Daily Gold Newsletter Archives

Posted on June 2, 2023 by Richard

Gold – Holds $1900.00 + For Now

Commentary for Friday, June 2, 2023 (www.golddealer.com) – Today gold closed down $25.60 at $1952.40, and silver closed down $0.24 at $23.64. The price of gold moved lower on the opening this morning, and in typical fashion drifted to lows on the day. Its price “swing” was $30.00, definitely not too hot, and a bit on the cold side. The strong jobs report for May kept our shiny friend left footed because it suggests an aggressive interest rate policy is still in the cards. Across our trading desk the physical market remains focused during this consolidation. The public buys the dips, and while there has been some selling, popular bullion products are rarely in inventory more than a few days. Premiums for bullion are down a small amount from several months ago, so considering the present “drama” they have remained surprisingly steady. Last Friday gold closed at $1944.10 / silver at $23.24 – on the week gold was up $8.30 and silver was higher by $0.40. Another week of more “noise” and little price movement.

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

Should you decide to use our Delayed Delivery Program please talk with your service rep and understand how this program works. It is handy if you want to lock in the price “now” and insist on new product – but is not for everyone. Just like us – you must pay upfront to “lock in” prices and you can’t “change” your mind. So, unless God has blessed you with patience, please ask your rep for other options and thank you for understanding.

Monday was Memorial Day, and the US commodity markets were closed.

On Tuesday the price of gold moved to highs on the day ($1962.00) before traders sold this modest strength and the price of gold dropped to lows on the day ($1952.00) before once again bouncing higher in what looks like a short covering rally.

This kind of trading pattern was typical of last week’s indecisive pricing, but it is worth noting that last night’s Hong Kong cash price approached $1932.00 (a nine-week low) before recovering to $1962.00 and settling at the higher end of the range.

Still, I am not optimistic, because the Fed will continue to fight inflation with higher interest rates. Which means that the bulls will struggle with holding $1900.00. And without fresh bullish news they may have to settle for something between $1800.00 and $1900.00. Not the end of the world but consolidation continues as long as higher interest rates create stormy weather.

Neils Christensen (Kitco) – Gold prices holding above $1,950 an ounce as U.S. consumer confidence falls less than expected to 102.3 – “The gold market is holding on to modest gains around $1,950 an ounce as sentiment among U.S. consumers remains resilient. American consumer confidence index fell to 102.3 in May, down from April’s upwardly revised reading of 103.70, the U.S. Conference Board reported Tuesday. The data came in better than expected; according to consensus estimates, economists were looking for sentiment to drop to 99.1. Although report noted that while U.S. consumers are maintaining an upbeat attitude, their expectations remain fairly pessimistic. Looking at the components of the report, the Present Situation Index fell to 148.6 from last month’s reading at 151.80. At the same time the Expectations Index dropped to 71.5, down from the previous level of 71.7. “The Expectations Index has now remained below 80—the level associated with a recession within the next year—every month since February 2022, with the exception of a brief uptick in December 2022,” the report said. Ataman Ozyildirim, senior director, Economics at The Conference Board, said that the outlook for the labor market is starting to deteriorate.

“Their assessment of current employment conditions saw the most significant deterioration, with the proportion of consumers reporting jobs are ‘plentiful’ falling 4 ppts from 47.5 percent in April to 43.5 percent in May. Consumers also became more downbeat about future business conditions, weighing on the expectations index. However, expectations for jobs and incomes over the next six months held relatively steady,” he said. Although inflation expectations remain elevated, Ozyildirim said that they are starting to stabilize. “Consumers in May expected inflation to average 6.1 percent over the next 12 months – essentially unchanged from 6.2 percent in April, though down substantially from the peak of 7.9 percent reached last year. Nonetheless, consumers continued to view inflation as a major influence on their view of the US economy.”

On the day gold closed up $13.90 at $1958.00, and silver closed down $0.11 at $23.13.

On Wednesday gold moved to highs on the day ($1975.00) even as the Dollar Index surged higher (104.6) and new jobs data beat expectations. Now consider that Treasury yields are moving lower, and you have another confusing bump in the economic road. Lower Treasury yields usually signal market caution even in the global economy. Still, these are the latest cues in short term data points which I usually ignore because they come and go like the wind. Some professionals believe that gold finished higher on the day because of increased safe haven buying created over anxiety in the vote to extend the US debt limit. There is something to this also, but a better approach is to keep your eye on the bigger picture.

The US and most of the world are fighting higher inflation and endemic inflation. A double whammy created by the modern printing press. These threats have chipped away at the buying power of the dollar for decades. This continual grind will support and eventually push the price of gold/silver bullion higher in my view. But in the meantime, traders are watching carefully to see if our shiny friend can carve out a new bottom at these substantially lower prices.

Reuters (Ashitha Skivaprasad) – Gold firms; set for monthly loss on dollar strength, Fed’s rate hike bets – “Gold firmed on Wednesday supported by lower Treasury yields but the dollar’s strength, with more interest rate hikes in the offing and optimism about a U.S. debt deal kept bullion on course for its first monthly dip in three. Spot gold was up 0.5% at $1,968.19 per ounce by 1033 ET (1433 GMT) on weaker-than-expected Chicago purchasing managers’ index (PMI) data, before paring some gains on stronger U.S. jobs data. It has lost nearly 1.1% this month and $120 from near-record highs scaled earlier in May. “We’ve had kind of a push-pull effect,” amid support from lower yields and pressure from the dollar, said David Meger, director of metals trading, High Ridge Futures. “With the job’s data relatively strong, concern about the possibility of further rate hikes would obviously have a tendency to pressure gold… and yet on the other side, we have the PMI data pulling in the opposite direction.” The dollar index headed for a monthly gain, making bullion less attractive to overseas buyers. Investors priced in a 71% chance of a 25-basis point hike in the Federal Reserve’s June meeting versus 60% before the data. High interest rates dim appeal for zero-yield gold. But key support around $1,950 could fuel momentum trade to push gold back to $2,000, said Edward Moya, senior market analyst at OANDA. Traders also focused on developments around the U.S. debt ceiling, with the U.S. House of Representatives due to vote on a bill to lift the limit. Silver rose 0.4% to $23.30 per ounce, platinum fell 1.3% to $1,000.84, while palladium slipped 2.3% at $1,368.65. All three were set for a monthly drop. Russia’s Nornickel saw the global palladium market swinging to a surplus in 2024 from a deficit in 2023 as recycling outpaces a demand recovery.”

