Gold – Fresh Bullish News Needed
Commentary for Friday, Feb 10, 2023 (www.golddealer.com) – Today gold closed down $3.40 at $1861.75, and silver closed down $0.07 at $22.03. On the day gold eventually drifted lower reacting to a stronger dollar, renewed world optimism and the hope that the FOMC “disinflation plan” is supported by a pattern of lower inflation data points. US consumer price data will be on display Feb 14th and will likely provide needed fresh trading information. There is, however, a heaviness apparent in gold because money markets expect a peak in the current Fed rate cycle a little over 5% in July. My hunch is that gold will drift lower until the metals have adjusted to this last stage of rising interest rates. Last Friday gold closed at $1862.90 / silver at $22.33 – on the week gold higher by $1.15 and silver was also higher by $0.30.
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On Monday gold was firm on the open but even this tepid reaction did not hold up and by the domestic close the price of gold was almost unchanged. Considering the large price drop on Friday, today’s action provided a proverbial “wet blanket” to bullish sentiment. Suggesting that the recent ¼ percent interest rate Fed “pivot” will not be enough to stop inflation. And that higher interest rates over a longer period of time are the FOMC’s primary objective.
Reuters (Seher Dareen) – Gold gains capped by stronger dollar, yields – “Gold rose on Monday, yet gains were limited by a stronger dollar and yields, with investors banking on the precious metal’s safe-haven appeal as concerns about an economic slowdown linger. “Traders will look at gold as a safe-haven asset and buy into it,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago. Concerns over a slowdown remain and that is likely to keep demand for gold on a firm footing this year, analysts said. Weighing on gold, the dollar index advanced 0.6% to an almost month-high, making the yellow metal more expensive for buyers holding other currencies, with benchmark Treasury yields rising as well. Gold prices dropped more than 2% on Friday after data showed U.S. job growth accelerated sharply last month, with focus on speeches by a host of Fed officials this week, including Chairman Jerome Powell. The Fed last week increased interest rates by a quarter of a percentage point to 4.5%-4.75% after a year of larger hikes, and investors are now pricing in the policy rate peaking at 5.05% in June.”
On the day gold closed up $3.30 at $1866.20 and silver closed down $0.15 at $22.18.
Grant on Gold (Zaner) – (1) Gold closed down more than 3% last week, but not before setting a new 10-month high at $1959.77 on Thursday. (2) While silver reached a 10-month high at $24.64 last week, those gains could not be sustained, and the white metal ended the week with a 5.3% loss. (3) Platinum closed down 3.7% last week. It was the fourth consecutive lower weekly close. (4) Palladium remains defensive at the low end of the range, with the low from December of 2021 at $1528.00 within striking distance.
On Tuesday the price of gold was choppy to mildly higher on the open, suggesting my comments about a “wet blanket” for the bulls yesterday may have been overstated. Still, I expected a lower open as traders await Chief Powell’s comments today. The Chief will talk about economic policy but may have nothing new to add to this conversation.
So, gold will remain defensive because interest rate hikes are still a big unknown. I suspect professionals can’t get their heads around how the Fed will “fight inflation” and move interest rates lower. Which presents an ongoing problem for bullish sentiment. His comments were as expected “a little bad and a little good”. In the end Wall Street sensed some optimism and the Chief bought more time for inflation to cool in the short term.
Reuters – “Federal Reserve Chair Jerome Powell will address an event hosted by the Economic Club of Washington at 12:40 p.m. ET (1740 GMT) on Tuesday. “We may go a little bit higher but ultimately I think that we are due for more of a correction, and this (rise) is just a pause,” said Daniel Pavilonis, senior market strategist at RJO Futures. Minneapolis Fed President Neel Kashkari on Tuesday said that the U.S. central bank would perhaps have raise interest rates to at least 5.4% to tame high inflation, yet the strength of the U.S. labor market makes it less likely that the economy will fall into a recession. With Fed officials John Williams, Michael Barr, and Christopher Waller due to speak during the week, “(they) are going to talk about having to continue to fight inflation, which would strengthen yields,” added Pavilonis. U.S. interest-rate futures show that markets are expecting the Fed funds rate to peak just above 5.1% by June, compared with expectations of a peak below 5% prior to Friday’s surprisingly strong jobs report. Analysts at Commerzbank forecast gold prices at $1,850 by mid-year and $1,950 by end-2023.”
On the day gold closed up $5.50 at $1871.70 and silver closed down $0.06 at $22.12.
