Gold – More Rate Hikes?
Commentary for Friday, September 29, 2023 (www.golddealer.com) – Today gold closed down $12.30 at $1848.10, and silver closed down $0.28 at $22.24. Another one of those weeks the bulls would like to forget. A tepid short covering rally reversed direction in early trading and gold again moved to daily lows into the weekend. There is more than enough worry to go around. Traders are worrying over 9-month lows and a government shutdown; Barron’s is waving a red flag at Wall Street and the world is drowning in debt. The gold trade is so worried about rising interest rates that other problems are now on the back burner. Let’s hope the Fed does not get carried away with its powerful interest rate hammer as it too continues to worry about rising inflation. Last Friday gold closed at $1925.40 / silver at $23.60 – on the week gold was down $77.30 and silver was down $1.36. Like I said, a dreary week for the bulls.
Please note that FedEx is no longer asking for delivery signatures. They are scanning IDs. We have complained to FedEx, but they remain resolute. Scanned identification is safer, but if you have a problem with this decision, please make your feelings known to FedEx. Unfortunately, the present delivery time for the USPS alternative is 2-3 weeks.
Should you decide to use our Delayed Delivery Program please talk with your service rep and understand how this program works. It is handy if you want to lock in the price “now” and insist on a new product – but is not for everyone. Just like us – you must pay upfront to “lock in” prices and you can’t “change” your mind. So, unless God has blessed you with patience, please ask your rep for other options and thank you for understanding.
On Monday the price of gold held around $1925.00 in early trading yet drifted to $1915.00 by the end of the day. Traders are in the same pickle as last week. Fed hawkishness continues to grind away at the bullish scenario. At the same time, the price of gold is still in the fight above the important $1900.00 support.
I suspect this “give and take” market will remain in place until the last two FOMC meetings of 2023. The Oct/Nov confab is only important in that it might set the stage for the much-awaited December 12th and 13th get together. The Fed calls this last meeting of the year a “Meeting associated with a Summary of Economic Projections”. One that everyone will be eager to hear as Chief Powell explains how current policies will eventually control inflation and interest rates.
FXEmpire (James Hyerczyk) – Gold Resilient Amidst Rising Global Instability, US Government Shutdown Fears – Fed’s Hawkish Stance – The U.S. Federal Reserve’s stance remains primarily hawkish, with the potential for another rate hike by the year’s end, despite already aggressive monetary tightening cycles. This has driven the dollar and bond yields higher, creating pressure across commodity markets including gold. Global Economic Outlook – Major central banks worldwide are signaling a retention of high rates to combat inflation as concerns about global economic stagnation increase. The market is interpreting these decisions not as triumphs against inflation but as preemptive measures anticipating economic downturns. The sentiment is clear: the global economy is weakening, and the central banks are bracing for impact. Shutdown Mechanics – A government shutdown is imminent as the disagreement over federal spending escalates. This situation occurs when Congress fails to pass the requisite funding legislation, which results in a halt to all non-essential work by federal agencies, affecting millions of federal employees and various sectors of the economy. Shutdown Implications – If a shutdown occurs, the ramifications are extensive, impacting not just federal workers but also numerous government services and sectors connected to the federal government. Industries such as travel could face significant losses, and the overall economic growth could be reduced by 0.2% every week the shutdown persists. Market Reaction – Goldman Sachs predicts a temporary but significant dent in economic growth, coupled with a rebound once the government reopens. However, the repercussions extend beyond tangible financial losses to eroding confidence in the government’s ability to perform basic duties, possibly unsettling financial markets. Market Sentiment – There is a prevalent market belief that the government shutdown and resultant economic turmoil could offer a conducive environment for gold investments. Investors are possibly betting on gold to weather short-term governmental instability and to capitalize on potential long-term economic growth. Economic and Political Instability – The government shutdown, induced by disagreements over federal spending and inflamed by hard-right demands for extensive cuts, presents a critical backdrop to gold prices. The ensuing instability, both economic and political, could foster an environment conducive to gold investments, with the commodity potentially serving as a safe harbor amid turbulent economic seas. Bullish Outlook for Gold – The combination of aggressive monetary stances, looming economic challenges, and political instability might amplify gold’s appeal as a reliable investment. Considering the current economic landscape, market speculation, and prevailing sentiments, a strong upward trajectory for gold is conceivable, with investors likely turning to this time-tested asset for stability in the face of a turbulent financial scene. Final Notes – The multifaceted economic landscape, characterized by stringent monetary policies, looming government shutdowns, and potential economic contractions, highlights the imperative to closely monitor evolving market trends and sentiments. Gold’s status and trajectory in this intricate financial tapestry will likely be shaped by the unfolding economic and political narratives, requiring constant vigilance and informed analyses for optimal investment strategies.
On the day gold closed down $8.80 at $1916.60, and silver closed down $0.45 at $23.15.
