Gold – The “No Hurry” Fed
Commentary for Friday, Feb 23, 2024 (www.golddealer.com) – Today gold closed up $18.90 at $2038.60, and silver closed up $0.20 at $22.97. Gold surprised even insiders today as it threatened $2040.00 out of the clear blue sky. Perhaps this strong finish will remind us of the popular 1930 story by Watty Piper – The Little Engine That Could. If you belong to the right age group, you will remember the story of a little train engine that would not give up despite hardships, finally arriving at her destination summoning the children to enjoy the festivities. So how does this story relate to gold’s pricing journey? Gold has had to work at staying above $2000.00, and in its own way believes the Fed will cut interest rates. But the January FOMC minutes suggest that the Fed is in no hurry to change interest rate policy. So, will gold remain stuck in the snow avalanche that stopped the train in our story? Or will it continue to define lasting value, eventually making all-time highs? The majority of those in the physical market believe that gold will eventually toot its whistle, rewarding those who did not get discouraged on the road to price appreciation. Last Friday gold closed at $2011.50 / silver at $23.46 – on the week gold was higher by $27.10 and silver was lower by $0.49.
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.
We were closed Monday, February 19th President’s Day. Banks, the Post Office, Wall Street and the commodity markets were also closed.
On Tuesday the price of gold opened on the firm side, this first day of a short trading week. It moved from $2020.00 through $2030.00 before settling somewhat lower on the day. China lowering its key interest rate and a weaker dollar supported a higher price in gold.
The Dollar Index lost a half point in the early trade, not a big deal but an important outside factor supporting the price of gold this morning.
This looks like another rainy morning in Los Angeles as President Biden visits LAX for his third fund raiser in three months. And the chaos continues as to whether former President Trump can run again against President Biden. A legal question which will likely have to be sorted out by the Supreme Court before November. Which guarantees more political drama from both sides, and likely no real progress in matters of importance to the working class.
Christopher Lewis (FXEmpire) – Gold Continues to See Buyers Jumping Into The Market – “The gold markets continue to see a lot of inflows, as there are a lot of reasons to think that the gold market could continue to go higher over the next several weeks, if not years. Gold Markets Technical Analysis – You can see gold has rallied above the 50 day EMA during the trading session and it now looks as if we are ready to go much higher. That being said, this is a market that has a lot of noise around it and of course you have to be somewhat cautious as to what you do with your position size anyway, after all gold does tend to be very noisy. So, with that being said, it’s likely that we have a scenario where short-term pullbacks continue to find plenty of buyers. I think down here at the $2,000 level is a beginning area of massive support down to the $1,980 is something that you have to pay close attention to. The 200-day EMA sits underneath there as well. So, with all of that being said, it has to come in and technical traders will have to acknowledge that. On a move higher, the $2,060 level followed by the $2,075 level, both could cause major issues. But I think it is becoming apparent that the best strategy is buying on dips. I don’t necessarily think that you want to chase it with a huge position, but the last couple of days, I have been telling you that this is a market every time it pulls back, the buyers get involved, and that’s what we continue to see. Pay attention to the 10-year yields in the United States because they will have a major influence on gold. The US dollar will have a major influence on gold and of course, geopolitical concerns, which there are plenty of, will continue to have a major influence on gold. If we can clear the $2075 level, gold is going to take off. You can see the air pocket that we hit on December 4th when we had that wicked spike in early Asian trading. With that, I remain bullish, but I recognize it’s going to be pretty choppy. Make sure to be cautious with your sizing, but I think it is obvious that there is only one direction at this point.” Silver Price Forecast – Silver Continues to Show Signs of Strength – The silver markets continue to look bullish at this point, as we have a few major levels making themselves known as we continue to see buyers on dips. Silver Markets Technical Analysis – You can see that we have bounced a bit to save the 50 day EMA as support and as I record this, we are currently testing the 200 day EMA, which of course will capture a lot of attention. Above, we have a significant barrier in the form of $23.50, that is followed by $24.50 and then eventually $26. When you look at the action of silver over the last several years, the area between $22 and $26 has been an area of intense focus for the market. We have broken out of this area a couple of times, but in general, we’ve stayed in this general vicinity. I think this is a market that continues to be “buy on the dip” and that does make a certain amount of sense considering that central banks around the world will be loosening monetary policy this year. Furthermore, pay close attention to the US dollar, which has fallen a bit during the trading session so that does help silver as well. If we can break above the $23.50 level, I think you’ll see people adding to positions, trying to push it to that crucial $24.50 level. Short-term pullbacks offer buying opportunities, and the $22 level underneath, I think, is your hard floor in the market. You can make out over the last, say, six weeks that we have formed a bit of a W pattern, which will attract a lot of attention as it is a widely followed technical pattern. You should also pay attention to the 10-year yield in America. If it starts to drop, that will hold silver, and of course, gold which silver quite often will follow in and of itself. However, never forget that there is the industrial demand part of the equation as well, so silver can be a bit more volatile than gold as well at times because of this.”