On the day gold closed up $5.90 at $1963.90, and silver closed up $0.34 at $23.47.

Zaner (Chicago) – “With a fresh new high for the move in the dollar to the highest level since March 15th yesterday, the gold market is short term overbought and is facing ongoing currency related pressure. Surprisingly, silver has avoided the pressure seen in the early gold trade thereby signaling its continued focus toward physical commodity fundamentals instead of financial/currency related factors. However, gold and silver should see minimal support from a continued slide in US interest rates today. Unfortunately for the bull camp gold ETF holdings saw an outflow yesterday of 11,088 ounces which lowers the net purchases this year to 461,016 ounces. In a minimally supportive development for silver, ETF holdings yesterday increased by 127,446 ounces, which is important for the bull camp after seeing several massive outflows last week. Fortunately for the bull camps in gold and silver Chinese nonmanufacturing PMI readings for May came in much higher than expected and that offsets softer than expected Chinese manufacturing PMI data. While it seems like the US is nearing a debt ceiling deal some economists are suggesting spending cuts in the bill will increase the chances of a US recession. Yet another negative weighing on gold and silver prices is a slight escalation in the prospects of a US rate hike after upbeat US scheduled data recently and particularly if a budget deal manages to reduce uncertainty throughout the markets. With a test and a sharp rejection of yesterday’s dip to $1,950 in gold, that level has been given added credibility as key support. As indicated already, we see silver vulnerable to risk-off trade but the magnitude of the net spec and fund long in silver from last week’s COT report looks less vulnerable to long liquidation than the spec long in gold. As indicated already the silver market should see some pressure from the disappointing Chinese manufacturing PMI readings for May as that could reduce the countries upcoming silver imports. In the end, July silver has key support at $23.00 but without prices leaping in a big picture broad-based risk on euphoria from a debt deal, the bull camp lacks a story that justifies buying at support.”

On Thursday gold’s pricing pattern was typical, reflecting a mild dip on the opening ($1958.00) and the subsequent push to highs on the day ($1980.00) and finally settling with a positive bias. The plus here for gold is that these early dips are bought by the paper trade, the minus being that when overhead resistance is tested, the result does not create the typical buzz. Which might suggest that even the bulls lack conviction.

Still, today’s pop to the upside is worth noting in a market looking for fresh news. The Wall Street Journal this morning noted that the Fed may not raise interest rates at the June FOMC meeting. But have the option of resuming their program later in the year. This idea of a “pause” comes and goes these days, but the handwriting may already be on the wall if you consider that today Treasury yields dropped below their 200-day moving average.

I doubt the Fed will “pause” but if they do it would be very bullish for gold sentiment. The bulls will also be smiling at an improved technical picture because of gains above $1900.00.

Reuters (Deep Kaushik Vakil) – “Gold edges higher on dollar pullback as US rate hike bets ebb – “Gold prices rose after mixed U.S. jobs data on Thursday, as the dollar tumbled on expectations of the Federal Reserve skipping an interest rate hike at its next policy meeting. U.S. private payrolls increased by 278,000 in May, beating expectations for a rise of 170,000, but separate data showed the number of new U.S. jobless claims rose modestly last week. “The initial reaction was the market selling off … and then you have another number 15 minutes later showing that jobless claims came out in line,” said Daniel Pavilonis, senior market strategist at RJO Futures. The dollar drifted lower from a two-month high, making bullion cheaper for holders of other currencies, as investors trimmed bets that the Fed will raise interest rates this month. Markets now see a 70% chance the Fed will keep rates unchanged next month, up sharply from a 30% probability earlier, after Fed officials including the vice chair-designate pointed towards a rate hike “skip” in June. “There’s some kind of safe-haven demand supporting gold because of uncertainty regarding the debt ceiling bill,” said Commerzbank analyst Carsten Fritsch. The U.S. Senate was set to take up the bill with just four days left to pass the measure and send it to Democratic President Joe Biden to sign, averting a catastrophic default. Gold, which does not yield any interest of its own, tends to lose its appeal when interest rates rise.”

On the day gold closed up $14.10 at $1978.00, and silver closed up $0.41 at $23.88.

On Friday the price of gold was not nearly as defensive as you might think considering the DOW was significantly higher this past week. Such strength might suggest that the Fed interest rate policy will be getting a haircut sooner than later. Still, it is better to remain cautious – speculation about interest rates is now a national pastime. The bulls and bears are more evenly matched than the bullish technical picture might suggest.

Jim Wycoff (Kitco) – “Technically, the gold futures bulls have the overall near-term technical advantage. A downtrend on the daily bar chart has stalled out. Bulls’ next upside price objective is to produce a close in August futures above solid resistance at $2,050.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at this week’s low of $1,949.60. First resistance is seen at this week’s high of $2,000.70 and then at $2,007.00. First support is seen at Thursday’s low of $1,970.10 and then at $1,960.00. The silver bulls and bears are back on a level overall near-term technical playing field. A downtrend on the daily bar chart has been negated. Silver bulls’ next upside price objective is closing July futures prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at the May low of $22.785. First resistance is seen at today’s high of $24.12 and then at $24.40. Next support is seen at Thursday’s low of $23.335 and then at $23.00.”

