a hole in public finances, a source in the finance ministry said, following a meeting between Prime Minister Rishi Sunak and finance minister Jeremy Hunt. British manufacturing last month suffered its biggest contraction since the depths of the first COVID-19 lockdown in May 2020, with optimism draining fast, a survey showed.”

On the day gold closed up $9.10 at $1645.00 and silver closed up $0.54 at $19.67.

Zaner (Chicago) – “While outside market conditions are conducive to the gold and silver rallies this morning, the gold market should draft additional lift from World Gold Council indications that central banks purchased a record amount of gold (399 tons) in the 3rd quarter 2022. However, in a strange development the World Gold Council has yet to announce the source of a substantial amount of “unreported buying”. It is important to note that despite a decline of 8% in gold ETF holdings in the 3rd quarter year-to-date gold demand overall has returned to “pre-pandemic levels”. According to the WGC world gold demand reached 1,181 tons in the 3rd quarter and posted a 28% gain versus the 2021 quarter. While mining production in the 3rd quarter increased, recycled gold fell by 6% and hedging dropped off by nearly 20%. Yesterday gold ETF holdings declined by 60,953 ounces pushing the year-to-date decline in holdings to 2.8%. In another minor negative overnight Indian gold jewelry retailers are reporting lackluster interest and in significant longer-term development Indian consumers are reportedly shifting their gold holdings into ETF instruments over physical holdings. However, increased investment in Indian ETF holdings is a positive demand factor for the world gold market if younger generations embrace the cultural shift. Fortunately for the bull camp, the net spec and fund long in gold remains near 3-year lows and the jump in central bank purchases could help establish strong fundamental value on the charts around $1,625. With the silver market yesterday rejecting a sub $19.00 trade and ranging sharply higher this morning, a run above $20.00 is possible. Critical support in December silver today is $19.41 with a pivot point seen down at $19.08.”

On Wednesday gold drifted higher in the overnight Hong Kong and London market but sold off in the domestic New York trade, settling initially around $1650.00. The early overseas rise may have been the result of a rumor that China has formed a committee to study the removal of Covid restrictions. Or perhaps a bit of optimism that Fed officials are reconsidering aggressive interest rate hikes. Gold yawned over this morning’s ADP release. Private payrolls rose 239,000 in October beating expectations (195,000). Under “normal” circumstances this “beat” might suggest the Fed has room to be less aggressive. Which would support the flagging bullish sentiment. And suggest at least some caution in the short bearish camp.

The FOMC did raise rates the expected 0.75 of a point after the market close today. This makes the fourth consecutive 0.75 point rate hike. And brings the target range to 3.75% – 4% which is the highest level seen since January of 2008 (CNBC). I don’t think Chief Powell has come off his hawkish stance, but he did open a window for consideration. The new statement hinted at that policy change, saying when determining future hikes, the Fed “will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.” Economists are hoping this is the much talked about “step-down” in policy that could see a rate increase of half a point at the December meeting and then a few smaller hikes in 2023.”

Still the gold market turned volatile. Moving optimistically higher ($1670.00) in the live New York market. Then tanking ($1635.00) in the aftermarket (NY Globex) before settling on the day. Traders simply did not like the reality of today’s candid comments by Chief Powell. His perceived hawkishness again created a heavy gold trade moving forward.

What happens today is important. But what the FOMC will have to say about future rate hikes through the first quarter of 2023 is now the focus. It is possible that today’s aftermarket is an overreaction, but we will have to see if traders buy this dip through next week. Powell did after all offer the possibility of some relief.

And the smart money is betting that the December rate hike will be a half point hike. This would be good news if you are looking for something to be optimistic about in the middle of this unwinding mess. In the meantime, expect further volatility as gold and the dollar move in opposite directions. And monitor deteriorating economic conditions in Europe.

On the day gold closed up $0.70 at $1645.70 and silver closed down 0.07 at $19.60.

On Thursday the Hong Kong and London markets reflected significant weakness over Chief Powell’s comments on Wednesday. The New York market hovered between $1624.00 and $1618.00. On the positive side we are seeing mild short covering and bargain hunting as prices bounced off daily lows ($1618.00) and moved as high as $1632.00 in the aftermarket.

This does not have me dancing around our parking lot, but it does suggest interest especially because the Dollar Index this morning pushed towards monthly highs (113.00). This market needs time to stabilize but we may be going into the weekend on a small upbeat. Considering the Fed “pivot” scenario is losing steam and the employment picture improves.

(Reuters) – “The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting the labor market remains strong despite slowing domestic demand amid stiff interest rate hikes from the Federal Reserve to tame inflation.”

Sill gold’s technical picture remains bearish and the trade defensive. “The reality is that people were expecting some dovish tilt (from the Fed), there was no dovish tilt. Inflation remains high globally … and the Fed is sticking to its mandate,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago. “I don’t see the tide turning for gold and its gathering bullish momentum again until after the Fed is done raising rates, probably not till March of 2023.”

