Gold – Raising or Lowering?
Commentary for Friday, March 15, 2024 (www.golddealer.com) – Today gold closed down $5.70 at $2157.30, and silver closed up $0.33 at $25.20. As is typical these days, the gold bulls and gold bears have delt with cross winds all week. The bulls will have to turn logic on its head, believing this recent top is only a good start and higher prices are a sure bet down the road. The bears face a very different kind of scenario. According to insiders, the much talked about, and still expected lowering of interest rates is the primary reason gold has made new highs. This unexpected imbalance is already factored into these higher prices but is now a busted flush. The reason being that inflation this time around turned out to be surprisingly “sticky”. Higher interest rates are now the new normal and will eventually push the price of gold lower. Another interesting horse in the race is the US 10 Year Treasury Note. In the past 6 months interest rates have consolidated around 4%, not bullish or bearish, suggesting solid stability. In which case the price of gold may become very boring. Last Friday gold closed at $2178.60 / silver at $24.34 – on the week gold was down $21.30 and silver was down $21.30.
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On Monday gold opened choppy but steady, trading between $2175.00 and $2183.00 and it closed just mildly in the green by the end of the day. This may suggest gold is taking a breather… which is good. Price consolidation in this area would help the bullish scenario. Keep in mind that Chief Powell has only turned dovish when he acts on his most recent comments that inflation is not far from where it needs to be before the central bank starts cutting interest rates.
Setting up the possibility of rate cuts and reducing rates are different animals. The Chief was vague relative to FOMC timing because this gives the Fed room to correct imbalance in the process. I remain optimistic about higher prices in gold, but future price increases may be less dramatic as the physical market returns to the basics like lower interest rates. Physical demand from the private sector will increase and central banks worldwide will stabilize prices.
FXEmpire (James Hyerczyk) – Gold Prices Forecast: CPI Data to Determine Upcoming Trends – “Early Uncertainty Ahead of CPI Report – Gold prices are at a crossroads on Monday, influenced by recent U.S. labor market data and Federal Reserve member statements, especially Chairman Powell. The upcoming Consumer Price Index (CPI) data is pivotal in shaping market expectations and the short-term direction of gold prices. Gold’s Reaction to Labor Market and Fed Comments – After achieving a peak of $2,195.235 on Friday, gold prices have stabilized. This rally was fueled by signs of a slowing U.S. labor market, coupled with dovish remarks from the Federal Reserve. Concurrently, the dollar index is hovering near a two-month low, further impacting gold’s value. Increased Trader Interest in Gold – The Commitment of Traders report shows a notable shift in market sentiment. There’s been a significant jump in net-long positions in gold, with an increase of 63,018 contracts to 131,060 as of March 5. This marks the most substantial weekly rise in 3.5 years, highlighting gold’s current desirability and discouraging short selling. CPI Data’s Influence – Tuesday’s CPI data release is expected to be a critical driver for gold this week. A lower CPI figure could fuel arguments for an earlier Fed rate cut, enhancing gold’s attractiveness. Market forecasts currently indicate a high likelihood of three to four U.S. rate cuts starting as early as June. Rate Cut Expectations Boosting Gold – The probability of a Fed rate cut by June stands at 73%, as per the CME Group’s FedWatch Tool. Lower rates typically increase the allure of non-yielding assets like gold. Fed Chair Jerome Powell’s recent testimony has added weight to these expectations. Market Forecast – Considering the market’s strong interest in gold and the anticipation of Fed rate cuts, a bullish outlook for gold is likely in the short term. The CPI data’s outcome will be crucial in confirming this trend, with lower rates potentially propelling gold prices higher. Technical Analysis – Gold is slightly higher on Monday, but inside Friday’s range, which usually indicates investor indecision and impending volatlity. A trade through $2154.06 will be the first sign of weakness. This move will form a minor top at $2195.235. This will break the pattern of seven consecutive higher-highs and higher-lows. A trade through the top will signal a resumption of the uptrend. The best sign of a major top will be a closing price reversal top chart pattern. If there are signs of a top then the first target zone will be $2089.77 to $2064.87. This is followed by the 50-day moving average at $2044.75.”
On the day gold closed up $3.90 at $2182.50, and silver closed up $0.17 at $24.51.
On Tuesday the price of gold weakened as today’s hot inflation numbers suggest that the Fed will remain hawkish relative to its interest rate policy. This of course encourages the bearish gold scenario, but I would not become too concerned for two reasons. The first reason is that in typical fashion traders bought this dip, always a plus for gold. The second is that today’s inflation data is only a “snapshot” of an uncertain picture. You can expect inflation numbers to change sides, turning bullish or bearish a few more times before the Fed picture is clear.
