Gold – Volatility Increases
Commentary for Friday, May 3, 2024 (www.golddealer.com) – Today gold closed down $0.20 at $2299.00, and silver closed down $0.13 at $26.45. Price volatility this week certainly took the buzz out of bullish sentiment in the short term, but let’s not prematurely frown. This volatility may be the harbinger of good news for those who are patient and looking for price stability. On Monday of last week gold lost $66.20 and on Tuesday of this week it lost another $54.00. Before you read too much into these volatile swings consider a more optimistic view. It is obvious that gold is settling and moving lower, but this correction is what this overbought market needed to reset the stage for reliable pricing. The big question remains, will the Fed lower interest rates in the short term? On Wednesday of this week Jerome claimed it was not going to happen, and he is probably right. But according to Reuters on Friday US jobs slowed more than expected in April and the increase in annual wages fell below 4.0% for the first time in three years. So, there is some pushback by academics relative to the bottom line when it comes to interest rates. If the Fed hints at lower interest rates this year gold will soar. Insiders believe there is not much chance that interest rates will move higher because the economy is already slowing down. I look for a quiet, orderly trade, which reminds us that physical ownership of gold bullion has no substitute in this troubled world. Last Friday gold closed at $2334.80 / silver at $27.24 on the week gold was down $35.80 and silver was down $0.79.
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On Monday the price of gold opened the week quietly, trading between $2330.00 and $2346.00, but still managed to finish the day mildly in the green. This week may produce volatility as the Federal Reserve Open Market Committee meeting begins on Tuesday and ends Wednesday afternoon. Chief Powell will then take part in his usual press conference. Few expect anything new in this exchange, but the Wall Street Journal claims that interest rates will persist in the longer term, which is a minus for the bullish gold scenario and could portend further downside.
Still, there are enough trouble spots in this world to support these higher gold prices. But no fireworks to push gold higher as the US is hopeful that Hamas will accept Israel’s new ceasefire offer. These crosscurrents create a pensive trade, and the optimist is hoping the worst is over in the short term. If so, this would portend price stability, a plus for gold at these higher levels.
FXEmpire (Christoher Lewis) – Gold Continues to See Supportive Action – “Gold continues to see a lot of volatility, but in the end, it sees more support than anything else. This is a market that should be approached with a bit of caution as far as position size is concerned. Gold has initially fallen overnight during the off hours on Monday, but at this point in time, it does look like it is trying to do everything it can to recover and perhaps take off to the upside. In general, this is a market that I think will be very noisy but bullish underneath. The $2,300 level is likely to be an area of significant support and I do think a lot of people will be paying close attention to it. If we were to break down below the $2,300 level, then the 50 day EMA comes into the picture. The market has been strong for some time, and I just don’t see how it will change anytime soon, especially considering there are so many concerns out there. Nonetheless, I like this market. I like buying short term pullbacks, and those pullbacks should continue to attract a lot of inflows. The $2,400 level above is a major resistance barrier, and I think at this point we might be trying to come into a $100 consolidation area working off some of the froth from the massive shot higher. I have no interest in shorting gold because I think gold is far too strong and there are far too many concerns out there that could make gold go higher, and as a result you have to think of dips in this market as an opportunity to pick up the possibility of “cheap gold.” This is the way the market has been trading for some time, and it should continue to do so unless we see some kind of major change in attitude and fundamentals.”
On the day gold closed up $10.60 at $2345.40, and silver closed up $0.13 at $27.37.
On Tuesday the price of gold dropped like a rock even before Chief Powell had a chance to offer his perspective tomorrow and the paper trade did not seem interested in buying this dip before the close as gold finished on lows of the day. This is not good for the bulls but might be healthy in the long term for building positive sentiment. Perhaps laying the groundwork for all-time highs. Still this drop is a significant blow to the bullish scenario, especially in the short term.
