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Gold – Shifting Sentiment

Gold – Shifting Sentiment

Commentary for Friday, January 6, 2023 ( – Today gold closed up $29.40 at $1864.20 and silver closed up $0.56 at $23.82. Gold trading sentiment is again all over the place as this volatile week draws to a close. This morning the domestic paper market opened higher, sold off and then jumped into the promising $1865.00 range. The welcomed rise in gold’s bullish outlook comes from an obscure mix of fresh economic data. In December nonfarm payrolls rose and the US service industry contracted for the first time in 3 years (Reuters). Now consider that Treasury yields are trending lower, suggesting that lower interest rates will increase gold’s investment appeal. Of course, we have seen this kind of sentiment shift before so I would suggest a grain of salt is necessary. Positive gold scenario comes into and goes out of focus on a regular basis these days. The fact is that paper traders are still punching around in the dark, in a confused trading environment. Last Friday gold closed at $1819.70 / silver at $23.86 – on the week gold was higher by $44.50 and silver was down $0.04.

Important Notice – 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 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 markets closed early in the holiday trade. We also closed early (2:00 PM) and did not ship because Brinks, UPS and FedEx were closed for Christmas. We are back to normal operations today and thank you for your patience. For reference use Friday’s closing market.       On the day gold closed up $8.90 at $1795.90 and silver closed up $0.28 at $23.76.

On Tuesday gold moved higher in the domestic trade, this really first day back from trading interruptions and holiday schedules. A good start but not definitive as gold rises to near six-month highs as investors await Fed minutes. The December minutes are due on Wednesday. US monthly employment is due on Friday. Gold could hit $1900.00 in the short term (Reuters). With an economy that could go into recession, uncertainty over the Fed’s rate-hike path and geopolitical risks, “investors remain a little cautious, and gold is looking pretty attractive,” said Edward Moya, senior analyst with OANDA. Benchmark U.S. 10-year Treasury yields were near their lowest in a week, reducing the opportunity cost of holding non-yielding gold. The dollar index jumped 0.8%. The market focus is now on the release on Wednesday of the minutes from the Fed’s Dec. 13-14 policy meeting as well as other economic data expected this week. If the minutes reveal that the U.S. central bank is considering slowing the pace of rate hikes and ending the hiking cycle at a lower peak rate, there will be “scope for further increases in the price of gold”, said Ricardo Evangelista, senior analyst at ActivTrades. Moya noted that while the dollar was up as well, when it comes to a flight-to-safety environment, gold would outperform the asset. Gold could make a run towards $1,900 in the short term, for the purposes of intraday moves, $1,860 is going to be tentative resistance,” Moya highlighted.”

That sounds a bit too optimistic to me. But it’s better than hearing higher interest rates will be the doom of higher gold prices. Let’s call this first look at 2023 a good start and be happy our shiny friend is still holding above $1800.00.

You might want to make the case for early safe haven buying and a positive technical picture for gold but keep in mind that our shiny friend has struggled with overhead resistance between $1800.00 and $2000.00 since the summer months of 2020. And I would be happy to see gold pricing hold this trading range until the Fed’s interest rate intentions are clear.

On the day gold closed up $20.00 at $1839.70 and silver closed up $0.20 at $24.06.

On Wednesday gold prices moved higher as the Dollar Index lost a half point in early trading, perhaps over how traders considered weakening manufacturing data. But this may be “more of the same” as traders buy the dips and sell the rallies. The pricing range for gold today was between $1850.00 and $1862.00. We finished the day on lows, perhaps suggesting a tiring bull.

Reuters – Gold hovers near mid-June highs after Fed minutes – “Gold held near seven-month highs reached on Wednesday after the minutes of the Federal Reserve’s last meeting showed all its policymakers remained committed to fighting inflation but agreed on the need to slow rate hikes in 2023. Officials at the Federal Reserve’s Dec. 13-14 policy meeting acknowledged they had made “significant progress” over the past year in raising rates enough to bring inflation down. “Gold is holding remarkably steady despite Fed minutes that state clearly that rates will continue to rise and there would be no rate cuts in 2023 contrary to what the market has priced,” said Tai Wong, a senior trader at Heraeus Precious Metals in New York. The minutes indicated that officials “emphasized the need to retain flexibility and optionality when moving policy to a more restrictive stance,” with a scale back to quarter-percentage-point increases as of the Jan. 31-Feb. 1 meeting possible, but open to an even higher “terminal” rate if inflation persists. Gold prices could, however, ease if recent aggressive buying in Asia and Europe fades, Wong added, while expecting that gold could move between $1,800-$1,900 in the short term.”

Trading volumes at suggest that investors are optimistic these days as gold and silver become more valuable. Even as premiums for acceptable bullion products remain high.

We believe this is true because traders are married to the theory of “let’s be patient with the Fed and its interest rate dilemma”. Which offers a nice underpinning of current gold pricing. But any aggressive action by the FOMC this year could flip that liberal confidence on its head.

There has been an inside dealer joke for some time now that higher premiums assure higher prices. Which is a bit too optimistic for me. But this home spun savvy does contain wisdom.

It’s difficult to see gold prices busting through the remaining tough overhead resistance if interest rates continue to rise. That is why professionals still see this trade as defensive.