There are some, me included who still believe the Fed will “pivot”. In other words, they do not take the FOMC at their word. But latest theory based on an optimistic economic model is “higher interest rates for a longer time”. Regardless of which side of the aisle you are on the best strategy is flexibility. Avoid being naïve. Each side of this argument is trying to sell you something.

Bloomberg – “A US recession is effectively certain in the next 12 months in new Bloomberg Economics model projections, a blow to President Joe Biden’s economic messaging ahead of the November midterms. The latest recession probability models by Bloomberg economists Anna Wong and Eliza Winger forecast a higher recession probability across all timeframes, with the 12-month estimate of a downturn by October 2023 hitting 100%, up from 65% for the comparable period in the previous update. The forecast will be unwelcome news for Biden, who has repeatedly said the US will avoid a recession and that any downturn would be “very slight,” as he seeks to reassure Americans the economy is on solid footing under his administration.”

On the day gold closed down $18.40 at $1627.30 and silver closed down $0.16 at $19.44.

Zaner (Chicago) – “Clearly, the net Takeaway from the FOMC meeting has resulted in a rekindling of recession fears from the potential of over tightening. In addition to currency related selling in gold and silver this morning the markets are seeing spillover pressure from a jump in US treasury yields. In fact, yesterday the Fed chairman indicated that their upside targeting for Fed funds will likely result in a higher rate than previously forecasted by the central bank. While not a major negative, gold ETF holdings yesterday declined by large 100,783 ounces and those holdings are nearly 3% lower year-to-date. At least in the near term, the recent boost in global gold demand from the World Gold Council quarterly report is tossed aside. Even though the markets earlier in the week saw rumors suggesting China might be preparing to exit their Zero Covid policy, daily infections have caused expanding activity restrictions. Not surprisingly, news of a significant jump in Perth mint October gold sales is brushed aside because of patently bearish “overall” outside market conditions. Given the hawkish tone of the Fed yesterday and the impressive sharp range up move in the dollar this morning currency related pressure is likely to become a fixture in the days ahead. Critical and highly suspect support in December gold today is close to the market at $1,621.10, but the market is likely to knife straight through that contract low! Not surprisingly, the silver market has once again held up impressively in the face of very negative gold price spillover as the speculative trade in silver seems to view the $19.00 level as some form of value. Overnight silver ETF holdings saw a minimal inflow of 25,261 ounces but remain 14% lower year-to-date.”

On Friday gold pushed dramatically higher, surprising physical and paper traders. The reasoning for higher prices is not as clear as analysts suggest. The key here is understanding how resolute the Fed is about its policy of raising interest rates to control inflation. And the truth may be that they are not sure themselves which introduces more confusion. What we have this morning is a sentiment rerun which has been in place for months.

Traders, fully bearish this week because of a hawkish Fed are again looking for reasons to believe the FOMC will moderate. It may be time to consider better reasons for higher gold and silver prices. The dollar index cannot go up forever, a massively strong dollar is ruinous to the US economy and our trading partners. In my mind the index could easily shed 10% of its value, pushing gold back towards $2000.00 or even higher once the dollar begins to fade.

I also don’t get dealer comments which claim that investor demand is flagging. We can’t keep live bullion products on the shelf and our delayed delivery program remains popular even with higher premiums from the manufacturers! Most of this physical action is from seasoned, big players who have returned for some early bargain hunting.

Also consider an alternate case for today’s higher gold and silver prices. It could be that hawkish Fed sentiment was exaggerated. And this pushed gold and silver into an oversold condition.

And safe haven buying continues to grow in Europe and Russia. Reuters – “The downturn in the euro zone economy has deepened as high inflation and fears of an intensifying energy crisis hit demand, adding to evidence the bloc is heading for a winter recession. A closely-watched survey showed euro zone October business activity contracted at the fastest pace since late 2020.”

On the day gold closed up $45.20 at $1672.50 and silver closed up $1.35 at $20.79.

Platinum closed up $36.40 at $969.80 and palladium closed up $41.40 at $1836.90.