On Tuesday the price of gold moved to session lows this morning, a pattern trade which has become typical of late. The problem gold has recently is that traders expect bad news even when there is some reason to suggest that the trading cup is half full not half empty.
Now that gold is again testing support ($1900.00) commentary assumes it will not hold up and the discussion centers around support at $1890.00. I have no problem with a market trending lower. And helped with a rising bearish technical picture, this one will likely bust through the $1900.00 support. But it is a mistake to let the current negative wave become your only fixation. Gold is still holding up at the higher end of its range. Paying attention to the “noise” is not a bad idea but keep your thinking within the wider and troubled world geo-political frame.
In this business, the lower the price of gold becomes, the more interest it creates in those who embrace the physical possession of real money. Money which is outside the control of banking or Wall Street. It is probably an understatement to say that people have a natural fear of government intervention, but these thinkers are the bedrock of the physical market. Increased bargain hunting is expected but this market will remain shaky as long as the Fed is aggressive.
Reuters (Ashitha Shivaprasad) – Gold retreats as dollar, yields rise on hawkish Fed – “Gold prices on Tuesday were set to fall for a second straight session as Treasury yields and the dollar rose on prospects of the Federal Reserve keeping interest rates higher for longer. Inflation staying above the Fed’s 2% target remains a greater risk than tight central bank policy slowing the economy, Chicago Fed president Austan Goolsbee said on Monday. “The market is not currently positioned for gold to behave as a safe-haven yet. If there is a fear that the Fed is going to over-tighten and anticipation of significant deterioration in the economy, then it is good news for gold,” said Edward Moya, senior market analyst at OANDA. Higher interest rates raise the opportunity cost of holding bullion, which is priced in dollars and does not yield interest. The dollar rose to near 10-month highs while the benchmark 10-year Treasury yields scaled a fresh 16-year peak. Investors await the personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, due on Friday to gauge the Fed’s interest-rate path. “If we get a hot report, then there will be further downward pressure on gold,” Moya added. Reflecting investor interest in bullion, SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell on Monday to their lowest level since January 2020. “The (gold) bears would be eying liquidity resting below recent lows at $1,900 and then at $1,885 next. Those are our immediate downside targets,” Fawad Razaqzada, market analyst at City Index.”
On the day gold closed down $16.20 at $1900.40, and silver closed down $0.20 at $22.95.
On Wednesday gold moved aggressively lower, threatening $1870.00. This drop surprised even me, but it does demonstrate how fast momentum players can jump on a serious trend. At this point even the serious players in the physical market will have to grin and bear it considering gold has moved from $1940.00 through $1870.00! A whopping $70.00 loss in the past month.
Bargain hunting is picking up across our counter, but it may be too soon to be looking for the expected short-covering rally and bounce in prices which would signal a short-term bottom. Still, I suspect this too may happen faster than bears would anticipate. All of this drama and we are only halfway through an interesting trading week with fresh inflation news due Friday.
Reuters (Anjana Anil) – Gold hastens retreat on higher-for-longer rate bets – “Gold extended declines for the third straight session on Wednesday as appeal for non-yielding bullion took a hit from bets that the Federal Reserve may keep interest rates elevated, while traders hoped for more cues from U.S. inflation numbers this week. The prospects of higher-for-longer U.S. rates sent investors scurrying to the safety of the dollar instead, making gold more expensive for overseas buyers. Further hammering appetite for zero-yield gold, Treasury yields also remained near 16-year highs. “As long as the narrative remains higher-for-longer, it’s going to continue pressuring precious metals, ” said Ryan McKay, commodity strategist at TD Securities, adding the break below the $1,900 mark also triggered technical selling. “If the (inflation) data continues to come in stronger, that will be another thing that continues to weigh on gold.” The U.S. personal consumption expenditures (PCE) index, the Fed’s preferred inflation measure, is due on Friday. However, “If the inflation number falls, we could see some support coming to gold and the expectation of tightening monetary policy could dampen a bit,” said ANZ analyst Soni Kumari. A “soft landing” for the U.S. economy is more likely than not, Minneapolis Fed President Neel Kashkari said on Tuesday, but there’s also a 40% chance that the Fed will need to raise rates “meaningfully” to beat inflation. On the flip side, gold continued to find some support from robust physical demand, especially from central banks and in China, although “the near-term dynamics are certainly the Fed,” TD’s McKay said.”
On the day gold closed down $28.80 at $1871.60, and silver closed down $0.47 at $22.48.
On Thursday the price of gold again dipped to session and new recent lows. This downward fall from grace has defined the bearish scenario of late because despite rising interest rates, and the Fed “pausing” for a second time the US economy seems to be doing just fine.
Of course, you can pick and choose sectors to criticize but generally Wall Street is not exactly hiding under the bed. This is, at least for the present time, the most optimistic “snapshot” paper investors could hope for and if this economic picture does not materially change the Fed has options and may continue to fight inflation with even higher interest rates.
