Gold – The Bearish Scenario
Commentary for Friday, Feb 2, 2024 (www.golddealer.com) – Today gold closed down $16.90 at $2036.10, and silver closed down $0.43 at $22.70. Gold dipped on the open today after the January jobs report roared, coming in at nearly double the expected number. This after a strong jobs showing in December suggests dynamic US employment growth. Results like this may shield the US economy from recession and offer the FOMC hawkish options which encourage a bearish scenario for the metals. Still, there are several moving parts to this latest optimism which will keep the bears at bay in the shorter term. Insiders will be looking for confirmation of a significant downtrend before rethinking their trading strategy. Last Friday gold closed at $2016.90 / silver at $22.81 – on the week gold was up $19.20 and silver was down $0.11.
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 traded between $2036.00 and $2022.00 with mild safe haven demand as Biden is pressured to retaliate against a terrorist drone attack which killed 3 US soldiers in Jordan. A strong response is unlikely, but the Middle East is always a political hotspot below the surface and Biden promised a response. Still, the President does not need another problem before the election. Today’s short term rise in gold will not amount to much as markets refocus on the FOMC meeting which begins on Tuesday and ends Wednesday. After which Chief Powell will have his usual press conference. I’m not expecting fresh news, but anything which might relate to the Fed’s upcoming meeting in March will create increased speculation. Whether possible shifting sentiment translates into price changes for gold remains to be seen. Generally, however, the closer we get to March the more potential for volatility.
FXEmpire (Christopher Lewis) – Gold Markets Continue to Look For Momentum – “ Gold was rather volatile early during the trading session on Monday, as we continued to look for some type of bigger move. It’s worth noting that the market is using the 50-day EMA underneath, offering massive support, and that short-term pullbacks offer buying opportunities from what I can see, especially with the 2,000 level underneath offering a significant barrier that I believe is more or less a barrier zone of support down to the $1,980 level. In general, this is a situation where you probably continue to see a lot of value hunting, but we could just take off and if we do, 2040 will be the next target, after that 2060, followed by 2075. Anything above the 2075 dollar level really gets the market cooking and at that point in time it becomes a buy and hold scenario. On the other hand, a breakdown below the $1,980 level for me would be a rather significant turn of events and a change in attitude. Keep in mind that the central bank meeting, the Federal Reserve meeting on Wednesday, is going to probably be a major event. Not so much the decision, although it could be if they surprise markets, but I will be focused on the press conference. Where are the Americans going with monetary policy? How quickly are they getting there? That type of thing. The looser monetary policy statement, the more bullish this will be for gold, and of course, vice versa. Pay attention to those interest rates in America because if they drop, that helps gold as well. So, we’ll have to wait and see how this plays out, but I certainly have no interest in selling it, at least not as long as we are above that crucial $1,980 level. All that being said, position sizing will be crucial, but for the longer term, I believe the gold will probably continue to be a very important asset to own due to the geopolitical concerns as well as everything mentioned previously.”
On the day gold closed up $8.40 at $2025.20, and silver closed up $0.38 at $23.14.
On Tuesday the price of gold moved to daily highs ($2048.00) for a short time, reversing to daily lows ($2030.00) and finishing slightly in the green for the day. This created its typically choppy trading pattern and prices firm enough to keep the bulls interested. But I would not expect much change in the price of gold. Insiders are anxious to hear comments from Powell on Wednesday. The trade does not, however, expect enough fresh information to move the needle.
According to Vladimir Zernov (FXEmpire) consumer confidence reached two year highs amid declining pessimism about the future. This figures if inflation softens, our economy continues to show improvement and America adjusts to changing interest rates. Physical gold and silver bullion always have a place in this changing economic picture. The less “fear factor” the less interest in the physical metals. The more “fear factor” the more interest in making sure investors create a safe haven outside government intervention. The price of gold today is elevated ($2000.00) which tells you that folks are not ready to completely trust world leaders.
Reuters (Anushree Ashish Mukherjee) – Gold scales two-week peak as market focus turns to Fed meeting – “Gold prices climbed to a two-week high on Tuesday, supported by a softer dollar and lower Treasury yields while focus turned to the Federal Reserve’s policy meeting for insight into how soon it will cut interest rates this year. “A big part of gold moving is rates have been coming off and the dollar is in the red, but we are seeing the market elevated due to the anticipation for the Fed interest rate decision on Wednesday,” said Daniel Pavilonis, senior market strategist at RJO Futures. The dollar index, opens new tab fell 0.2%, making gold more appealing to other currency holders. The benchmark 10-year Treasury yields hit a two-week low. Lower interest rates decrease the opportunity cost of holding bullion. The Fed’s policy decision is due on Wednesday, having made a dovish turn in the December meeting. Markets are widely expecting the U.S. central bank to leave rates unchanged at the end of the two-day meeting. Fed wants to have a steady market so we may not see that many rate cuts, and Powell is going to be neutral and talk about the possibility of lowering interest rates, Pavilonis added. Last week data showed moderate growth in U.S. prices in December, keeping annual inflation below 3% for a third consecutive month and potentially allowing the Fed to begin cutting interest rates this year. A Reuters poll showed on Monday that uncertainty about the economy and U.S. interest rate cuts could drive record gold prices in 2024. Spot silver rose 0.3% to $23.28 per ounce, hitting its highest level since Jan.15 earlier in the session. Spot platinum fell 0.2% to $925.26 an ounce and palladium lost 0.2% to $981.21.”