Zaner (Chicago) – “While part of the significant gains this morning is partially the result of a 2-day high to low slide of $58 in gold, and $1.30 in silver, the markets are also benefiting from a slight setback in the dollar, reports of a possible relaxing of Chinese incoming air travel restrictions, and reports of strong Chinese demand for Australian gold. Apparently, the largest Australian precious metal refiner indicated that China purchases of gold bars has remained strong, and Bloomberg overnight posted a story from the Perth Mint indicating institutional buying of gold has “surged”. Even the silver market saw positive demand news last night following a forecast that Indian silver consumption might jump by 80% this year and post a record. However, Indian silver purchases in the prior 2 years has been near record lows and therefore part of the recovery is from pent-up demand. Evidence of the recovery in Indian silver demand came from a jump in January through August silver imports to 6,370 tons (from 203 million tons) which dwarfs the prior year’s same period import tally of only 153 tons. Furthermore, silver holdings in London fell to only 27,101 tons at the end of September reaching the lowest levels since 2016 when the LBMA began keeping records. From a technical perspective, the sharp rejection of the downside breakout in December gold from yesterday was posted on a relatively high trading volume which could serve to discourage fresh selling today especially given the strong early upside follow-through rally. Clearly, the Fed’s open-mindedness toward the magnitude of upcoming hikes was more than offset by the Fed’s view that the ultimate peak in interest rates will be higher than previously forecasts but the fear of the Fed should moderate now that the meeting is past. While the rejection of the spike down move in gold yesterday was impressive, the spike down reversal in silver was even more impressive. In fact, the December silver contract has now violated and rejected the $19.00 level on 5 of the last 8 trading sessions and looks to see both inside and outside market buying influences today!”

Posted on October 28, 2022 by Richard

Gold – Fed Equivocation

Commentary for Friday, Oct 28, 2022 (www.golddealer.com) – Today gold closed down $21.10 at $1639.50 and silver closed down $0.33 at $19.15. Gold finished the week trending lower as the dollar gained strength and traders once again focus on near term, likely hawkish Fed policy. The early in the week speculation of a Fed interest rate “pivot” has disappeared in the heat of rising US inflation numbers. This “back and forth” trading sentiment is typical of a market which lacks conviction because the deep thinkers in Washington can’t seem to get everyone on the same page at the same time. An informed Reuters source this morning even claimed that a recession would support the price of gold. What is supporting the price of gold are the current discounted prices coupled with safe haven demand in a world threatening even more confusion. Current demand is patiently underpinned by China and India between $1600.00 and $1650.00 because they sense value at these numbers. Ignore the emotional noise until the Fed does something tangible with the existing interest rate structure. Last Friday gold closed at $1651.00 / silver at $19.04 – on the week gold was down by $11.50 and silver was up $0.11.

On Monday gold was quiet in the overnight Hong Kong and London markets. And the domestic New York trade was typically choppy, confined to both sides of $1650.00 and finished the day almost unchanged. This was expected as the strong Dollar Index remains steady ($112.00).

The lack of follow through from Friday’s jump in prices will disappoint the bulls. But it also makes sense when you consider that higher prices Friday were created over the “possibility” of a Fed pivot. This new insight was created last week by two Fed governors. But most believe the majority of the FOMC faithful are still very hawkish. They favor higher interest rates until there is something measurable that would suggest inflation is beginning to cool.

At this point patience will be required to see what the FOMC does between now and next year. And analysts are all over the place. Reuters – “Markets have priced in a 75-basis-point interest rate hike by the Fed in November but are now scaling back bets for a similar hike in December after reports that Fed officials will likely debate the size of future increases. A survey showed U.S. business activity contracted for a fourth straight month in October, the latest evidence of an economy softening in the face of high inflation and rising interest rates. “Gold could potentially rally to $2,250 per ounce in case of a sizable U.S. recession and fall to $1,500 per ounce in an ultra-hawkish Fed scenario,” Goldman Sachs.”

I have become suspicious of the much used “pricing in” concept, where there was a time when I used this notion regularly. It remains to be seen if the markets have “priced in anything” during this confusion. Ditto about “scaling back” interest rates. Not surprisingly I’m in accord with the latest Goldman Sachs evaluation – this circus could easily push gold to $2250.00 if traders turned dovish on interest rates. Or gold could fall to $1500.00 with a hard US landing. Not because extreme interest in gold and silver bullion is over but because during a recession both assets are easily sold to raise cash. Finally, keep in mind that the more isolated Russia becomes the more precarious this stand-off between Russia and the US. Notwithstanding any unilateral support from other parts of the world. President Biden owns the fallout from this mess as we move backwards towards a different kind of cold war. But let’s at least keep talking to each other in a political sense as the world becomes a more dangerous place.

On the day gold closed down $2.30 at $1648.70 and silver closed up $0.13 at $19.17.

