Gold – A Qualified Steady
Commentary for Friday, June 16, 2023 (www.golddealer.com) – Today gold closed up $0.60 at $1958.40, and silver closed up $0.19 at $24.08. Given the wild swings in sentiment this week it seems counterintuitive that the prices of gold and silver remain close to unchanged. And traders are scratching their heads wondering why the price of gold is still higher (+ $100.00) considering the reversals in sentiment these past 12 months. Still, gold pricing is not near as messy as it could be considering Chief Powell turned dovish this week with a surprising “pause”. Yet promised further rate hikes before year end. A storyline as to why the price of gold quickly recovered after heading south in Thursday’s aftermarket would be thin. But for now, I’m not buying the argument that the Fed is just punching around in the dark. Last Friday gold closed at $1962.20 / silver at $24.33 – on the week gold was down $3.80 and silver was off $0.25.
Monday, June 19th (Juneteenth) is a national and state holiday. Commodity markets, Wall Street, Banks and the USPS are closed. GoldDealer.com will also be closed.
Please note that FedEx is no longer asking for delivery signatures. They are scanning IDs. We have complained to FedEx, but they remain resolute. Scanned identification is safer, but if you have a problem with this decision, please make your feelings known to FedEx. Unfortunately, the present delivery time for the USPS alternative is 2-3 weeks.
Should you decide to use our Delayed Delivery Program please talk with your service rep and understand how this program works. It is handy if you want to lock in the price “now” and insist on new product – but is not for everyone. Just like us – you must pay upfront to “lock in” prices and you can’t “change” your mind. So, unless God has blessed you with patience, please ask your rep for other options and thank you for understanding.
On Monday gold pricing was choppy moving between $1965.00 and $1950.00 as traders continue in a “wait and see” mode which is dependent on how interest rates settle in the short term. There are of course other major factors still to be decided both here and overseas. But for now, everyone is super focused on this week’s FOMC outcome.
The FOMC begins Tuesday and ends Wednesday afternoon as Fed Chief Powell concludes this important press conference. I believe “insiders” in this trade think there are more reasons to be bearish relative to the price of gold than to be bullish at this point.
I’m still cautious but less pessimistic – the rising interest rate curve is old information and yet gold is still holding above $1900.00. It may not even be a big deal to say that there is not much downside in the current pricing range. Of course, my speculation is just that, but even with the numbers of bears increasing the price of gold is holding up rather well.
Reuters (Deep Kauskik Vakil) – Gold slips as dollar strengthens at start of busy Fed week – “Gold prices slipped on Monday as the dollar and bond yields firmed, while traders braced for a busy week of key U.S. inflation prints and major central bank policy meetings, with all eyes on the Federal Reserve. The dollar index drifted 0.1% higher, making gold more expensive for overseas buyers, while an uptick in U.S. Treasury yields made zero-yielding bullion less attractive. “Going into this week with gold is almost like a coin flip,” said Bob Haberkorn, senior market strategist at RJO Futures. The U.S. consumer price index for May is due at 8:30 a.m. EDT on Tuesday, with the producer price index reading due on Wednesday morning ahead of the Fed’s interest rate decision later that day. “The fact that if we get a halt on rate hikes would push gold up pretty big despite a hawkish (Fed) statement,” Haberkorn said. Markets priced in a 79% chance of the Fed keeping rates unchanged, and a 68% chance of a hike in July, according to CME’s Fedwatch tool. The European Central Bank and the Bank of Japan will deliver their rate decisions on Thursday and Friday, respectively. “Gold is trading on the assumption that US interest rates will stay where they are with any hike likely to send the precious metal crashing down towards $1,900 an ounce,” Kinesis Money analyst Rupert Rowling said in a note. “Palladium could head back above $1,500 in the fourth quarter of this year owing to improving automotive production, however this is currently under pressure from destocking by the automakers,” said Metals Focus analyst Jacob Smith.”
On the day gold closed down $6.90 at $1955.30, and silver closed down $0.34 at $23.99.
On Tuesday the price of gold firmed to $1970.00 in the early trade but quickly sold off moving to lows on the day at $1940.00. Traders continue to deal with a defensive market as they patiently wait for tomorrow’s big news about interest rates.
I’m pretty much a believer that gold has already factored in rising interest rates going forward so Chief Powell’s revelations tomorrow may not include anything that is not already known. Still, it is a plus that gold is trading above $1900.00, even as bearish news is on the rise.