On the day gold closed up $16.00 at $2027.50, and silver closed down $0.33 at $23.11.
On Wednesday the price of both gold and silver were a bit on the soft side which must be a disappointment to the bulls who enjoyed a nice pop in prices yesterday. Still all eyes will be on the release of the last FOMC minutes (Jan 30th and 31st) as traders once again look for clues as to what the Fed has on its mind and when it might shift interest rate gears.
All this ruminating is of course speculation because the proof of the pudding will be tasted after the FOMC meeting which will be held March 19th and 20th. That confab could move the needle because the Fed will offer a summary of their economic projections.
Whether those projections will be positive or negative for gold will hinge on the direction of interest rates. More specifically, are rates trending lower, remaining steady, or moving higher?
Higher interest rates are a fact these days and generally they create an expectation that these higher interest rates will eventually move inflation lower. But the key to this thinking revolves around how long the Fed can keep rates higher without pushing the economy into recession.
The much awaited minutes of the last FOMC meeting were released today and most everyone was disappointed that FOMC members remain hawkish relative to interest rates. This was not unexpected, but the bright bullish light which helped push gold back above $2000.00 is starting to dim after seriously considering the January minutes. And the number of those who still believe the Fed will turn dovish anytime soon, may be moving rapidly lower.
If you are looking for something less bearish in the tea leaves consider today’s aftermarket, which was up a few dollars. So gold is not exactly falling out of bed. But the sobering realization that lower interest rates are not right around the corner may stymie speculation of higher gold prices at least through the summer months.
On the day gold closed down $5.20 at $2022.30, and silver closed down $0.26 at $22.85.
On Thursday gold held steady finishing mildly in the red, ignoring mixed growth in the US economy and the latest Purchasing Managers Index (PMI). The Dollar Index was steady around 104.00. These factors have calmed the market and produced small changes in the price of gold.
So, what to do while waiting for the second shoe to fall? Enjoy a quiet week and join everyone else in second guessing FOMC developments and its “subject to change” interest rate policy.
FXEmpire (Christopher Lewis) – Gold Continues to Struggle in The Same Region – “In gold, as you can see, we did rally a bit early during the trading session on Thursday as the $2,030 level continues to offer a bit of resistance, which happens to be where the market fell apart from the surprise CPI announcement during the previous week. This, of course, is a region in the market that will continue to be important, and therefore traders will continue to pay attention to how the market behaves at that price. With that being the case, I think a little bit of a pullback does make some sense due to the fact that there’s a little bit of market memory here on short-term charts. We are also in the middle of the overall consolidation, and that’s commonly a place where you’ll see a little bit of trouble. This has been a very strong move to the upside, and it’s been stubbornly bullish, because every time we rally and give up some gains, we turn around and rally again, only to give those up again.”
