Gold – A Remarkable Week
Commentary for Friday, March 8, 2024 (www.golddealer.com) – Today gold closed up $20.60 at $2178.60, and silver closed down $0.03 at $24.34. The gold bulls have reasons to smile this week, beginning with a solid technical picture being that prices have risen 5 trading days in a row! And while I’m usually the first to throw up a caution flag when gold prices surge, this time around this enthusiasm seems well placed. Fed Chief Jerome Powell shared his thoughts this week concerning interest rates, and in each case a bit of optimism tempered his hawkish nature. When the dust settled the bulls believed that interest rates would begin to move lower this year, helping Wall Street and Main Street get a better night’s sleep. Only time will tell if this week becomes that “watershed bullish moment” but it’s not too much to say that the gold market is a lighter trade with developing opportunities. Last Friday gold closed at $2089.90 / silver at $23.15 – on the week gold was higher by $88.70 and silver was higher by $1.19.
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On Monday it looked like last Friday’s Happy Surprise carried over into the Monday trade as prices moved from $2085.00 through $2115.00! This provides both gold and silver with a strong technical picture and sets the stage for an attempt at all-time highs. With this latest surge in prices analysts must believe that the primary reason the metals are trending higher is that the Fed is seriously considering lowering interest rates. The US dollar is lower from recent highs on the monthly chart, but this is only a sideshow. The possibility of lower rates is the main driver.
Increased safe haven demand because of a problematic Middle East or any number of other global problems helps create tension. And this move does reinforce the notion that physical gold is always a good idea, regardless of price because it helps balance a dicey investment culture.
I would however like to see some solid consolidation at these prices to balance the overall picture. This would avoid the “too much, too soon” scenario. Yes, these higher prices suggest that the Fed will turn dovish, but it may not. If the Fed remains hawkish, gold will see increasing overhead resistance. But true believers see little downside considering the bigger picture.
There are some traders who remain suspicious of this rally. It could be seeing some sort of short squeeze covering. This group must be in the minority, but they could be right.
This jump in prices has everyone’s attention so get ready for stories of $3000.00 or $4000.00 gold. Ignore this rhetoric, the public is not standing in line to buy or sell bullion. And the phones are not ringing off the hook. If they were, you could not get a parking space, like in the old days.
Reuters (Polina Devitt) – London gold price benchmark hits all-time high, LBMA says – “London’s gold price benchmark hit an all-time high of $2,098.05 per troy ounce at an afternoon auction on Monday, surpassing the previous record of $2,078.40 set on Dec. 28, the London Bullion Market Association (LBMA) said. LBMA is a leading trade body that certifies gold refiners, allowing them access to London’s bullion market, the world’s largest. The LBMA Gold Price is the global benchmark price for unallocated gold delivered in London. “Yet again gold reinforces its diversification appeal with the new high reached today,” Ruth Crowell, LMBA chief executive, said in a statement. In the spot market, gold prices were anchored near a two-month peak on Monday, following last week’s tepid U.S. economic data, which solidified bets for the Federal Reserve’s first interest rate cut of the year in June. Gold scaled a record peak of $2,135.40 in early December. The precious metal has so far outperformed initial expectations this year. Reuters’ January poll of analysts expected gold to average $2,053.50 per ounce in 2024. The LBMA’s 2024 forecast survey saw it at $2,059. “Given gold moved into overbought territory on this rally, a correction lower is possible. A reversion to the previous upward trend would return gold to around $2,050 per ounce,” analysts at Heraeus said in a note.”
On the day gold closed up $30.80 at $2117.70, and silver closed up $0.63 at $23.78.
On Tuesday the price of gold moved to highs on the day ($2138.00) before turning choppy, but still finished nicely in the green. If gold can hold the pricing area above $2100.00 it would be seen as another plus for the developing bullish scenario. While gold did finish in the green today the aftermarket showed weakness as traders sold the initial rally. This may not be a big deal, but it could suggest that the present rally is now in overbought territory.
Fed Chairman Powell will address Congress on Wednesday and Thursday of this week. Everyone will be looking for hints as to the Fed’s next interest rate move. And the monthly US employment report is out on Friday. Any of these events could also dampen the recent excitement. But clearly gold and silver have been exceptional performers since the surprising jump in prices last Friday. That being said, caution may reward the patient. Gold is up $92.00 this past month, and $270.00 this past year, and traders are already preparing for profit taking.