On the day gold closed down $25.60 at $1952.40, and silver closed down $0.24 at $23.64.

Platinum closed down $6.60 at $1011.60, and palladium closed up $10.90 at $1386.80.

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

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Posted on May 26, 2023 by Richard

Gold – Another Tough Week

Commentary for Friday, May 26, 2023 (www.golddealer.com) – Today gold closed up $1.00 at $1944.10, and silver closed up $0.45 at $23.24. To say this was another tough week for metals might be an understatement as bearish trading sentiment continues to rise. Reuters used the term “wobbles” relative to gold to make the point that sticky inflation has created this recent downdraft in prices because it assures traders that the Fed will continue to raise interest rates. This is an old headache because the solution to rising inflation is to slow the economy. But our economy is speeding up, so this is one of those conundrums we all face as the Fed produces more and more fiat currency. How all this will end remains to be seen but for now the bears are gaining ground. Last Friday gold closed at $1978.70 / silver at $23.92 – on the week gold was down $34.60 and silver was down $0.68.

Just a reminder that we will be closed this Monday (May 29th) for Memorial Day.

On Monday the price of gold traded between $1969.00 and $1978.00 today and finished the day midrange – this typical “indecisive” pattern has become the new normal in a market pretty much evenly divided between the bulls and bears, but with a downward “drift” supporting the notion that higher interest rates will continue to limit higher prices in gold. And depending on how aggressive the Fed becomes; these higher interest rates will continue to push gold prices lower.

It is worth remembering however that gold is not trading at what would have been considered a bargain price not long ago, so expect bargain hunting to increase if prices continue to weaken.

MarketWatch – Gold ends lower, extending losses after worst week since February – The ICE U.S. Dollar Index, a key gauge of the U.S. dollar’s value compared with its rivals, rose to its highest level since March late last week, although it was marginally lower on Monday. It stood at 103.18 in Monday dealings DXY, +0.04%, off less than 0.1% on the day. Still, the dollar’s revival in recent weeks has coincided with a pullback in gold prices as a stronger greenback makes gold — which is priced in dollars — more expensive for buyers using rival currencies. The dollar index trades around 1.5% higher month to date.

“Although gold has fallen back from the near record high it surged to earlier in the month, it remains at a level that the precious metal has only traded at a smattering of times in its long history as market confidence remains fragile and investors are seeking gold to manage their risk,” said Rupert Rowling, market analyst at Kinesis Money, in daily commentary.

Debt-ceiling talks continue, with traders waiting to see whether a deal might be reached by the end of the week and if Monday’s talks yield any progress. Gold had benefited from debt-ceiling and recession fears, and prospects for the U.S. to default on debt is “naturally bullish for [the metal] over the long term,” but “potential nervous updates before the June 1 deadline will not necessarily lead to gold aiming higher if the [U.S. dollar] moves higher as a result of concerning headlines from Washington,” said Jameel Ahmad, chief analyst at CompareBroker.io, in daily commentary. “We must remember that even though both gold and the U.S. dollar are very much assets of safety, previous flashes of sudden rallies for the greenback … have unexpectedly been bad news for gold,” he said.

The markets will also be closely monitoring remarks from Federal officials this week as well as Wednesday’s release of minutes from the central bank’s policy meeting earlier this month. On Monday, St. Louis Fed President James Bullard said he would like to see two more quarter-percentage-point interest-rate hikes this year. Minneapolis Fed President Neel Kashkari, however, told The Wall Street Journal in an interview published Sunday that he’s open to pausing rate hikes at the Fed’s next meeting in order to buy time to assess the inflation outlook and the effects of more than a year of rate increases. With the biggest headwind of the last year, the Fed’s consistent hiking of interest rates, “seemingly drawing to a close and a trading environment that is still risk averse, gold has found significant support a little below the psychologically important threshold of $2,000 an ounce,” said Rowling. “While a fresh push above $2,000 looks unlikely, assuming the U.S. debt ceiling talks do reach agreement, gold looks well supported and looks set to continue trading comfortably above $1,950 in the medium-term”.

On the day gold closed down $3.90 at $1974.80, and silver closed down $0.20 at $23.72.

Zaner (Chicago) – “The charts favor the bear camp in gold and silver to start the new trading week. While a portion of the bull camp is hopeful of flight to quality buying interest following debt ceiling negotiations at the White House today, we think the markets are at risk of faltering from fears of recession if talks break down. Last week gold ETF holdings declined by 154,592 ounces while silver ETF holdings saw a decline of 2.02 million ounces. With the dollar early today drifting below last Friday’s low, the bull camp in gold is hopeful the May rally is losing momentum. With the trade generally remaining positive about US debt ceiling negotiations, it is possible that optimism will spill over into this week thereby allowing gold and silver to consolidate above last week’s low. Unfortunately for the bull camp, Indian buyers remain extremely price-sensitive especially with the Indian currency vulnerable to further US dollar strength. Unfortunately for the bull camp, the latest COT positioning report (which is probably overstated) showed a net spec and fund long reading near 12-month highs leaving the market vulnerable to stop loss selling from signs of an impending US debt ceiling deal. The May 16th Commitments of Traders report showed Gold Managed Money traders reduced their net long position by 14,837 contracts to a net long 131,789 contracts. Non-Commercial & Non-Reportable traders net sold 14,423 contracts and are now net long 237,557 contracts. On the other hand, with recent financial market relationships out of sync it is possible gold could shift its focus from the dollar to the direction of US interest rates. Obvious support is $1,960.30 and then again down at $1,954.30 with the bear camp holding modest fundamental and technical control. Fortunately for the bull camp in silver the market saw a correction last week and the beginning of a possible consolidation low support level building around the $23.56 level. However, the latest COT positioning report remains near the upper level of the range of its long positioning of the last 12 months. The Commitments of Traders report for the week ending May 16th showed Silver Managed Money traders are net long 13,443 contracts after net selling 13,726 contracts. Non-Commercial & Non-Reportable traders had 36,749 contracts after decreasing their long position by 11,556 contracts.”