Zaner (Chicago) – “Initial weakness in the dollar overnight translated into a temporary rally in gold to start the trading week. Given the one-way street to unending jumbo US rate hikes, it is not surprising that gold reversed direction aggressively at the end of last week in the wake of suggestions that November’s 75-basis point US rate hike might open the Fed to a slight moderation of the pace of increases in the December meeting. On the other hand, the Fed last week made it very clear that softening in the economy will not deter their battle against inflation, but that gold bearish theme was countervailed by words of caution from a Fed member indicating the Fed could not “overdo it”. In yet another inflation tempering US official commentary, the US Treasury Secretary indicated that inflation was not “embedded” in the US economic structure. Unfortunately for the bull camp in treasuries, equities and physical commodities last week saw historical inflation readings from the UK and Europe. While we have mentioned it several times already German producer prices registered a year-over-year jump of 45.8% last week in a reading that unnerved investment in European instruments and that in turn provides the US dollar with ongoing strength. Over the weekend reports from India suggested that pre-festival gold buying has been unremarkable despite gold prices last week reaching the lowest level since the beginning of the pandemic! With the Indian rupee at record lows, Indian imports of gold might moderate sharply if it were not for the low flat price. Even though the December gold contract into the close Friday was near the level where the last COT positioning report was measured, into the low last week the market was $36 lower which likely put the net spec and fund long down to the lowest levels since the middle of 2019. The Commitments of Traders report for the week ending October 18th showed Gold Managed Money traders net sold 21,923 contracts which moved them from a net long to a net short position of 20,633 contracts. Non-Commercial & Non-Reportable traders reduced their net long position by 18,006 contracts to a net long 83,353 contracts. Last week gold ETF holdings declined by 779,853 ounces and are now 2.4% lower year-to-date. Given the silver market’s capacity to stand up to weakness in gold and significant strength in the dollar last week and in turn respect the $18.00 level over 6 trading sessions, the range up move on Friday could signal silver’s newfound bullish capacity especially if extreme hawkish Fed views are tempered further. It should be noted that the net spec and fund long in silver remains extremely low compared to the last 3 years but is not as liquidated as the gold spec positioning. Silver positioning in the Commitments of Traders for the week ending October 18th showed Managed Money traders went from a net long to a net short position of 7,599 contracts after net selling 8,722 contracts. Non-Commercial & Non-Reportable traders were net long 8,679 contracts after decreasing their long position by 7,432 contracts. Last week silver ETF holdings increased by 517,650 ounces but are 13% lower year-to-date. In the end, we are not impressed with bullish fundamental prospects in gold and silver.”

On Tuesday gold was supported as the dollar weakened. The Dollar Index moved lower by a full point in the morning as consumer confidence flagged over worries about inflation and recession which may lead to a less aggressive Fed. This in turn introduced a mild short covering rally.

If consumers see a cloudy inflation future, this fear is not reflected in the Dow Jones Industrial Average. The DOW this past month looks technically sound, moving from 29,000 towards 32,000. Expected higher interest rates did not stop this forward march which suggests stock investors believe this FOMC landing will be soft enough. It is surprising that there can be such a wide expectation divergence using the same Fed guidance.

Neils Christensen (Kitco) – Gold prices holding at session highs as U.S. consumer confidence drops to 102.5 – The gold market is holding at session highs as rising inflation continues to take its toll on U.S. consumer confidence. The Conference Board said on Tuesday its consumer confidence index fell to a reading of 102.5 this month, down from September’s reading at 107.8. The data significantly missed expectations as economists were looking for a reading of around 105.9. “Notably, concerns about inflation – which had been receding since July – picked up again, with both gas and food prices serving as main drivers. Vacation intentions cooled; however, intentions to purchase homes, automobiles, and big-ticket appliances all rose. Looking ahead, inflationary pressures will continue to pose strong headwinds to consumer confidence and spending, which could result in a challenging holiday season for retailers,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. Looking at the components of the report, The Present Situation Index dropped sharply to 138.9, down from September’s reading at 150.2. At the same time the Expectations Index dropped to 78.1, down from last month’s level at 79.5. “The Present Situation Index fell sharply, suggesting economic growth slowed to start Q4. Consumers’ expectations regarding the short-term outlook remained dismal,” Franco said. “The Expectations Index is still lingering below a reading of 80—a level associated with recession—suggesting recession risks appear to be rising.”

I would be less concerned about our financial system during this “unwinding” if everyone took the process more seriously. Yesterday’s comments by US Treasury Secretary Janet Yellen should have been recognized as a red flag and not ignored. Leverage in the private sector, especially as it relates to unregulated banking derivatives could easily be the epicenter of the next financial disaster. “We are also attentive to the possibility that higher market volatility could expose vulnerabilities in nonbank financial intermediation,” the Treasury chief said. “Regulators have been working together to better monitor leverage in private funds and develop policies to reduce the first-mover advantage that could lead to investor runs in money market funds and open-end bond funds.” As for Treasuries, Yellen’s comments marked the second time this month that she acknowledged concerns over the functioning of the $23.7 trillion market.

On the day gold closed up $4.10 at $1652.80 and silver closed up $0.17 at $19.34.

On Wednesday gold initially rose to two-week highs ($1675.00) but traders sold the rally in usual fashion and on the day our shiny friend only posted modest gains. The day was driven by a weaker dollar.US bond yields slipped on expectations that the Federal Reserve would temper aggressive rate-hikes after December (Reuters). The Dollar Index has lost more than 4 full points since Friday’s recent high and is now trading below 110.00. This significant weakness makes gold more attractive to foreign buyers. If Treasury yields continue to slip over softer economic data it bolsters hopes that inflation will moderate, and the Fed will be less aggressive.

