Gold – Still Working On It
Commentary for Friday, August 23, 2024 (www.golddealer.com) – Today gold closed up $29.50 at $2508.40, and silver closed up $0.78 at $29.79. The title page today should reflect Thursday’s profit taking drop even as the Dollar Index moved lower two points this week. But today’s jump to higher ground sets the stage for answering a big question. Is gold comfortable hanging out around $2500.00? Or do these large back and forth price swings suggest more testing of support is in the cards? The answer is old news and centers around whether the Fed remains aggressive relative to interest rate policy. But Chief Powell at Jackson Hole this week claims it may now be the time to lower interest rates. Some commentators are talking about a full point reduction. So, while the bulls are “still working on it” these swings suggest record high prices may be in the making before the end of this year. Last Friday gold closed at $2498.60 / silver at $28.78. On the week gold was higher by $9.80, and silver was higher by $1.01.
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On Monday the price of gold was choppy but broke above $2500.00 on two occasions, so this market continues to rattle the naysayers. Jim Wycoff (Kitco) – “Broker SP Angel said today in a dispatch that gold prices started to climb Friday afternoon on reports China’s central bank has given new gold- import quotas to Chinese banks, “triggering speculation of a renewed wave of buying.” Chinese 10-year yields fell to record lows last week, with institutions rushing to buy over concerns of growth slowdown and deflation. “As a result, Chinese buyers are seeking alternative safe-haven protection, with gold an obvious candidate,” said the broker. Also supporting gold are lingering concerns about an Iranian military strike against Israel. However, it’s possible an Israeli-Hamas ceasefire agreement is close. That could change Iran’s calculus on attacking Israel following recent Israeli assassinations of Hamas and Hezbollah officials.”
I fall into the group of dealers who believe that gold above $2500.00, especially in the short term, should see some consolidation. Trader speculation that Chief Powell has painted himself into a corner is just “frothing” talk from the peanut gallery. Some backing and filling after the next FOMC meeting (Sept 17th and 18th) is healthy. If you are worried about the price of gold running out of gas remember that the Middle East threatens to unravel, and spending continues to explode. What this country needs is a bit of fiscal conservatism. In the old days the Republicans were seen as conservative and Democrats liberal relative to spending policies. Today there is not much difference between either party, regardless of what they claim.
Reuters (Anushree Ashish Mukherjee) – Gold dips after record run as traders await cues from Fed – “Gold eased on Monday after piercing the $2,500 ceiling in the previous session, as investors booked profits from the record run and positioned for more cues from the Federal Reserve and developments in the Middle East. Spot gold was down 0.2% at $2,503.50 per ounce as of 11:57 a.m. ET (1557 GMT), shy of the record high of $2,509.65 hit on Friday. U.S. gold futures rose 0.2% to $2,542.10. “We will not be surprised to see some consolidation/pull-back in the gold market as traders may be disappointed if the Fed only indicates a likelihood of a 0.25 bp rate cut and does not hint at the possibility of a larger 0.50 bp cut,” David Meger, director of alternative investments and trading at High Ridge Futures, said. Traders see a 77.5% chance of the Fed cutting interest rates by 25 basis points (bps) in September, according to the CME FedWatch Tool. The focus will turn to minutes from the Fed’s last policy meeting on Wednesday and Chair Jerome Powell’s speech at an economic symposium in Jackson Hole on Friday. Gold may fall into the $2,479-$2,487 range following its failure to break resistance at $2,507, according to Reuters technical analyst Wang Tao. But UBS analyst Giovanni Staunovo said gold could rise further in the coming months, likely reaching $2,600/oz by end-year, adding all eyes will be on any indication of an imminent rate cut from Powell. On the physical front, several Chinese banks have been given new gold import quotas from the central bank, anticipating revived demand despite record high prices. Gold demand is strong as geopolitical tensions, particularly from the Israel-Iran-Hamas conflict, drives safe-haven buying, Achilleas Georgolopoulos, investment analyst at forex broker XM, wrote in a note. Silver rose 1.1% to $29.33 per ounce. Platinum gained 0.3% to $957.43, while palladium shed 2.2% to $930.33.”
On the day gold closed up $3.20 at $2501.80, and silver closed up $0.46 at $29.24.
On Tuesday the price of gold once again asserted itself, pushing to $2530.00 as the bulls strengthen the space above $2500.00 and bears become less willing to short rallies in both gold and silver. These higher prices in gold are supported by a weaker dollar and perhaps increased physical demand from China. Still gold finished the day only mildly in the green which may suggest that enthusiasm is slowing in the short term. Technical experts see the next upside challenge for gold at $2600.00, which seems like a stretch given our shiny friend higher by $106.00 this past month and $615.00 year over year. And this “higher prices” trend is at odds with the recent belief that the Fed will lower interest rates at the September FOMC meeting.