The reason for the rather sudden retreat is likely a combination of two factors. The first being profit taking in the paper market, with gold up almost $130.00 this past month this must figure into the equation. And second, the trigger looks like the bulls have placed any hope of a significant interest rate reduction on the back burner, the Wall Street Journal claiming that interest rates will remain higher because the Fed is worried about inflation. So goes the volatility in the price of gold as the FOMC deals with an uncertain interest rate future. I would not be surprised to see more sudden moves in gold, one way or the other before Christmas.
FXEmpire (James Hyerczyk) – Gold Market Update – “Gold is trading lower on Tuesday, positioning itself below $2,320 per ounce as traders anticipate the upcoming Federal Reserve meeting on Wednesday. Despite this dip, gold is on track to achieve its third consecutive monthly gain, with an increase of nearly 4% for the month.” Federal Reserve’s Impact – “The focus is on the Federal Open Market Committee’s decision due this Wednesday, where a hawkish shift is expected in response to recent inflation trends. Swaps traders have adjusted their expectations, now foreseeing a maximum of two rate cuts by year-end, the fewest since November 2023, according to Bloomberg. Higher interest rates generally dampen gold’s attractiveness since it yields no interest. Strong Demand and Geopolitical Tensions – “Gold’s year-to-date surge of over 12% is supported by robust demand from Asian markets, particularly China, and ongoing geopolitical tensions in regions like Ukraine and the Middle East. The World Gold Council reported a record start to the year in central bank gold purchases. Moreover, a weakening US dollar, partly due to speculation around Japanese intervention in currency markets, has also bolstered gold prices.” Market Outlook and Influences – “While geopolitical instability and central bank demand have been key drivers of gold’s recent gains, the focus has shifted towards macroeconomic indicators and central bank policies. The upcoming U.S. non-farm payrolls data and Federal Reserve’s policy direction will be critical in shaping market expectations. Despite the current pullback, analysts from ANZ maintain a positive outlook on gold, anticipating a potential rise to $2,500 after a healthy correction.” Short-Term Forecast – “The Federal Reserve’s anticipated hawkish pivot could significantly influence the financial terrain, particularly affecting interest rates and the value of the U.S. dollar. A hawkish stance generally leads to higher interest rates, which could boost the dollar as yields become more attractive relative to other currencies. This strengthening of the dollar typically exerts downward pressure on gold prices, as it becomes more expensive in other currencies, reducing demand. However, the long-term outlook for gold remains fundamentally bullish. Despite potential short-term declines due to a stronger dollar and higher rates, the ongoing geopolitical risks and sustained demand, especially from central banks and Asian markets, provide strong support for gold prices. Additionally, if the escalation of geopolitical tensions continues, it could revive gold’s appeal as a safe-haven asset, counterbalancing the impact of a stronger dollar. In summary, while the Fed’s hawkish actions could temper gold’s rise temporarily, the enduring demand and macroeconomic uncertainties suggest that gold’s price path is likely to ascend once these immediate pressures abate. Technical Analysis – “The short-term trend is down, but the intermediate-term trend is up. Despite several days of consolidation, traders remain nervous because of the current distance between the short-term bottom and the up trending 50-day moving average. A sustained break under the April 23 short-term bottom at $2291.46 could trigger an acceleration to the downside into the 50-day moving average at $2218.07. However, recapturing the minor top at $2352.64 could breathe some life into the lingering bulls.”
On the day gold closed down $54.00 at $2291.40, and silver closed down $0.98 at $26.39.
On Wednesday the price of gold moved higher on the open looking at $2310.00 before settling somewhat lower but finishing the day nicely in the green. The FOMC did not change interest rates this time as expected. This better than expected bounce to the upside is the result of mild bargain hunting as the Dollar Index came off highs on the day after yesterday’s price disaster. Some believe gold and silver will remain defensive given the higher interest rate environment. Still others remain bullish claiming that our shiny friend is only resting and will soon surge in price because gold and silver bullion are unique monetary assets. Independent of government guidelines and are even more important in this hostile world regardless of price.
