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Gold – Does Worry Matter?

Gold – Does Worry Matter?

Commentary for Friday, Feb 17, 2023 ( – Today gold closed down $1.60 at $1840.40, and silver closed up $0.01 at $21.69. Gold drifted lower today as the Dollar Index drifted higher. Talk of additional interest rate hikes hurt the bullish scenario. Reuters was working at creating worry this week with “fresh hawkish rhetoric from U.S. Federal Reserve officials, setting bullion up for its third straight weekly dip.” They are doing their job, but I suggest folks would be better off ignoring “official opinion” when it comes to buying or selling the metals. Academics are concerned with monetary policy – my bet is that they are not allowed to own gold. You are concerned with buying or selling an independent financial asset, which becomes more important as debt continues to grow. Stick with the bigger picture. Gold has been in a general downtrend since it failed to move above $1940.00 in early February. Today, buyers can save $100.00 an ounce. Gold is on sale. Could prices move lower? Of course, but even with all of today’s rhetoric gold closed almost unchanged. Does worry help or hinder the process? A reminder that will be closed Monday (Feb 20th) for President’s Day. Domestic markets, banks and the post office will be closed. Last Friday gold closed at $1861.75 / silver at $22.03 – on the week gold was down $21.35 and silver was down $0.34.

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On Monday gold was defensive, but relatively steady, waiting for further meaningful inflation data – in the sense that traders want something more than opinion. I think these “data markers” are vague enough to let commentators take either side of the trade. Which is what Fed Chief Powell is looking for – more time to see if their “disinflation theory” holds up, meaning they hope that over time inflation will become less and less of a problem.

On the day gold closed down $10.90 at $1851.90 and silver closed down $0.21 at $21.82.

Grant on Gold (Zaner) – (1) Gold ended last week with a very slight loss. It was the second consecutive lower weekly close. The yellow metal remained defensive on Monday, dropping to a 5-week low of $1850.52. (2) Silver logged its fourth consecutive lower weekly close last week, ending up down 1.5%. A modest downside extension on Monday saw a new 10-week low established at $21.79. (3) Platinum closed down 3% last week, notching a fifth consecutive lower weekly close. (4) Palladium set a nearly 3-year low at $1510.82 on Monday, leaving the 2020 low at $1494.05 vulnerable to a short-term challenge.

On Tuesday the closing price of gold held up but again looked like it was waiting for the other shoe to fall. I believe lower prices are just around the corner. Keep your powder dry and expect sudden shifts in (bullish/bearish) sentiment. This week’s gold pricing will likely be a repeat of last week’s coming and going Fed anxiety. But in the longer term it remains to be seen if bullish gold traders can shake the inevitable “grind” created by higher interest rates.

On the day gold closed up $2.10 at $1854.00 and silver closed up $0.02 at $21.84.

On Wednesday gold weakened in the overnight Hong Kong market. A downdraft which was reflected in the domestic trade as gold moved to lows on the day ($1835.00), and trades showed very little interest in buying the dip in prices. Reuters – “Gold prices dropped to their lowest in over a month on Wednesday, weighed down by a stronger dollar as better-than-expected U.S. economic data raised worries the Federal Reserve could hike interest rates further.” This if of course an old story that keeps reinventing itself and discouraging the bullish scenario.

On the day gold closed down $19.80 at $1834.20 and silver closed down $0.29 at $21.55.

Zaner (Chicago) – “With a sharp range down extension in April gold putting prices to the lowest level since the end of December, the gold market has seen the largest reaction of most financial markets to the US CPI release yesterday. Apparently, gold and silver traders are concerned about the prospect of higher interest rates and slowing physical and investment demand. However, gold should be undermined following news overnight from Indian Trade officials that India gold imports in the April through January timeframe declined. The market should also be undermined following news that Gold Fields LTD projected its 2022 production to rise 3% over 2021. Adding into the initial negative fundamental news for gold and silver today are outflows from ETF holdings yesterday of 6426 ounces in gold and 380,443 ounces in silver. As expected, December gold displayed significant post CPI report volatility with a high to low 1-hour range of $31 with the bias eventually shaking out in favor of the bear camp. Therefore, we think the recent correction in gold will extend, especially with Federal Reserve commentary indicating the CPI result will likely result in a higher-than-expected terminal interest rate level. The silver market through the CPI report carved out a smaller relative range than gold of $0.43 right after the CPI release and ended the action yesterday with slightly less bearish charts than the gold market. Unfortunately for the bull camp, the silver charts have posted significant damage this morning with a range down move to the lowest price since November 30th. Obviously, the CPI report has generated fears of higher and or longer US interest rate hikes which in turn is expected to provide economic headwinds to the world’s largest economy. Therefore, as predicted by the Silver Institute several weeks ago, the silver market is facing demand headwinds well into the first quarter of 2023. However, a lack of financial market consensus on the meaning of the CPI result has allowed the bear camp to partially win by default. Without risk-on sentiment flowing from equities from favorable US retail sales, April gold looks destined to slide to $1,825. Keep in mind, the markets will be facing another US inflation report on Thursday in the form of PPI with expectations pegging a gain of 0.4% on a month over month basis. Given gold and silver reactions to CPI, we expect a smaller bearish PPI reaction on Thursday and then we might find reliable lows in gold and silver.”

