Gold – Considering Options
Commentary for Wednesday, November 23, 2022 (www.golddealer.com) – Today gold closed up $6.60 at $1744.90 and silver closed up $0.33 at $21.36. Gold moved mildly into the green in the early trade this morning, but most expect a quietly defensive market going into the long Thanksgiving weekend. Everyone is paying close attention to the latest Fed minutes released after the market close today for hints about short-term interest rates possibilities. The Fed has raised interest rates 0.75% four times since June. The next hike opportunity will be in mid-December, and most are hoping for something less (0.50%). Today’s minutes, released after the domestic market was closed, seemed to suggest this possibility. The rather new idea of “higher but longer” is what makes the bullish gold scenario “tick”. Anything approaching the old hawkish interest approach along this more modest path would likely drive gold lower in the short term. Also remember that gold is higher by $90.00 this past month. Which encourages profit taking. If higher interest rates encourage traders to “buy” the dips and “sell” the rallies, this would continue to pressure the bulls. But for now, gold and silver have weathered the short-term storm at least which is a mild plus moving into the holiday season. Last Friday gold closed at $1751.90 / silver at $20.98 – on the week gold was off $7.00 and silver was higher by $0.38. These are tight spreads considering the large amount of palavering on both sides of the isle.
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On Monday gold was defensive and pricing spreads moved from $1748.00 though $1738.00, with a negative bias. The reasoning here remains unchanged. The Fed pivot is being ignored and traders are fixed on short-term Fed decisions. Reuters – “Gold prices slipped to their lowest in over a week on Monday as the dollar extended gains, while the market’s attention turned to the U.S. Federal Reserve’s November meeting minutes due this holiday-shortened week. “Overall, the general macro environment still is higher interest rates, which is a negative for the precious metals as central banks continue to look to increase interest rates,” said Chris Gaffney, president of world markets at TIAA Bank. The Fed’s November meeting minutes are due on Wednesday, with most traders betting on a 50-basis point hike in the December meeting, and some seeing 24.2% chance of a 75-bps hike following recent comments by Fed officials. Investors also kept track of the economic fallout from fresh COVID-19 restrictions in top bullion consumer China, where physical gold premiums fell sharply last week as buying slowed. “China in particular is an active market for precious metals and if they continue to lock down, that’s negative for the overall economic environment and less money to spend in China for investment purposes.”
The Dollar Index has moved from 106.00 through 108.00 since last Thursday! Which presents the bulls with a recurring headache. And makes the bears more aggressive. But you have seen this inverse relationship play out several times so the likely outcome should not be a surprise. The Dollar Index will likely become overbought, and the price of gold oversold.
The Fed “pivot” theory was responsible for gold recently moving from $1640.00 through $1780.00. But bullish “insiders” moved to the sidelines when momentum went out the window. Everyone will have a better idea of what the FOMC has on its mind Wednesday. But judging from today’s continued dip in gold prices it would not surprise me to see the paper market adjust to something below $1700.00 in a “wait and see mode”.
At the same time bullion premiums in the physical market remain high, which suggests interest at these discounted levels. Both for immediate and delayed delivery. The dip in crude oil prices today is a minus for bullish scenario and suggests recession fears are again building in Europe.
This week will present a thin trade. I suspect paper traders are already in the traveling mode for the Thanksgiving weekend. Which offers a “window” for paper shenanigans. Be suspicious (discount) last-minute pricing changes, if their source is outside the United States.
On the day gold closed down $14.50 at $1737.40 and silver closed down $0.13 at $20.85.