Reuters (Anjana Anil) – Gold climbs on dollar retreat and conflict-driven demand – “Gold prices rose on Thursday, driven by a retreating U.S. dollar and safe-haven demand on the back of the Middle East conflict while investors await further U.S. economic data for a steer on interest rate expectations. The dollar weakened against a basket of currencies. The dollar index was down 0.2% making bullion more appealing to buyers holding other currencies. “Gold price gains today are correlated to the softening of the U.S. dollar ahead of the release later today of the PMI number,” said Ricardo Evangelista, senior analyst at ActivTrades. “We also have lingering geopolitical instability, which favors the safe-haven gold, and also uncertainty about the economic outlook, with Japan and the UK both now in technical recession … alongside China.” Conflict in the Middle East has intensified with Israel’s bombardment of Rafah in Gaza’s south. On the data side, the focus is on initial jobless claims at 1330 GMT and U.S. manufacturing and services data scheduled for 1445 GMT. “Any signs of economic weakness could spark hope that rate cuts could be on the way, which may assist gold,” said Tim Waterer, chief market analyst at KCM Trade. Lower interest rates boost the appeal of holding non-yielding gold. Minutes of the U.S. Federal Reserve’s latest policy meeting released on Wednesday showed that a majority of the central bank’s policymakers are concerned about the risks of cutting interest rates too soon. Markets are pricing in about a 72% chance of a June rate cut, the CME Fed Watch Tool. In other precious metals, spot platinum was up 1.5% at $895.90 an ounce, palladium rose 0.3% to $951.97 and silver gained 0.6% to $23.02.”
On the day gold closed down $2.60 at $2019.70, and silver closed down $0.08 at $22.77.
On Friday gold finished the week with a happy surge to the upside as prices moved from lows of $2015.00 to highs on the day of $2040.00. And while it may seem that the price of gold is “stuck” the physical market is patiently waiting for the next round of higher prices.
This enthusiasm is bolstered by the unraveling state of world affairs. And the unending rise in world debt. Patience is required to get through this shifting sentiment but with the long term view in mind those who hold steady during this transition should be nicely rewarded.
Reuters (Anjana Anil) – Gold holds ground as dollar weakens, US rate cut hopes dim – “Gold prices held steady on Friday but were set for a slight weekly gain buoyed by a softer dollar and safe-haven demand from escalating tensions in the Middle East, even as U.S. Federal Reserve officials bruised hopes of early rate cuts this year. The dollar index was heading for its first weekly dip in almost two months. A weaker dollar makes greenback-priced bullion less expensive to overseas buyers. “Gold is up primarily on the fact that the U.S. dollar is a little weaker,” said Bob Haberkorn, strategist at RJO Futures. “It’s a delicate walk right now in the precious metals market, but there is a lot of safe haven buying despite the rates being as high as they are.” Fed Governor Christopher Waller said on Thursday that he was in “no rush” to cut rates, firming investor bets against U.S. interest rate cuts before June. Most policymakers at the Fed’s last meeting were concerned about the risks of cutting interest rates too soon, the minutes showed. Recent data showing higher-than-expected U.S. consumer and producer prices also dashed speculation about an early interest rate cut, further weighing on bullion. Lower interest rates boost the appeal of holding non-yielding bullion. “More hawkish comments from Fed officials overnight have been a modest drag for the yellow metal,” said UBS analyst Giovanni Staunovo. A surge of interest in bitcoin exchange-traded funds (ETFs) is prompting investors to swap out holdings in gold-backed ETFs. Spot platinum dropped 0.3% to $904.25, palladium gained 0.9% to $976.91. Silver lost 0.2% to $22.70 and was down 3% so far in the week.”
On the day gold closed up $18.90 at $2038.60, and silver closed up $0.20 at $22.97.
Platinum closed up $4.30 at $906.00, and palladium closed up $18.30 at $985.20.
Jim Wycoff (Kitco) – “Technically, the gold futures bears have the slight overall near-term technical advantage. Prices are in a 2.5-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 the February high of $2,083.20. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,950.00. First resistance is seen at this week’s high of $2,045.50 and then at $2,050.00. First support is seen at this week’s low of $2,023.90 and then at $2,007.60. The silver bears have the overall near-term technical advantage. However, a nine-week-old downtrend on the daily bar chart has been negated to suggest a market bottom is in place. Silver bulls’ next upside price objective is closing March futures prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at the February low of $21.975. First resistance is seen at $23.00 and then at Thursday’s high of $23.20.”
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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