On the day gold closed up $6.30 at $2031.50, and silver closed down $0.03 at $23.11.
On Wednesday gold again surprised, as it moved from testing support at $2035.00 through testing daily highs around $2055.00. Gold finally settled off highs on the day, but dealers did not immediately sell the rally and its price remained elevated through the close. Which might suggest insiders are looking for and would participate in a rally to the upside. In other words, dealers may be turning towards the optimistic side of the bullish scenario.
Of course, this is my speculation. There are other reasons which may support this push to higher ground. The labor market may be losing momentum according to ADP. The Dollar Index dipped to recent lows this morning (103.00). Safe haven demand is picking up over mixed signals from the Middle East. Still, the market lost more than half of its daily gain in today’s aftermarket so all this noise may amount to no more than a tempest in a teapot.
While against the apparent odds it appears that the Fed may get its “soft landing” as inflation cools. If inflation heads south, it suggests a fresh bearish development for the metals. Logically the price of gold should be moving lower, but paradoxically it moved to recent highs today.
The Fed left interest rates unchanged today, as expected, but Fed Chief Powell added details to the possible outcomes being considered for the more important FOMC meeting in March. The Fed Chief basically argued against an interest rate cut in March. He and his cohorts want to see inflation rates continue lower before taking any further action. But he did leave the door open to a rate cut if the economy substantially weakens. In other words, he described the typical Fed building blocks but rearranged their order. Let’s hope that a plan is in place by March because if this process continues through the summer or fall possible outcomes become more erratic.
Reuters (Anushree Ashish Mukerjee) – Gold prices firm as spotlight shifts to US Fed policy meeting – “Gold gained on Wednesday but was on track to snap its three-month winning streak, while markets were glued to the U.S. central bank’s policy rate outlook discussion later in the day. Gold has declined 0.8% so far this month after surging to a record peak in December, as traders pared back bets of a March start to U.S. rate cuts. We expect algorithmic buying activity to support prices, and strong physical demand and central bank demand, the major components of demand drivers for gold, are lining up in the same direction, said Daniel Ghali, commodity strategist at TD Securities. U.S. private payrolls rose far less than expected in January, data showed, though the pace likely overstates the slowing labor market momentum. The two-day meeting of the Federal Open Market Committee (FOMC) concludes later in the day, with the Fed likely to keep interest rates unchanged. Chair Jerome Powell’s news conference at 2:30 p.m. ET will be watched for insight into how soon the Fed will cut interest rates this year. The odds of a rate cut in March have dropped to about 64% currently, from about 73% a month ago, according to the CME FedWatch Tool. The press conference is where the markets will start to look for any signs that March is indeed on the table for the Fed’s first rate cut, Ghali added. The dollar index, opens new tab fell, but was on course for its best month since September, and benchmark 10-year U.S. Treasury yields hit a two-week low but were also set for monthly rise. Spot silver prices gained 0.1% to $23.19 per ounce, while platinum was up 0.5% at $925.47, and palladium rose 0.3% at $979.28. All three metals were poised for monthly declines.”
On the day gold closed up $16.90 at $2048.40, and silver closed down $0.06 at $23.05.
On Thursday gold moved between $2030.00 and $2060.00, again testing support and overhead resistance while finishing the day mildly in the green. This market, while precarious in nature, seems relatively happy at these higher levels, even as higher interest rates create crosswinds for the bullish scenario. Still, there may be major interest rates shifts, at least in the making that will support higher gold prices. (Reuters) – “Major central banks are now signaling that interest rates will likely move lower in coming months as inflation weakens, calling time on what of what has been the most aggressive tightening cycle in decades. The United States, UK and Sweden all left rates steady this week, with the U.S. Federal Reserve saying it sees lower rates on the horizon. Traders expect the Fed and ECB to start easing around the mid-year mark, while outlier Japan could finally hike rates soon.” Continued patience here by the bulls may prove rewarding.
