Is the U.S. dollar doomed?

The inflation debate is back in the headlines, but gold is trading down nearly 1% on Friday. Analysts are keeping a close eye on the U.S. dollar and the bond market for clues as to where gold might head next.
 

Here's a look at Kitco's top three stories of the week:

1. Hot inflation and better-than-expected retail numbers.

2. Federal Reserve Chair Jerome Powell testifies before Congress.

3. Firmer USD weighs on gold, but the dollar is 'doomed' long-term, says DoubleLine Capital CEO Jeffrey Gundlach.

 

By Anna Golubova

For Kitco News

 

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Don't chase gold and silver at these levels but buy the dips – Carley Garner

Although the first quarter should represent the low in precious metals, one market strategist warns investors not to chase the market at current levels.

In an interview with Kitco News, Carley Garner, co-founder of the brokerage firm DeCarley Trading, said that she has been bullish on gold since March and is expecting prices to end the year much higher.

However, she added that there is a risk the precious metal could see one more washout before it is ready to rally higher.

"There's some pretty heavy resistance around $1,850. So, if you're trying to buy around $1830, it's a little bit dangerous," she said. "You want to make sure you have some hedges in place."

Garner added that she likes the idea of buying on dips and said there is the possibility gold retests support just below $1,800 an ounce.

Not only is the gold market finding strong fundamental support in a low interest rate environment, but Garner said that the precious metal is also entering a positive seasonal period.

"Late summer, early fall is usually a really good time of year for gold and silver," she said.

Looking at gold's fundamentals, Garner said that she doesn't expect the inflation threat to provide much more support for gold, pointing to the drop in raw commodity prices like the one in lumber prices. The lumber market has given back its gains after seeing a historic rally in the first half of the year. Garner said that she sees similar patterns across a broad spectrum of commodities from hog futures to copper.

However, Garner said that weak commodity prices raise the specter of deflation or even stagflation instead of an inflation threat. It is unlikely that the Federal Reserve will move quickly to tighten its monetary policy in this environment, she added.

Garner said that she expects the deflation threat to reveal itself later in the year as she expects oil prices to fall back to $50 a barrel. She explained that U.S. shale producers have been reluctant to increase oil production; however, with oil now trading above $70 a barrel, crude oil supply is starting to pick up again.

"Higher prices cure higher prices," she said. "Crude oil is going to be the last one to crash. And that's the one thing that really, when we talk about inflation, really hurts everybody."

Looking at gold prices, Garner said that if gold prices can push back to $1,900 an ounce by the end of the summer, then she would expect to see the yellow metal back at $2,000 an ounce by year-end.

Garner noted that once gold finds new momentum, the market is ripe to attract new speculative interest.

"A lot of speculators are net long, but they're holding very small positions based on what we've seen as a historically. So a lot of those people got out of gold at the start of the year have plenty of ammo to put it back to work as things start moving the right way," she said.

For silver, Garner said that the metal has been extremely quiet; however, like gold, she expects to see higher prices by year-end.

"Similar to silver, I don't think we can rule out one more test of the lows, but ultimately, I think we're going to see somewhere between $29 and $31 by the end of the year," she said.
 

By Neils Christensen

For Kitco News

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Gold holds steady above $1800 but fails to truly break out to higher prices

Continued pressure from exceedingly strong U.S. equities markets coupled with dollar strength has curtailed any continuation of the momentum created from the most recent rally. Gold hit an intraday low on June 29 of approximately $1750 and then traded higher for the next five consecutive trading days. This took gold futures above their 100-day moving average, which is currently fixed at $1789.80, before forming a base and trading sideways just above $1800 per ounce.

As of 4:50 PM EST gold futures basis, the most active Comex contract is currently down four dollars at $1806 per ounce. This is a net change of – 0.22%. Dollar strength was a partial contributor to today's modest decline. The dollar index is currently up +0.13%, a gain of 12 points, and fixed at 92.235. This indicates that roughly half of today's price decline in gold can be attributed to dollar strength. However, it was the continuation of an exceptionally strong U.S. equities market that pulled investment capital away from the safe-haven asset and into the risk-on asset class.

