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Gold – Cautious Price Patience

Gold – Cautious Price Patience

Commentary for Friday, September 1, 2023 ( – Today gold closed up $1.60 at $1939.80, and silver closed down $0.24 at $24.23. It’s easy to see that gold and silver have been enjoying a small updraft in pricing since last Friday, as the trade considers FOMC dovish options. But I believe professionals will discount this small bullish happiness once it concludes that steady inflation numbers are a harbinger of bad news for the bulls. Still this revelation may take time to develop. The domestic markets are closed Monday for Labor Day – this short trading week suggests tight price ranges and a continued, even sleepy trade. Last Friday gold closed at $1911.10 / silver at $24.22 – on the week gold was higher by $28.70 and silver was up $0.01. A very quiet week, with some underlying tension.

Monday, September 4th is Labor Day. Domestic markets are closed, and will also be closed. It is hard to believe today, but a universal Labor Day, including the right to strike without fear or bloodshed was a hard-won victory for the American worker.

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 price of gold continued choppy between $1905.00 and $1925.00, so mildly higher relative to Friday’s close but holding its own considering hawkish comments by Chief Powell last week. And the drag created by a rising Dollar Index, which began moving higher last Thursday and has since settled on both sides of 104.00 which represents 3-month highs. There are several data points of interest to gold speculators this week, but this is overplayed. The general picture of higher interest rates is in place and well known, so I expect this market will play out flat and on both sides of $1900.00 until the confusion over interest rates is resolved.

Reuters (Deep Kaushik Vakil) – “Gold shrugs off hawkish Powell to start data-packed week – “Gold held its ground on Monday as investors digested hawkish comments from Federal Reserve Chair Jerome Powell before a slew of U.S. economic data this week that is expected to shed light on inflation and the labor market. “Even if gold and silver are not moving up, they’re relatively steady, but even being steady in this environment can be considered positive news,” said Carlo Alberto De Casa, market analyst at Kinesis Money. The U.S. central bank may need to raise interest rates further to cool still-too-high inflation, Powell said at an annual gathering in Jackson Hole, Wyoming on Friday. Gold struggled for direction as gains were kept in check by a higher dollar, while a retreat in benchmark 10-year Treasury yields from multi-year highs offered some respite. Non-interest-bearing bullion tends to underperform when higher interest rates boost yields on rival safe-havens like U.S. bonds. “The general view is that market participants were already priced for a hawkish outcome in the lead-up to Powell’s speech, which allows room for some relief on little surprises,” said Yeap Jun Rong, a market strategist at IG. “Concerns of re-accelerating inflation on U.S. economic resilience are translating into mounting bets of a November rate hike.” A series of economic data this week, including the U.S. core PCE inflation and August non-farm payroll report, will likely provide more clarity on the economy’s strength. Highlighting investor sentiment toward bullion, data on Friday showed COMEX gold speculators cut net long positions in the week ended Aug. 22.”

On the day gold closed up $6.80 at $1917.90, and silver closed up $0.02 at $24.24.

On Tuesday the price of gold drifted lower in the early trade ($1915.00) but quickly reversed direction, moving to daily highs ($1936.00) on news of sagging consumer confidence. The theory here is that we are closer to recession than most believe, which makes sense because you can’t move interest rates from near zero through something like 5% + without causing an economic slowdown. Interest rates are the classic inflation break and Chief Powell has stated many times – controlling inflation remains a number one priority.

This morning’s disappointing consumer confidence provided fresh data which suggests the economy is “slowing down”. The news was jumped on by the paper trade, encouraging the bullish scenario and driving prices higher in gold (three week high) and silver (four week peak).

It makes sense to realize that no one economic tool is without fault. Economists use many tools and throw in some “Kentucky Windage” before opining about economic growth or recession. My bet is that this latest bullish encouragement will be placed on the back burner when the reality of a still hawkish Fed creeps back into the headlines.