A few things to consider. First the dollar is likely oversold so expect some sort of upward correction which could discourage new gold bulls. Many still believe that the Fed will not deviate from its 0.75 percent rate hike by year end. It may reconsider further immediate rate hikes next year or perhaps slow down the process. And look for confirmation that inflation is not as aggressive as most believed just a month ago.

The idea that the Fed would “pivot” was ignored just a few months ago. But this morning this very dovish notion has reinvented itself. The Bank of Canada surprised the market and other central banks by raising interest rates less than expected.

Paper speculators in the gold futures market have typically sold this kind of rally. Not a big deal if bullish sentiment improves but this rising positive sentiment could easily collapse if the dollar rebounds significantly. ETF outflows in the metals are discouraging but are offset by record gold demand during Diwali – the Hindu festival of light that celebrates good luck and prosperity.

On the day gold closed up $11.20 at $1664.00 and silver closed up $0.14 at $19.48.

On Thursday gold was choppy to mildly weaker in the New York cash market as the Dollar Index bounced off yesterday’s oversold lows. The European Central Bank raised interest rates the expected 0.75 of a point. ECB President Christine Lagarde remains an inflation hawk and informed analysts suggest even higher rates will be necessary to stop rising inflation within the EU. This discourages a rate pivot. Even though the European economic slowdown continues.

The US 3^rd quarter economic rebound could embolden the FOMC relative to future rate hikes which would be a minus for the still fledging rise in the price of gold and silver. But the obvious slowdown in consumer spending suggests the public remains cautious.

Reuters – “However, “the (Fed’s) November meeting is already expected to deliver 75 basis-point, and December likely to do likewise,” StoneX analyst Rhona O’Connell said, adding, “this talk of an early pivot is premature.” A majority of economists in the Oct. 17-24 Reuters poll forecast another 50-basis point hike in December. U.S. rate hikes increase the opportunity cost of holding zero-yielding bullion.”

The results of the Reuters poll are bullish for the metals if the academics are right and would likely override the higher interest rate consideration. Rhona O’Connell’s “premature” comment about a pivot remains central to the argument raging between the bulls and bears.

The academic poll carries big dovish weight, but inflation is out of the bottle and the Fed is faced with the problematic decision of fighting now or fighting later. I suppose that Powell is still looking for signs that inflation is slowing down and therefore the FOMC could get away with a half point hike. But some economists claim that inflation is not slowing down and will increase through next year. Others point out that if you look at the wider 10-year picture frame inflation will be around 2.5% which is Fed friendly. But these stakes are very high. If the Fed fumbles the ball Wall Street and the nation will pay the price. And the public will hold the Democrats responsible in coming elections. President Joe is already worried and bringing back former President Obama to head off losing the narrow edge the Dems hold in the House.

On the day gold closed down $3.30 at $1660.70 and silver closed unchanged at $19.48.

On Friday gold traded lower in the overnight Hong Kong and London markets and continued weak in the domestic New York trade. This is the result of the likely event I mentioned earlier in the week, namely the dollar weakness turned into an oversold market. The Dollar Index bounced off Thursday’s weekly lows (109.00) moving back towards a kind of weekly middle ground around 111.00. This makes sense because traders are not sure what the Fed has in mind for the short to medium time frame. Reuters claims that traders have now refocused on the impending rate hike next week. Bets for rising rates overall have put gold on course for a seventh straight monthly fall. “However, with the passing of time, recession fear is getting stronger and that could probably give a much-needed support to gold prices, and limit the downside,” Bharti added. Helping drive some of gold’s gains this week, the Fed was seen slowing its aggressive rate-hike pace in December, amid some signs of a U.S. economic slowdown. But Jigar Trivedi, a senior analyst at Mumbai-based Reliance Securities, said the outlook for gold still appears bearish with investment demand still weak and retail demand also not aggressive. “Gold should trade in a range of $1,640-$1,660 till there is an outcome from the Fed,” Trivedi added.

On the day gold closed down $21.10 at $1639.60 and silver closed down $0.33 at $19.15.

Platinum closed down $29.00 at $958.40 and palladium closed down $33.80 at $1894.60.