In the meantime, expect volatility but not enough to change the big picture. Which is higher prices over the longer time frame. Ignore this short term noise and ask yourself this question. What forms of wealth can produce cash money on demand? Of course there are other choices, but none are as simple, private, and straightforward as gold bullion in your own position. The plus being that anyone can enjoy these advantages outside the traditional banking system, and away from intrusive government intervention.
Reuters (Ashitha Shivaprasad) – “Gold under pressure from Fed rate cut doubts after inflation data – “Gold prices remained under pressure on Tuesday, dropping as much as 1% at one point, after a hot U.S. inflation report dimmed prospects of the Federal Reserve cutting interest rates soon. Spot gold fell 0.9% to $2,163.69 per ounce as of 9:22 a.m. ET (1322 GMT), retreating from a record high of $2,194.99 reached on Friday. U.S. gold futures also dipped 0.9% to $2,169.40. U.S. consumer prices increased solidly in February, suggesting some stickiness in inflation. Data showed the Consumer Price Index (CPI) rose 0.4% on a monthly basis in February. Annually, it increased 3.2%, above the 3.1% forecast. “CPI comes in a bit sweaty but the market was expecting a high print so the initial reaction was a bit muted, but prices have been volatile since,” said Tai Wong, a New York-based independent metals trader. He said gold bulls would still look for reasons to drive it higher. “Now focus will shift to next week’s Fed meeting where there will be an updated dot plot,” Wong said, referring to central bankers’ interest rate forecasts. The market is still pricing an around 70% chance of a U.S. rate cut by June, according to the CME FedWatch tool. Low interest rates help gold prices as they reduce the opportunity cost of holding the precious metal that earns no interest. “We do not expect a pronounced cycle of interest rate cuts in the U.S., given persistent inflation risks, we believe that the further upside potential for gold is limited in the medium to long term,” Commerzbank said. Spot platinum fell 1.9% to $915.35 per ounce, palladium lost 1.3% to $1,017.25. UBS in a note said that it expects palladium to stay oversupplied over the coming years, as demand for autocatalysts, which account for about 90% of the metal’s use, keeps declining. Silver shed 0.9% to $24.19.”
On the day gold closed down $22.10 at $2160.40, and silver closed down $0.32 at $24.19.
On Wednesday the price of gold bounced higher and by the close gold had recovered most of yesterday’s loss. This market remains in a weird kind of transitory mode because sentiment can and usually does shift quickly. If, on any given trading day the interest rate outlook is hawkish, gold will move lower. On the other hand, if Powell or one of his lieutenants seem a bit dovish traders turn bullish, and gold moves higher. Today you have a combination of a technical bounce higher and renewed hope that we will see a rate cut by the summer months.
This day to day indecision makes planning difficult but the latest numbers from our trading desk indicate that the public is again interested and buying. With so much government fumbling, coupled with the rising debt worldwide many now realize that trying to time rate cuts is problematical. Loose ends within the Fed are scary enough as insiders are already buying bullion at these higher levels. But I’m surprised that this group of first responders has not grown much larger because the possibility of a government mistake continues to grow.
Reuters (Sherin Elizabeth Varghese) – Gold firms as June rate cut bets still intact – “March 13 (Reuters) – Gold prices edged higher on Wednesday after dropping more than 1% in the previous session, as investors digested hotter-than-expected U.S. inflation data and still banked on a Federal Reserve interest rate cut in June. Spot gold edged up 0.4% to $2,164.69 per ounce, as of 1212 GMT. Bullion posted its worst single-day drop since Feb. 13 on Tuesday. U.S. gold futures rose 0.2% to $2,170.00. “The market driver behind the decline of gold is quite clear as the U.S. CPI numbers came in higher than expected,” said Carlo Alberto De Casa, a market analyst at Kinesis Money. “It’s just a psychological correction after a long strike of positive days and markets are realizing that the Fed will not cut rates too quickly.” Bullion slumped 1.1% on Tuesday as data indicated that U.S. consumer prices rose sharply in February, above expectations, indicating some stickiness in inflation. Higher-than-expected inflation means that the Fed will be under more pressure to keep interest rates higher for longer, weighing on non-yielding assets such as gold. However, Fed policymakers are still seen starting rate cuts in June. Traders now see about a 65% chance of a June cut, slightly lower than the 72% seen before the data, according to the CME Group’s FedWatch Tool. “While physical gold demand has been holding up well since 2021, a sharp price rally is likely to temper discretionary gold buying in 2024,” analysts at ANZ Research said in a note. Focus now shifts to U.S. retail sales, the producer price index, and the weekly initial jobless claims print, due on Thursday, which will provide further updates on the status of the U.S. economy. Spot platinum rose 1.2% to $935.25 per ounce, palladium gained 2.8% to $1,070.25 and silver was up 0.7% to $24.33.”
