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Gold – Hopeful – Less Cautious

Gold – Hopeful – Less Cautious   

Commentary for Thursday, November 10, 2022 ( – Today gold closed up $40.20 at $1750.30 and silver closed up $0.38 at $21.68. I am traveling this week so a short newsletter. We are closed this Friday for Veteran’s Day. Keep in mind however that the commodity markets are open, while the banks and USPS are closed. This week was a big one for metals, as gold moved above one-month highs, offering bullish hope in a rising interest rate environment. This morning the Consumer Price Index (CPI) for October missed, meaning it came in under the expected numbers. Reuters (Brijesh Patel) Gold climbs 2% as U.S. inflation data cements Fed slowdown bets – “Gold prices jumped 2% to a more than two-month high on Thursday as data showed U.S. inflation cooled off a bit in October, lifting hopes that the Federal Reserve would adopt a less aggressive approach on rate hikes. “When we start to see inflationary data showing that inflation is coming down, there is an expectation that the Fed is going to begin to slow the pace of those interest rate hikes,” said David Meger, director of metals trading at High Ridge Futures. “Hence you could argue that the dramatic pressure that has been applied to the gold market over the last several months has been released and gold now has the ability to move higher.” Following the U.S. data, the dollar dropped more than 1% to a near two-month low, making gold less expensive for other currency holders. Benchmark U.S. 10-year Treasury yields slipped to a one-month low.” Last Friday gold closed at $1672.50 / silver at $20.79 – as of Thursday gold was higher by $77.80 and silver was higher by $0.89.

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On Monday gold settled after Friday’s jump to higher ground on speculation that the Fed might ease its aggressive interest rate policy. This idea comes and goes but this time around higher prices were large enough to get focused attention. And trouble in the crypto markets, while in my opinion not related to gold, always brings an unnecessary safe-haven comparison.

Grant on Gold (Zaner) – (1) Gold posted a gain of 2.2% last week after the cycle low at $1614.92 (29-Sep low) withstood another challenge. Arguably there is now a formidable triple bottom in place. (2) Silver posted an impressive 8.2% gain last week. While modest upside follow-through was seen on Monday, the $21.24 high from October 4 remains intact, but vulnerable at this point. (3) Platinum jumped 1.9% last week, its third consecutive higher weekly close. (4) Palladium remains defensive within the broad range, well below the midpoint of the COVID-era range.

On the day gold closed up $4.00 at $1676.50 and silver closed up $0.11 at $20.90.

On Tuesday gold, not surprisingly, again surged, moving convincingly towards $1720.00. In my opinion the power of computer trading momentum was on display. This encouraged gold’s rather damaged but improving technical picture. And gave credence to the perhaps dovish Fed “pivot”.

On the day gold closed up $35.60 at $1712.10 and silver closed up $0.58 at $21.48.

On Wednesday gold settled as the excitement of higher prices faces the reality of the Dollar Index once again rising above 110.00. (Reuters) – “Gold steadied near a one-month peak on Wednesday, although prices were stuck in a tight range with gains curbed by an uptick in the dollar and investor caution ahead of the release of U.S. inflation data.”

Zaner (Chicago) – “Gold and silver eased back overnight as the markets awaited the election results and started to focus more on Thursday’s CPI release. The trade is looking for a monthly increase of 0.7% in headline CPI and a 0.5% increase in core. Those are “hot” numbers, and if they come in that way, it could reignite talk of another jumbo rate hike in December, which would support the dollar. Trader polls have been favoring a less-than-jumbo hike, with 2:1 in favor of a 50 basis points versus 75. The CPI number could change that. The likelihood of significant volatility today and tomorrow leaves both metals vulnerable to additional long liquidation and a possible pullback to the bottom end of Tuesday’s ranges. The dollar extended a three-session downdraft to a seven-week low Tuesday, which lent support to the metals, but it appeared to find some safe-haven inflows overnight due to uncertain US election results and the problems with a cryptocurrency bank. Chinese PPI showed a 1.3% year over year drop overnight. This was a smaller decline than was expected, but it does suggest that global inflationary pressures could be easing, at least from a commodity perspective. Chinese CPI eased but was still positive at +2.1% YOY versus 2.8% in September. At the end of October, the World Gold Council pegged ETF gold holdings at 1.639 tonnes, their lowest month-end reading since March 2020. In contrast, central banks have been acquiring gold. The WGC estimates that central bank holdings increased by 186.0 tonnes during the second quarter of this year and by a record 399.3 tonnes during the third quarter. This compares to 90.6 tonnes during the third quarter of 2021. Prior to then, the previous record was 240.5 tonnes in the third quarter of 2018. While central bank gold holdings have only had one net quarterly decline in the past 11 years, their record increase in the third quarter was more than double the 145.2 tonnes in gold ETF outflows between March and October.”

On the day gold closed down $2.00 at $1710.10 and silver closed down $0.18 at $21.30.

On Thursday the bulls were smiling as a cooling in October inflation numbers suggests a Fed pivot is more likely. The next FOMC meeting is 34 days away and surprisingly the oddsmakers are looking for a modest half point rise in interest rates. Just a few weeks ago this obvious pivot was unthinkable, but it serves well in reminding everyone how uncertain these markets remain.

It appears the Fed will have wiggle room in its interest rate policy. It is always too early for FOMC assumptions. Their game plan can change by the hour considering their decisions must fit into a still confused world. But this is worth noting. The cooling of inflation is what Powell said would happen initially. He later blinked because the numbers were getting hotter, but his initial view was accurate. Which is encouraging from a consumer’s point of view.

The bullish scenario remains optimistic, and the technical picture improves. Charting experts have moved from extremely bearish to perhaps a “push” between the bears and bulls. Improved bullish sentiment however should be taken with a grain of salt. Today’s close ($1750.30) is a great improvement but gold gets no “cigar” until it shows strength above $1800.00. Overhead resistance remains fearsome so look for volatility and a continued battle for higher ground.

On the day gold closed up $40.20 at $1750.30 and silver closed up $0.38 at $21.68.

Platinum closed up $57.70 at $1064.30 and palladium closed up $95.00 at $1951.60.

My Brothers and Sisters, thank you for your business and friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and have the booster! We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variants remain dangerous. At the same time trust that God will soon get us back to normal and our traditional business model. As always, thank you for your patience. Richard Schwary

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