Zaner (Chicago) – “With a broad-based risk off environment flowing from equities and commodities, a pulse up in the dollar and significant outflows from gold and silver ETF holdings yesterday (-120,453 ounces in gold, -2.1 million ounces in silver) the bias in gold and silver is clearly pointing down. With the gold market yesterday failing to post a higher high for the move in the wake of a fresh downside breakout in the dollar and a downside breakout in treasury yields, the market may have made a temporary top. On the other hand, gold and silver price action could find fresh direction this morning following the Fed’s favorite inflation gauge of personal consumption expenditures which are projected to gain 0.5% (an increase of 0.2% from the prior month). However, would be buyers of gold and silver were likely discouraged yesterday by a jumbo ECB rate hike and were subsequently discouraged following a noted recovery bounce in the dollar. We also see Chinese gold demand prospects deteriorating with this week’s additional lockdown orders. In fact, soft 2022 Chinese gold demand has already been confirmed with a report yesterday that Chinese January through September gold consumption fell by 4.36% over comparative 2021 levels. From a short-term technical perspective, the high this week in December gold was posted on a minimal increase in trading volume, indicating prices above $1,667 are viewed by some as expensive. Given the negative outside market influences this morning and the presence of a key US inflation report, support in December gold falls to $1641.20 and traders should see the PCE report reactions set the tone of the session. In other words, the theme of a December moderation of Fed hawkishness could be tested this morning.”

Posted on October 21, 2022October 21, 2022 by Richard

Gold – An Upbeat Weekly Close

Commentary for Friday, Oct 21, 2022 (www.golddealer.com) – Today gold closed up $20.20 at $1651.00 and silver closed up $0.37 at $19.04. The paper trade created a bit of buzz this morning as both gold and silver jumped higher and the Dollar Index lost 2 full points! This surprising outcome over the possibility that the Fed may soften its current inflation fighting agenda. I would not get carried away because it’s sensible to look for paper traders to sell this rally. But the metals trade at least for today seems lighter. And so does the Wall Street trade as stocks rally and negative sentiment suggests an improvement. Not to rain on this parade but it is too soon in this debate to call this the anticipated Fed “pivot”. But at least there is a fresh scenario on the table that can be tested next month. If the expected 0.75 of a point interest rate from the FOMC holds up this small rally will melt like snow on a hot day. But if the Fed decides a half point hike is a better choice bullish sentiment in the metals will be bolstered. Beware however of this Trojan horse. In January you could realize that higher interest rates are still part of the Fed’s fighting game plan. They are just going to spread them out over a longer period. Last Friday gold closed at $1641.70 / silver at $18.02 – on the week gold was higher by $9.30 and silver was higher by $1.02.

On Monday gold was strong overnight in Hong Kong and London. And continued higher in the domestic New York trade as the cash market moved above $1668.00 before settling on both sides of $1660.00 for the day. The strength was created as the Dollar Index lost more than 1% of its value in the early morning trade. Reuters also suggests a rise in safe-haven demand for gold as geopolitical risks continue to mount. TD Securities – “In the near term, however, the recovery in risk assets bolstered by signs of stabilizing gilts is raising pressure on precious metal shorts, but gold prices need to break above $1,750/oz to extend the short squeeze.”

The rumor-mill this week is typical. Some analysists suggest the Fed and the market are low-balling the potential of higher interest rates (FX Empire). That is possible and if these folks are correct the paper trade will soon be dealing 5% + interest rates. Which will increase the pressure on gold and silver prices as investors buy Treasuries following strong guaranteed returns.

It is tough to argue with this scenario – gold is struggling against higher interest rates. But the value of gold in an inflationary world should not be ignored for two reasons. The first is simply that today’s bounce to higher ground does support the notion that gold is carving out a reliable bottom even in the face of negative news. The second reason is that gold has survived in a higher interest environment. Through a combination of safe-haven interest created by the disconnect between EU problems and the escalation of war in the Ukraine.

Still, this latest jump in the price of gold saw about half of today’s gain lost in the aftermarket suggesting traders selling the “rallies” and buying “dips”. We are still in the middle of this latest interest rate storm. But to overlook the value of physical gold and silver bullion at these discounted prices could be perilous if the inflation genie is already out of the bottle.

On the day gold closed up $15.30 at $1657.00 and silver closed up $0.65 at $18.67.

Grant on Gold (Zaner) – “(1) Gold ended last week with a 3% loss after data confirmed that the Fed has yet to get a handle on inflation. (2) Silver plunged 9.2% last week, erasing most of the gains recorded in the previous two weeks. (3) Platinum closed down 1.9% last week, but price action was confined to the previous week’s range. (4) Palladium is displaying a softer tone within its range as recession worries, inflationary prices, and higher interest rates conspire to sap auto demand.”

On Tuesday gold drifted lower in the New York cash market, unable to build on yesterday’s modest rise in prices. Even as the Dollar Index came off weekly highs which suggests that negative sentiment and the bearish technical picture remains the primary trading focus. Gold pushed to highs on the day ($1657.00), in what looks like mild short covering but drifted lower finding daily support at $1646.00. By the end of the day gold managed to claw its way back to familiar support ($1650.00) but this remains a heavy trade and the bear continues to roar.

