Gold – To Raise or Not to Raise?
Commentary for Friday, June 9, 2023 (www.golddealer.com) – Today gold closed down $1.40 at $1962.20, and silver closed up $0.07 at $24.33. The price of gold this week was indecisive as traders pondered rather limited but powerful FOMC decisions relative to interest rates. I believe professionals still favor higher interest rates and therefore lower gold prices as this unwinding process continues, but they are less certain given the latest signs of a possible slowing US economy. Reuters (By Deep Kaushik Vakil) – Gold heads for best week in five on Fed rate pause bets – “Gold eased on Friday on a stronger dollar and higher yields but was set for its best week since early May after weaker jobs data bolstered bets for the Federal Reserve to hold pat on interest rates next week. “Gold is oscillating in a $1,940-$1,990 range and is likely to remain so until inflation data and the Fed result next week,” said Tai Wong, a New York-based independent metals trader, adding bullion remains “more sensitive to weak or dovish economic data.” The dollar index bounced off two-week lows, making gold expensive for overseas buyers, while higher 10-year Treasury yields made zero-yield bullion less attractive. Markets now priced in a 72% chance of the Fed standing pat next week, but odds of a hike in July were 67%, the CME Fedwatch tool showed. Traders braced for the U.S. inflation report for May due on Tuesday, a day before the Fed announces its policy decision. China raised its gold reserves for a seventh straight month to 67.27 million fine troy ounces by May-end. Standard Chartered analyst Suki Cooper noted “a sharp increase in the number of central banks looking to add gold in the next five years.” Palladium, used in emissions-controlling devices in cars, plunged to its lowest since May 2019, hovering at $1,304. “Palladium has slumped to four-year lows after weak US and Chinese data and appears to be headed for a new, lower range.” Last Friday gold closed at $1952.40 / silver at $23.64 – on the week gold was up $9.80 and silver was up $0.69.
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 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 gold initially dipped below $1940.00 but fresh data this morning from the Institute of Supply Management (ISM) suggesting rising recession fears was enough to reverse gold’s direction and it quickly challenged $1965.00. This is not a big deal and if you consider Friday’s $25.00 drop into the red traders may just be looking at a mild short covering rally.
Still the threat of an economic slowdown continues to create cross currents between the bullish and bearish trading scenarios. Which means, for the time being, traders will pay super attention to anything which might influence this balance between “recession” and “no recession”.
The outcome of this changing picture will be the determining factor as to where the Fed might ultimately land relative to interest rates. The sad part to this story is that even at this late stage in the interest rate game the FOMC is not exactly sure where this recovery is heading and more importantly whether inflation is moving higher or lower.
Traders looking for higher prices are happy enough to claim that gold put in a short-term bottom at $1940.00. But this may turn out to be a placeholder in a generally bearish market weighed down by higher interest rates. You could make a happier bullish case for the price of gold looking at the worldwide picture of continued spending. But this contains bearish shadows as other central banks worldwide continue to fight rising inflation with higher interest rates.
Reuters (Deep Kaushik Vakil) – Gold rebounds after US services slowdown boosts Fed pause bets – “Gold rebounded on Monday after weaker U.S. services sector growth reinforced bets for the Federal Reserve to stand pat on interest rates next week. The U.S. services sector barely grew in May as new orders slowed, with the Institute for Supply Management’s non-manufacturing index falling to 50.3 last month from 51.9 in April and missing expectations for an uptick to 52.2. The index is seen by some economists as an indicator of the Fed’s favored inflation gauge, as services prices tend to be stickier and less responsive to rate hikes. The dollar index slipped after the data, making greenback-priced bullion more affordable for overseas buyers, while 10-year Treasury yields retreated. Traders pegged the chances of the Fed pausing its interest rate hikes at its June 13-14 meeting at 78%, according to the CME FedWatch Tool. “The market is really taking it in as a reason to pencil out some rate hikes here … It’s certainly something that the Fed is pleased to see with respect to its fight against inflation,” said Daniel Ghali, commodity strategist at TD Securities.”