FXEmpire (Christopher Lewis) – Gold Continues to Look For Buyers Ahead of FOMC – “Gold continues to have traders looking for answers, as the darling of the commodity markets seems to be taking a breather here. The gold market bounced a bit during the early hours on Wednesday as the FOMC looms large. The FOMC meeting could of course have a major influence on where we go next but at this point, I think you’ve got a situation where traders are somewhat concerned about what Jerome Powell may say and probably with good reason – quite frankly because if he does end up being very hawkish this could be a situation where Gold truly plunges down to the 50-day EMA maybe even down to the $2,200 level. All things being equal, I think this is a situation where traders come in and pick up value. However, if we can take out the top of the candlestick during the Tuesday session, then gold should go looking to the $2400 level. In general, this is a market that I’m bullish on, but I also recognize that you have to keep in mind that we were a little overdone to the upside for a while and therefore, I think ultimately this is a market that does go higher, but the question is will it pull back fifty dollars in the process? That’s the part I would be concerned about. I would keep my position size reasonable because obviously there will be a lot of noise around that FOMC press conference. Expect a lot of nonsense in the meantime, but in the end, we will more likely than not see a continuation eventually. That is the key though, eventually. I think a correction has been needed for some time, and the FOMC announcement has been the perfect excuse to make it happen.”
I think that when gold takes a nosedive, there is always an overreaction in that investors look for this anomaly to continue in a domino fashion. In other words, bearish sentiment grows too rapidly. So, if you are looking for something completely out of the box to bolster the bullish standpoint consider the follow from Ernest Hoffman: Record PBoC gold purchases may indicate that China is planning to invade Taiwan – Experts – “China’s massive and sustained central bank gold purchases are raising fears that the country may not only be shoring up its currency but may also be laying the economic groundwork for a full-scale invasion of Taiwan, according to a Telegraph report published Tuesday. “The relentless purchases and the sheer quantity are clear signs that this is a political project which is prioritized by the leadership in Beijing because of what they see is a looming confrontation with the United States,” Jonathan Eyal, associate director of the Royal United Services Institute (RUSI) in the UK, told the newspaper. “Of course, it’s connected also to plans for a military invasion of Taiwan.” China’s gold-buying spree began in October 2022, building up its official reserves to a record high of 2,262 tons, valued at $170.4 billion at current prices. The People’s Bank of China (PBOC) added 27 tons of gold in just the first three months of 2024. The PBoC’s current purchase streak came shortly after the United States and its Western allies froze $350 billion in Russian currency reserves held at foreign central banks in response to its invasion of Ukraine. “There is absolutely no question that the timing and the sustained nature of the purchases are all part of a lesson that [China] have drawn from the Ukraine war,” Eyal said, adding that China’s burgeoning gold reserves are an attempt to insulate the country from the impact of U.S. dollar sanctions if and when it launches its own invasion.”
I have no idea what is on China’s mind. Just like I thought there was no chance that Putin would go crazy in the Ukraine. But one thing is sure, if China becomes aggressive to the point of forcefully invading Taiwan, no one, even the US will challenge them from a military standpoint. But this unlikely black swan move would send gold through the roof, and again prove that gold bullion is indispensable in these troubled times.
On the day gold closed up $19.60 at $2311.00, and silver closed unchanged at $26.49.
On Thursday the price of gold failed to build on yesterday’s modest move to the upside which is disappointing. It is a mistake to overreact to the latest FOMC assessment but with Chief Powell claiming that progress on inflation has stalled, this market will likely continue to drift lower, and it finished the day mildly in the red. Support at $2300.00 looks weak as sentiment continues to lose its mojo and traders expect these higher interest rates to continue.
A few insiders believe that the handwriting is on the wall, which suggests that $2200.00 will become the next reality as gold’s technical picture loses steam. This is not the end of the world, but the bulls might have to settle for giving back the gains they enjoyed when many believed the Fed would cut interest rates by the summer months. Still, the world is a troubled place and safe-haven demand will blunt some of this recent weakness, but prices will continue to settle.