I have said for some time that the price of gold would likely trade between $1600.00 and $1650.00 as this market adjusts to higher interest rates. And the downside in gold at these new lower levels would be limited using the following reasoning. Today the yield on 10-year Treasuries is 4% +, more than enough to slow down the US economy and unwind a cheap money policy in place during the pandemic. The academic community are split over this issue, but many thinkers believe the Fed will come to a similar conclusion, which is already foreshadowed in England as our friends across the sea choose a less obtrusive route to control spending.

New York Times – LONDON — In a stark retreat, Prime Minister Liz Truss of Britain on Friday fired her finance minister and partly reversed a tax plan that had rattled global financial markets, unsettled investors and set off a spiraling crisis that still threatens her political survival. In a brief news conference from Downing Street, she vowed to raise the country’s corporate tax rate after promising last month not to do so. The increased taxes will help pay for other tax cuts she had initiated and are meant to calm investors, who worried that the cuts were unfunded. “It is clear that parts of our mini budget went further and faster than markets were expecting,” Ms. Truss said, adding, “We need to act now to reassure the markets.”

On the day gold closed down $8.00 at $1649.00 and silver closed down $0.10 at $18.57.

On Wednesday gold pushed to 3-week lows as the Dollar Index (113.00) gained a full point since Tuesday’s low (112.00). This latest dip looks more like a bear raid than anything else, but it is tough to figure because these discounted prices should have brought in safe haven buying from both China and India. Today’s pricing route began at $1650.00 and settled on the day around $1630.00. Not the end of the world but enough of a wrinkle to suggest more confusion.

Still, the negative sentiment waterfall is not new and for now remains unrelenting. Traders are convinced the Fed will forge ahead with still higher interest rates. The fact that the FOMC has done little to encourage the notion that a “middle ground approach” is a consideration has become a nagging loose end. It reminds me of an old story my Mom used on occasion – a warning about bulls in the China closet. “It is widely believed that the phrase came about from real-life situations when cattle were brought to the market in London in the 17th century. The beasts would stray into nearby China shops and played havoc with the items. The earliest recorded use is in Frederick Marryat’s novel, ‘Jacob Faithful’ (1834).

It is difficult to imagine negative sentiment getting worse, which helps the contrarian theory – “prices are bottoming as all the sellers have sold”. But what the bulls need is news that the Fed will not overreact in its fight against inflation. The “overreaction” theory has underscored bearish sentiment since economists suggested months ago that the Fed was “behind the inflation curve”.

The technical picture from expert Jim Wycoff (Kitco) “Technically, the gold futures bears have the solid overall near-term technical advantage. 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 the September low of $1,622.20. First resistance is seen at today’s high of $1,659.50 and then at this week’s high of $1,674.30. First support is seen at $1,630.00 and then at $1,622.20.”

“The silver bears have the solid overall near-term technical advantage. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $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 today’s high of $18.755 and then at $19.00. Next support is seen at this week’s low of $18.155 and then at $18.00. Wyckoff’s Market Rating: 2.0.”

On the day gold closed down $21.50 at $1627.59 and silver closed down $0.23 at $18.34.

Zaner (Chicago) – “While the dollar index is trading higher early this morning that action does not appear to be the primary force behind the sharp slide in gold prices. In fact, red hot inflation readings from the UK (a 40 year high) and talk of aggressive rate hikes from several central bankers has flooded the headlines and that has knocked gold sharply lower. Reports are the ECB plans to implement another jumbo hike next week, the Minneapolis Fed Pres. indicated the benchmark policy rate in the US will have to rise above 4.75% and the BOE has indicated they will begin selling bonds on November 1st. Therefore, surging interest rates are likely to dominate gold and silver with the dollar adding into the selling environment. In conclusion, a continuation of dollar strength in the face of spiking interest rates could quickly throw December gold to and perhaps below the October low down at $1,622.20. Yesterday, the gold market saw a forecast for a 13% cut in gold output from one miner which would result in the lowest production since 2015. On the other hand, Turquoise Hill raised its fiscal year gold output, but the increase was not as large as the decline in output from the other miner reporting production figures yesterday. While the markets were not expecting the Russians to buy gold for their reserves, the Russian Finance Minister indicated now would not be a good time for Russia to buy for gold reserve holdings. Even though the markets are expecting Indian festival-inspired gold buying over the coming 2 weeks, it could take a return to the September lows, along with a jump in the value of the Indian currency for Indian buying to have a material upside impact on gold prices. Recently Indian gold jewelers expected festival sales this year to hold steady with last year’s post Covid related rebound. In conclusion, we are bearish toward gold, but acknowledge an already heavily liquidated net spec and fund long position which could bring about an exhaustion low later this week. In a positive development, gold ETF holdings increased minimally yesterday while silver ETF holdings posted another large inflow of 1.1 million ounces.”

