Gold and silver are at key levels ahead of the EU open

Gold and silver are at key levels ahead of the EU open

After falling another 1.56% during Tuesday's session gold is hanging on at the previous wave low support this morning near $1686/oz. Silver is trading 0.32% in the black very close to the $24.00/oz psychological area. Both chart structures look very weak but this could be a telling session as gold could make a double bottom or push to trade at its lowest level since June 2020.

After inheriting a negative lead from the U.S. bourses, indices in the Asia Pac area are mixed. The Nikkei 225 (-0.86%) and Shanghai Composite (-0.44%) closed lower while the ASX closed 0.78% in the black.

In FX markets, the dollar index is down a tough (-0.02%) and the biggest mover was USD/JPY which rose 0.30%. Other than the yen weakness it was a pretty lacklustre session. Lastly, in the rest of the commodities complex, spot WTI (1.07%) and copper (0.32%) both trade higher.

There has been some data out this morning, U.K. final GDP for Q4 came in at 1.3% to beat the prelim reading of 1.0%.

On a more negative note overnight, there has been a new lockdown imposed for a city (Ruili) in China after new coronavirus cases. Residents have been told to stay home for a week and cars are prohibited from leaving the city.

Sticking with China, there were financial media reports which said the PBOC will ensure stable liquidity next month.

On the data front overnight, Chinese Manufacturing PMI (51.9 vs expected 51.2) & Services (56.3 vs expected 52.0) both beat analyst consensus readings to stay in expansionary territory. However, in Japan Industrial Production for February (preliminary) fell -2.1% month on month vs the expected reading of -1.3%.

Heads up for U.S. President Biden to speak on infrastructure today (Wednesday). There are also suggestions that Biden could also increase the corporation tax rate.

We also heard from Fed's Barkin who said he is not convinced of use cases for Bitcoin. He then spoke about rates saying the Fed will hold rates until 3 part test met and once past this crisis the US must get fiscal house in order.

Looking ahead to the rest of the session highlights include German employment numbers, EU CPI, Canadian GDP, US ADP, U.S. pending home sales and weekly DoE's.
 

By Rajan Dhall

For Kitco News

 

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The $1700/oz psychological area has been breached once again

The $1700/oz psychological area has been breached once again

Gold is still looking pretty heavy at the moment and lower levels are in focus as the bulls continue to remain in charge. There has been a fresh wave of selling pressure as both stocks and fixed income yields rise in the EU session so far.

The next support comes at the previous wave low at $1672.8/oz and this area was very prominent back in April to May 2020. Before that, the area was also a very strong resistance back in March 2020 too and this does help any suggestions that it could be a key area this time around.

The lighter red trendlines are showing the channel has been very well respected too. The lower channel zone could act as a support zone and the price has bounced off the trendline at least three times already. If there is a break below the trendline then it might spell more trouble for the yellow metal.

If this is the case, the next major support zone is at $1587/oz but before that the $1600/oz psychological level is in the way. The volume has not been extremely healthy at the moment and this shows the lack of demand at this current price point. One thing is for sure, the bears are in charge as $1700/oz has been broken again today.

By Rajan Dhall

For Kitco News

 

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Gold and silver slide lower leading into the EU open

Gold and silver slide lower leading into the EU open

Gold and silver are starting the EU session in the red after falling in the Asia Pac session. The yellow metal is down -0.26% while silver trades nearly 1% in the red below the $25/oz psychological handle. It was not much better in the rest of the commodities complex as copper lost 1% of its value and spot WTI fell 1.77%.

The risk sentiment overnight was mixed as the Nikkei 225 (0.71%) and Shanghai Composite (0.55%) both closed higher but the ASX dropped -0.36%. In the FX space, the dollar index (0.11%) was firmer and the biggest casualty was the Canadian dollar as USD/CAD traded 0.36% in the black.

In news from the Asian session, Suez Canal authorities confirm that Ever Given has been successfully refloated. This hopefully means that the ships stranded either side can start moving again.

In Australia, there has been another COVID-19 case and the State of South Australia will close the border with Queensland. This comes after the nation had been handling the pandemic extremely well and managed to open up its economy.

Germany is also struggling with a third coronavirus wave and Germany's Merkel says the country need curfews, may use Federal law to tighten restrictions.

US Trade Representative Tai says the U.S. isn’t ready to lift tariffs on Chinese imports soon. Tensions between the two economic powerhouses remain high especially as the plight of the Uighur Muslims still remains a hot topic.