The rule here is simple – there is little chance that analysts will be able to tell what the Chief is up to before, during or after the Wednesday meeting. Jerome Powell is a recognized academic in his role as Chair of the Federal Reserve of the United States. But his real talent is his ability to calm the political and economic waters as the Fed continues to battle stubborn inflation. Jerome has nicely managed a soft landing of sorts, while steadily tapping the inflation brakes. Let’s hope that our luck holds and this talent for making everyone happy continues to impress.
Reuters (Deep Kaushik Vakil) – Gold gains after U.S. inflation data firms Fed pause bets – “Gold advanced on Tuesday after data showed U.S. consumer price gains slowing in May and traders firmed up bets that the Federal Reserve would stand pat on interest rates. The U.S. consumer price index (CPI) rose 4.0% in May, the smallest annual increase in more than two years, but stayed well above the Fed’s 2% target. In the 12 months through May, core CPI climbed 5.3%, showing that underlying price pressures remained strong. “Overall, this is still an elevated level of inflation, but the market participants are acknowledging the idea that we might be near terminal rates regardless,” said Daniel Ghali, commodity strategist at TD Securities. Traders of futures tied to the Fed’s policy rate now see about a 95% chance the U.S. central bank will decide to forgo an 11th straight interest-rate hike and keep the benchmark rate at 5.00% to 5.25% on Wednesday. Before the report, traders saw about a one-in-four chance of a June rate hike. The dollar eased 0.5% to near its lowest in three weeks, making greenback-priced gold more appealing to overseas buyers, while 10-year Treasury yields ticked lower. While gold is seen as a hedge against inflation, higher rates to tame price pressures generally weigh on the non-yielding asset’s appeal. Gold may also find support from expectations that central banks are near the peaks in their rate hike cycles, said analysts at Commerzbank in a note, seeing gold prices “slowly but surely regain ground over the next few months”. “The market is set up here for an asymmetric reaction to the upside on a pause,” Ghali said. The dollar eased 0.5% to near its lowest in three weeks, making greenback-priced gold more appealing to overseas buyers, while 10-year Treasury yields ticked lower. While gold is seen as a hedge against inflation, higher rates to tame price pressures generally weigh on the non-yielding asset’s appeal. Gold may also find support from expectations that central banks are near the peaks in their rate hike cycles, said analysts at Commerzbank in a note, seeing gold prices “slowly but surely regain ground over the next few months”.
On the day gold closed down $10.70 at $1944.60, and silver closed down $0.23 at $23.76.
On Wednesday the price of gold drifted higher which is a bit surprising because most insiders believe the Fed will raise interest rates a quarter point after the market closes today. At any rate, gold closed in the green today, likely on bullish FOMC possibilities. But the proof of this pudding will be tasted later in the day, after Chief Powell blesses the interest rate outcome at least in the short term. This market is foggy because trading sentiment comes and goes like the wind. Look for increased volatility in today’s aftermarket especially if the Fed raises more than a quarter point. That being said, there is rising sentiment that inflation is slowing which supports the notion that the Fed might stand pat today but keep its options open for the rest of the year.
Trading Economics: “The consumer price inflation in the United States declined to 4.0 percent in May 2023, the lowest since March 2021 and slightly below expectations of 4.1 percent, driven by a decline in energy prices. In addition, the core rate, which excludes volatile items such as food and energy, has slowed to 5.3 percent, the lowest since November 2021, supporting the argument for the Federal Reserve to consider pausing its current cycle of monetary tightening.”
Well, all I can say is that this Fed decision surprised me more than anything the FOMC has done since the early days of the pandemic. Chief Powell paused the Fed’s aggressive interest rate agenda. What exactly that means for the precious metals and Wall Street remains to be seen but for now the Chief is continuous. The reason gold struggled in today’s aftermarket was because he also suggested that two more interest rate hikes might be in order before yearend.
“May you live in interesting times” is an English expression that is claimed to be a translation of a traditional Chinese curse. While seemingly a blessing, the expression is normally used ironically; life is better in “uninteresting times” of peace and tranquility than in “interesting” ones, which are usually times of trouble. Despite being so common in English as to be known as the “Chinese curse”, the saying is apocryphal, and no actual Chinese source has ever been produced. The most likely connection to Chinese culture may be deduced from analysis of the late-19th-century speeches of Joseph Chamberlain, probably erroneously transmitted and revised through his son Austen Chamberlain. (Wikipedia).