On Wednesday gold was choppy between $1870.00 and $1885.00 as investors mulled over the Chief’s most recent thoughts on the economy and inflation. We are in the same old spot – relative to the interest rate question. But for now, Jerome has bought more time before judgment.
If the FOMC is right and inflation is cooling, the Fed will have room to orchestrate that much talked about “soft landing”. The good part about this old scenario is that investors will not have to wait long before the next round of measurable inflation indicators are on the table.
It is worth noting that gold pricing this past month is higher by a yawn ($13.20) and this past year by a second yawn ($50.80). With all this time and bombast pricing is very sleepy.
Reuters (Brijesh Patel) – Gold eases in choppy trade as investors await U.S. economic data – “Gold prices edged lower in a choppy session on Wednesday due to a slight uptick in the dollar, while investors looked forward to more economic data to gauge the U.S. Federal Reserve’s rate-hike strategy. “The main focal point here has been the shift in sentiment after the jobs report. There were high expectations that (Fed chief) Jerome Powell would take advantage of the opportunity to jawbone the market down a bit, but he did not,” said David Meger, director of metals trading at High Ridge Futures. “We continue to see gold prices to be range bound here. There is some fairly strong support in the $1,850 to $1,870 range. We think dips are going to remain a buying opportunity in the short term.” Powell on Tuesday said interest rates might need to move higher than expected if the U.S. economy remained strong, but reiterated he felt a process of “disinflation” is underway. New York Fed President John Williams on Wednesday said his expectations of future central bank rate cuts is driven mostly by a need to respond to the likelihood of lower levels of inflation in the future. Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion. Following a robust U.S. jobs report, market participants now await January inflation numbers next week that could offer more cues on the Fed’s rate-hike path. “One factor that could well be keeping the gold price so supported is the strength of buying from central banks, including those in China, India and Turkey,” Kinesis Money analyst Rupert Rowling said in a note.”
On the day gold closed up $5.70 at $1877.40 and silver closed up $0.25 at $22.37.
Zaner (Chicago) – “The gold and silver markets continue to claw their way back from last week’s aggressive break and have rejected the downside extension on Monday with higher highs and higher lows. With the dollar remaining within this week’s sideways consolidation range. the gains in the gold and silver today are likely the result of other forces than the Dollar. In fact, to extend this morning’s impressive initial gains probably requires a fresh lower low for the week in the Dollar with a decline below 102.845. However, today’s US scheduled report slate (on its own) is unlikely to yield significant reactions in financial markets. On the other hand, there will be two Fed speeches today but given the muted response to the Fed chairman speech yesterday we expect only minimal headwinds from the morning and midday speeches. In retrospect, evidence of increased Chinese central bank gold buying from earlier in the week should be seen as a long-term supportive development for gold. In fact, the Chinese central bank posted net buying for the third straight month with holdings increasing by 15 tonnes over the prior month. Therefore, the 3 months increase in Chinese gold reserves is 77 tonnes in 3 months. For an extended period, Chinese gold reserves were not a known figure and the current “estimated” Chinese gold reserves at 2,025 tonnes seems to understate their actual holdings. At 2,025 tonnes, Chinese central bank gold holdings are one quarter of US central bank gold holdings. Unfortunately for the bull camp yesterday gold ETF holdings saw a 3rd straight day of outflows with the 62,439-ounce reduction leaving the year-to-date decline at 0.8%. While current consolidation low support in April gold around $1,880 and that level is not significant, that level should thicken if the Dollar index falls back to the 102.846 level. With gold and silver prices trading in sync with equity prices yesterday, the precious metal trade is considering physical, industrial, and investment demand environments in addition to dollar action. The failure of silver to close positive in the face of strong recovery action in gold highlights prevailing bearish view toward silver. However, the overnight trade in silver was exclusively in positive territory and other industrial metals like PGM’s, Zinc and copper are tracking positive early this morning. Unfortunately for the bull camp, silver ETF holdings yesterday declined by 231,953 ounces, but holdings are still up 1.3% for the year. From a technical perspective, the silver charts are still generally bearish with 4 days of lower highs and lower lows targeting support down at $21.09 if gold fails to hold $1880 today.”
On Thursday the gold pushed higher on the open ($1890.00) but this initial rally was quickly sold by the paper market and gold drifted steadily lower – by closing it had made lows on the day ($1866.00). And our shiny friend lost another $5.00 in the quiet aftermarket.