ECB chief economist Philip Lane stated, “There is a clear risk of self-fulfilling adverse dynamics taking hold". He added “To counter these risk factors, it is essential that the ECB acts as a stabilising force and boosts confidence by committing to the preservation of favourable financing conditions”.

In the UK BoE's Tenreyro has stated he does not currently see any sustained pick up in demand or inflation. He then added that the BoE stands ready to take whatever action is necessary to achieve its remit.

The White House Press secretary Psaki has said that President Biden plans to split his "build back better" package into two separate proposals.

Looking ahead to the rest of the session highlights include the ECB PEPP purchases and comments from ECB's de Cos.

 

By Rajan Dhall

For Kitco News

 

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Hold gold or drop gold?

Hold gold or drop gold?

Is bitcoin really hurting gold? This question is on everyone’s mind as bitcoin is up 85% and gold is down 10% since the start of the year. And this debate is not dying out anytime soon, at least according to our top three stories from this week.

Fed Chair Jerome Powell said that ‘crypto is a substitute for gold, not the U.S. dollar’. This kind of statement is pretty unprecedented coming from the Fed Chair, who also called bitcoin too volatile to be a global currency.

Powell stated: “Bitcoin is a speculative asset that is essentially a substitute for gold rather than the dollar.”

CNBC’s Jim Cramer is now advising to have: 5% in gold and 5% in bitcoin. After telling investors to keep 10% of their portfolio in gold for almost four decades, Cramer has had a change of heart.

He said: “Gold let me down … If [investors] listen to me, they will drop half their gold. I've been saying 10% gold since 1983. And now, I say 5% in gold, 5% in bitcoin."

Our top story of the week is the CPM’s annual Gold Yearbook. A quick summary is that the pandemic has 'changed the world' and gold prices will reap the benefits.

The group stressed that while the pandemic will eventually end, it has accelerated some of the main drivers for gold.

CPM Group says governments will struggle to reverse their fiscal support. And gold’s triggers will be debt, deficit, and ultra-loose monetary policies.
 

By Anna Golubova

For Kitco News

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What’s the catalyst to take gold price to $1,900?

What's the catalyst to take gold price to $1,900?

Now that gold is sitting comfortably above $1,700 an ounce, is it ready for liftoff towards $1,900? Analysts remain optimistic but say that the precious metal needs a new catalyst to get it there.

After an eventful week, gold managed to stay above $1,720 an ounce. The precious metal even attempted to break the key resistance level of $1,750 on Thursday. And even though the move up failed, June Comex gold futures were last trading at $1,733.90, up 0.38% on the day.

"Factors that would normally weigh on gold, such as rising stock markets and the firm U.S. dollar, do not appear to be pressuring its price all that much at present," said Commerzbank analyst Eugen Weinberg.

This trading pattern could be a sign that it's time to start picking up gold, RJO Futures senior commodities broker Daniel Pavilonis told Kitco News.

"Market sentiment is low compared to where it was back in August. This is a good sign. It is probably the time to start picking up gold. Next week, we could see more of an up week for gold," Pavilonis said.

Gold is being pulled by two different outlooks — the short-term risk-on view, which is based on vaccinations and the economic recovery, and the long-term risk-off view, which is filled with uncertainty and an accommodative Federal Reserve.

"I'm not surprised we are not breaking to the upside yet. The U.S. dollar continues to be firm. It will be firm for the next little while as Europe is shutting down after failures with vaccine distribution. Flows of funds are likely to skew to the U.S.," said TD Securities head of global strategy Bart Melek.

In the long-term, however, there is uncertainty, Melek pointed out. "We happen to think we break out into $1,900 by year-end because we will see inflation and no action from the Federal Reserve," he said. "Also, we'll have more debt and more infrastructure spending."
 

Potential catalysts

Yet, gold is unlikely to surge until there is a new catalyst, according to analysts.

"Gold appears comfortable at current price levels. Physical demand offers a cushion on the downside, but a macro catalyst to drive upside risk is absent," said Standard Chartered precious metals analyst Suki Cooper.

One such catalyst could be gold's break from 10-year Treasury yields. Recently, gold has been dragged down whenever yields would go up. But that inverse relationship could break, which would help gold breakout, Pavilonis said.

"Rates are going up a bit today, and gold is holding well. It is a positive sign. Maybe we start to snap free of the correlation that if rates go up, gold has to go down. If we can deviate away from that with the announcement of Biden's new infrastructure package, it will be good for gold," he said. "When we see inflation, it is time to buy gold."

With more money printing and more accommodative policies out there, inflation will kick in, and the February low could be the bottom in gold, Pavilonis noted. "The longer we see sideways price action in gold, the more the path of least resistance becomes to the upside," he said.