Zaner (Chicago) – “In retrospect, both gold and silver were fortunate to avoid significant declines last week in the face of predictions that US Fed funds might need to rise above 7% to quell inflation. While the Chinese central bank left rates unchanged overnight, the closure of schools in the capital city has sent a wave of fresh economic recession fear into world markets. Obviously, a significant range up breakout in the US dollar this morning has added fresh currency related selling interest in gold and silver. Fortunately for the bull camp, it appears that treasury yields might be poised to slide lower and that might serve to cushion gold and silver against strength in the Dollar. However, this week it is possible the markets will be presented with a temporary wave of euphoria from the upcoming kickoff of the holiday shopping season, and that could firm the dollar further and pressure the Treasuries thereby setting the stage for a quick decline in December gold down to $1,725. Obviously, the December gold contract has a critical pivot point to start the week at $1,750, with the 100-day moving average today proving lower support and targeting at $1,724. The COT positioning report for November 15th showed the noncommercial and nonreportable net long in gold at 147,131 contracts which is a 50,000 contract increase in the net spec and fund long on a week over week basis. Gold positioning in the Commitments of Traders for the week ending November 15th showed Managed Money traders net bought 48,945 contracts which moved them from a net short to a net long position of 40,726 contracts. Non-Commercial & Non-Reportable traders were net long 147,131 contracts after increasing their already long position by 53,119 contracts. In short, the gold market is relatively overbought in the spec sector and therefore vulnerable to negative fundamentals. Traders pressing the short side of the silver market should be aware that the Silver Institute in its latest publication predicted global demand for silver will rise 16% this year reaching 1.2 billion ounces and in turn creating the biggest deficit in “decades”. This week’s net spec and fund long position in silver was 31,230 contracts, a net increase of about 6,000 longs from November 8th! Key support in December silver is obviously $20.00 with a key pivot point in the trade early today seen at $20.55. The November 15th Commitments of Traders report showed Silver Managed Money traders net bought 3,401 contracts and are now net long 15,894 contracts. Non-Commercial & Non-Reportable traders are net long 31,230 contracts after net buying 6,953 contracts. Last week gold ETF holdings declined by 282,207 ounces while silver ETF holdings increased by 2.2 million ounces.”
On Tuesday gold ignored the mild downtrend in the Dollar Index as traders created a weak choppy trade with a negative bias. The market finished the day close to unchanged, which is a plus for gold considering the coming long weekend. The latest FOMC minutes release may only hint at the Fed’s next December move. And will be made public after the New York market closes tomorrow. Potential volatility could be reflected in the aftermarket, but for now the metals reflect a quiet holiday attitude with tight trading ranges.
On the day gold closed up $0.90 at $1738.30 and silver closed up $0.18 at $21.03.
FX Empire (Christopher Lewis) – Gold Price Forecast – Gold Markets Drift Sideways – Gold markets have been rather quiet during the trading session on Tuesday, as we are hovering around the $1750 level. Gold markets have been quite noisy during the trading session on Tuesday, as we continue to look at the $1750 level with interest. This is an area that has been important a couple of times in the past, so it does make a lot of sense that we would see noisy and quite frankly difficult behavior in this general vicinity. Ultimately, I do think this is a situation where we are going to have to make a bigger decision, and it will almost certainly be driven by Federal Reserve expectations, and of course the interest rate market. After all, the interest rate market has a huge negative correlation to the gold market. If we break down below the lows of the Monday session, then we could drop down to the 50-Day EMA, which is at the $1710 level. Underneath there, the next major support area is at $1680. The question now is whether people are going to be focusing on central-bank behavior, or if they are going to be paying attention to the potential global slowdown, which could have people running toward gold. A break above the $1800 level would be a huge barrier to overcome, and if we do, then I suspect that gold has much further to go at that point, perhaps reaching the $2000 level over the longer term. Ultimately, this is a market that I think will be very noisy over the next couple of days, especially as Thanksgiving is coming on Thursday, that will certainly have an effect on the hours that electronic trading is available. Because of this, it’s likely that we will see chop more than anything else.
