Gold – Opportunity or Trouble?
Commentary for Friday, April 26, 2024 (www.golddealer.com) – Today gold closed up $5.00 at $2334.80, and silver closed down $0.10 at $27.24. The bulls are definitely not happy this week considering Monday’s large drop of $66.20 but the interesting part of this story is that while gold did drift a bit lower after this calamity it basically settled perhaps suggesting that the worst is over, at least for the short term. The problem at this point is trying to figure out what the Fed has in mind. They have become more worried about inflation and now a slowdown in our economy. Of course, this loss of direction is not news, this market has been plagued with “first this and then that” since the October lows of $1916.00. But there really is not much to complain about as gold again threatens $2400.00. Investors are taking advantage of these high interest rates. But they are also interested in physical gold bullion even at these lofty prices judging by our sales this week. The fact that most bought the weakness in both gold and silver prices this week is a plus for bullish scenario especially in the larger term. Last Friday gold closed at $2398.40 / silver at $28.81 on the week gold was down $63.60 and silver was down $1.57.
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 moved dramatically lower, moving from $2360.00 through $2325.00 before traders stepped up to buy the weakness. Still the market stumbled and closing on lows now has traders wondering if they should have paid attention to talk last week that the price of gold was overbought. The drop trigger was already in place as Powell hinted that lower interest rates may be placed on the backburner as the Fed worries about inflation. How dramatic this drop will be depend on whether investors consider the current range above $2300.00 a bargain. Typically, a drop of this size introduces a kind of hangover period which further tests support levels. It is good that this weakness came early in the week, this will provide time for this market to settle. The fact that US stocks seem to be getting used to higher interest rates is another minus for gold. Any price stability this week is a plus for gold, all other things considered. I would not assume that such a large drop in price will significantly increase bearish sentiment. There are other still developing fundamental reasons to own gold and silver bullion in this crazy world. Patience is one of the 4 cardinal virtues. And I have a feeling that those who possess even a small amount of patience will eventually be nicely rewarded.
Reuters (Ashitha Shivaprasad) – Gold drops more than 2% to one-week low as Middle East worries ebb – “Gold prices dropped more than 2% to a one-week low on Monday as worries over a wider Middle East conflict subsided, prompting investors to scale back safe-haven trades in favor of riskier assets like equities. Spot gold was down 2.3% to $2,336.29 per ounce as of 9:43 a.m. ET (1343 GMT), poised to mark its biggest intra-day fall in more than a year. U.S. gold futures slid 2.7% to $2,349.70. “Some risk of an imminent retaliation in the Middle East has been removed, which has attracted some selling activity in gold. But the question is how much scope there is to the downside,” said Daniel Ghali, a commodity strategist at TD Securities. Tehran downplayed Israel’s retaliatory drone strike against Iran, in what appeared to be a move aimed at averting regional escalation. Gold also came under pressure as Wall Street’s main indexes opened higher, cutting demand for the safe-haven and non-interest paying asset. Geopolitical tensions coupled with robust central bank buying had driven gold to a record high of $2,431.29 on April 12. Investors are now waiting for the release on Friday of the U.S. personal consumption expenditures (PCE) report for cues on the prospect of U.S. interest rate cuts. Chicago Federal Reserve President Austan Goolsbee on Friday said progress on bringing down inflation has “stalled” this year, becoming the latest official to drop an earlier focus on the coming need for rate cuts. “Gold could revisit all-time highs in case of a surprise PCE report that shows inflation cooling … We still expect buying activity out of Asia to remain resilient as gold is seen as a currency-appreciated hedge in Asia,” Ghali added. Other metals also posted steep declines, with spot silver shedding 4.6% to $27.35 an ounce, platinum down 1% to $922.00 and palladium shedding 1.8% to $1,008.25. “Any improvement in ICE (internal combustion engines) vehicle sales relative to the BEV (battery electric vehicle)market share could help to support the palladium price,” Heraeus Metals said in a note.”
On the day gold closed down $66.20 at $2332.20, and silver closed down $1.60 at $27.21.