Another catalyst could be the U.S. dollar finally losing steam. "As the year unfolds, the USD resumes its downtrend, and real yields remain negative, prices are likely to regain traction," Cooper said.

Also, there are a number of risks that could flare up, affecting investors' risk appetite, said FXTM market analyst Han Tan.

"From signs that COVID-19 cases are making a resurgence globally to simmering U.S.-China tensions, amid the shifting expectations for the Fed's policy outlook, the relative calm in markets could yet be upended by the realization of such risks," Tan stated.
 

What to watch next week

The biggest data release is slated for Friday — the latest employment data. Market consensus is for the U.S. economy to have added 655,000 jobs in March. The U.S. ISM manufacturing PMI and jobless claims are scheduled for Thursday, while ADP employment data are going to be released on Wednesday.

Markets will also be watching the U.S. house price index on Tuesday and pending home sales on Wednesday. The U.S. markets will be closed for Good Friday.

Aside from macroeconomic data, investors will be keeping a close eye on the rhetoric from Washington, any new stimulus announcements, and the number of global COVID-19 cases.

"With the ink on the $1.9tn fiscal relief plan barely dry, next week sees President Joe Biden push ahead with the $3tn Build Back Better green energy and infrastructure plan," said ING economists. "The difficulty will be getting it passed by Congress, given the need for 60 Senators putting it forward for a vote … It may need to be broken up into smaller packages and diluted to some extent should Republicans put up stiff opposition. It is not going to be an easy sell."

 

By Anna Golubova

For Kitco News

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Gold price fails attack on $1,750 as Fed’s Powell hints tapering

Gold price fails attack on $1,750 as Fed's Powell hints tapering

Gold shot up to a one-week high as it attempted to break the key resistance level at $1,750 an ounce after Federal Reserve Chair Jerome Powell praised economic progress and hinted at potential rollback of asset purchases.

"As we make substantial further progress toward our goals, we'll gradually roll back the amount of Treasurys and mortgage-backed securities we've bought," Powell told NPR's Morning Edition in a live interview. "We will very gradually over time and with great transparency when the economy has all but fully recovered, we will be pulling back the support that we provided during emergency times."

The Fed currently makes $120 billion in monthly bond purchases.

In response to the comments, gold jumped to a one-week high, with June Comex futures reaching $1,747.10 an ounce. However, the attempt to breach the $1,750 an ounce level has failed so far as prices retreated, and June futures were last at $1,735.20, down 0.02% on the day.

Powell also highlighted that the U.S. economy is recovering quicker-than-expected due to fiscal and monetary stimulus and vaccine progress. This will allow the Fed to taper at some point in the future, Powell said Thursday.

"In a nutshell, it's a combination of better developments on COVID, particularly the vaccines, and also economic support from Congress. That's really what's driving it," he said. "That's going to enable us to reopen the economy sooner than might have been expected."

The Federal Reserve was quick to respond to the COVID-19 pandemic, cutting rates near zero and making $120 billion in monthly bond purchases. On the fiscal side, Congress passed more than $4 trillion in stimulus in the past year.

In the last monetary policy announcement, Powell promised to keep the central bank's accommodative stance in place until the economy reaches full employment and inflation averages around 2%.

During the NPR interview, Powell reiterated that any rate hikes would only be considered "when the economy is all but fully recovered."
 


 

By Anna Golubova

For Kitco News

 

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Gold and silver trade flat leading into the EU open

Gold and silver trade flat leading into the EU open

Gold and silver are trading flat this morning leading into the EU open. Gold is trading at $1727/oz while silver has moved near the psychological $25/oz area.

Risk sentiment overnight was mostly weak following the weak handover from the US. The Nikkei 225 (-2.04%) and Shanghai Composite (-1.30%) moved lower while the ASX closed 0.50% in the black.

In FX markets, it was the dollar that outperformed overnight. The weakest major currency was the pound which fell over half a percent. In the rest of the commodities complex, copper (0.80%) and spot WTI (1.95%) both trade higher.

Looking at some of the news stories, BOJ's Kuroda said the central bank is to continue with powerful monetary easing persistently.

There was a fall in aluminium prices overnight with some analysts citing the fact that China is considering a sale of around half a million tons of aluminium from state reserves as the reason for the move.

UK medical firm AstraZeneca says it will release up-to-date results from the final stage trial of its vaccine, responding to criticism from a U.S. science agency.

On the data front, Japan (Jibun Bank) Markit preliminary manufacturing PMIs for March came in at 52.0 (prior 51.4), Australia preliminary March Markit PMIs manufacturing it 57.0 vs the prior reading of 56.6 and services printed at 56.2 vs the prior 54.1.

