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Gold – Jackson Hole – Powell at Work

Gold – Jackson Hole – Powell at Work

Commentary for Friday, August 25, 2023 ( – Today gold closed down $7.10 at $1911.10, and silver closed up $0.01 at $24.22. Everyone was holding their breath, awaiting Chief Powell’s Jackson Hole comments early in this trading day. And the market held steady until the Chief called inflation “too high” and warned that “we are prepared to raise rates further”. Gold moved from $1923.00 to lows on the day approaching $1890.00. And just as quickly recovered ($1910.00). So, what just happened? The Chief refocused his hawkish reality. This speech was not much different from his last Jackson Hold appearance a year ago. The cautionary plus here, is that gold is not falling out of bed even as higher interest rates loom large. Last Friday gold closed at $1886.10 / silver at $22.70 – on the week gold was up $25.00 and silver was higher by $1.52. Another ho hum week for gold but the silver bulls are stirring.   

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On Monday the price of gold pushed to daily highs in the New York cash market ($1898.00) but traders again sold the rally repeating the kind of roller coaster ride we should be getting used to in this interest rate transition period. The Jackson Hole Economic Symposium is a 3-day conference put on each year by the Federal Reserve Bank of Kansas City at Jackson Hole, a lovely area located in Wyoming. This meeting is attended by important financial thinkers from around the world. And the discussion will be highlighted by comments from Chief Jerome Powell this Friday. Traders will be watching carefully for fresh interest rate tips.

If the Powell comments at least open the dovish door for consideration, it would be a welcomed plus for the bullish scenario. If the Chief remains resolute about fighting inflation, especially in the shorter term, the price of gold would remain defensive. In either case, the professionals give gold a plus because its price has remained above March lows, mitigating downside risk.

Reuters (Deep Kaushik Vakil) – Gold loiters near 5-month low as traders hunt for more Fed cues – “Gold held around five-month lows on Monday, pressured by higher bond yields as markets geared up for the Federal Reserve’s Jackson Hole symposium for clues on where interest rates might settle. “The market remains concerned about the outlook for rates in the U.S. and most clearly, the recent spike that we’ve seen in the bond yields to a cycle high,” said Ole Hansen, Saxo Bank’s head of commodity strategy. “The cost of holding a gold position right now is simply too high for longer-term investors to get involved.” Gold grazed its lowest since mid-March at $1,883.70 last week, as buoyant economic data raised bets for higher-for-longer U.S. interest rates, reducing demand for the non-yielding commodity. Rising Treasury bond yields and home mortgage rates may reduce support at the U.S. Federal Reserve for additional rate increases, the prospect of which has already been ebbing on the basis of weaker inflation. Investors now look to Fed Chair Jerome Powell’s speech on Friday, as central bankers from around the world assemble in Jackson Hole for their annual conference. “The discussion is likely to be centered around whether it warrants a higher level of longer-term equilibrium interest rates versus a decade ago,” said Kelvin Wong, senior market analyst, Asia Pacific, OANDA. SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.3% on Friday, reporting its first inflow in a month.”

On the day gold closed up $7.20 at $1893.30, and silver closed up $0.60 at $23.30.

On Tuesday gold traded between $1890.00 and $1905.00 which I find interesting considering the mounting bearish sentiment in the metals these days. Think about it, the rising interest rate story has been in place for some time and in fact interest rates are now around 5%, which is a huge jump when compared with pandemic lows of near zero.

And yet our shiny friend is working hard to remain closer to $1900.00 than to $1800.00. And that in spite of all the moving averages heading south. Don’t get me wrong, I’m not dancing in the streets because I think the Fed will remain hawkish. But all in all, things could be a great deal worse and yet the gold is not particularly weak in price or in physical demand.

Reuters (Brijesh Patel) – Gold holds near five-month low, focus turns to Jackson Hole – “Gold prices hovered near a five-month low on Tuesday as a stronger dollar and higher bond yields dented bullion’s appeal, while focus shifted to the Jackson Hole symposium due later this week for more cues on the interest rate outlook. Benchmark 10-year U.S. Treasury yields eased for the day. However, they were still near their 15-year high levels. Meanwhile, limiting gold’s upside, the dollar rose 0.2%, making gold more expensive for holders of other currencies. Gold prices fell to their lowest level since March last week as strong U.S. economic data boosted bets that U.S. interest rates would stay higher for longer. Higher rates increase bond yields, making non-yielding bullion less attractive. “The Fed is going to remain optimistic here and that’s probably going to support the argument that maybe the Fed will have to do more tightening,” said Edward Moya, senior market analyst of the Americas at OANDA. Richmond Fed president Thomas Barkin said the U.S. central bank needs to defend the 2% inflation target to ensure its own credibility remains intact with the public. On the technical front, gold prices are trading below the 50, 100 and 200-day moving averages. Speculators who trade on technical signals regard a break below such moving averages as a bearish sign. Indicative of sentiment, receding fears of a U.S. slowdown and surging bond yields have gradually eroded the appeal of exchange-traded funds (ETF) backed by safe-haven gold. “Against this backdrop, gold will doubtless find it difficult to come out of the defensive in the near future. That said, sentiment is now already so bearish that it wouldn’t take much to spark a price recovery,” Commerzbank said in a note.”

On the day gold closed up $3.10 at $1896.40, and silver closed up $0.12 at $23.42.

On Wednesday the price of gold was surprisingly strong in the early trade, moving to $1920.00 as the chance that the Fed will leave rates unchanged grows stronger. Anything above $1900.00 will help the bullish scenario. Traders will be suspicious of this latest vibe because while the Fed may leave rates unchanged in September, they will likely opt for a rate hike before the end of the year. The potential downside in gold prices is growing weaker, a plus for the bullish sentiment. But the upside near term for the price of gold will likely be capped because of the fear of higher interest rates. Especially if inflation does not continue to move lower.