Reuters (Lucia Mutikani) US consumer confidence drops in August on inflation worries – “U.S. consumer confidence fell more than expected in August after two straight monthly increases amid renewed concerns about inflation, a survey showed on Tuesday. The Conference Board said its consumer confidence index dropped to 106.1 this month from a downwardly revised 114.0 in July. Economists polled by Reuters had forecast the index retreating to 116.0 from the previously reported 117.0. The decline erased the back-to-back increases in June and July. “Write-in responses showed that consumers were once again preoccupied with rising prices in general, and for groceries and gasoline in particular,” said Dana Peterson, chief economist at The Conference Board in Washington. “The pullback in consumer confidence was evident across all age groups, and most notable among consumers with household incomes of $100,000 or more, as well as those earning less than $50,000.”

On the day gold closed up $18.60 at $1936.50, and silver closed up $0.54 at $24.78.

On Wednesday gold continued higher as the dollar weakened and the momentum trade joined the party. The price of gold opened flat around $1935.00 but quickly moved to daily highs, threatening $1950.00 as the dollar lost more steam. Since last Friday the Dollar Index has moved from 104.00 through 103.00. Some economic prophets claim that higher interest rates have become anathema to the economy and should be avoided, especially in the short term.

Still, I’m old school when it comes to short term price moves up or down. Making great judgments should be avoided. Stating the obvious makes more sense. The price of gold began its charge to the upside in mid-August ($1890.00), in what turned out to be a surprising short-term bottom. Since then, it has gathered momentum, now challenging $1950.00.

But it makes sense to question how far this latest bullish fun can continue. There has been huge overhead resistance in place since the summer months ($1960.00) and the cardinal event concerning higher interest rates is unresolved. Traders will be looking for at least a profit-taking round given Powell’s obsession with inflation. Or more likely a significant sell off in gold if the Washington Deep Thinkers press their bets on higher interest rates.

This type of pricing action is typically not of much interest in the physical market because time frames are almost never short term. Today’s long term bullion investors only sell a portion of their out of sight nest egg when they have specific needs. This approach does not worry about growing storm clouds or sunny days. In either case a tried-and-true response is at the ready.

Reuters (Deep Kaushik Vakil) – Gold steadies near three-week high as traders await more US data – “Gold was perched atop a three-week high on Wednesday as traders positioned for more U.S. economic readings that could further alter the odds of another interest rate hike by the Federal Reserve. U.S. job openings dropped in July to approach pre-pandemic levels, raising hopes that the Fed could lower inflation without a sharp rise in the unemployment rate. “The chances of another rate hike before the end of the year dropped… and this caused a drop in U.S. Treasury yields and also in the U.S. dollar,” said ActivTrades senior analyst Ricardo Evangelista. “Bad news for the economy will be good news for gold.” Benchmark 10-year yields came off their lowest in two weeks, while the dollar hovered near lows hit during its worst session since Aug. 4 on Tuesday. Dollar-priced bullion, which bears no interest, finds support when bond yields fall. Investors now await the Commerce Department’s second take on April-June GDP at 1230 GMT, the PCE price index on Thursday and the nonfarm payrolls (NFP) report on Friday. “Of course, the risk here is that the JOLTS (Job Openings and Labor Turnover Survey) report was a lone wolf and if the U.S. GDP and NFP data comes in hot, hold on to your gold hats as we could easily see Tuesday’s gains reverse,” said Matt Simpson, senior analyst at City Index.”

On the day gold closed up $7.80 at $1944.30, and silver closed down $0.05 at $24.73.

On Thursday the price of gold opened relatively steady, which is a small surprise considering the PCE (Personal Consumer Expenditures) came in as expected. What is interesting about this fresh data is that inflation this past year (4.2%) has been steady. With all the drama about “rising or falling” inflation is not moving higher or lower.