On Thursday gold presented a typically wobbly market, choppy on the open but generally higher as the dollar weakened. The Dollar Index opened around 113.00 and trended lower, moving towards 112.00 which prompted higher gold prices. This gave the bulls a little breathing room from yesterday’s weakness. The New York cash market moved from $1625.00 through $1645.00 before the paper traders sold the rally and the markets closed mildly higher. The rumor which prompted dollar weakness was that Japan might sell dollars to support the yen. Not an uncommon move between countries looking to offset trade imbalances created by the dollar.

But this is another example of “unforeseen” fallout which many believe will become common worldwide as central banks adjust to post pandemic conditions. And damage from war in the Ukraine becomes permanent. Examples on our side of the world include fallout as the Fed backs away from the pandemic free lunch financial model. Within the EU, the mess that the Bank of England has created comes to mind. Here, the government must seriously intervene to protect the pound. They will worry about inflation later. And Russia can now openly threaten Europe over energy delivery as Moscow feels threatened over further unilateral sanctions.

It would also appear that yesterday’s swoon in gold prices was helped by Minneapolis Federal Reserve Bank President Neel Kashkari’s inflation comments: “But if we don’t see progress in underlying inflation or core inflation, I don’t see why I would advocate stopping at 4.5%, or 4.75% or something like that. We need to see actual progress in core inflation and services inflation, and we are not seeing it yet.” Most Fed policymakers expect to need to raise the policy rate, now at 3%-3.25%, to 4.5%-5% by early next year, based on projections published last month and comments made publicly since then Kashkari’s remarks signal a readiness to go even further. “That number that I offered is predicated on a flattening out of that underlying inflation,” Kashkari said. “If that doesn’t happen, then I don’t see how we can stop.” (Reuters)

On the day gold closed up $3.30 at $1630.80 and silver closed up $0.33 at $18.67.

Zaner (Chicago) – “While the December gold contract managed to reject the initial lower low for the move overnight and the Dollar is lending some initial support, the path of least resistance remains down with an upside breakout in US treasury yields to the highest levels since the financial crisis in 2008 dominating market sentiment. In fact, investors yesterday continued to pull money from gold and silver ETFs leaving traders and investors negative toward the sector. Apparently, sentiment in gold is so negative that reports of a 43% jump in September gold shipments from the key European gold refining hub Switzerland failed to provide support. Swiss gold exports to India in September rose 79%, shipments to China increased by 16%, and sales to Turkey rose by 36%! With a major Indian festival gold demand window just ahead and gold prices near two-year lows, we suspect Indian bargain hunting buying will present in the headlines in the coming sessions. However, given bearish big picture outside market conditions a temporary buying wave is not likely divert the market from the downside. With the gold market seeing its net spec and fund long jump 45,000 contracts in last week’s report, the sharp failure at the $1,650 level this week might have been stop loss selling from bottom picking late last week off the temporary consolidation at $1,650. On the other hand, into the low today, the December gold contract was trading $50 below the level where the last positioning report was measured and that could mean the net spec long has been brought down to the lowest levels since May 2019. Unfortunately for the bull camp, technical signals for a major low are likely to be overwhelmed by ongoing bearish fundamental forces. In the near term, we see December gold headed below the late September low down at $1,622.20. Relatively speaking the silver market has held up impressively in the face of this week’s washout in gold with the December silver contract holding well above last week’s lows again this morning. While the $18.00 level might be seen as some form of value, fundamentals for a solid bottom are not apparent!”

On Friday gold was flat in overnight Hong Kong and London trading but rallied early in the New York domestic market, bouncing off overhead resistance at $1645.00. This rather erratic gold pricing was helped by dramatic changes in the value in the dollar. The Dollar Index touched 114.00 in the early trade but quickly lost steam – settling around 112.5 for the day.

It is difficult to say what created higher gold prices going into the weekend. But even short-term bullish optimism is welcomed these days. And higher gold is probably related to two factors. First, this market is oversold, anything that sounds promising will get attention. Second, and more importantly Reuters said this morning that the Federal Reserve will debate the coming December interest rate hike. “Some Fed officials have begun sounding out their desire to slow down the pace of increases soon, according to the Wall Street Journal, and how to signal plans to approve a smaller increase in December. “The hopes that the Fed may temper or take the foot off the gas pedal slightly is helping the market,” said Andre Bakhos, managing member at Ingenium Analytics LLC in Plainsboro, New Jersey. Stock markets have been hammered by worries of aggressive rate-hiking cycle tipping the U.S. economy into a recession, with the benchmark 10-year U.S. Treasury yield hitting fresh 15-year highs earlier in the session.”

Some traders claim this is the first step towards a modified Goldman Sachs scenario which early on suggested gold would see $2,250.00 by 2025. Too optimistic for my tastes but you must give them credit for at least thinking out the box in this new rising interest rate world.

On the day gold closed up $20.20 at $1651.00 and silver closed up $0.37 at $19.04.

Platinum closed up $24.50 at $954.60 and palladium closed down $74.10 at $1995.70.

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.

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.”

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.