Elsewhere in the Asia Pac area, the Australian Treasury Secretary said he expects a spike in long term unemployment following the COVID-19 pandemic.

On the central bank front, BoC Gravelle said he sees a smoother recovery and Fed's Bullard says he sees the target rate staying near zero through 2023. Fed's Bullard looking for 6.5% GDP growth, unemployment down to 4.5% this year and lastly, Fed's Brainard says she expects to see transitory increases in inflation.

US President Biden says the US will have 600m doses of vaccine by the end of May. Sticking with the US President Biden's first fiscal 2022 proposals will be released on Friday and a full budget is expected in Spring.

On the geopolitical front, South Korean military officials confirmed that North Korea fired 2 missiles off its west coast on Sunday.

Looking ahead to the rest of the session highlights include PMI's from the major nations, DoE's, EZ consumer confidence and comments from Fed's Powell, Barkin, Williams, Daly Evans, ECB's Lagarde and US treasury secretary Yellen.
 

By Rajan Dhall

For Kitco News
 

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Gold and silver trade marginally lower leading into the EU open

Gold and silver trade marginally lower leading into the EU open

Once again gold and silver trade lower this morning but only marginally. The yellow metal is just under flat at $1737/oz while silver over around half a percent into the red at $25.64/oz.

After inheriting a positive close from Wall Street, the bourses in the Asia Pac area struggled. The Nikkei 225 (-0.61%), ASX (-0.11%) and Shanghai Composite (-0.93%) all closed in negative territory.

In FX markets, the dollar once again reigned supreme. This time it was the commodities currencies that suffered as CAD, NZD and AUD all traded lower against the greenback. NZD/USD was the worst-performing major down -1.09%.

In the rest of the commodities complex, there was more weakness. Copper and WTI are both down 0.77% but nickel was the only one to buck the trend and traded 1.14% higher.

We had some comments from ECB's Lane who said, PEPP purchases will show a substantial increase in a consistent way over several weeks.

Over in Asia, China says will promote the use of a safe travel pass between China and Russia.

This comes after, the U.S., Canada, U.K. and EU sanction China over the treatment of Uyghurs. China responded by adding 10 more EU individuals to their travel ban list.

On the plus side, China's Premier Li Keqiang says again economic growth this year could exceed a target of above 6%.

It has been reported that there are signs that North Korea is deploying multiple rocket launchers on a western border island.

In the UK, there are some vague reports that AstraZeneca may have provided outdated data about its COVID-19 vaccine trial, according to the NIH.

On the vaccine front, the Biden administration is concerned Johnson & Johnson may miss vaccine goal.

Sticking with the President, there are reports that Biden's Economic Advisors are ready to present the President with the $3 trl next phase of the stimulus plan.

Adding to this on the stimulus front, Japan's MoF announces stimulus spending to support firms, workers.

Overnight Fed head Powell said the Fed will continue to support the economy 'for as long as it takes'.

As the house prices continue to rise in New Zealand, the government announces new measures to curb the rises. NZ housing agency can borrow NZ$2bnb for land purchases. The government are looking to boost housing supply, infrastructure with NZ$3.8bn fund. The administration has also extended the horizon for tax on investment property sales.

Looking ahead to the rest of the session highlights include the UK labour market report, ECB purchase data, US new home sales, NZ trade data, BoJ minutes and comments from BoE's Bailey, Cunliffe, Fed's Powell, Bullard, Bostic, Barkin, Williams and Brainard.

 

By Rajan Dhall

For Kitco News

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Can the government confiscate your gold? E.B. Tucker on ‘the war against your wealth’

Can the government confiscate your gold? E.B. Tucker on 'the war against your wealth'

Ray Dalio, co-chief investment officer of Bridgewater Associates, recently wrote that policy makers short on money will likely raise taxes and prevent capital flows into “other assets” like gold and Bitcoin. E.B. Tucker, director of Metalla Royalty and author of “Why Gold, Why Now” said that the government already has the tools to do this.

“Everyone gets this idea that the [government] will raid your house and look for your gold. It’s not necessary. All you have to do is limit the ability to transact gold in the legal market, and then you assess an excise tax,” Tucker said.

By David Lin

For Kitco News

 

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Gold, silver, platinum and palladium are ‘a form of currency’

Gold, silver, platinum and palladium are 'a form of currency'

Mar 20, 2021

Guest(s): Anna Golubova Social Media Reporter

A lot has happened in the gold space this week. And the tides may finally be turning for the precious metals. Here's a breakdown of the top three stories.

 

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