On the day gold closed up $5.60 at $1958.00, and silver closed down $0.11 at $23.53.
On Tuesday the price of gold was typically choppy, pushing to $1966.00 on a Wall Street Journal headline – “Destruction of Ukraine Dam Floods Front Line, Scrambling Battle Plans”. The notion that this ongoing tragedy will create fresh safe haven demand.
The market stalled at its highs (1965.00), dropped to lows on the day (1955.00) yet managed to finish the day in the green and with a mild upward bias. Gold’s ability to fight for the higher end of the trading range today will be noticed by paper traders and may keep everyone honest, perhaps holding bear raids to a minimum during this unwinding process.
Still, it is difficult to find a wildly bullish story line for gold at these levels. While the technical picture still favors the bulls, the bears are working their way back into the picture. And my bet is that some professionals see more downside than upside at these higher levels.
It should offer encouragement that into the unwinding process, even as interest rates climb, our shiny friend is holding the higher end of its range. Pricing could easily be a hundred dollars less. Do not be surprised however to see gold turn into the Little Engine that Could.
GRANTONGOLD.COM (Zaner) – (1) Gold remains defensive below the $2000 level as ongoing strength in the labor market keeps the threat of inflation highlighted. That in turn makes it difficult to rule out further rate hikes. (2) Silver ended May with a loss of 6%. It was the first lower monthly close in three, as uncertainty over the debt ceiling and growth risks worried investors. (3) Platinum is maintaining a corrective stance, although Monday’s rebound offers some encouragement. (4) Palladium continues to bounce along the bottom, within striking distance of the 4-year low at $1329.18.
On the day gold closed up $7.50 at $1965.50, and silver closed up $04 at $23.57.
On Wednesday gold continued to drift between $1940.00 and $1970.00 waiting for news which might refresh a tired bull market. Traders expecting a Fed pause stand in the way of the more sensible and increasing bearish sentiment created by the expectation of higher interest rates.
The problem with this assessment is that it may take a long time to figure out what the Fed has in mind. This is not a “one and done” FOMC meeting agenda item, they will continue to play with this interest dynamic until they are satisfied that their inflation mandate is accomplished.
Those who fear that an aggressive Fed will push the US economy into recession, a common belief not so long ago, will soon understand that this logic is dated. Our economy is doing just fine, considering the mess created by the pandemic. The latest signs of growth are encouraging and even Wall Street is reinventing itself. All this to say that the price of gold, at this present time is moving lower because its ancillary job, besides being real money, is to reflect public tension. And for the time being most of the public is feeling more relaxed.
Reuters (Brijesh Patel) – Gold subdued with focus on US Fed meeting, inflation data – “Gold prices inched lower on Wednesday due to a slight uptick in U.S. bond yields, although bullion was still stuck in a narrow range as investors looked forward to inflation data and Federal Reserve policy meeting next week. Benchmark 10-year Treasury yields ticked higher to 3.706%, increasing the opportunity cost of holding non-interest bearing gold. “Yields have remained relatively elevated keeping some light pressure on the gold market,” said David Meger, director of metals trading, High Ridge Futures. “Clearly inflation is still the main focal point of this market. At this point the expectation is that the Fed is going to pause. However, if those inflationary numbers remain extremely elevated, you could see a shift in outlook.” The U.S. inflation report for May, due June 13, ahead of the Fed meeting, will provide more clarity about the health of the world’s largest economy. While traders anticipate a nearly 77% chance that the Fed will hold interest rates in the 5%-5.25% range, they see nearly 54% odds of another hike in July, according to the CME FedWatch tool. Weaker U.S. services sector growth data earlier this week also reinforced bets for the Fed to stand pat on interest rates at the June meeting.”
On the day gold closed down $22.80 at $1942.70, and silver closed down $0.13 at $23.44.