On Tuesday the price of gold dipped on the open, touching $2295.00 but reversed direction and moved to session highs ($2330.00) before settling mildly in the red for the day. If this is the beginning of a price stabilization trend for gold it would be a plus for the bulls considering the heavy loss we saw only yesterday. I would not get too carried away here, you could see further settling as the market was down an additional $5.00 in the aftermarket. But these dips are slowing down, and this is a great start in a market that has convinced itself that interest rates will remain “higher for longer”. Now don’t get me wrong, this could be the new reality, but the flip side of the coin could easily replace this bearish sentiment by the summer months. And if there is any hint of lower interest rates by that time gold will shake off its lethargy and move higher.
Reuters (Ashitha Shivaprasad) – Gold drifts lower for second day as Middle East fears subside – “Gold prices extended losses for a second day to hit a more than two-week low on Tuesday as diminishing fears about an escalation of tensions in the Middle East prompted investors to book profits ahead of key U.S. economic data this week. Spot gold was down 0.7% to $2,311.07 per ounce by 9:09 a.m. ET (1309 GMT) after earlier hitting its lowest since April 5. Bullion’s March to April rally drove it up by nearly $400 to an all-time high of $2,431.29 on April 12. Israeli strikes intensified across Gaza on Tuesday in some of the heaviest shelling in weeks, but with fears of a wider conflict receding after Iran said last week it had no plan to retaliate following an apparent Israeli drone attack, financial markets showed signs of sharper appetite for risk. That has meant gold, traditionally seen as a haven from risk, has lost ground, said Julia Khandoshko, CEO at European broker Mind Money. The market is also closely monitoring signals from the U.S., where inflation data and statements from the Federal Reserve indicate that interest rates may not be cut in June, Khandoshko said. Recent remarks from Fed officials hinted at no urgency to cut rates, reducing the appeal of non-interest paying bullion. Traders now expect the first Fed rate cut to come most likely in September. The market will keep a tab on U.S. GDP data due on Thursday and the Personal Consumption Expenditures (PCE) print on Friday for more clues on the health of the economy and the timing of cuts. Khandoshko added that overbought gold was also witnessing a technical correction. Elsewhere, spot silver fell 0.6% to $27.04. Autocatalyst metals platinum dipped 1.4% to $904.60, and palladium dropped 1.2% to $996.43.”
On the day gold closed down $4.50 at $2327.70, and silver closed up $0.12 at $27.33.
On Wednesday the price of gold drifted between $2326.00 and $2312.00 continuing to settle, finishing the day mildly in the red as traders looked for fresh short term information. It is becoming more clear that the price of gold will be further tested as traders believe the latest surge to all-time highs may have pushed our shiny friend into the overbought range.
That being said, there are so many other important factors supporting the physical gold market that the bulls may just be catching their breath in a developing roller coaster ride to higher prices and increased safe haven demand. Geopolitical tension is rising in other parts of the world, central banks are buying gold bullion in preparation of currency devaluation, and as always, the public both here and abroad find gold and silver bullion a refuge in troubled times.
Reuters (Ashitha Shivaprasad) – Gold little changed as spotlight shifts to US data – “Gold prices steadied on Wednesday as risk premiums over tensions in the Middle East eased while investors strapped in for U.S. economic data, due later in the week, that could offer clues to the Federal Reserve’s interest rate path. Spot gold eased 0.1% to $2,318.50 per ounce by 9:20 a.m. ET (1320 GMT), after having hit its lowest since April 5 in the previous session. U.S. gold futures fell 0.2% at $2,336.50. Spot silver dipped 0.3% to $27.20. Bullion prices have fallen over $100 after hitting a record high of $2,431.29 on April 12. The dollar index firmed 0.2%, making greenback-priced bullion less attractive to overseas buyers. “The gold and silver market is seeing correction with a de-escalation in the Middle East conflict. The key question is if these corrections will turn into near-term price downtrend that would signal market tops are in place,” said Jim Wyckoff, senior analyst at Kitco Metals. “Market focus is back on economic reports and the Fed. If we see hot inflation data, then it is going to be harder for Fed to cut rates and gold could drop to below $2,200.” The U.S. gross domestic product (GDP) data is due on Thursday and the Personal Consumption Expenditures (PCE) report on Friday. Traders now expect the first Fed rate cut to come, most likely in September. Higher interest rates reduce the appeal of holding non-yielding gold. In the long term, gold will rise further, with 2024 being an election year, persistent geopolitical conflict and increasing U.S. debt, said Jonathan Rose, Genesis Gold Group CEO. “Central banks have a monstrous appetite for gold right now, and that is definitely not slowing down,” he added. Platinum lost 0.4% to $903.61, while palladium edged 0.6% lower to $1,013.75. “Both (platinum and palladium) metals have been under pressure as consumers draw down on inventories. However, palladium will be harder hit amid rising electric vehicle sales due to its limited uses elsewhere,” ANZ analysts wrote in a note.”