On Thursday gold pricing was steady on the open even though the Dollar Index was stronger, and the January Producer Price Index came in hot – suggesting the Fed may have to continue raising interest rates. Still, the early New York cash market traded quietly between $1828.00 and $1838.00 – traders bought weakness and sold strength – a typical “holding pattern”. Until the close when “buying” dominated and gold finished mildly in the green.

This close should be enough optimistic news to keep the bears at bay through the weekend. The domestic markets will be closed for President’s Day; my guess is that traders remain cautious, even defensive – looking for a significant change in Fed monetary policy.

On the day gold closed up $7.80 at $1842.00 and silver closed up $0.13 at $21.68.

Zaner (Chicago) – “In retrospect, it seemed as if precious metal markets and the dollar were the only markets to see significant reaction to the extension of US inflation concerns following US CPI. Therefore, we expect selling in gold and silver again ahead of today’s US Producer Price Index release. After yesterday’s post CPI reaction in metals their nearly exclusive focus on action in the dollar should be expected again this morning. However, we suspect the reactions to the inflation report today will be significantly less than those experienced on Tuesday with the trade already rekindling inflation concern and chattering about even higher terminal rates in the US for 24-hours. It is also possible that traders see the PPI report as a more volatile number involving uneven manufacturing purchase activity and therefore PPI could be discounted by the trade. With a very full slate of US scheduled data beyond PPI today precious metals are likely to see some classic physical commodity market reactions to the data especially on those showing the pace of the US economy. While the markets were presented with news of a 76% decline (32 month low) in Indian gold imports last month, that news should have been factored yesterday. In fact, the Indian economy continues to be a stellar performer relative to the rest of the world and their gold purchases are likely to rebound, especially with those buyers keen to buy breaks. Yesterday gold ETF holdings declined by 11,870 ounces and are now down 0.9% on the year. Silver ETF holdings yesterday increased by 143,708 ounces and are now 1.9% higher year-to-date. In conclusion, we see the bias pointing down but warn of the potential of a significant short covering rally if PPI is 0.3% or lower.”

On Friday gold closed almost unchanged. I my opinion this was yet another “hurry up and wait” week featuring typical changing sentiment. What’s worse is that even with all this indecision we still do not have a clear idea of pricing direction!

Some knowledgeable traders believe a recession is inevitable. They are convinced the Fed interest dialogue remains hawkish. Others, just as qualified, are convinced lower interest rates are in the making – which will support higher metals prices.

I believe the best approach at this point is to wait patiently for the Fed to actually move interest rates. The next Federal Open Market Committee (FOMC) is March 15th and 16th. I would not be surprised to see gold prices gyrate but finish the next month right in line with today’s pricing.

On the day gold closed down $1.60 at $1840.40 and silver closed up $0.01 at $21.69.

Platinum closed down $9.60 at $915.50, and palladium closed down $33.20.

Jim Wycoff (Kitco) – “Technically, the gold futures bulls have lost their slight overall near-term technical advantage. Prices are in a fledgling downtrend on the daily bar chart. Bulls’ next upside price objective is to produce a close in April futures above solid resistance at this week’s high of $1,881.60. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at Thursday’s high of $1,854.90 and then at Wednesday’s high of $1,870.90. First support is seen at the overnight low of $1,827.70 and then at $1,820.00. The silver bears have the overall near-term technical advantage. Prices are in a downtrend on the daily bar chart. Silver bulls’ next upside price objective is closing March futures prices above solid technical resistance at $22.635. The next downside price objective for the bears is closing prices below solid support at $20.00. First resistance is seen at the overnight high of $21.585 and then at $21.875. Next support is seen at the overnight low of $21.155 and then at $21.00.”

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