On Tuesday gold repeated yesterday’s “back and forth” pattern of indecisive pricing. The price range was also similar, coming in around $20.00, which further indicates a kind of “ho-hum” attitude among traders who are waiting for accurate information relative to higher interest rates.

Reuters (Deep Kaushik Vakil) – Gold recovers as debt-ceiling talks make little progress – “Gold prices rebounded from their earlier losses on Tuesday, as yields fell and the dollar retreated from its highs, while another round of U.S. debt ceiling talks ended without much progress. Gold rose from session lows on reports of further negotiations over raising the debt ceiling, said Daniel Pavilonis, senior market strategist at RJO Futures. Representatives of President Joe Biden and congressional Republicans ended another round of debt-ceiling talks with no signs of progress as the deadline to raise the government’s borrowing limit or risk default ticked closer. Wall Street’s main indexes fell and the dollar index backed off from its session high, while benchmark 10-year yields fell from a two-month peak. “The inverse correlation between yields and gold is still there,” Pavilonis said. Bullion has lost nearly $100 an ounce from its near-record peak hit earlier this month, mainly pressured by growing bets on interest rates staying higher for longer. “For now the market has not entirely ruled out another rate hike, and that’s clearly not what (it) was looking (like) just a month ago and that’s leading to this realignment of prices,” said Ole Hansen, head of commodity strategy at Saxo Bank. Minneapolis Fed President Neel Kashkari said on Tuesday U.S. rates may have to go “north of 6%”. Gold tends to lose appeal when rates rise and push up bond yields, increasing the opportunity cost of holding zero-yield bullion. Investors now await the minutes from the Federal Open Market Committee’s May 2-3 meeting on Wednesday.”

On the day gold closed down $2.40 at $1972.40, and silver closed down $0.25 at $23.47.

On Wednesday gold pricing was a carbon copy of that seen on Monday and Tuesday. On the open prices moved higher, traders sold the rally and gold drifted to the lows on the day. The pricing spread was about $25.00 so this market remains sleepy in a sense, but traders continue to test the downside while fear of rising interest rates cap the upside. With due respect Reuters’ talk of a “catastrophic default” is nonsense, but it is plain to see that one of the great catastrophes of this age is government unfunded liability which continues to grow at an alarming rate.

Reuters (Deep Kaushik Vakil) – Gold dips on dollar strength as US debt talks drag on – “Gold eased on Wednesday as the dollar firmed, cutting some safe- haven flows into bullion from the looming risk of a U.S. debt default as talks entered a critical stretch, while investors awaited minutes of the Federal Reserve’s recent policy meeting. The dollar index rose to a fresh two-month high, weighing on demand for greenback-priced bullion. Negotiators for Democratic President Joe Biden and top congressional Republican Kevin McCarthy were set to reconvene on Wednesday morning, seeking a deal to raise the debt ceiling and avoid a catastrophic default. “Overwhelmingly, the debt ceiling headlines are at play…. But there’s some signal in the noise,” said Daniel Ghali, commodity strategist at TD Securities. Gold gained in the previous session “despite headwinds from a rising broad dollar, which reveals notable demand behind the scenes.” Wall Street’s main indexes opened lower as the debt ceiling impasse kept investors on edge. If regional U.S. banking troubles were to subside and agreement reached over the debt ceiling, gold could fall further, said Edward Gardner, commodities economist at Capital Economics. Bullion was hovering just above 1-1/2-month lows touched last week as several Fed officials suggested the central bank would stick to its rate-hiking plan. Higher interest rates tend to increase the opportunity cost of holding non-interest-bearing gold. Minutes of the Fed’s May 2-3 meeting are due at 2 p.m. EDT, after the central bank raised its benchmark overnight interest rate by a quarter of a percentage point to the 5%-5.25% range.”

On the day gold closed down $9.60 at $1962.80, and silver closed down $0.35 at $23.12.

On Thursday the price of gold, not surprisingly continued lower, touching $1940.00 before we saw a small bounce higher on what looks more like short covering than bargain hunting.

This bearish refocus has been created by a stronger dollar. The Dollar Index peaked at 104.00 today in the early morning trade. As traders remain defensive, expecting higher interest rates, the so-called “pivot” becomes less likely as our economy continues to improve.

A step-down pricing pattern has been in place since early May and has done a nice job of discouraging bullish sentiment as the Fed continues to tap the economic brakes with their interest rate hammer. It is surprising that these much lower prices have not created that much buzz in the physical market. Which might suggest that fresh buyers are waiting until this market stabilizes and a reliable new floor becomes apparent.

Some physical gold traders are considering a “new floor” of between $1800.00 and $1900.00 is realistic as the Fed continues to battle inflation.

A guaranteed interest rate of 5% has attracted folks who might have invested in gold when interest rates were lower. This rocky road to lower gold prices is not for everyone, but our shiny friend may be oversold, so anticipate a short covering rally.

Most dealers I know are grousing (petty complaining or grumbling). Get over it, we had a great run, and it will take a while to get the physical trade to refocus. But not as long as you might think. As soon as everyone realizes there is no substitute for gold and silver bullion the clouds will clear. And we will be back to “normal” if there is such a thing these days. If you are so disposed, take advantage of lower prices. If you believe the market will remain weak – stand aside. But remember that just like prices do not rise forever, they also do not fall forever. Picking up a few bargains at these lower levels makes good sense if you keep the longer term in mind.

