Gold – A Bullish Friday
Commentary for Friday, March 1, 2024 (www.golddealer.com) – Today gold closed up $41.20 at $2086.90, and silver closed up $0.48 at $23.15 . While gold opened choppy today it quickly moved past 4 week highs, surprising even insiders with higher prices and increased enthusiasm. This latest move is a big deal in that it blows out any remaining short play which began to cloud the bullish scenario when gold broke below $2000.00 in February. It also carried weight because breaking above $2050.00 opens the technical door to even higher prices. The spike in crude oil above $80.00 makes the bulls smile because it suggests rising inflation numbers. I would not get carried away here however because the mix of plus and minus factors affecting gold and silver prices is complicated. But I do enjoy calling today Bullish Friday because the focus on the metals is moving in a positive direction. Last Friday gold closed at $2038.60 / silver at $22.97 – on the week gold was higher by $48.30 and silver was higher by $0.18.
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On Monday the price of gold developed a mild downward trend, as pricing moved between $2036.00 and $2026.00, so this still looks like a quiet market, perhaps a carryover from last week. To keep things in perspective, it’s helpful to realize that 2023 was a solid year for gold being up 13%. While 2024 is just beginning, gold is having a rather cool start relative to last year. Which should not surprise us as higher interest rates and technical overhead resistance cap prices and enthusiasm. Still, it is a plus that gold is still trading above $2000.00. It is worth remembering that Wall Street has already factored in the “good news” about possible lower rates. If that scenario does not work, the resultant fear factor would create higher gold prices.
Christopher Lewis (FXEmpire) – Gold Continues to Look For Buyers on Dips – “Gold markets have drifted lower early during the trading session on Monday, as we continue to see a bit of uncertain movement in the short term. The gold market did very little during the trading session on Monday as we don’t have much in the way of economic data to move the markets. With that being said, the market is basically hanging around the $2,030 level and trying to determine its next big move. The 50 day EMA underneath continues to offer short-term support, but if we can break down below there, then it opens up the possibility of a move down to the $2,000 level. The $2,000 level is the beginning of a significant support level that extends down to the $1,980 level. Keep in mind that gold is going to be paying attention to a lot of different things at the same time, not the least of which, of course, would be Federal Reserve expectations. Federal Reserve and Economic Data – The focus of market participants is currently on the Federal Reserve’s impending interest rate decisions, highlighted by the upcoming release of the personal consumption expenditures price index. The market is reacting to recent economic indicators, especially the consumer and producer price indices, which have reported higher than expected figures, leading to concerns about the persistence of high interest rates and their impact on gold. Geopolitical Context and Safe-Haven Demand – The ongoing geopolitical tensions in the Middle East have bolstered gold’s appeal as a safe-haven asset. The conflict has led to a significant increase in gold prices, as it is traditionally seen as a secure investment during times of global instability. Influence of Treasury Yields and the Dollar – The downward movement in U.S. Treasury yields and a softer dollar are factors currently supporting gold prices. These economic elements are pivotal in influencing the attractiveness of non-yielding assets like gold within the investor community. Short-Term Outlook – In the short term, the outlook for gold is trending towards a bearish bias. The anticipation of delayed rate cuts by the Federal Reserve, along with strong economic data, suggests a potential decrease in the desirability of gold as a non-yielding asset. Investors and traders in the gold market should closely monitor upcoming economic data releases, including GDP figures and the core PCE price index, as these will play a significant role in determining the direction of gold prices in the coming weeks.”
On the day gold closed down $10.10 at $2028.50, and silver closed down $0.45 at $22.52.
On Tuesday the price of gold continued choppy moving between $2038.00 and $2030.00 managing to finish in the green just slightly on the close. Traders believe that gold will continue to hold steady but are suspicious of Fed intentions. Any fresh news would attract a great deal of attention, but for now this trade feels boring.
It’s easy to make a case for higher gold prices in the longer term. The short term, however, is problematic because interest rates, the main variable, remain uncertain.
And if the day to day price swings in gold continue to be small there is danger of consumer complacency. Gold yawned as the Consumer Confidence Index for February weakened. Ordinarily this type of negative economic data would create at least the expectation of rising prices. But in this case, it failed even to even heat up the buzz machine.
The good news is that each time gold or silver moves reasonably lower, fresh money eventually takes advantage of lower bullion prices. These are mostly long term players which are committed to the longer term. The average order size, however, has seen a modest decline since late 2023, suggesting that investors may be taking advantage of higher interest rate opportunities.