FXEmpire (Christopher Lewis) – Gold Continues to Look For Floor – “Gold fell a bit during the course of the trading session on Thursday as we continue to see a lot of negativity. That being said though, we are also supported right around the $2,300 level. In general, this is a market that I think is trying to sort out what to do next. And with the jobs number coming out, that’s going to have a major influence on what people think the Federal Reserve does. Speaking of the Federal Reserve, they made a mess of the situation on Wednesday so as usual, they are clear as mud. With this, I think people are somewhat confused as to what to do, but gold might be a little bit of an outlier when it comes to most markets due to the fact that it protects against geopolitical risks. And of course, if we do see interest rate cuts coming down the road, that will help gold. Profligate spending by the US government, of course, will have a major influence on what happens with gold as well. If we break down from here, the 50-day EMA comes into the picture, and then the $2,200 level. If we break higher, meaning that we go above the $2,350 level, it’s possible that we go looking to the $2,400 level again, which was recently the swing high. In general, this is a market that I think continues to be noisy, but I do think that if there is a significant pullback in this area, you’re looking for an opportunity to get long yet again.”
On the day gold closed down $11.80 at $2299.20, and silver closed up $0.09 at $26.58.
On Friday the price of gold was typically choppy, moving between $2315.00 and $2285.00, finishing the day around unchanged. Gold continues to create trading headaches while looking for solid footing amid mixed signals between the Fed and the academic world. My best guess, and I underline guess, is that prices will continue to wobble between $2225.00 and $2300.00 depending on the next set of interest rate rumors. I remain nicely bullish even with these crosswinds and would expect higher prices next year. Unless the Fed makes a mistake, in which case the ownership of physical bullion becomes even more important regardless of price.
FXEmpire (Christopher Lewis) – Gold Continues to See Noise – “The gold market continues to see a lot of noise, as the jobs numbers in America have fallen significantly during the session on Friday. As you would expect with a jobs report coming out on Friday, the gold markets are all over the place today. With that being the case, it does make a certain amount of sense that you exercise some caution. The jobs numbers missed by about 60,000 jobs. And I think at this point, the market is trying to sort out what it wants to do. The $2,300 level, of course, is an area that has been important multiple times. So, the fact that we are hanging around this area is not a huge surprise. If we turn around and rally from here, then I think it’s just the continuation of more of the same. And quite frankly, if it looks like the Fed may cut rates, and I think it’s a little premature to say that then that will drive gold higher. We have plenty of geopolitical issues, so keep that in mind. So regardless of what happens here, we are still very much in an uptrend. The 50-day EMA underneath could obviously offer a lot of support. And then underneath there, I think the $2,200 level is a major floor just waiting to happen. I don’t have any interest in shorting gold, and quite frankly, I would love to see this market pull back in order to take advantage of cheap gold bars. At this point in time, I remain bullish, but maybe a little bit of stability is needed first on an upward trajectory to actually put money to work.”
On the day gold closed down $0.20 at $2299.00, and silver closed down $0.13 at $26.45.
Platinum closed up $2.90 at $959.60, and palladium closed up $9.30 at $947.50.
Jim Wycoff (Kitco) – “Technically, the gold futures bulls have the overall near-term technical advantage but are fading. A price uptrend on the daily bar chart has been negated and prices are starting to trend down on the daily bar chart. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at $2,364.40. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $2,200.00. First resistance is seen at Thursday’s high of $2,336.10 and then at $2,350.00. First support is seen at the overnight low of $2,303.20 and then at this week’s low of $2,291.70. The silver bulls and bears are on a level overall near-term technical playing field. A three-week-old price downtrend is in place on the daily bar chart. Silver bulls’ next upside price objective is closing July futures prices above solid technical resistance at $28.00. The next downside price objective for the bears is closing prices below solid support at $25.00. First resistance is seen at $27.455 and then at $27.75. Next support is seen at the overnight low of $26.61 and then at this week’s low of $26.25.”
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