Reuters (Deep Kaushik Vakil) – Gold hits 2-month low on debt talks progress, rate hike bets – “Gold slid to its lowest in two months on Thursday as optimism around the U.S. debt ceiling talks lowered safe-haven demand for bullion and robust economic data fueled bets of another rate hike by the Federal Reserve. White House and Republican negotiators made some progress in late-night talks over raising the debt ceiling, top congressional Republican Kevin McCarthy said. “It’s a one-two punch for gold … if a deal is done over the weekend, then that will remove the biggest risk off the table,” said Edward Moya, senior market analyst at OANDA. Gold extended losses after revised estimates showed the U.S. gross domestic product increased at a 1.3% annualized rate last quarter, up from the 1.1% pace estimated last month. “A rather impressive round of economic data suggests this economy is still showing so much resilience … the argument for possibly delivering another rate hike is gaining steam here,” Moya added. Traders looked to the Fed-favored inflation gauge, core personal consumption expenditures (PCE) index, due Friday. Markets now priced in a 41% chance of a 25-basis points hike in June, seeing cuts no sooner than September, according to the CME FedWatch tool. Gold, a non-yielding asset, tends to lose appeal in a high-interest rate environment. The dollar climbed to its highest since mid-March, making gold less attractive for overseas buyers, while benchmark Treasury yields were near highs seen on March 13. Gold was “really viewing things through the lens of the dollar,” said independent analyst Ross Norman.”

On the day gold closed down $19.70 at $1943.10, and silver closed down $0.33 at $22.79.

On Friday gold’s pricing pattern continued to worry the bulls, as it pushed to $1955.00 and again sold off reaching a daily low of $1940.00 in the early trade. We should see some squaring up of the trading books and a relatively flat finish today as most traders have left for the long Memorial Day weekend. The domestic market is closed on Monday.

Reuters (Deep Kaushik Vakil) – Gold wobbles as sticky inflation drives up US rate hike bets – “Gold prices came off session highs on Friday after an uptick in a key U.S. inflation gauge raised bets that interest rates will be higher for longer-than-expected, with bullion on course for a third weekly loss as debt ceiling talks enter the 11th hour. Bullion pared gains after the personal consumption expenditures (PCE) price index, which the Federal Reserve tracks for its 2% inflation target, increased 4.4% in the 12 months through April after advancing 4.2% in March. “The PCE number just kicked one of the legs out on the stool of the gold market, a softer number would have provided the tailwind behind gold,” said Phillip Streible, chief market strategist at Blue Line Futures, in Chicago. Traders boosted bets that the Fed is not done raising rates, which would erode the attraction of non-yielding gold. Benchmark 10-year Treasury yields, and the dollar index hovered near their highest levels since mid-March, both on track for their third straight weekly gains. But the dollar eased 0.1% for the session, which “has carved out some breathing space for bullion”, said Han Tan, chief market analyst at Exinity. Gold briefly slipped to its lowest since March 22 and is still headed to end the week 1.4% lower as the White House and congressional Republicans aim to put the final touches on a deal to raise the debt ceiling. While some of the bullish sentiment in gold has faded, it could return with supportive data, said Craig Erlam, senior market analyst at OANDA.”

On the day gold closed up $1.00 at $1944.10, and silver closed up $0.45 at $23.24.

Platinum closed up $1.80 at $1031.20, and palladium closed up $7.90 at $1431.50.

Zaner (Chicago) – “Even though August gold has recovered from a fresh low for the move overnight, the charts generally favor the bear camp. According to some press outlets, gold is higher this morning because of a retrenchment in the dollar, but that retrenchment is insignificant early on with dollar charts retaining a bullish set up. However, the parties to the debt ceiling negotiations appear to be so confident in their ability to strike a deal next week, that the President and Congress are leaving Washington for the holidays! In the end, if the dollar has rallied several weeks off the fear of a default and a deal is forming, the dollar bulls and gold bears will have a significant test of their capacity early next week. Therefore, the $1950 level in August gold might be some form of temporary/key bottom with $23.00 potentially a strong value zone in July silver. On the other hand, the pendulum regarding the Fed’s next rate decision (next week) has moved slightly in favor of a hike following a stubborn US PCE reading and somewhat positive US jobs news. In other words, another major negative for gold and silver prices will face a key junction next week setting the stage for a key pivot for price trends in June. Regardless of the Fed’s stance next week, gold and silver this week faced the highest US treasury yields since March 9th and we suspect Treasury markets are also poised to shift trend action next week. We suspect precious metal and many other physical commodity markets are experiencing selling in the wake of credible evidence of a minimal flare in Chinese Covid infections. In other words, the trade is concerned that the latest flare could result in a return to lock down which would surely dampen gold demand by the world’s largest consumer (China). Yesterday gold ETF holdings fell 4,998 ounces while silver ETF holdings increased by 100,343 ounces.”

Posted on May 19, 2023 by Richard

Gold – Another Volatile Week

Commentary for Friday, May 19, 2023 (www.golddealer.com) – Today gold closed up $22.20 at $1978.70, and silver closed up $0.42 at $23.92. To say that gold had a volatile week would probably be an understatement. In February of this year gold topped $1950.00 with the requisite buzz, but when gold lost $150.00 in a month the analysts were sure that $1800.00 would not hold, and the next stop was $1750.00. By early March, however the bulls were counting on a dovish interest rate program and gold pushed through $2050.00 before bullish sentiment again turned sour, and gold crashed through $1990.00 support on its way to recent lows ($1950.00). Early today the same professionals suggested that bearish news will continue, and gold will trend lower. And then, out of nowhere gold surged higher as Fed Chief Jerome Powell suggested that interest rates may be less aggressive. It is easy to forget about volatility when prices are moving higher. But the truth is benign – the price of gold usually reflects our economic tension level. Buying on dips in these troubling times makes sense because as you saw today – a sentiment whipsaw may be right around the corner. Last Friday gold closed at $2014.50 / silver at $23.99 – on the week gold was down $35.80 and silver was off by $0.07.