Reuters (Deep Kaushik Vakil) – Gold gains before Fed policy decision as US data shows inflation slowdown – “Gold gained on Wednesday on a softer dollar in the run-up to the Federal Reserve’s latest policy decision, with markets expecting the U.S. central bank to keep interest rates unchanged following signs of slowing inflation. The dollar hovered around multi-week lows, making greenback-priced bullion more appealing to overseas buyers, after softer U.S. consumer inflation data cemented bets for a pause in the Fed’s monetary policy tightening cycle. Treasury yields also dipped after the data showed U.S. producer prices logged their smallest annual increase in nearly 2-1/2 years. Inflation, as measured by the Fed’s preferred gauge, is still more than double the central bank’s 2% target. Traders see more than a 95% chance of a pause in the rate hikes on Wednesday but a nearly 60% probability of an increase at the meeting in July, according to CME Group’s FedWatch tool. “If we do get a pause and then the market gets a relief rally after that I’m probably going to remove some positions because Jerome Powell will come out with some hawkish rhetoric,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago. Fed policymakers may well signal more rate increases once they take time to assess the economy, the financial system, and whether inflation continues to fall.”
On the day gold closed up $10.70 at $1955.30, and silver closed up $0.28 at $24.04.
On Thursday overnight gold pricing in Hong Kong and London was very weak ($1925.00). But today’s morning cash market in New York aggressively bought this swoon pushing our shiny friend to $1960.00 before settling on both sides of $1955.00 for the day. An impressive recovery considering that higher interest rates are still in the cards by Powell’s own admission.
This “recovery” was helped by a significantly weaker dollar. The Dollar Index lost almost a full point in early morning trading today. And today’s early rally might also be helped by short covering and the realization that physical gold, in spite of rising interest rates offers unequalled financial balance in a world trying to sort out the truth from the fiction about inflation.
Still, I think most professionals will remain edgy about the Fed promise of higher interest rates. So, it figures that today’s volatility will not be going away anytime soon.
Across our trading desk silver bullion selling is increasing but gold bullion owners are standing pat for the present. Mostly because the physical market differs greatly from the futures market. The owners of physical gold may not like the latest drop in prices, but they are almost never short-term players. They are financial planners in a confused economic and political world.
On the day gold closed up $2.50 at $1957.80, and silver closed down $0.15 at $23.89.
On Friday gold pricing was tight and sleepy as traders embraced the end of a turbulent week. This coming Monday, June 19th (Juneteenth) is a national and state holiday. Commodity markets, Wall Street, USPS and the banks are closed. We will be closed, and I expect with most traders already on the holiday road that pricing will remain quiet, perhaps even through next week.
Reuters (Seher Dareen) – Gold firms on weaker dollar, yet limited by Fed rate hike path – “Gold rose on Friday as the dollar hovered near a month’s low, but expectations of more U.S. interest rate hikes this year capped gains. “The market turned a little wiser this week – it wants to stay long gold, and price weakness is being used as a buying opportunity along with the emerging belief that incoming data is unlikely to support the projection of two more hikes before year-end,” said Ole Hansen, head of commodity strategy at Saxo Bank. After the Federal Reserve signaled on Wednesday that borrowing costs might still need to rise by the year-end, traders see a 74% chance of a 25-basis-point rate hike in July being the only rate hike in 2023, the CME’s FedWatch tool showed. But driving a rebound in bullion in the previous session, U.S. initial jobless claims were unchanged at 262,000 for last week, while industrial output dropped 0.2% in May. Meanwhile, holdings in SPDR Gold Trust — the world’s largest gold-backed exchange-traded fund — saw outflows for most of this week. This was “simply because gold is very boring compared to the stock market,” Hansen added. Global shares rose to 14-month highs. Higher interest rates dull the appeal of zero-yield bullion. The dollar index hovered close to a one-month low, with the euro touching a one-month high against the dollar, making it less attractive. A weaker dollar makes gold less expensive for overseas buyers. “We anticipate gold price volatility to continue as traders assess the longer-term trends of U.S. interest rate paths, inflation dynamics, and euro strength,” said analysts at investment bank SP Angel.”
Jim Wycoff (Kitco) – “Technically, the gold futures bulls have the slight overall near-term technical advantage. However, the bears have re-established a price downtrend on the daily bar chart. Bulls’ next upside price objective is to produce a close in August futures above solid resistance at $2,000.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,900.00. First resistance is seen at this week’s high of $1,985.90 and then at last week’s high of $1,987.80. First support is seen at the overnight low of $1,967.00 and then at $1,950.00. The silver bulls have the overall near-term technical advantage. Silver bulls’ next upside price objective is closing July futures prices above technical resistance at the June high of $24.62. 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 this week’s high of $24.52 and then at $24.62. Next support is seen at today’s low of $23.91 and then at $23.50.”
On the day gold closed up $0.60 at $1958.40, and silver closed up $0.19 at $24.08.
Platinum closed down $4.60 at $995.40, and palladium was up $18.80 at $1401.80.
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