The Jackson Hole Federal Reserve symposium held later this week will give Chief Powell an opportunity to further develop his feelings on our economy and inflation. So, price volatility at these higher levels of gold and silver is still on the table. But for now, bullish sentiment rules and the bears will remain sidelined until this latest rising trend in the metals cools.
Reuters (Anushree Ashish Mukherjee) – Gold extends record rally on dollar weakness, rate-cut bets – “Gold prices extended their record run on Tuesday, rising more than 1%, driven by a weaker dollar and growing investor confidence that the Federal Reserve will cut interest rates in September. U.S. gold futures gained about 1.1% to $2,569.00. The dollar index sank to a seven-month low against its rivals, making gold more attractive for other currency holders, while the yield on the benchmark U.S. 10-year note fell 3.4 basis points from Monday. Western investors are cautious ahead of the Jackson Hole meeting on Friday and some signs that traders in Shanghai are back on the bid in gold are supporting gold prices to new highs, said Daniel Ghali, commodity strategist at TD Securities. Positioning in gold might be overextended, with expectations of significant Fed rate cuts possibly leading to a correction if this narrative is challenged, he added. Traders will be closely monitoring the minutes of the Fed’s July policy meeting on Wednesday and Fed Chair Jerome Powell’s keynote speech at the Jackson Hole symposium at the end of the week for more cues on rate cuts. Traders see a 73.5% chance of the Fed cutting interest rates by 25 basis points in September, according to the CME FedWatch Tool. Gold, which tends to thrive in a low-interest-rate environment, has risen more than 20% so far this year and heading for the best year since 2020. “Geopolitical uncertainties, the rise in speculative interest, and substantial global ETF inflows are further fueling the bullish trend in gold” said Joseph Cavatoni, market strategist at World Gold Council. Holdings of SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, jumped to their highest in seven months at 859 tons on Monday. Spot silver rose 1.2% to $29.84 per ounce, platinum gained 0.6% to $959.00 and palladium was up 1.5% at $945.85.”
On the day gold closed up $9.50 at $2511.30, and silver closed up $0.22 at $29.46.
On Wednesday the price of gold saw a mild drift to the downside, in what looks like a halfhearted attempt to test support at $2500.00. Then again it could be just the typical sideways action traders expect waiting for fresh news. The bulls will have to be patient in this range as the market trades between $2475.00 and $2525.00 in the short term. If the Fed holds interest rates steady in September, we are likely to test support around $2475.00. If they cut rates, even a quarter point, traders will push the bullish envelope anticipating $2600.00. The bigger picture here is that there is likely not much present downside and new highs are in the making.
FXEmpire (Christoher Lewis) – Gold Continues to Look Strong Long Term – “The gold market is likely to see a lot of noise at the moment, but it is also the FOMC Meeting Minutes late on Wednesday that we are going to react to next. After all, there are a lot of ideas that the Fed may cut aggressively. Technical Analysis – The gold market has been pretty sideways over the last couple of days, although Tuesday was positive, Wednesday is very quiet. At this juncture, it’s worth noting that the FOMC meeting minutes come out late on Wednesday, and I think that has a major influence on where we go next. Short-term pullbacks are potential buying opportunities, with the $2,475 region offering quite a bit of potential support, as it was potential resistance. If we can break above the highs of the Tuesday session, that would obviously be very bullish, and I think it would show the market getting ready to continue going higher. The FOMC meeting minutes come out late in the day on Wednesday, and I think that will be a big mover. But really, at this point, I think it’s hard to deny the fact that we are in a major uptrend, and therefore one would assume that it should continue to be so. Short-term pullback should see plenty of buyers, especially near the 2400 level where the 50-day EMA is hanging around right along with the uptrend line. This is a market that I think will continue to be very noisy. But ultimately, anytime it falls, it seems like there are plenty of people out there willing to buy gold. This does make a certain amount of sense. After all, we have a major geopolitical time bomb out there with so many negative things going on at the same time and we have central banks cutting rates. Furthermore, we have central banks buying gold, which also puts a bit of a floor in it. I’m a buyer of dips as I think we will go higher. Silver Continues to Look Bullish – Silver continues to look bullish, although it is also a bit stretched at this point in time. The market will continue to wait for the FOMC Meeting Minutes and will also pay attention to the reaction of the US dollar in general. Technical Analysis – Silver rallied slightly during the early hours on Wednesday as we continue to see upward pressure, but I think at this point in time, the market is likely to try to break above $30 level is a large psychologically significant figure in an area that caused some problems on Tuesday. This is a market that has been very bullish over the last week or so and I do think at this point, we have gotten so far ahead of ourselves that a little bit of a pullback I don’t think would be a huge surprise and I don’t necessarily think it would be unhealthy. At that point, we would have to be looking at this market through the prism of perhaps offering value. Ultimately, this is a scenario where if we were to break above $30, then we could go looking to the $31.50 level, possibly even the $32 level. If we do pull back from here, I’d pay attention to the 50 day EMA because that of course is an indicator that a lot of people watch anyway. And then after that, the $28.50 level offer and support also. I have no interest in shorting silver, although I don’t necessarily want to chase silver all the way up at this extended area, at least in the short term. All things being equal, this is a market that I think continues to see a lot of value hunting if and when it presents that opportunity, as has been the case for some time now.”