On the day gold closed up $15.00 at $2175.40, and silver closed up $0.77 at $24.96.
On Thursday the price of gold dipped on the open, moving to session lows of $2160.00 as traders once again became defensive as the Dollar Index pushed to weekly highs (103.25). The spot price of gold continues to consolidate around $2161.00 which suggests that investors may be having second thoughts about the still popular notion that the Fed will soon turn very dovish. An alternative view, however, may be that interest rates are already high enough to tame inflation, but the FOMC needs more time for them to accomplish the task.
These two opposing views have been around for some time but continue to switch sides as to which is the most popular. This is the reason gold continues to move up and down relative to interest rate expectation. The plus at this point is that even with these crosswinds, gold is trading above $2100.00, supported by safe haven demand, rising debt worldwide and central bank inflows. It is hard to believe that considering the awful state of world politics and a challenge to dollar hegemony already in the making that gold will not be much higher in the coming decade.
Reuters (Anjana Anil) – Gold retreats as dollar, yields firm on higher US inflation data – “Gold slid on Thursday after a larger than expected rise in February’s U.S. producer price index (PPI) cooled expectations of early rate cuts by the Federal Reserve, boosting Treasury yields and the dollar. Spot gold was down 0.6% at $2,161.10 per ounce as of 10:03 a.m. EDT (1403 GMT), moving away from a record peak of $2,194.99 hit on March 8. U.S. gold futures also dipped 0.7% to $2,166.60. The dollar gained 0.3% against its rivals, making gold less attractive for other currency holders, while benchmark U.S. 10-year note yields rose to a more than one-week high. “I expect to see continued pressure (on gold), with all of the data showing the U.S. economy is strong, the labor market still strong,” said Chris Gaffney, president of world markets at EverBank. “It really makes investors question just how quickly the Fed’s going to decide to start cutting (rates).” U.S. producer prices increased more than expected in February amid a surge in the cost of goods like gasoline and food, which could fan fears that inflation is picking up again. Higher inflation adds pressure on the Fed to keep interest rates elevated, weighing on non-yielding assets such as gold. However, traders continue to bet on interest rate cuts in June, pricing in about a 64% chance compared to 72% before the CPI data earlier this week, according to the CME Group’s FedWatch Tool. The Fed is expected to hold rates steady at its policy meeting next week, but the focus will be on the “dot plot” projections. “Gold is an uncertainty hedge, an inflation hedge with higher inflation and more uncertainty. I think that provides a good floor for precious metals pricing,” Gaffney added. Spot platinum fell 1.1% to $928.15 per ounce, while palladium rose 1.3% to $1,072.56. Silver slipped 0.3% to $24.97, after hitting a more than three-month high earlier in the session.”
On the day gold closed down $12.40 at $1263.00, and silver closed down $0.09 at $24.87.
On Friday gold was indecisive, trading between $2172.00 and $2156.00 while ignoring the latest University of Michigan Consumer Sentiment Index, fresh problems in the Middle East, and Reuters comments that peak interest rates boost US demand for riskier form of corporate debt. Which might suggest the latest economic projections have again created a tempest in a teapot or colloquially speaking – a great commotion over unimportant matters.
That being said Neils Christensen (Kitco) offers a very bullish option from Florian Grummes. “The gold market continues to consolidate after hitting record highs, and while the price has room to fall further, one market strategist said that the precious metal is ultimately headed higher. In his latest market commentary, Florian Grummes, Managing Director at Midas Touch Consulting, said that gold’s rally above $2,200 an ounce has definitively ended a 13-year correction and consolidation phase as prices traded repeatedly between $1,900 and $2,075 an ounce. “Regardless of short-term pullbacks or interim consolidations, this likely signifies only the beginning of the next major uptrend in the precious metals sector,” he wrote. Although there is a risk that gold prices fall back to the initial breakout area around $2,075, Grummes said that he ultimately sees an initial price target at $2,535 an ounce. However, he added that these corrections should be considered a buying opportunity. Grummes said he expects gold to hit his target within three months. Currently, the market appears to be holding initial support above $2,150 an ounce, which was the level that triggered significant selling in early December. April gold futures last traded at $2,166.20 an ounce, down 0.66% on the day. “It can be assumed that after the two-and-a-half-month consolidation, the ongoing rally is unlikely to end after just three weeks. In case of doubt, the new uptrend may continue swiftly but with volatility,” he said. One reason why Grummes is optimistic that a correction will be short-lived is because of how little attention gold’s breakout rally has received from generalist investors and mainstream media. “The sentiment in the gold market is still neutral and does not pose an obstacle to higher prices for the time being,” he said. Grummes added that with growing risks in overheated equity markets, and potential economic uncertainty, it’s only a matter of time before investors start paying attention to gold as a safe-haven asset. Of course, it’s not all investors who ignore precious metals. While Western investors continue to pile into the “Magnificant 7” tech stocks, investors in Asian have been busy buying gold. Grummes said that he expects Chinese investors to continue to buy gold as it follows the example set by the government. The People’s Bank of China has increased its gold reserves for 16 months straight, buying 12 tonnes of the precious metal last month. “China dominates the physical gold market through strong demand from the central bank and the buying frenzy at the beginning of the Year of the Dragon. Through arbitrage trading, the paper gold market in the West is increasingly under pressure,” said Grummes. “Overall, the macroeconomic environment remains highly favorable for the gold price.”