Reuters (Ashitha Shivaprasad) – Gold holds firm as investors look to inflation data – “Gold prices moved up on Tuesday as the U.S. dollar and Treasury yields lacked momentum, while investors await key inflation reading and comments from Federal Reserve officials this week. The dollar index was subdued, and benchmark 10-year Treasury yield slipped, making bullion more attractive for overseas buyers. “A slight uptick in inflation data will pressure the gold market but it is well supported at the $2,000 level by central bank buying. It is unlikely Fed officials will change their stance until more data,” said Phillip Streible, chief market strategist at Blue Line Futures, in Chicago. “Gold will have a record run in the fourth quarter when rate cuts materialize.” At least 10 Fed officials are due to speak this week, while the core personal consumption expenditures price index, the Fed’s preferred inflation gauge, is due on Thursday. Recent comments from Fed policymakers suggested that the U.S. central bank is in no rush to cut rates. Prices are also supported as China’s middle-class attempts “to preserve their dwindling fortunes caused by the property market crisis and a prolonged stock market sell-off”, Ole Hansen, Saxo Bank’s head of commodity strategy, wrote in a note. China’s net gold imports via Hong Kong in January hit the highest since mid-2018, official data showed. Spot platinum climbed 1.4% to $892.05 per ounce but was down more than 9% so far this year. Palladium rose 1.1% to $961.51 and was down 12% for the year. “The low price level of platinum and palladium is already leaving its mark on producers of platinum group metals who are likely to reduce their production in response. This should help to stabilize prices,” Commerzbank wrote in a note. Silver rose 0.6% to $22.65.”
On the day gold closed up $5.50 at $2034.00, and silver closed unchanged at $22.52.
On Wednesday the price of gold continued to trade within a narrow range, waiting for fresh information which might signal a broader change in direction. Nevertheless, this remains a quiet market as gold finished the day almost unchanged. Business across our trading desk remains steady with long term customers. And we have seen a few large gold bullion buyers return just recently. Not like the old days but still an encouraging sign.
The silver bullion market for us has only seen light selling, which is also a plus. I’m surprised that the potential of much higher silver prices has not created more fireworks with the investing public. This could be just a pause in their enthusiasm curve as recent price dips in silver has created buying caution. Generally, the public is patient when it comes to silver bullion so waiting for a better price is part of the dynamic. But there are insiders who believe that this lack of further downside points to a significant bottom in silver prices. So, there is solid potential for increased interest once all the players are sure current price levels are stable.
Reuters (Ashitha Shivaprasad) – Gold holds ground as traders buckle in for Fed cues – “Gold prices ticked up on Wednesday as traders strapped in for key economic data and comments from U.S. central bank officials on the timeline of interest rate cuts. “The Fed is in the driver’s seat for the gold market. We can see all-time highs in prices when they say something more concise on when the rate cuts are coming,” said Bob Haberkorn, senior market strategist at RJO Futures. “Gold is having a quiet session ahead of tomorrow’s data. We need to see significantly better data that shows inflation is cooling for prices to move above the $2,050 mark.” Data on Wednesday showed the U.S. economy grew at a solid clip in the fourth quarter amid strong consumer spending but appeared to have lost some speed early in the new year. Market focus is on the Federal Reserve’s preferred gauge of inflation – the core personal consumption expenditures (PCE) price index due on Thursday. Recent Fed commentary and hot inflation data has pushed bets of Fed’s first rate cut to June, compared to March at the start of the year. Higher rates tend to discourage investment in non-yielding bullion. Fed Governor Michelle Bowman on Tuesday signaled she is in no rush to cut rates, particularly given upside risks to inflation. “Signs of a weaker economy would be expected to support gold as they imply greater pressure on central banks to cut interest rates,” Frank Watson, market analyst at Kinesis Money, said in a note. Spot platinum fell 0.9% to $880.55 per ounce, palladium dropped 2.6% to $912.25. Citi Research in a note said it considers any resultant price rallies as opportunities for producers to build up hedging positions and for speculators to open fresh short positions, as palladium’s long-term demand outlook remains very negative.”
On the day gold closed down $1.00 at $2033.00, and silver closed down $0.11 at $22.41.
On Thursday the price of gold dipped mildly on the open but reversed direction and moved to session highs of $2050.00, and finally closed just mildly in the green. This bit of happiness was helped along as the US labor market and Personal Consumption Expenditures (PCE), combined with a weaker dollar to encourage the bullish scenario. There are some who believe that investors have been looking for a reason to buy this market, and the above factors fit the bill.
Still, the $2050.00 overheard resistance for gold has proven to be daunting as traders have sold rallies testing this ceiling three times in the past 3 months. Any break above $2050.00 would obviously further encourage the bulls. It is unlikely in my mind that the FOMC will lower interest rates this year, but if they did all-time highs in gold becomes a possibility.