The NASDAQ composite gained 31 points in trading today and closed at 14,733.2397, which is a new record high. The S&P 500 also hit a new record high and, after gaining 15.08 points, closed at 4384.63. Lastly, the Dow Jones Industrial Average gained 126.02 points and closed at 34,996.18. This was the highest close on record, although it hit an intraday high on May 10, just above that price point.

Gold has traded from $1750 per ounce to an intraday high last Thursday of $1819. Some analysts believe that this most recent pullback is simply profit-taking following the most recent run-up in gold of approximately $70.

The key elements that market participants are focusing upon are the direction of interest rates as well as any potential retracement from recent gains in the U.S. equities markets. The U.S. 10-year notes have seen diminishing yields which are currently fixed at 1.373%, and the 30-year Treasury bond fixed at 2.002%. Current yields are at their lowest point since February of this year.

In an exclusive interview today with Bloomberg news, the European Central Bank President, Christine Lagarde, was asked if it was time to begin to look at rolling back some of the recent accommodative monetary policies, in which she quickly answered, "This is not the time to consider that."

However, it was reported by Reuters today that the European Central Bank will chart a new policy path at its next meeting to reflect its change in strategy and how to show it is serious about reviving inflation. Last week the ECB announced a new strategy similar to that of the Federal Reserve to tolerate letting inflation run hotter above its 2% goal when interest rates are near zero as they are now.

Reuters reported that "This is meant to reassure investors that policy will not be tightened prematurely and cement their expectations about price growth, which has lagged below the ECB's target for most of the past decade."

The Federal Reserve Chairman Jerome Powell will speak to Congress this week with an update on the Fed's current monetary policy. According to CNBC, a "part of his task will be selling the Fed's still easy policies in the wake of a strong economy and surging inflation." Powell continues to be steadfast that the current accommodative monetary policy will remain fully intact until "substantial further progress" is made towards the Fed employment and inflation goals.

Chairman Powell's difficult task will be to convince Congress that it is necessary to maintain its current dovish monetary policy in light of the fact that U.S. equities continue to rise and GDP continues to strengthen. With inflationary pressures at the highest level they have been at in eight years and a surge in housing prices, this could be a hard sell at best.

The fact that both the ECB and the Federal Reserve have collectively continued to promote their accommodative stance could be the underlying impetus needed to move gold to higher pricing.
 

By Gary Wagner

Contributing to kitco.com

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Gold and silver trade lower leading into the European open

Gold and silver are leading into the first day of the trading week in the red. After closing 1.15% higher last week the yellow metal has lost nearly half a percent to trade at the psychological $1800/oz level once again. Silver has just dipped under the $26./oz mark and the support to watch is holding at $$25.51/oz. In the rest of the commodities complex, copper is down -0.75% and spot WTI is also -0.56% in the red.

Looking at the risk sentiment from overnight, the Nikkei 225 (2.25%), ASX (0.83%) and Shanghai Composite (0.70%) all closed positive leading into the European open (Much of the positive price action could come due to the Chinese RRR rate cut on Friday). Dax and FTSE futures are actually pointing towards a slightly negative open.

In FX markets, the dollar index has moved 0.11% higher and the biggest mover overnight is USD/CAD which trades 0.21% in the black. In general commodities currencies have struggled. Bitcoin is trading marginally higher at $34,341.

Looking at some of the main stories from the weekend and overnight, the Australian regulator APRA says banks must have a plan to deal with negative interest rates by April 2022.

There were reports that noted the China state financial media said that there could be more support for the economy incoming.

ECB head Lagarde says end of PEPP may be followed by a new format of support.

Sticking with the ECB, Schnabel said she does not expect that inflation will get 'excessively high'.

Chinese military confirmed that a U.S. warship unlawfully entered the South China sea.
 

Looking ahead to the rest of the session highlights include comments from Fed's Williams, Kashkari and ECB's de Guindos. There is no real tier one data to look out for.
 