This suggests the paper trade is booking short-term profits when available. Today’s early rally was created by dollar weakness and fresh data suggesting mildly higher unemployment numbers. None of this is a big deal – this kind of action is intuitive in a defensive market.
Today you saw the almost traditional drift in gold – bullish optimism is offset with pessimism over the ability of the Fed to keep a lid on interest rates long enough to give its “disinflation” scenario time to succeed.
In the meantime, this market is rangebound with little chance of a sustained break to the upside in the short term. Savvy traders are just waiting for “bear raids” testing near term support.
Keep your seat belts fastened but look for moderation in pricing. It just makes good sense.
Ignore the “end of the world is nigh” scenario. This fiction is used by criminal telemarketing hacks to sell overpriced graded bullion junk over the phone. These retched people are not your friends. They will rob you if given the opportunity – don’t let them. Do your due diligence before making decisions. If you are confused send me an email at, Ask an Expert.
Real gold and silver bullion should have a permanent place in your investment planning. Why? Because this asset provides financial counterbalance over the long term. More importantly bullion is truly independent of government edict. That is why the central banks of the world have always used their gold holdings as a measure of their financial strength and reliability.
On the day gold closed down $11.20 at $1866.20 and silver closed down $0.27 at $22.10.
Zaner (Cicago) – “Even though the downside breakout in the Dollar Index this morning is only a few ticks, the gold and silver markets are drafting support from expectations of a downside extension in the dollar, if US jobs data today extends its recent trend of improvement. We also suspect gold and silver are benefiting from risk on psychology flowing from favorable Disney earnings yesterday and from ongoing strong performance of European equity markets. Normally a physical commodity market would get a noted lift from news of a reduction in production from a key output area but another decline in South African gold output in December of 3.3% versus year ago levels is apparently a minor supportive development. Perhaps the trade has long accepted the downtrend in South African output, but severe power supply issues in South Africa are developing and could cause further losses and generate enough headlines to become a more important issue to the trade. Unfortunately for the bull camp gold ETF holdings yesterday declined by 15,457 ounces and remain 0.8% lower year-to-date. Yesterday’s outflow was the 4th straight daily decline in gold holdings. However, the gold trade should garner minimal lift from a noted month over month jump in Perth Mint sales of gold coins and minted bars in January with sales of 64,395 ounces versus 60,634 ounces in the prior month. It should also be noted that stories have surfaced from Russia of significant purchases of gold bars, with one of Russia’s largest gold producers (Polymetal) indicating they have only sold inside the country this year. It is possible that gold and to a lesser degree silver are garnering lift from a slight boost in flight to quality interest from rising concern toward Credit Suisse and from threats from Russia against Ukraine if Western fighter jets are employed in the battle. Looking ahead, a lower low in US initial claims later today could spark a temporary wave of rate hike fears and lift the dollar. Therefore, gold could temporarily retrench and potentially retest support at $1,873. In the silver market, any renewed interest rate fears from US jobs date, a temporary bounce in the dollar from data this morning and brief spillover pressure from a dip in gold could pressure silver and push prices down temporarily to first key support on the charts at $22.20. On the other hand, silver ETF holdings jumped by 3.1 million ounces and are now 1.7% higher on the year.”
On Friday gold pushed to highs ($1868.00) and traders once again sold this modest strength as our shiny friend settled on daily lows ($1854.00). This pattern has repeated itself a number of times this week and suggests a lingering apprehension about FOMC interest rate intension.
Gold’s 60-day pricing chart reflects this ongoing apprehension, as traders also sold gold’s most recent attempt to move above $1950.00. This market has then been settling to the downside for the last several weeks. There is price support at $1850.00 but with worldwide optimism making a comeback and a strong bounce higher in the Dollar Index yesterday I suspect the likely fallback position of gold pricing will eventually be $1800.00 which we last saw in January. Of course, all this depends on those upcoming and still pesky inflation data points.
(Reuters) – “Investors await U.S. consumer price data due on Feb. 14. While concerns abound of a global recession, a strong rally in world markets suggests optimism is returning, which could ease the Fed’s rate hike cycle. “We will have to see significant and sustained progress on the inflation front before authorities on the monetary side of things will feel comfortable to allow rates to pivot lower,” said Bart Melek, head of commodity markets strategy at TD Securities.”
On the day gold closed down $3.40 at $1862.80 and silver closed down $0.07 at $22.03.
Platinum closed down $12.30 at $945.60, and palladium closed down $91.80 at $1521.90.
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