On Monday the price of gold was choppy with a surprising upward bias. The bulls challenged overhead resistance ($2022.00) three times but could not hold this higher ground as traders sold the rallies. The upward challenge, however, encourages the “higher gold faithful” and was supported by a weaker Dollar Index, moving from 102.07 through 102.40 in the early trade.

I can’t believe that traders are waiting for debt ceiling talks to move the sentiment needle. A waste of time and taxpayer money in my opinion as neither the Democrats nor Republicans will make the needed monetary changes. Talk, talk, talk and more talk!

Reuters (Deep Kaushik Vakil) – Gold gains on dollar pullback, debt-ceiling talks in focus – “Gold advanced on Monday on a weaker dollar as traders stuck to bets on interest rate cuts before year-end despite comments from Federal Reserve officials, with focus also on the U.S. debt ceiling talks. The dollar eased from a five-week high, making bullion cheaper for overseas buyers. “Investors will continue to deploy their capital in gold as the prospect of a rate-cutting cycle continues to firm over the next 12 months,” said Daniel Ghali, commodity strategist at TD Securities. Minneapolis Fed President Neel Kashkari said there was more work to be done to rein in inflation, while Atlanta Fed president Raphael Bostic played down chances of rate cuts this year. Any hawkish comments are “essentially disregarded” because the market is inferring what the Fed might end up doing based on incoming data as opposed to what they are saying, Ghali added. Focus will be on more Fed speakers this week, including Chair Jerome Powell. Wall Street, meanwhile, gained on optimism for a likely deal to raise the U.S. debt limit. Most market participants were still betting on at least one rate cut before 2023 ends, according to the CME’s FedWatch tool. Higher interest rates dim appeal for zero-yield gold. While gold remains supported by factors including rate cut bets, a “major risk-on wave stemming from a deal could drag gold into the sub-$2,000 domain”, said Han Tan, chief market analyst at Exinity. Rising demand from automakers, industry and investors will push the global platinum market into its biggest deficit in years, three industry reports predicted.”

On the day gold closed up $3.50 at $2018.00, and silver closed up $0.14 at $24.13.

Zaner (Chicago) – “With the significant jump in the US dollar at the end of last week, a new high in the Dollar this morning, a slight rise in US interest rates and softer than expected Chinese new loan data last week, the commodity markets are facing signs of slowing instead of signs of out-of-control inflation. Fortunately for the bull camp, the recent correction in gold prices prompted fresh buying interest in India after seeing those buyers back off with prices above $2,020. Unfortunately for the bull camp, soft US scheduled data, strength in the dollar and global economic slowing fears leaves global gold demand expectations disappointing and leaves the bear camp with an edge with respect to demand fundamentals. Even though we suspect the latest COT positioning report overstates the net spec and fund long (due to the washout late last week), the net spec and fund long was near 12-month highs. Gold positioning in the Commitments of Traders for the week ending May 9th showed Managed Money traders were net long 146,626 contracts after decreasing their long position by 1,190 contracts. Non-Commercial & Non-Reportable traders net bought 4,932 contracts and are now net long 251,980 contracts. However, the bull camp should be cheered with gold ETF holdings last week seeing inflows of 426,772 ounces resulting in a year-to-date gain of 0.3%. While we suspect the gold market will continue to erode on its charts, we expect the market to generally respect support around $2,000. However, we see critical/failure support at $1,982. Like the gold market, the silver market saw inflows to silver ETF holdings last week of 2.91 million ounces resulting in a year-to-date gain of 0.6% While the net spec and fund long positioning in silver was not as overbought as gold on a relative basis recently, the market was long enough to justify last week’s late selling wave. On the other hand, into the low on Friday, July silver was trading nearly $2.00 lower likely balancing the net spec and fund long and increasing the potential of $24.00 as a solid support level. The May 9th Commitments of Traders report showed Silver Managed Money traders are net long 27,169 contracts after net buying 38 contracts. Non-Commercial & Non-Reportable traders added 857 contracts to their already long position and are now net long 48,305.”

On Tuesday the gold bulls were disappointed to see gold sell off after pushing to highs on the day ($2014.00). Gold traders sold the early rally and pushed gold below the important $2000.00 support over new hawkish comments by Cleveland Fed President Loretta Mester.

Once again bullish sentiment struggles with questions about how aggressive the Fed will be in controlling inflation. This is an old story and an open question. But the information offered today by Mester has created another wave of speculation. The significant dip in gold caught a tepid bid at $1985.00. The weak aftermarket suggests that gold may turn into a heavy trade without fresh bullish information either from the Fed or perhaps worldwide safe haven demand.