The latest Social Security numbers will provide the bulls with more reasons to own this shiny stuff. In October 2022 the average SS check was $1550.48. The January 1st 8.6% cost of living increase (COLA) will be $133.00 a month. This will add $100 billion dollars to the national debt and is only a small example of other larger wage “triggers” already in place.

On the day gold closed up $13.10 at $1852.80 and silver closed down $0.27 at $23.79.

Zaner (Chicago) – “In addition to very impressive rallies yesterday, gold and silver have extended sharply this morning for an exceptional two day start to 2023. While not a major influence seeing German import prices, Swiss consumer prices, and French consumer prices decline in today’s scheduled data should indirectly provide lift for gold and silver prices as signs of inflation coming under control could result in less global central bank tightening and that in turn should apply pressure to the dollar. With the markets presented with the beginning of the monthly job report cycle this morning, recent gains are likely to be tested but extending strength through the coming three sessions (through payrolls on Friday) could mean 2023 will be a good year for precious metals. However, gold and silver started 2023 with a significant dose of volatility with February gold at times falling more than $30 off its early high and silver prices at times sitting $0.60 under its initial highs. In retrospect, gold and silver were initially unable to discount the significant rally in the dollar, but initially sustained strength in the dollar prompted a wave of long liquidation in the precious metal complex. While it is possible that a noted initial drop in US treasury yields in the first two sessions of 2023 is providing a bullish focus for gold and silver, the IMF 2023 forecast of inflation and recession certainly undermines many physical commodities at the beginning of this year. On the other hand, with the initial rally in gold to start 2023, prices reached the highest level since June 27th while silver prices reached the highest level since April 22nd, and that action could be a precursor to a higher fund allotment for gold and silver this year. However, given the release of the December Fed FOMC meeting minutes later today and given the recent strength in gold and silver, seeing the Fed remaining focused on inflation at the end of last year would not be a good thing for gold and silver longs. In fact, seeing a bullish vibe from the December Fed meeting minutes would also stoke a dollar rally and could foster a significant corrective slide in gold and silver prices later today. With the February gold contract at the high this morning sitting $48 an ounce above the level where the most recent COT positioning report was measured could mean the adjusted net spec and fund long into today’s action is at the highest level since June! Similarly, March silver into the high yesterday was trading $0.52 above the level where the positioning report was measured and adjusting the net spec and fund long in silver likely puts the net long at the largest level since April.”

On Thursday gold once again failed that acid test above $1850.00 so the bulls will have little joy on this wet and rainy day in Los Angeles. All it took to dash the hopes of $1900.00 was a tightening employment picture. It may provide some solace that the bulls bought this dip and gold finished off daily pricing lows. But what the bulls really need at this point is a blast of fresh information which will create another wave of positive sentiment.

But keep in mind this “back and forth” market should not surprise. Gold was higher by almost $100.00 this past month so a profit taking round figures and is healthy for this still developing market. The Dollar Index jumped higher by almost a point in the early trade as US jobless claims came in at 3-month lows. This drop in gold prices is not a big deal. But confirms trading tension below the surface. The deep thinkers still lack consensus. Reuters – “Atlanta Fed President Raphael Bostic on Thursday said U.S. officials of the central bank “remain determined” to lower inflation back to its 2% target, while Kansas City Fed leader Esther George said the bank would need to press forward with rate rises.” The U.S. economic outlook presented by Fed staff at last month’s meeting suggested that the battle to lower prices may last longer than anticipated.”

MarketWatch (Myra Saefong) – “Gold prices retreat after a 4-session rise to their highest since June – Gold futures retreated on Thursday, on track to post their first loss in five sessions, as traders booked profits in the wake of the metal’s rise to its highest price since June. “Gold prices have retraced their recent highs for two reasons. Firstly, it is the strength of the dollar index which is pushing the price of the shining metal lower. Secondly, after the run in prices, it is normal for traders to book profits,” said Naeem Aslam, chief market analyst at AvaTrade. Gold prices lost more ground as U.S. Treasury yields climbed after the U.S. ADP private-payrolls data showed 235,000 jobs were created in December. That was more than economists had expected, adding to concerns the economy is not slowing enough to prevent further Federal Reserve interest rate rises. Monthly U.S. data on nonfarm payrolls will be released on Friday.”

On the day gold closed down $18.00 at $1834.80 and silver closed down $0.53 at $23.26.

On Friday gold finished on a strong note today as traders see a bullish shift in the latest economic data which suggests the Fed will be less hawkish in its interest rate policy. Gold’s “here today / gone tomorrow” bullish sentiment has become the hallmark of this volatile trade. And no doubt will continue in place until the Fed’s interest rate strategy is better understood.

But there is a growing demand for quality physical bullion products. Especially if the dealer can manage immediate delivery on good funds. Even with major mints behind the manufacturing curve this happens more often than you might imagine. Most larger dealers have “standing orders” from trusted customers. Which suggests that the physical market is doing nicely at these elevated price levels. The premiums on quality products have recently moved lower. But are still historically high. Most physical dealers, however, do not see a return to the cheap good old days.

On the day gold closed up $29.40 at $1864.20 and silver closed up $0.56 at $23.82.

Platinum closed up $33.50 at $1092.60 and palladium closed up $74.00 at $1789.00.

My Brothers and Sisters, thank you for your friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry or Eric. Most employees have been vaccinated – if this is a concern ask for more information. 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 get us back to normal and our traditional business model. Thank you for your patience. Richard Schwary

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