Reuters (Anjana Anil) – Mounting US rate cut bets push gold to record highs – “Gold struck a record high on Tuesday, moving further above $2,100 per ounce in a rally sparked by growing bets for a U.S. interest rate cut in June, with safe haven demand from war in the Middle East also tipping the scales in bullion’s favor. Spot gold gained 0.6% to $2,127.99 per ounce as of 1409 GMT, having scaled a record $2,141.59 earlier. U.S. gold futures firmed 0.5% to $2,135.80. Bullion last hit a historic peak in December at $2,135.40. “We wouldn’t be surprised if gold gives back some of these gains as the Federal Reserve talks down imminent cuts, but once rate cuts look certain, we expect gold to trade significantly higher,” said Nitesh Shah, commodity strategist at WisdomTree. “Geopolitical risks emanating from the Red Sea and a year with a dense election calendar globally will likely see continued strength in retail demand for gold.” The Fed Chair Jerome Powell’s congressional testimony on Wednesday and Thursday will be closely watched for more clarity on U.S. interest rate path. The next major U.S. economic release will be February’s employment report due on Friday. Traders currently see a 68% chance that the Fed will start cutting rates by June, according to the CME FedWatch tool. The non-yielding metal is pressured when high interest rates to tame inflation raise returns on competing assets such as bonds and boost the dollar, making gold costlier for buyers with other currencies. Gold, often used as a safe store of value during times of political and financial uncertainty, has climbed over $300 dollars since the start of the Israel-Hamas war. Hamas negotiators will remain in Cairo for another day at the request of mediators, keeping ceasefire talks going after two days with no breakthrough, an official from the militant group said. Spot platinum fell 1.8% to $881.01 per ounce, and palladium dropped 2.2% to $938.81.”
On the day gold closed up $15.80 at $2133.50, and silver closed down $0.02 at $23.76.
On Wednesday the price of gold was strong again, flirting with $2150.00 on the open before settling off highs but nicely in the green. The Labor Department published its monthly Job Openings and Labor Turnover Survey (JOLTS) which points to a stable economy, giving Powell more options as to what the Fed might have in mind in the short term.
Powell’s testimony to Congress today was straightforward. CNBC – “I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting” to cut rates, Powell said. The Fed Chair said earlier in a press conference that rate cuts would likely begin at some point this year.” At the present time, traders are expecting a rate cut by June, so this part of the puzzle remains consistent. Still, the Chief’s comments must have struck a dovish chord or gold would not have moved nicely today. Personally, I believe that some sort of consolidation at this point would better serve the bullish scenario if you were looking for higher prices in the longer term. And this price consolidation should not surprise anyone, traders have already begun to talk about the “too much, too soon” possibility. In the meantime, gold ETFs are being restocked – a plus. And while gold demand in India was off 3% last year Reuters expects this important driver to more than recover in 2024. Another plus for gold.
Reuters (Sherin Elizabeth Varghese) – Gold holds near all-time-high levels ahead of Fed testimony – “Gold prices gained on Wednesday to trade near previous session’s record highs as markets expect Federal Reserve Chair Jerome Powell’s testimony later in the day to reveal clues on a potential June rate cut. Spot gold gained 0.3% to $2,132.80 per ounce, as of 1249 GMT after hitting a historic high of $2,141.59 per ounce in the prior session. U.S. gold futures were steady at $2,141.60. Bullion has powered to record highs in other major currencies as well. Increasing expectations of interest rate cuts, which boost the appeal of non-yielding bullion, following weaker U.S. economic data recently, and fears of an imminent correction in stock markets have led to strong demand for alternative asset classes such as bitcoin and gold, said Commerzbank analyst Carsten Fritsch. Along with the bullion, the world’s largest cryptocurrency, bitcoin also touched a record high on Tuesday before retreating sharply. Tuesday’s rally pushed spot gold’s 14-day relative strength index to 78, much above the ‘overbought’ levels at 70. “We think the gold price has run too far in the short term and expect a correction. U.S. labor market data on Friday could put a damper on rate cut hopes,” Fritsch said. Traders see a 72% chance for a June Fed rate cut. Investors’ focus is also on Powell’s first day of semi-annual congressional testimony on the state of the U.S. economy amidst an environment of elevated interest rates. “We expect Powell to suggest that rate cuts may be delayed but likely to start in 2024,” UBS said in a note. “With a mid-year Fed rate cut as our base case, we forecast spot gold will rise to $2,250/oz by end-2024 alongside central bank buying, demand from China, and an expected revival in demand for gold exchange-traded funds.” In other metals, spot silver rose 0.4% to $23.77. Platinum was up 0.8% to $888.00 per ounce, and palladium gained more than 1% to $958.05.”
On the day gold closed up $16.80 at $2150.30, and silver closed up $0.51 at $24.27.
On Thursday the price of gold was choppy in the early trade, trading between $2148.00 and $2160.00, which might suggest that prices are beginning to settle down from earlier gains this week. Chief Powell’s talk with a Senate Panel today did not seem to create crosswinds in pricing so he hit the mark in that the Chief was not too hawkish or too dovish. Still, analysts continue to speculate about FOMC interest rate intentions. The uncertainty of the FOMC’s next move will likely keep recent gains intact but I think traders are optimistic over higher prices in the longer term. I also do not think these markets will become volatile, but they may turn very boring, when compared to all the fireworks we enjoyed last week and this week.