A few of the “informed” believe that rates could move to 7%! This is what creates that underlying tension of something going amiss along the way. But if our economy stays above water the paper investment world sees blue skies and gold will remain under selling pressure.
Reuters (Swati Verma) – Gold holds near 6-month low as higher US rates bite – “Gold prices were subdued on Thursday, having slid to their lowest in about six months in the last session, as an elevated U.S. dollar and Treasury yields continued to exert pressure on the non-yielding metal. The dollar held near 10-month highs against its major peers, while Treasury yields climbed to a 16-year peak as investors bet the U.S. economy will outperform its competitors in an environment of higher interest rates. “Expectation that the Fed is not done and could do more is weighing on the gold price.” Higher rates raise the opportunity cost of holding bullion, which does not yield interest, and support the dollar, in which it is priced. Gold prices have shed more than 3% so far this month and are on track for their worst monthly showing since February. The metal fell 1.4% on Wednesday in its biggest daily decline since July. Minneapolis Fed President Neel Kashkari on Wednesday said he is not yet ready to say rates have been lifted enough to get inflation back to the 2% target amid ample evidence of ongoing economic strength. Data on Wednesday showed orders for long-lasting U.S. manufactured goods rose in August and business spending on equipment appeared to regain momentum. Market focus now turns to the revised U.S. GDP growth rate for the second quarter and weekly jobless claims due later in the day, with the August personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, due on Friday. “Despite the Fed hiking rates, incoming data out of the U.S. remains solid,” said UBS analyst Giovanni Staunovo.”
On the day gold closed down $11.20 at $1860.40, and silver closed up $0.04 at $22.52.
On Friday the fact that gold showed no interest in a short covering rally will further damage the bullish scenario. With $1900.00 now in the rear-view mirror the possibility of testing $1800.00 support, which goes back to early December of last year will weigh heavily on the paper trade. If you are thinking of buying this weakness, patience might be rewarding. But frankly I’m surprised this market is not already considered oversold. The reason likely being is that this latest swoon in prices caught everyone by surprise. We are seeing virtually no selling in bullion gold or silver at these new lower prices but at the same time customers are not waiting in line. My bet is that it might take a week, or two before normal trading volumes are reestablished.
Reuters (Ashitha Shivaprasad) – Gold ticks higher on slowing US core price inflation – “Gold prices rose on Friday, helped by a retreating dollar and Treasury yields as data showed core price inflation slowed in August, but bullion was still on track for monthly and quarterly declines on prospects of higher U.S. interest rates. The core personal consumption expenditures (PCE) price index rose 3.9% on an annual basis in August, down from 4.3% in July. The headline index, however, gained by 3.5% on the year, up from 3.4% in July. “We have seen lows in gold for the short term. After weaker PCE, a move back over $1,885 will be a salve for scalded bulls,” said Tai Wong, a New York-based independent metals trader. “Last weeks ‘higher-for-longer’ Fed dot plot has done its damage, but gold has been remarkably resilient behind central bank buying.” Bullion hit its lowest in six months on Thursday and is set to end September down 3.3% and the quarter 2.3% lower, after the Federal Reserve struck a hawkish stance. Higher rates raise the opportunity cost of holding gold, which is priced in dollars and does not yield any interest. The dollar was down 0.4% and benchmark 10-year Treasury yields retreated from a 16-year peak, lifting bullion’s appeal, but both were still headed for quarterly rise. Data on Thursday showed the U.S. economy maintained a fairly solid pace of growth in the second quarter. On the physical front, gold premiums eased slightly in top consumer China this week, but remained elevated on high investor demand amid a broadly weaker yuan and economic worries.”
On the day gold closed down $12.30 at $1848.10, and silver closed down $0.28 at $22.24.
Platinum closed up $1.50 at $906.80, and palladium closed down $22.70 at $1255.20.
Jim Wycoff (Kitco) – “Technically, the gold futures bears have the solid overall near-term technical advantage. Prices are in a four-month-old downtrend on the daily bar chart. Bulls’ next upside price objective is to produce a close in December futures above solid resistance at $1,950.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,850.00. First resistance is seen at Thursday’s high of $1,896.80 and then at $1,900.00. First support is seen at the overnight low of $1,879.60 and then at this week’s low of $1,874.50. The silver bears have the overall near-term technical advantage. There are stiff technical support layers just below the market that may halt the decline. Silver bulls’ next upside price objective is closing December futures prices above solid technical resistance at this week’s high of $24.05. The next downside objective for the bears is closing prices below solid support at $22.00. First resistance is seen at the overnight high of $23.34 and then at $23.50. Support is seen at $23.00 and then at the overnight low of $22.81.”
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
Risk Disclosure – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisors. The precious metal and rare coin markets are random and highly volatile so they may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.
