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Gold – Adjusting to Higher Rates

Gold – Adjusting to Higher Rates

Commentary for Friday, September 8, 2023 ( – Today gold closed up $0.90 at $1918.40, and silver closed down $0.06 at $22.89. Our shiny friend drifted quietly lower ($20.00) this week as analysts again brought out the tea leaves in a market decidedly lacking in fresh information. Which way this market will move in the short term is anyone’s guess. Going into the weekend there is reasonable support around $1920.00, and given the Fed’s still hawkish outlook, this is a small plus for the bulls. I’m still of the opinion that if the Fed raises even a token amount, traders will assume the worst-case scenario and continue in a defensive mode. The downside here may be less than expected. The general confusion factor is high, and traders will buy the dip as gold continues to adjust to these higher interest rates. Last Friday gold closed at $1939.80 / silver at $24.23 – on the week gold was off by $21.40  and silver was down $1.34.

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 the domestic gold market was closed for Labor Day.

On Tuesday the price of gold began to fade over the long weekend. This weakness continued in the domestic US market. The top to bottom spread in prices was typical, as gold moved between $1934.00 and $1925.00. This latest swoon in the price of gold was the result of a stronger dollar, now at 6-month highs. The Dollar Index moved from 104.00 through 104.75 today alone.

This is the old story, as traders again consider the possibility of higher interest rates over the longer term. Just the consideration of these higher rates is enough to stifle higher gold prices. At the same time the uncertainty between Wall Street and the financial community is not resolved. This to some degree keeps the price of gold from falling out of bed, in the shorter term.

Reuters (Brijesh Patel) – Gold hits 1-week low as dollar strengthens after weak China data – “Gold slipped to a one-week low on Tuesday as investors sought the U.S. dollar after weak data in China, although rising expectations for a pause in interest rate increases by the U.S. Federal Reserve limited losses. Making gold more expensive for other currency holders, the dollar gained 0.5% to a more than three-month high after data showed China’s services activity expanded at the slowest pace in eight months in August. However, the drop in the price of gold was limited by hopes that interest rate increases may be ending. “The expectation for a dovish Fed in September is capping the downside for gold,” said Carlo Alberto De Casa, market analyst at Kinesis Money. Recent U.S. economic data has backed bets of a soft landing as worries about inflation and recession have eased, cementing expectations that the Fed might not have to raise interest rates further. According to the CME FedWatch tool, traders see a 93% chance of the Fed leaving rates unchanged at a Sept. 19-20 policy meeting, and about a 60% chance that rates would remain at current levels for the rest of the year. Gold, which yields no interest, tends to lose its attraction when interest rates rise. A focus will also be on comments by Fed officials who are expected to speak during the week. “Gold seems to be searching for a fresh fundamental catalyst to trigger its next significant move,” Lukman Otunuga, senior research analyst at FXTM, said in a note. “In the meantime, the precious metal is showing signs of exhaustion on the daily charts with weakness below the 50-day SMA opening a path back toward $1,920.”

On the day gold closed down $13.60 at $1926.20, and silver closed down $0.67 at $23.56.

On Wednesday gold held up in the early trade ($1925.00) but soon moved lower, finding support around $1915.00 as the Dollar Index moved to weekly highs (105.00). While the drift to lower ground is obvious, and will likely continue, our shiny friend is still fighting for that important ground at or above $1900.00.

The Institute of Supply Management (ISM) was unexpectedly upbeat this morning, suggesting economic growth. A minus for the bullish gold scenario, but hardly definitive.

Technically the bears have the advantage in gold and silver. The trading mood is downbeat. But the possibility of a shift in Fed thinking has created a “neutral status quo”.

There is not enough good news to move the price of gold or silver significantly higher and not enough bad news to move them considerably lower.

I would expect more of the same, in this short week, barring any lightning bolts.

Reuters (Deep Kaushik Vakil) – Gold at one-week low as firm dollar, yields dominate mood – “Gold languished near one-week lows on Wednesday on strength in the dollar and Treasury yields, driven by expectations for U.S. interest rates to stay elevated for longer and worries about China’s economy. “Fears of recession in the U.S. having constantly been pushed back as we see resilience in the activity data are giving a boost to the U.S. dollar,” said Edward Gardner, commodities economist at Capital Economics. The dollar held near a six-month peak, denting investor appetite for greenback-priced bullion, while benchmark 10-year Treasury yields were also close to Aug. 25 highs. Federal Reserve Governor Christopher Waller said on Tuesday the latest round of economic data was giving the U.S. central bank space to see if it needs to raise interest rates again. “Waller’s comments suggest that the Feds thinking has shifted and that they are worried about the downside risks of doing too much,” said Michael Hewson, chief market analyst at CMC Markets. Markets were all but certain that the Fed will keep rates unchanged at its Sept. 19-20 meeting, but still bet on a 42% chance of a rate hike before 2024, according to CME FedWatch tool. Higher U.S. interest rates and Treasury yields lift the opportunity cost of holding non-interest-bearing gold. “A lot will also depend over the next few months on how China’s economy holds up, in particular appetite for jewelry, which really goes hand in hand with consumer confidence,” Gardner said. China’s services activity expanded at the slowest pace in eight months in August, as stimulus failed to meaningfully revive consumption.”