Reuters (Ashitha Shivaprasad) Gold surge could dull India wedding season demand; China outlook robust – “A surge in global gold prices to record highs could dampen consumption during the wedding season in India, but top buyer China will see robust safe-haven demand this year, analysts and traders said. China and India together account for more than half of total global gold demand. Benchmark spot prices hit a record high $2,164.09 on Thursday, driven mostly by bets for U.S. monetary easing, which increases investors’ appetite for the zero-yield paper gold as opposed to competing assets such as Treasury bonds and the dollar. In India, the world’s second-largest gold consumer and a major importer, domestic prices rose to a record 65,587 rupees per 10 grams. The rise in prices led to a drop in demand which prompted dealers to offer discounts of about $14 an ounce over official domestic prices – inclusive of 15% import and 3% sales levies – versus last week’s $1 premiums. “Consumers can’t wrap their heads around current price levels. If prices stay this high, it’s going to affect demand during the ongoing wedding season,” said Prithviraj Kothari, president of the India Bullion and Jewelers Association Ltd. “There’s no reason for banks and refiners to import. March imports would be negligible,” Kothari said. Gold is an intrinsic part of Indian weddings and the summer wedding season is currently underway. “Scrap supplies are increasing. Consumers who need to buy are exchanging old jewelry for new,” said Ashok Jain, proprietor of Mumbai-based gold wholesaler Chenaji Narsinghji. In China, dealers cut premiums to $25-$36 over benchmark prices versus $36-$48 last week, but traders said overall demand should be robust in 2024. “While the price spike has driven some selling, demand will be up after some time as people get used to these levels,” especially on safe-haven demand, said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong. Asian buyers are known to be price-sensitive, but that might change, said Ross Norman, an independent analyst based in London. “The mindset changes, and as the market goes higher, it almost validates the reason you’re buying,” Norman said. Analysts said the surge in gold prices could also attract some new investor interest in other regions. A sustained rally could revive buying activity in Germany, a key retail hub for coins and bars, said Alexander Zumpfe, senior precious metals trader at Heraeus.”
On the day gold closed up $7.70 at $2158.00, and silver closed up $0.10 at $24.37.
On Friday gold challenged $2190.00 highs on the day and created a little bit of well-deserved buzz in the process. Across our trading desk we have seen surprisingly little selling at these record levels, a plus for the physical market. And we have seen a few large buyers return, which is always good news. The best news however is that the public seems a bit underwhelmed, which is interesting when you consider that gold is higher by $125.80 this month and $345.30 this past year. With those kinds of numbers expect settling. But you never know, this market has created legitimate momentum: “Bitcoin replacing gold in portfolios? Not so fast, says JP Morgan.”
Reuters (Anjana Anil) – Gold marches higher as US jobs data boosts bets of early rate cut – “Gold prices surged to a fresh record high on Friday as data showing a rise in the U.S. unemployment rate boosted expectations that the Federal Reserve could begin cutting interest rates soon. Spot gold rose 0.7% to $2,173.49 per ounce by 10:42 a.m. ET (1542 GMT), while U.S. gold futures added 0.7% to $2,180.50. Bullion was on track to post its biggest weekly percentage increase since mid-October. Gold reached an all-time high of $2,185.19 after a report showed a rise in the U.S. unemployment rate and a moderation in wage gains despite job growth acceleration in February. “We still believe the same underlying premise remains, which is the combination of the expectation that the Fed is still going to cut rates later this year and dollar weakness,” said David Meger, director of metals trading at High Ridge Futures. The dollar index was 0.3% lower, making gold cheaper for overseas buyers, while the yield on the 10-year U.S. Treasury fell to a more than one-month low. Traders boosted bets the Fed could start cutting interest rates in May to around 30% after the jobs report, although June remained the mostly likely scenario at 80%. Gold began its record run on Tuesday when it surpassed its December peak, primarily aided by growing indications of cooling price pressures and its traditional safe-haven cachet. Low interest rates are supportive for gold prices as they reduce the opportunity cost of holding bullion. “This (jobs) report will be seen as one that keeps the Fed on course for June. Gold prices will continue to trend higher overall, though a short consolidation may be necessary,” said Tai Wong, a New York-based independent metals trader. Spot silver eased 0.3% to $24.25, while platinum was down 0.5% to $913.95 per ounce, and palladium lost 0.6% to $1,027.25. All were set for weekly gains.”
On the day gold closed up $20.60 at $2178.60, and silver closed down $0.03 at $24.34.
Platinum closed down $8.10 at $912.00, and palladium closed down $15.00 at $1016.00.
Jim Wycoff (Kitco) – “Technically, the gold futures bulls have the solid overall near-term technical advantage and have momentum. A steep three-week-old uptrend is in place on the daily bar chart. Bulls’ next upside price objective is to produce a close in April futures above solid resistance at $2,250.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $2,100.00. First resistance is seen at today’s high of $2,190.80 and then at $2,200.00. First support is seen at the overnight low of $2,161.20 and then at $2,150.00. The silver bulls have the overall near-term technical advantage and have momentum. Silver bulls’ next upside price objective is closing May futures prices above solid technical resistance at $26.00. The next downside price objective for the bears is closing prices below solid support at $23.50. First resistance is seen at today’s high of $24.85 and then at $25.00. Next support is seen at today’s low of $24.47 and then at Thursday’s low of $24.22.”
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