FXEmpire (Christoher Lewis) – Gold Continues to Consolidate – “The gold market has continued to consolidate during the trading session on Friday as we are near the highs and simply grinding away. This is a sign that the market is trying to work off the froth. Gold Markets Technical Analysis – The gold market initially did rally during the trading session on Friday, but it looks like the $2,175 level is starting to cause a little bit of a headache for traders, and I think that might end up being the main story here. After all, we have a situation where gold has gotten a little stretched. So, a little bit of a pullback wouldn’t necessarily be the biggest surprise. Ultimately though, I think you’ve got to look at this through the prism of a market that once it does pull back, you have to be thinking of it as a buying opportunity. After all gold has been strong for quite some time and there are a lot of fundamental reasons to think that continues. That’s not to say that we can’t pull back towards the $2,075 level, an area that was previous resistance. And I think a lot of people would be very interested in buying due to the fact that there’s a lot of market memory there. That being said, be cautious. I wouldn’t get overly exposed at this point, but I’m certainly not looking to short gold anytime soon. With that, I am just waiting for the pullback to bounce in and then to get involved. If we can break above the recent highs, that would also be a very strong sign, obviously. And at that point in time, I think you have to look at it through the prism of a market that will eventually go looking maybe as high as $2,500. That’s obviously a longer term projection, but it is something that could happen. So with that, I like the idea of owning gold. I don’t want to short the gold market regardless, even if you told me we were going to pull back, I wouldn’t be inclined to do so. Now it just comes down to whether or not we go sideways and work off some of the excess froth or if we pull back and try to find and create more value. Silver Price Forecast – The silver market has rallied again during the trading session on Friday as Wall Street dumps stocks early in the day. You can see we continue to see a lot of upward pressure in general, and I do think at this point you have to look at Silver as likely to go running towards the $26 level. That being said, I think you’ve got a situation where short-term pull backs continue to be thought of as buying opportunities if you get them. The $24.50 level underneath should be a support level that I think a lot of people will be paying attention to, especially after that massive candlestick on Wednesday. All things being equal, I do think this is a situation where you’re just looking for value and trying to take advantage of it. Now, the question is, can we break above $26? I don’t know because silver has a hard time following gold once we get parabolic. This is mainly because there have been multiple scandals, like JPMorgan Chase, of rigging in the silver market, and there’s no sign that that’s stopped. The CFTC has fined them millions of dollars multiple times, but considering how much they make doing it, they will continue to do it. So therefore, I think 26, maybe $26.50 is about as good as it gets, but that doesn’t mean you can’t make money along the way. You just simply take short-term pullbacks and use them to your advantage. From a longer term perspective though, I still like gold better than silver, mainly because silver is so volatile. It’s also an industrial metal, so it does behave a little bit on the fickle side occasionally. But as things stand right now, it is moving lockstep with gold. It continues to pay attention to lower interest rates around the world coming, and possibly an economic growth situation where it spurs demand later this year. We’ll see. But when you look at the longer term charge, $26 is very tough to crack.”
On the day gold closed down $5.70 at $2157.30, and silver closed up $0.33 at $25.20.
Platinum closed up $7.80 at $941.20, and palladium closed up $11.70 at $1083.50.
Jim Wycoff (Kitco) – “Technically, the gold futures bulls have the solid overall near-term technical advantage. A steep four-week-old uptrend is in place on the daily bar chart. A bullish pennant pattern has also formed on the daily bar chart. Bulls’ next upside price objective is to produce a close in April futures above solid resistance at $2,250.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $2,100.00. First resistance is seen at Thursday’s high of $2,181.30 and then at $2,190.80. First support is seen at the overnight low of $2,164.40 and then at this week’s low of $2,156.20. The silver bulls have the firm overall near-term technical advantage. Prices hit a three-month high overnight. Silver bulls’ next upside price objective is closing May futures prices above solid technical resistance at the December high of $26.575. The next downside price objective for the bears is closing prices below solid support at $23.50. First resistance is seen at $25.50 and then at $26.00. Next support is seen at $25.00 and then at $24.50.”
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