FRAUDULENT SCHEME TARGETING SHIPPERS OF HIGH VALUE ITEMS
The North American Collectibles Association has recently become aware of a fraudulent scheme targeting shippers of high value items. Thieves are obtaining shipping data of packages and calling in to Carriers to request that specific packages be rerouted to be ‘held for pickup’. The thieves then produce ID matching the name on the label and disappear with the package. We are now strongly recommending all customers request a restriction on their respective accounts with Carriers to not allow any rerouting of packages.
On Thursday gold opened quietly but quickly pushed to daily highs ($1970.00) as the Dollar Index fell from steady around 104.00 through daily lows (104.45) a substantial drop, created over fresh news that weekly jobless claims surged higher. This will raise the odds of a Fed “pause” in interest rates giving the economy breathing room. More clarity will be provided with next week’s FOMC meeting. I think a pause is unlikely, but that is now a minority opinion.
One this is sure; the Fed always keeps its interest rate options open. If they slow interest rates in the short term it does not mean they cannot speed them up by the end of the year.
Reuters (Brijesh Patel and Ashitha Shivaprasad) – Gold jumps 1% as weak US jobs data lifts Fed pause prospects – “Gold prices climbed 1% on Thursday after data showed U.S. weekly jobless claims surged last week, cementing expectations that the Federal Reserve will pause its interest rate hiking cycle. The number of Americans filing new claims for unemployment benefits surged last week, suggesting that the labor market was slowing amid mounting risks of a recession. “This data shows a further weakness in the US economy, which is good news for gold as it will allow the Fed to be on hold,” said Edward Moya, senior market analyst at OANDA. “If we get further softness in inflation, if the Fed holds and they really don’t signal a strong likelihood of a hike for the next meeting, then there is a good case for gold to edge higher.” Following the jobs data, the dollar slipped 0.4% to a near one-week low against its rivals, making gold less expensive for other currency holders, while benchmark U.S. 10-year Treasury yields tumbled. Money market participants now see a 76% chance that the U.S. central bank will skip raising interest rates at its policy meeting next week, up from nearly 66% earlier, according to the CME’s Fedwatch tool. Lower U.S. interest rates put pressure on the dollar and bond yields, increasing the appeal of non-yielding bullion. The U.S. consumer inflation report for May, due on June 13, could provide more clarity about the health of the world’s largest economy. “There’s a lot of uncertainty and you could see it in gold prices, if yields really start to back off here, then gold could move much higher,” said Daniel Pavilonis, senior market strategist, RJO Futures.”
On the day gold closed up $20.90 at $1963.60, and silver closed up $0.82 at $24.26.
On Friday gold closed with little fanfare and virtually no buzz, which is interesting considering the amount of aggressive trading “noise” which has been created this week. I’m beginning to like the silver bullion market again even at these elevated levels and the public is still in love with monster boxes for immediate delivery. This bodes well for the silver investor, especially in the longer term. It is the gold market that has me worried because I can’t convince myself that the Fed will “pause” even though this bullish sentiment is growing. The public, however, seems optimistic and the traffic into the store and parking lot continues to increase.
Jim Wycoff (Kitco) – “Technically, the gold futures bulls have the overall near-term technical advantage. Bulls’ next upside price objective is to produce a close in August futures above solid resistance at $2,000.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at the May low of $1,949.60. First resistance is seen at this week’s high of $1,986.50 and then at $2,000.00. First support is seen at $1,965.00 and then at the May low of $1,949.60. The silver bulls have gained the overall near-term technical advantage. Silver bulls’ next upside price objective is closing July 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 May low of $22.785. First resistance is seen at $24.75 and then at $25.00. Next support is seen at $24.12 and then at $24.00.”
On the day gold closed down $1.40 at $1962.20, and silver closed up $0.07 at $24.33.
Platinum closed down $1.10 at $1020.90, and palladium closed down $53.50.
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