Zaner (Chicago) – “At least to start today gold and silver have been “saved” by a moderate setback in the US dollar. In another minimally supportive development, gold ETF holdings yesterday increased by 153,789 ounces for the largest single day ETF inflow since June 17th. It should also be noted that silver ETF holdings increased yesterday by 1.38 million ounces! While the path of least resistance has shifted down in gold, prices are showing some strength early this morning, but that strength is likely to be temporary. In other supportive news, the IMF announced Kazakhstan, Turkey, UAE, India, and Cambodian central banks increased their gold holdings. Apparently, central banks in India and Turkey continue to add significantly to their gold holdings with recent monthly data showing both countries adding roughly 25.2 million ounces and 23.6 million ounces respectively. Relatively speaking the silver market held up to the big picture broad-based physical commodity market selling wave significantly better than gold! Clearly, the silver trade is cheered by recent Silver Institute projections that global demand for silver will rise 16% this year and surpass 1.2 billion ounces! The Silver Institute also predicted the market will have the largest deficit in decades potentially reaching 194 million ounces! The silver deficit in 2021 was 48 million ounces, with total silver ETF holdings at the end of last week at a very significant 754 million ounces. However, silver ETF holdings have continued to decline, with holdings at the end of last week 15% lower year-to-date. In the near term, expectations for strong silver demand and a large jump in the silver deficit are unlikely to be embraced by traders. Therefore, both gold and silver look to remain vulnerable to further dollar strength and might not be cushioned by declines in US treasury yields. On the other hand, there has been dovish Fed dialogue recently with many analysts beginning to predict a 50-basis point US hike in the December FOMC meeting, and yet traders are waiting for confirmation of the dovish stance from the upcoming release of Fed policy meeting notes on Wednesday. From a technical perspective, the gold market remains vulnerable to spec and fund stop loss selling with the latest COT positioning report producing the longest spec positioning since early August! Key support in February gold today is at the 100-day moving average of $1,736.25 with downside targeting for later this week seen at $1,720. Near-term support in December silver today is $20.57 but we doubt the market will fall to its 100-day moving average to $19.55 this week.”
On Wednesday gold prices in the early trade were typically choppy but mildly higher. The spread was something between $1732.00 and $1748.00 which is a plus, perhaps helping the bulls. But the entire market is muted waiting for a look at last month’s Fed minutes. Most professional trades believe that what is “known” about coming interest rate hikes in the short term is already factored into current pricing. Today’s “preview” look into what is becoming a confused group of Fed officials will not calm the waters. It is safe to consider this market tenuous. Smart money will be guarded as trading could move in either direction. But my guess is that price swings will not be large unless the Fed goes back to being more aggressive.
On the day gold closed up $6.60 at $1744.90 and silver closed up $0.33 at $21.36.
Platinum closed up $1.10 at $1014.50 and palladium closed up $18.40 at $1873.30.
Zaner (Chicago) – “Technical and fundamentals continue to diverge between gold and silver, with silver shifting bullish and gold shifting bearish. In fact, overnight February gold failed at close in support and reached the lowest level since November 10th while December silver continued to respect and build consolidation support around the $21.00 level. Obviously, silver continues to draft off the very bullish deficit forecast from the Silver Institute from earlier in the week and gold remains hostage to the fear of higher interest rates. With the New Zealand central bank raising interest rates by 75-basis points last night and the US Fed releasing its meeting minutes later today the gold market is facing the potential for fresh knock-on selling. However, the US economic report slate today is full of reports normally scheduled for Thursday and brought forward because of the holiday. The most critical readings today are initial claims (which are expected to increase slightly) and durable goods which are expected to repeat last month’s gain of 0.4%. Even more divergence between the 2 markets was evident in daily ETF flows reports yesterday with gold holdings declining by 27,195 ounces and silver ETF holdings increasing by a very significant 4.9 million ounces! The increase in silver holdings was the largest increase since September 19th. While we expect tight trading ranges until the release of the US FOMC meeting minutes later today, modest dovish dialogue in that release could save and then launch gold above the $1,775 level, but we think the most likely outcome is evidence of broad support for even higher ultimate US rate target levels. Therefore, initial downside targeting this afternoon in February gold is $1739.90. On one hand, the silver market flared sharply higher yesterday and at times reached $0.78 above its Monday low, but the trade was unable to hold the probe higher and ultimately fell back to psychological support of $21.00. Therefore, it appears that the bull camp currently lacks significant resolve, but the market should be able to respect support following very favorable forecasts of a global silver deficit ahead. Key pivot point support in December silver today is seen at $20.785, while a trade back above yesterday’s high of $21.37 could spark gains to $22.00 from short covering.”
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