Reuters (Deep Kaushik Vakil) – Gold slips as US data, Fedspeak sow doubts on rate cuts – “Gold fell on Tuesday after U.S. economic data and hawkish remarks from Federal Reserve officials drove bets that interest rate cuts may be delayed, but debt default jitters kept a floor under safe-haven bullion. U.S. retail sales increased less than expected in April, but the underlying trend was solid, driving an uptick in the dollar and Treasury yields. Meanwhile, Cleveland Fed President Loretta Mester said she does not think the U.S. central bank is at a point yet where it can hold rates steady for a period of time, given stubborn inflation, adding to hawkish comments from other Fed officials on Monday. “We needed to see more signs of a pivot from the Federal Reserve, and we haven’t really fully seen that yet,” said Craig Erlam, a senior market analyst at OANDA. High interest rates dull non-yielding bullion’s appeal, although it’s considered a hedge against economic uncertainties. But overall, “traders are going to remain buying any kind of dip on the gold market as they wait out this debt ceiling fiasco,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago, adding the $2,000 mark remained a key technical support level. Democratic President Joe Biden and top congressional Republican Kevin McCarthy will sit down at 3 p.m. EDT to try to make progress on a deal to raise the debt ceiling and avert an economically catastrophic default.”

On the day gold closed down $29.60, and silver closed down $0.39 at $23.74.

Zaner (Chicago) – “Despite noted weakness in the dollar this morning the gold market continues to retrench, and its charts look bearish into today’s potentially critical US debt ceiling negotiations. Perhaps the gold market is undermined following reports from the Indian government that their April gold imports declined 45%-to-3-month lows largely attributable to record prices crimping demand. India reportedly imported only 16 tons of gold in April compared with 29 tons last April. Reuters pegged the average monthly Indian import tally for April is 71 tons! A measure of flight to quality buying of gold, silver, platinum, and palladium could return if today’s meeting between the US President and Congressional leaders fails to solve the debt ceiling problem. If the debt ceiling negotiations unfold as in the past, no deal will surface until the last minute. In fact, it may be the job of the gold, silver, equity markets, currency markets and the treasury markets to apply pressure to the negotiators to get a deal. According to Bloomberg and other market pundits, gold remains the “best” flight to quality instrument, especially if the crisis is isolated within the US. China released industrial production and retail sales readings for April today, both of which failed to rebound as significantly as predicted. In our opinion, the precious metal markets have transitioned from markets needing signs that inflation is not contained and is becoming more sensitive to investment interest. In a minimally negative development gold ETF holdings yesterday declined by 20,722 ounces but remained 0.3% higher year-to-date. Uptrend channel support in June gold today is $2,013.30 with that support level increasing to $2,017.15 on Wednesday. The silver market appears to have failed at solid support this morning at the $24.00 level, shifting the charts bearish and potentially targeting $23.73. Therefore, the bull camp will need positive action in US equities following the adjournment of the US debt ceiling meeting today between the US President and Congressional leaders. Unfortunately for the bull camp in silver, silver ETF holdings yesterday declined by 542,140 ounces but remain 0.5% higher year-to-date.”

On Wednesday traders did not take advantage of yesterday’s dip in prices and gold tested lows on the day (1976.00) so this market remains defensive as the Dollar Index moved higher (103.00) on the day. The Dollar Index began rising last Thursday and has moved between 102.00 and 103.00 since last Friday, reflecting the growing belief that better-than-expected US economic numbers will give the Fed more room to tackle inflation.

This hawkish view comes in and out of focus like the wind but in fact is the assessment which makes the most sense because the FOMC has, from the very beginning, stated that controlling inflation is their number one priority. The Fed game plan is also clear – when this view begins to create trading grief or frowns on Wall Street Chief Powell uses the media to assuage the faithful. This is his genius, and in my opinion is the reason gold is trading at the higher end of its current trading range. But the reality of aggressive interest rates will eventually either cap or push gold prices lower – as is now the case. But this process is not simple or straightforward.

The lower gold and silver move in price the more demand will grow in the physical market. What we see today, which is rising complacency, will soon be replaced with strong bargain hunting. I like to think that gold and silver bullion are simply doing their job. Keeping everyone honest in a world which believes in “free lunch” politics. A system which creates ever larger piles of debt but somehow can never manage to balance its checkbook.

My feeling has remained pretty much the same for decades. The average person should not consider the metals a “get-rich-quick” proposition. Placing a portion of your savings in physical bullion on a regular basis is just another good financial habit. This good stewardship turns into a kind of valuable piggy bank and is available for quick cash whenever the need arises.

If you are wealthy and do not have a portion of your wealth in bullion, consider our growing debt mountain to be the “handwriting on the wall”. You should not need a biblical prophet to caution against the danger of creating fiat paper money out of thin air. The following insightful proverb “forewarned is forearmed” makes a lot of sense: “prior knowledge of possible dangers or problems give one a tactical advantage”.

On the day gold closed down $7.70 at $1980.70, and silver closed up $0.01 at $23.75.

On Thursday the price of gold continued lower as the dollar moved to 2-month highs. The Dollar Index has moved a full point higher (103.50) since Tuesday as traders see our growing economy as another reason for the Fed to continue its fight against inflation.

Jim Wycoff (Kitco) – “Technically, the gold futures bulls have the overall near-term technical advantage but are fading. A price uptrend on the daily bar chart has been negated. Prices are starting to trend down on the daily bar chart. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at the May high of $2,085.40. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,950.00. First resistance is seen at the overnight high of $1,988.80 and then at $2,000.00. First support is seen at the overnight low of $1,974.60 and then at the April low of $1,965.90. The silver bears have the overall near-term technical advantage. Prices are now trending lower on the daily chart. Silver bulls’ next upside price objective is closing July futures prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at $23.00. First resistance is seen at $24.00 and then at this week’s high of $24.39. Next support is seen at today’s low of $23.575 and at $23.00.”