On the day gold closed down $2.90 at $2508.40, and silver closed up $0.02 at $29.48.
On Thursday the price of gold opened choppy but quickly sold off, breaking below the much watched $2500.00 level, reaching $2470.00 before traders bought the weakness in the early trade. Apparently improving home sales looked like a small economic red flag and traders decided a profit taking round was the safest bet. There are, however, mixed economic signals which has been the elephant in the living room for months. In my mind our economy is doing just fine and any suggestion that the Fed might lighten up between now and the end of the year will charge up the bulls. Keep in mind that high interest rates slow economic growth and can reflect badly on the presiding President. And while the FOMC is impartial they don’t want to rock the boat so this latest drop in the price of gold is another opportunity to take advantage at what looks like higher prices in both gold and silver becoming a reality over the next decade.
FXEmpire (Christopher Lewis) – Gold Continues to Work Off Froth – “The gold market has been bullish for some time now, and on Thursday, we are trying to sort out whether we are comfortable with the idea of the market above the $2500 level. Technical Analysis – Gold markets have pulled back just a bit in the early hours on Thursday as we continue to see back and forth choppiness. Ultimately, we are hanging around $2,500 trying to sort out whether or not it is going to be supportive enough to turn the market around and allow it to go higher. I do think eventually we will go higher, but whether or not $2,500 holds remains to be seen. Even if it doesn’t, I won’t necessarily change my outlook. I recognize that it is bullish and probably will remain bullish. If we can break out to a fresh new high, that opens up a move to the $2,550 level, but that might take some time. On a pullback, I think that there is plenty of support near the $2,480 level, and then again at the 50-day EMA, which sits just above the crucial $2,400 level where the uptrend line is hanging about. All things being equal, there are plenty of reasons for gold to go higher. For example, the central banks, especially in Asia, are purchasing gold hand over fist. On the other hand, we also have to keep in mind that there are plenty of geopolitical risks out there that could lift gold. And then finally, lower interest rates could have a major impact on where we go next due to the fact that you don’t get paid as much with a bond, so people are willing to pay for storage of the metal. All things being equal, everything lines up for higher goals and prices, but we also have to work off some of the froth as well.”
On Thursday gold closed down $29.50 at $2478.90, and silver closed down $0.47 at $29.01.
On Friday the price of gold again surprised, reversing direction and making up for yesterday’s big loss. The big question, however, is whether traders will confuse this trade by testing support? The answer is that “testing support” is critical and provides answers to three important questions. (1) It helps confirm relative price direction. (2) it provides important insight relative to the current momentum problem. (3) it may provide a reliable roadmap to all-time highs for gold.
Still higher prices in the short term are a stretch. I worry about profit taking rounds when gold is bouncing around $2500.00 and losing momentum. But our economy continues to improve, and the feeling is that interest rates will eventually move lower. This will ultimately set the stage for record high prices in both gold and silver in my opinion. But the “how and when” process is far from clear so “patience” remains a key factor to this still developing puzzle.
On the day gold closed up $29.50 at $2508.40, and silver closed up $0.78 at $29.79.
Platinum closed up $11.80 at $960.40, and palladium closed up $22.50 at $942.50.
Jim Wycoff (Kitco) – “Technically, December gold bulls have the strong overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at $2,600.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $2,450.00. First resistance is seen at Thursday’s high of $2,551.40 and then at the contract high of $2,570.40. First support is seen at the overnight low of $2,519.80 and then at this week’s low of $2,506.40. September silver futures bulls have the overall near-term technical advantage. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $31.00. The downside price objective for the bears is closing prices below solid support at $28.00. First resistance is seen at this week’s high of $30.03 and then at $30.50. Next support is seen at $29.00 and then at this week’s low of $28.78.”
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