On the other hand, there are insiders who believe we will not have a “soft” economic landing, we will instead experience a “no landing”. This wording suggests a sticky finish to the drawn out process of unwinding our Rube Goldberg economy. One which offers a perpetual static state of uncertainty. I think this ending is a bit much, but you never know these days, in a country which believes in the free lunch, and political claptrap. Before you claim this is absurd, remember the elections are right around the corner, and each party has its own version of this nightmare.
Reuters (Anushree Ashish Mukherjee) – Gold firms after US jobless claims, focus on NFP data – “Gold prices gained on Thursday after data showed U.S. weekly jobless claims rose last week, while market focus shifted to the U.S. non-farm payrolls data for more cues on the Federal Reserve’s policy path. The Labor Department said initial jobless claims increased to a seasonally adjusted 224,000 for the week ended Jan. 27. A separate report showed that U.S. worker productivity grew faster than expected in the fourth quarter. Gold is still in a “bad hangover” after the Fed’s reaction but a small rally is happening because of the initial claims number, said Phillip Streible, chief market strategist at Blue Line Futures, in Chicago. Other metals like platinum, copper, silver are all down over one percent which may prohibit gold’s chance of any sustained recovery, he added. Investors’ focus now shifts to Friday’s U.S. nonfarm payrolls for further clarity on the interest rate path. “Gold is expected to trade with a neutral to bearish bias, though losses could be limited ahead of the U.S. nonfarm payroll report due on Friday,” said Jigar Pandit, Head Commodity and Currency Business at BNP Paribas’ Sharekhan. Limiting gains in bullion, dollar, gained 0.2%. Spot silver rose 0.3% to $22.96 per ounce, platinum fell 0.8% to $910.66, and palladium shed 2% to $957.46.”
On the day gold closed up $4.60 at $2053.00, and silver closed up $0.08 at $23.13.
On Friday the dip in gold took most by surprise but the smart money will consider this latest “insight” more of a short term “snapshot”. For now, a strong jobs report suggests a renewed hawkish Fed trend, but the FOMC could be considering an interest rate cut by the summer months. This back and forth strategy has always served the FOMC well because it allows them to tap the economic brakes and adjust interest rates as necessary.
Reuters (Anushree Ashish Mukherjee) – “Gold prices slipped on Friday as the dollar and yields jumped following a strong U.S. nonfarm payrolls report, which created some uncertainty about whether the Federal Reserve might start cutting interest rates soon. The dollar index was 0.5% higher, making bullion more expensive for overseas buyers. Benchmark 10-year bond yields also gained. U.S. employers added 353,000 jobs in January, beating the 180,000 jobs economists had expected. A resilient economy and strong worker productivity encouraged businesses to hire and retain more employees, a trend that could shield the economy from a recession this year. With a decline of less than 1% since the data, gold is “holding on like a barnacle despite a whopper of an employment report,” said Tai Wong, a New York-based independent metals analyst. “But we might need to wait a little and see if gold grinds much lower,” added Wong. According to the CME Fed Watch, opens new tab Tool, traders now expect about a 78% chance of a U.S. rate cut in May, compared to 92% before the data. Lower interest rates boost non-yielding bullion’s appeal. Fed Chair Jerome Powell this week dismissed the idea of lowering interest rates in the spring, but voiced confidence that inflation would return to the 2% target. “If these (interest) rates stay where they are and there is a lack of clarity around that, what we’ll likely see is a rather muted environment for the upside for gold,” said WGC market strategist Joseph Cavatoni. Among other precious metals, spot silver lost 2.3% to $22.63 per ounce, platinum fell 0.7% to $906.92 and palladium was down 0.6% at $956.53.”
On the day gold closed down $16.90 at $2036.10, and silver closed down $0.43 at $22.70.
Platinum closed down $20.20 at $893.80, and palladium closed down $22.00 at $945.70.
Jim Wycoff (Kitco) – “Technically, the gold futures bulls have the overall near-term technical advantage. Prices are in a two-month-old downtrend on the daily bar chart. Bulls’ next upside price objective is to produce a close in April futures above solid resistance at $2,100.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $2,000.00. First resistance is seen at the overnight high of $2,074.70 and then at this week’s high $2,083.20. First support is seen at this week’s low of $2,037.70 and then at the January low of $2,023.30. The silver bears have the overall near-term technical advantage. Prices are in a two-month-old downtrend on the daily bar chart. Silver bulls’ next upside price objective is closing March futures prices above solid technical resistance at $23.72. The next downside price objective for the bears is closing prices below solid support at the October low of $21.17. First resistance is seen at $23.00 and then at this week’s high of $23.445. Next support is seen at this week’s low of $22.605 and then at $22.25.”
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
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.