Wall Street Journal (Greg Ip) – We May Be Getting Used to High Inflation, and That’s Bad News – “Last fall, Americans were obsessed with inflation. The issue dominated the midterm elections. One in five respondents called it the nation’s most important problem, according to Gallup. These days, their attention is elsewhere. Just 9% of Gallup respondents now call inflation the most important problem, behind government leadership and the “economy in general” and just ahead of immigration and guns. It has barely come up in Washington’s fight over raising the debt ceiling. Good news? Maybe not. It may mean people are getting used to higher inflation, which would be very bad news. The more people behave as if high inflation is here to stay, the likelier it is to stay. That would force the Federal Reserve to choose between inducing a potentially deep recession to force inflation lower or giving up on its 2% inflation target.”

Reuters (Deep Kaushik Vakil) – Gold slides as robust US data drives hawkish Fed bets – “Gold extended declines on Thursday after more strong economic readings from the U.S. further soured bets that the Federal Reserve may ease up on interest rates hikes, with safe-haven bullion also pressured by optimism for a debt deal. A lower-than-expected number of new U.S. jobless claims last week was accompanied by a milder fall in a business index from the Philadelphia Fed. Along with a relatively vibrant jobs markets, some optimism over the debt ceiling negotiations has also strengthened the dollar, denting the need for safe havens a bit, said David Meger, director of metals trading at High Ridge Futures. “We’re no longer as positive on the gold market as we’ve been for really several months.” Pressuring gold, the dollar and 10-year Treasury yields climbed to multi-week peaks after the economic data, with markets now pricing in a 20% chance of another interest rate hike in June, compared with 20% bets of a cut around a month ago. Non-yielding bullion suffers when higher rates boost returns on competing assets like bonds. Dallas Fed President Lorie Logan said inflation is not cooling fast enough yet to allow the Fed to pause rate hikes in June, while Fed Governor Philip Jefferson said it was too early to judge the full impact of the rapid increases so far. Both sit on the Fed committee that sets monetary policy. “Gold’s failure to hold technical support at the 50-day moving average will likely encourage further tests of the downside,” said independent analyst Ross Norman.”

On the day gold closed down $24.20 at $1956.50, and silver closed down $0.25 at $23.50.

On Friday a simple comment about interest rates from Jerome Powell was enough to change trading sentiment from bearish to bullish in minutes. But I would not read too much in this latest revelation. We are still likely in the middle of a “wait and see” moment.

In the early trade today, insiders were considering further price breakdown. Today’s bounce to higher ground was surprising and supported by significant short covering. But in hindsight it is easy to see that gold was already oversold. We have seen no big sellers at these levels and the walk-in trade was already taking advantage of lower prices. A definitive answer as to whether gold will continue to recover or move lower will have to wait until the Fed makes up its mind.

Reuters (Kavya Guduru) – Gold gains on dollar pullback but faces weekly loss – “Gold prices advanced on Friday, tracking a pullback in the dollar, but increased optimism around a U.S. debt limit deal set prices on track for a weekly drop. The dollar index slipped 0.3% on the day and made gold more affordable for holders of other currencies, but the index was headed for a second straight weekly gain. “Gold has been dragged below the psychologically-important $2,000 level this week due to optimism surrounding a U.S. debt deal,” said Han Tan, chief market analyst, Exinity. Democrat Party negotiators told President Joe Biden on Friday that they are making “steady progress” in talks with Republicans aimed at avoiding a U.S. default, according to a White House official. Gold soared to $2,072.19 earlier this month, just cents away from an all-time high of $2,072.49, but has since lost about 5% following data that showed a tight labor market and still-high inflation. Moreover, “the hawkish undertones from recent Fed speak, along with some still-resilient U.S. economic data have prompted markets to now forecast a 30% chance of a June rate hike,” Tan added. The yellow metal was on track for its worst week since early February, down about 2.3% so far. High interest rates discourage investment in non-yielding bullion. The latest comments from Fed officials on Thursday that inflation was not cooling fast enough to allow the Fed to pause its interest-rate hike campaign added to the hawkish rhetoric. Gold might slide further into a range of $1,938-$1,947 per ounce, according to Reuters technical analyst Wang Tao.”

On the day gold closed up $22.20 at $1978.70, and silver closed up $0.42 at $23.92.

Platinum closed up $22.20 at $1978.70, and palladium closed up $73.60 at $1531.80.

Zaner (Chicago) – “While the gold and silver markets are receiving a small measure of lift this morning from weakness in the dollar, a bearish bias lingers in the marketplace. With a relatively thin US economic report slate today, the primary focus of the gold and silver trade is likely to be three Fed speeches with particular focus on the Fed Chairman speech. Even though the debt ceiling issue remains the primary focal point of most markets, with Biden outside the country we doubt he will allow progress to be made without his presence. On the other hand, a growing chorus of Democrats are supporting a move to use the 14th amendment to circumvent Congress under the guise of protecting the solvency of the United States and that nuclear option will likely be a hot topic on Sunday. Therefore, those pressing the short side of gold and silver should not discount the potential for a sudden revival of flight to quality buying interest next Monday. Since May 10th, gold has lost nearly $80 in value, while silver has lost more than $2.00 in value with both markets reaching their lowest levels since late March. Not surprisingly, gold, and silver ETF holdings this week have declined in sync with futures prices, but we now feel the risk of fresh shorts is on the rise! Clearly, declines in gold and silver prices this week have been the result of declining flight to quality interest from “hope” of a debt ceiling deal, but that outcome is far from certain.”

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

Gold – Interest Rates Cap New Highs

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Posted on May 5, 2023 by Richard

Gold – Buckle Your Seat Belts

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Posted on April 28, 2023 by Richard

Gold – Remains Firm

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Posted on April 21, 2023 by Richard

Gold – Mixed Sentiment Continues

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Posted on April 14, 2023 by Richard

Gold – Encouraged or Discouraged?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Posted on April 6, 2023 by Richard

Gold – Fresh News Required

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Posted on March 31, 2023 by Richard

Gold – Inflation – Cooling or Intransigent?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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