On the day gold closed down $8.10 at $1918.10, and silver closed down $0.35 at $23.21.

On Thursday the price of gold was typically choppy this morning, trading between $1916.00 and $1923.00 reflecting conflicting views of how the economy is doing and what the Fed will do with interest rates at its next opportunity. Still, the price of gold closed almost unchanged.

Normally this type of market should produce boredom…tight pricing spreads and not much action. But actually, gold holds a great amount of interest for a wide audience, likely still on the sidelines because the outcome of this latest grand experiment is not assured.

I think the average person on the street is more worried about rising living expenses and the price of gas. But a greater percentage of people with disposable income are considering options. You would be surprised at the increase in the number of our daily wires as investors bought this latest dip in prices. Even though guaranteed interest rates are all over the place at 5%.

The World Gold Council notes that ETF numbers are trending lower, perhaps a negative for the bullish gold scenario. But this may be another shift in the day-to-day trading wind because there is a big difference between Exchange Traded Funds and the physical market.

Host of the Rebel Capitalist Show George Gammon latest talk with Michelle Makori (Kitco) was interesting. George is looking for a Black Swan event which will be linked to an inversion of the yield curve. End of the world scenarios have been shouted from the house tops since I got into the physical business in the early 1970’s. Thanking God they never seem to show up, but cataclysm always manages to focus the cash physical market which has been hot for weeks across our counter as the public buys this latest dip.

FX Empire (Vladimir Zernov) – Gold, Silver, Platinum Forecasts – Gold Settled Near $1920 Amid Rising Demand For Safe-Haven Assets – Silver and platinum remained under pressure amid worries about the slowdown of the Chinese economy. Gold stabilized near the $1920 level despite a stronger dollar. It looks that rising demand for safe-haven assets provided some support to gold markets. In case gold settles back above $1920, it will head towards the nearest resistance level at $1935 – $1940. Silver remains under pressure amid worries about the situation in the Chinese economy. If silver stays below the $23.00 level, it will move towards the support at $22.25 – $22.50. If silver stays below the $23.00 level, it will move towards the support at $22.25 – $22.50. Platinum has also moved lower as traders fear that China’s demand for the metal would decline. A move below the $900 level will push platinum towards the support at $880 – $890. RSI remains in the moderate territory, so platinum has enough room to gain additional downside momentum.

On the day gold closed down $0.60 at $1917.50, and silver closed down $0.26 at $22.95.

On Friday the price of gold was choppy and will likely remain so next week as traders wait for the next CPI reading. The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. August 2023 CPI data are scheduled to be released on September 13, 2023, which is next Wednesday. The Labor Department averages may be adjusted after the fact, so analysts are not expecting any surprises. Still, this is an important data point which will likely influence the price of both gold and silver next week.

Reuters (Arpan Varghese) – Gold firms as dollar rally cools, traders eye more Fed cues – “Gold firmed on Friday buoyed by a slight retreat in the dollar, while investors hunkered down for more economic data next week to gauge the Federal Reserve’s interest rate hike plans. The dollar, however, is bound for its longest weekly winning streak since 2014, propelled by recent strong U.S. economic data. The greenback’s overall strength put bullion on course for its first weekly dip in three. Focus is now on U.S. inflation readings due on Sept. 13, and the Fed’s policy decision on Sept. 20. While there’s still significant investment in the dollar and Treasuries, there’s also plenty of safe-haven buying in gold and that’s supporting prices, said George Milling-Stanley, chief gold strategist at State Street Global Advisors. Even if CPI numbers look good, the Fed’s preferred gauge – the personal consumption expenditure – is still very sticky, “so if we get a recession or a period of slow growth amid continued high inflation, it could lift gold above the pack of other safe havens”, Milling-Stanley added. Traders saw around a 93% chance of the Fed keeping rates unchanged in September and 43% odds of one more hike before 2024, according to the CME FedWatch tool. Higher rates dull appetite for zero-yield gold. However, if the Fed ends up needing to hold longer, “that becomes the worst of all possible worlds for gold”, said Ilya Spivak, head of global macro at Tastylive. In physical gold markets, top consumer China’s economic support measures drove some demand optimism.”

Neils Christensen (Kitco) – “Technically, the gold futures bears have the overall near-term technical advantage. Bulls’ next upside price objective is to produce a close in December futures above solid resistance at the September high of $1,980.20. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at the August low of $1,913.60. First resistance is seen at Wednesday’s high of $1,954.50 and then at $1,965.00. First support is seen at this week’s low of $1,940.00 and then at $1,925.00. The silver bears have the overall near-term technical advantage. Silver bulls’ next upside price objective is closing December futures prices above solid technical resistance at this week’s high of $24.655. The next downside price objective for the bears is closing prices below solid support at the August low of $22.585. First resistance is seen at $23.50 and then at $24.00. Next support is seen at this week’s low of $23.13 and then at $23.00.”

On the day gold closed up $0.90 at $1918.40, and silver closed down $0.06 at $22.89.

Platinum closed down $14.80 at $891.70, and palladium closed down $22.70.

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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