This should have created a downdraft in the price of gold this morning because it would suggest the Fed will remain hawkish on its interest rate intention. You could make a reasonable argument that the expected downdraft was offset by the current uptrend in momentum, but momentum is dissipating. Inflation, at least according to this measurement, is not and the PCE is a favored economic tool used by the Fed. Eventually the price of gold drifted lower on the day but considering what it might have done I would call this only minor transitory pricing.

Reuters (Harshit Verma) – Gold clings to gains as cooling US inflation boosts Fed pause bets – “Gold held on to gains on Thursday after cooler U.S. inflation and weaker jobs numbers reinforced expectations that the Federal Reserve will keep interest rates on hold this year. Inflation as measured by the personal consumption expenditures (PCE) price index rose 0.2% last month, matching June’s gain. In the 12 months through July, the PCE price index increased 3.3%, after advancing 3.0% in June. U.S. consumer spending, which accounts for more than two-thirds of the country’s economic activity, accelerated in July. Weekly initial jobless claims fell 4,000 to 228,000. That compares with a four-week average of 237,500. Bob Haberkorn, senior market strategist at RJO Futures said that while the numbers were “not terrible”, they were “not great” either and may mean that the U.S. Federal Reserve would be in a position to halt interest rate rises early next year. Gold is now in wait-and-watch mode, and a drop in bond yields could prompt some strength in bullion, Haberkorn added. U.S. Treasury yields were little changed to slightly lower, while the dollar briefly trimmed gains, before rising again, after the economic data. Bets on the Fed leaving rates unchanged in September stood at 88.5%, while bets of a pause in November were at 56%, according to the CME Group’s FedWatch tool.”

On the day gold closed down $6.10 at $1938.20, and silver closed down $0.26 at $24.47.

On Friday the price of gold and silver settled into the “unchanged” region for the week. A kind of cooling down in both metals. This may be the result of two independent forces. A market struggling with a “soft landing” coupled with the notion that the Fed is willing to put up with marginally higher inflation rates. This is not a popular line, but it does kind of tack together an end game which will buy more time for all parties. Gold pricing has been trending lower since April but seems to have settled around $1900.00. Still, there are plenty of loose ends with both the bullish and bearish scenario. I just don’t see a short-term fix to the interest rate dilemma, so traders may play both sides of the street well into 2024.

Reuters (Harshit Verma) – Gold gains as Fed pause bets rise on U.S. jobs data – “Gold was set for a second straight weekly gain on Friday after data showing a rise in the U.S. unemployment rate in August boosted bets that the Federal Reserve may hold off on further interest rate hikes this year.   U.S. bond yields and the dollar extended their losses after the data, supporting non-yielding bullion. The U.S. economy added more jobs than expected in August, but a rise in the unemployment rate to 3.8% and moderation in wage growth pointed to an easing in labor market conditions. “Gold is rallying modestly after a generally friendly employment report though it wasn’t quite as weak as hoped,” said Tai Wong, a New York-based independent metals trader. “Bulls want to see gold advance and close strongly to maintain its recent momentum; weakness under $1,940 would be a concern.” Bets on the Fed leaving rates unchanged in September rose to 93.0% from 89% before the data, while bets of a pause in November rose to 65.1% from 55%, according to the CME Group’s FedWatch tool.”

On the day gold closed up $1.60 at $1939.80, and silver closed down $0.24 at $24.23.

Platinum closed down $5.70 at $965.60, and palladium closed up $9.40 at $1217.20.

Jim Wyckoff (Kitco) – “Technically, the gold futures bears still have the overall near-term technical advantage but the bulls have gained momentum this week. Bulls’ next upside price objective is to produce a close in December futures above solid resistance at $2,000.00. 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 $1,985.00 and then at $2,000.00. First support is seen at today’s low of $1,964.60 and then at $1,950.00. The silver bulls have the overall near-term technical advantage and have momentum. A fledgling price uptrend is in place on the daily chart. Silver bulls’ next upside price objective is closing December futures prices above solid technical resistance at the July high of $25.82. 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 $25.425 and then at the July high of $25.82. Next support is seen at $24.745 and then at $24.55.”

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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