Reuters (Harshit Verma) – Gold scales near two-week peak as Treasury yields retreat – “Gold prices jumped 1% to a near two-week high on Wednesday, helped by a pullback in U.S. bond yields and the dollar as investors looked ahead to the Jackson Hole symposium for guidance on interest rates. “It (gold) was a little oversold ahead of itself and we’re getting a bounce on some bargain hunting and then short covering,” said Bob Haberkorn, senior market strategist at RJO Futures, adding that a slight dip in yields is also helping. Benchmark 10-year Treasury yields slipped from near 16-year highs hit in the previous session, while the dollar pared gains against its rivals. The S&P Global’s flash U.S. composite PMI index showed U.S. business activity approached the stagnation point in August, with growth at its weakest since February as demand for new business in the vast service sector contracted. Market participants focus will be on a speech by Federal Reserve Chair Jerome Powell at Jackson Hole on Friday for additional clues on the path for interest rates. According to the CME’s FedWatch Tool, the probability that the Fed leaves rates unchanged at its September meeting is now at 88.5%. Gold is highly sensitive to rising U.S. interest rates, as they increase the opportunity cost of holding non-yielding bullion. “People are expecting a continued hawkish tone from Chair Powell. It is too early for him to point to a loosening in policy on the horizon,” said Daniel Ghali, commodity strategist at TD Securities. “The markets attention is now shifting from how high will rates go to how long will rates remain high.”

On the day gold closed up $22.10 at $1918.50, and silver closed up $0.94 at $24.36.

On Thursday the price of gold dipped on the open ($1911.00) and traders bought the dip as prices pushed to highs on the day ($1920.00). And on the day both gold and silver closed virtually unchanged. Even the physical trade was on the quiet side today.

This looks like settling to me after yesterday’s jump to highs on the week as traders may feel Wednesday was “too much, too soon” and took profits. All the attention will be on Jackson Hole, but I don’t think the Chief will vary much from his traditionally hawkish position on inflation.

Because of this, paper traders will likely square up accounts and move to the sidelines going into an uncertain weekend. Frankly there is some underlying tension in this trade which might favor the upside, still I expect a jerky market within a narrow price range for both gold and silver.

FXEMPIRE (Christopher Lewis) – Gold Price Forecast – Gold Markets Give Up Early Gain – “Gold markets have initially tried to rally during the trading session on Thursday but gave back those gains to show hesitation. At this point, I think we have got a scenario where the market simply doesn’t know what to do between now and the Jackson Hole Symposium, so therefore I think you probably have a lackluster session ahead. Ultimately, the market will then have to decide what to make of the central banker speakers, such as Jerome Powell and Christine Lagarde, and therefore I think it’s probably only a matter of time before we see some type of move. Once we get through that, then I think you have a situation where we could get a little bit of follow-through. Right now, it’s likely that the market will continue to see a lot of volatility, and I do think that if we break above the 50-Day EMA, then it opens up the door to go looking to the $2000 level. Underneath, the 200-Day EMA opens up the possibility of a move to the $1900 level. All things being equal, this is a market that is also in the midst of forming a “double bottom”, so it could be trying to tell us what’s about to happen next. Furthermore, the candlestick on Thursday was rather impulsive, so that’s exactly what you want to see in order to turn the market around and start going higher. In general, this is a market that continues to be very noisy, and you do need to be cautious with your position size due to the fact that the market adjustments do tend to be rather violent, and therefore you could find yourself on the wrong side of a bad position quickly. In general, you need to get some type of momentum going in order to jump in with the bigger position, so between now and then caution is the better part of valor. With that being the case, be very cautious but I do think that eventually the gold market probably will get a little bit of a boost. However, keep in mind that Jerome Powell could spook the markets.”

On the day gold closed down $0.30 at $1918.20, and silver closed down $0.15 at $24.21.

On Friday the price of gold was typically jittery, looking for fresh interest rate clues. And most traders thought the conclave at Jackson Hole provided an excellent opportunity. The reality here, however, is that the Fed’s interest rate position has not changed “one jot or tittle” if you are biblically inclined. This is not bad news, but it is stubbornly consistent.

Other, longer-term factors which may eventually push gold and silver to all-time highs are in play. But in the meantime, the Fed’s primary focus is rising inflation. This fixation will hinder the bullish scenario. But as our debt load continues to grow it makes sense to keep an independent financial asset like physical gold and silver bullion in a safe hiding place.

Jim Wycoff (Kitco) – “Technically, the gold futures bears still have the overall near-term technical advantage. However, a four-week-old downtrend on the daily bar chart has been negated. Bulls’ next upside price objective is to produce a close in December futures above solid resistance at $1,980.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,900.00. First resistance is seen at the overnight high of $1,951.20 and then at $1,963.50. First support is seen at $1,935.00 and then at Wednesday’s low of $1,926.20. 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 September futures prices above solid technical resistance at the July high of $25.475. The next downside price objective for the bears is closing prices below solid support at the August low of $22.265. First resistance is seen at this week’s high of $24.43 and then at $25.00. Next support is seen at $24.00 and then at Wednesday’s low of $23.475.”

On the day gold closed down $7.10 at $1911.10, and silver closed up $0.01 at $24.22.

Platinum closed up $5.20 at $944.30, and palladium closed down $15.50 at $1218.20. In my opinion platinum and palladium bullion provide great value but live products are scarce.

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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