On the day gold closed down $3.20 at $2324.50, and silver closed down $0.01 at $27.32.
On Thursday the price of gold kept a tight spread moving between $2340.00 and $2320.00 even though the US economy slowed in the first quarter of this year and inflation has not moved lower as some have expected. These important factors suggest the FOMC will remain hawkish and not move interest rates lower anytime soon. Still, gold has managed to move mildly into the green on the day which supports the notion that a reasonable consolidation is in place. The longer this consolidation continues, the more strength it will add to the longer term bullish scenario.
Reuters (Lucia Mutikani) – US economic growth slows in first quarter; inflation surges – “The U.S. economy grew at its slowest pace in nearly two years as a jump in imports to meet still-strong consumer spending widened the trade deficit, but an acceleration in inflation reinforced expectations that the Federal Reserve would not cut interest rates before September. The slowdown in growth reported by the Commerce Department in a snapshot of first-quarter gross domestic product on Thursday also reflected a slower pace of inventory accumulation by businesses and downshift in government spending. Domestic demand remained strong last quarter.” “This report comes in with mixed messages,” said Olu Sonola, head of economic research at Fitch. “If growth continues to slowly decelerate, but inflation strongly takes off again in the wrong direction, the expectation of a Fed interest rate cut in 2024 is starting to look increasingly more out of reach.” Gross domestic product increased at a 1.6% annualized rate last quarter, the Commerce Department’s Bureau of Economic Analysis said. Growth was largely supported by consumer spending. Economists polled by Reuters had forecast GDP rising at a 2.4% rate, with estimates ranging from a 1.0% pace to a 3.1% rate.”
On the day gold closed up $5.30 at $2329.80, and silver closed up $0.02 at $27.34.
On Friday the price of gold closed the week quietly and offered both good and bad news to investors. The bad news was obviously the big drop in prices on Monday – it was large enough to rattle these markets. The good news being that the price of gold and silver is settling nicely in the aftermath. More importantly the public is still a strong buyer of physical gold and silver bullion. This makes sense in that inflation numbers remain high.
But keep in mind that Monday’s big drop should serve as a reminder. Gold and silver bullion, at these higher price levels is more prone to sudden changes in the bullish / bearish crosswinds. So, keep your seat belts fastened, as usual because this ride may get more volatile. Especially as the Fed attempts to tame the inflation dragon. Hopefully without sending our economy into a recession. Also consider the possibility of stagflation (a decrease in economic growth (stagnation), an increase in inflation, and an increase in unemployment), an ugly term to all Central Banks. The last time we saw this anomaly according to JPMorgan’s Jamie Dimon was in the 1970’s and he is worried about a similar outcome today. If you remember those early hay days of the gold and silver bullion interest in the US it was crazy busy.
On the day gold closed up $5.00 at $2334.80 and silver closed down $0.10 at $27.24.
Platinum closed up $0.60 at $914.30, and palladium closed down $23.70 at $957.40.
Jim Wycoff (Kitco) – “Technically, the gold futures bulls have the firm overall near-term technical advantage. However, a nine-week-old uptrend on the daily bar chart has stalled out. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at $2,400.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $2,250.00. First resistance is seen at $2,375.00 and then at $2,400.00. First support is seen at the overnight low of $2,338.00 and then at $2,325.00. The silver bulls have the firm overall near-term technical advantage. However, a nine-week-old uptrend on the daily bar chart has stalled out. Silver bulls’ upside price objective is closing May futures prices above solid technical resistance at this week’s high of $28.795. The next downside price objective for the bears is closing prices below support at $25.00. First resistance is seen at $28.00 and then at $28.25. Next support is seen at this the overnight low of $27.285 and then at $27.00.”
Brothers and Sisters, thank you for your friendship. If you have unusual circumstances, need cash or a special favor – talk to Harry or Eric or Ken Slater. We are now back to our traditional business model. Thank you for your patience. Blessings. Richard Schwary
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