Reuters (Ashitha Shivaprasad) – Gold hits 1-month high as dollar dips after U.S. PCE data – “Gold scaled a one-month high on Thursday as the dollar slipped after inflation data came in line with expectations, with traders’ attention turning to further commentary from Federal Reserve officials for cues on interest rate cuts. “Gold bulls just needed an excuse to buy, and they found it,” with the data only on consensus after recent strong inflation readings, said Tai Wong, a New York-based independent metals analyst, adding gold could face technical resistance around $2,065. Data showed the U.S. personal consumption expenditures price index rose by 0.3% in January, while the core PCE price index gained 0.4%, pressuring the dollar, which makes gold cheaper for investors holding other currencies. “However, the Fed’s preferred gauge of inflation running at 0.4% for the month won’t bring a rate cut any closer than June,” Wong added. Although gold is traditionally considered an inflation hedge, higher interest rates to rein in the elevated prices discourage investment in bullion since it pays no interest. Markets are currently pricing in a 62% chance of a Fed rate cut in June, the CME FedWatch Tool showed. Earlier this week Fed officials said the door is opening for rate cuts, which could likely arrive later this year. “The steady stream of Fed speak has noted that there’s no rush in lowering rates and that news is priced into the market,” said David Meger, director of metals trading at High Ridge Futures. “If there is a potential change that would allude to the idea of lowering interest rates even a smidgen sooner, it will be positive for gold.”
On the day gold closed up $12.70 at $2045.70, and silver closed up $0.26 at $22.67.
On Friday gold opened around $2040.00 and moved through $2090.00, reinforcing its technical picture. I would claim this latest surprise is more a combination of momentum play from yesterday’s higher prices and short covering. Outside developments like crude oil moving past $80.00 set the stage for higher inflation. This from OilPrice.com will also underpin further safe demand over rising tension within the Ukraine. “NATO Raises Rhetoric as Russia Inches Forward in Ukraine – NATO has, for all intents and purposes, given Kyiv the green light to target anything within Russia’s borders, with Secretary General Jens Stoltenburg telling RFE/RL that Kyiv would be within its defensive rights to strike military targets outside of Ukraine. The problem with that, of course, is that these strikes on Russia would likely be accomplished with Western (and primarily U.S.) weapons— which would amount to more than a NATO green light. That would be a Western attack, by proxy, for which Putin has threatened significant escalation. At the same time, France’s Macron is being rather provocative (as is his nature) with statements to the effect that European nations are prepared to send troops to Ukraine (even though his fellow Europeans have not agreed to this). Macron likes to be dramatic, and this was a great opportunity for him, prompting a backlash from Washington and other European capitals (though Slovakia also said that the EU and NATO were considering troops on the ground). From Putin’s perspective, there were quite a few red lines crossed in just a week – and about three weeks from presidential elections in Russia. However, the end result was for Macron to look like a fool playing Napoleon and a bit of a panic on the NATO media front as they attempted to walk this boots-on-the-ground threat back.”
Reuters (Ashitha Shivaprasad) – Gold advances to 4-week peak as US rate cuts expected soon – “Gold started March on a positive note, with prices rising to a four-week high on Friday after muted economic data hardened expectations of a U.S. interest rate cut by June. Benchmark U.S. 10-year Treasury yields, and the dollar index retreated after the data, making gold more attractive. Data showed U.S. manufacturing slumped further in February. Another set of data on Thursday indicated that the annual increase in U.S. inflation in January was the smallest in three years, keeping a June rate cut from the Federal Reserve on the table. Bart Melek, head of commodity strategies at TD Securities, said gold is seeing some upside as the market is convinced that the Fed will ease its monetary policy by midyear, lowering the opportunity cost of bullion. “In three-four months, prices will hit a record if we see poor economic data and the market is convinced that (the) Fed is ready to cut,” he said, adding that strong central bank buying is also supporting the market currently. Lower interest rates tend to boost demand for non-yielding gold. Physical gold demand in India was subdued for the week as an uptick in domestic prices dented sentiment and prompted buyers to delay purchases. UBS analysts in a note, “we believe market participants underestimate the potential for prices to rise amid lower U.S. rates, a weaker dollar, and firm industrial application demand for silver.” Spot platinum rose 0.6% to $880.80 ounce, while palladium was up 1.4% at $955.50. Both eased on a weekly basis. Northam Platinum’s CEO said platinum mining companies in South Africa are caught up in the worst crisis in three decades as prices plummet.”
On the day gold closed up $41.20 at $2086.90, and silver closed up $0.48 at $23.15.
Platinum closed up $4.30 at $884.20, and palladium closed up $19.30 at $952.80.
Jim Wycoff (Kitco) – “Technically, the gold futures bulls have gained the slight overall near-term technical advantage. A three-month-old downtrend on the daily bar chart has been negated and prices are starting to trend up. Bulls’ next upside price objective is to produce a close in April futures above solid resistance at $2,100.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $2,000.00. First resistance is seen at the overnight high of $2,066.10 and then at $2,075.00. First support is seen at $2,050.00 and then at the overnight low of $2,047.00. The silver bears have the overall near-term technical advantage. Silver bulls’ next upside price objective is closing March futures prices above solid technical resistance at the February high of $23.56. The next downside price objective for the bears is closing prices below solid support at the February low of $21.975. First resistance is seen at $23.00 and then at $23.25. Next support is seen at this week’s low of $22.245 and then at $22.00.”
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