By Rajan Dhall

For Kitco News

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Is Bitcoin evolving into a universal, all-use currency? Lyn Alden on reaching 'steady state' growth

Bitcoin is fast emerging as a viable form of payment, thanks to improvements in its transaction speeds and reductions in costs from layer 2 payment protocols like Lightning Network, but its utility as a currency makes more sense in some situations than others, said Lyn Alden, founder of Lyn Alden Investment Strategy.

El Salvador has recently made Bitcoin legal tender, and in a country where phones are more ubiquitous than bank accounts, transactions may be made easier in some cases with this law.

“The challenging thing there is that because they’re underbanked, it’s sometimes ironically easier to get a cheap smartphone than they can get a bank account, so when you have a free Bitcoin wallet on a cheap cell phone, that actually can make transacting easier in some cases,” Alden told David Lin, anchor for Kitco News. “There is volatility risk, but a lot of them can convert back to dollars if they decide they don’t want to hold large amounts of Bitcoin.”

Consumers should be aware to take on debt in Bitcoin, as generally speaking, any form of debt that is in a different currency than the source of income is risky if the value of the debt rises unexpectedly, Alden said.

Compared to gold, Bitcoin is better for digital transactions, ecommerce, and long-distance money transfers of large quantities, whereas gold would be one of he “worst ways” to transact in any of those domains.

However, gold does enjoy lower volatility, and has low to negligible transaction costs if the transaction is done in person and the vendor accepts gold as a form of payment.

“I like to view Bitcoin as an emergent thing. It’s not something that’s reached its steady state yet,” she said. “Will it go up to $5 or $10 trillion or will it settle down for a while, and so it’s not reached a steady state in the same way that gold or dollars generally have.”

For Alden’s outlook on Bitcoin and gold prices, watch the video above. Follow David Lin on Twitter: @davidlin_TV (https://twitter.com/davidlin_TV).
 

By David Lin

For Kitco News

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Gold and silver trade lower heading into the European session

After a promising start to the U.S. session yesterday gold (-0.24%) ended up closing -0.09% lower and that bearishness has continued today. It was a similar story for silver which now trades at $25.77/oz down 0.48% leading into the European session. In the rest of the commodities complex, copper is 0.19% in the black and spot WTI is flat.
 

Indices in the Asia Pac area followed the downbeat tone in Europe and the U.S. overnight. The Nikkei 225 (-0.63%), ASX (-0.93%) and Shanghai Composite (-0.04%) all closed lower. Having said that, futures are pointing towards a positive cash open in Europe.

In FX markets, the dollar index has moved 0.18% higher and the biggest mover overnight is USD/JPY which jumped 0.32% higher retracing some of yesterday's losses. In the crypto space, bitcoin is trading just under flat at $32,845.

Looking at some of the news from overnight, Fed's Daly says It would be premature to say that we've achieved victory against the pandemic.

There were reports last night that the U.S. is to add more Chinese firms to the economic blacklist regarding human rights violations.

COVID-19 cases climb to a new record day in South Korea and the government called an emergency meeting.

Australia to triple its access to Pfizer Covid-19 vaccines to 1m doses/week from July 19.

Pfizer says a third shot of its vaccine is even more helpful in combatting COVID-19

ECB sources said that policymakers failed to agree on the new policy guidance and it will be revisited on 22nd July.

 

COMEX copper futures maintenance margins lowered by 9.1% to USD 6,000/contract for July.

COMEX 5000 silver futures initial margins for speculators lowered by 10% to USD 14,850/contract.

China inflation figures for June. CPI 1.1% y/y (expected 1.3%), PPI 8.8% y/y (expected 8.8%).

UK May monthly GDP +0.8% vs +1.5% m/m expected.

Looking ahead to the rest of the session highlights include Candian employment change, ECB minutes and comments from BoE's Baliey and ECB's Lagarde.

By Rajan Dhall

For Kitco News
 

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Gold and silver move higher heading into the European open

Although gold closed higher during Tuesday's session it retreated from the high of $1815.05/oz and this morning the yellow metal has once again moved higher in the Asia Pac session to trade just above $1800/oz. Silver ($26.32/oz) has also moved higher but has not pared all the losses from yesterday's session. In the rest of the commodities complex, copper trades 1.47% higher at $4.30/lb and spot WTI is trading flat after a heavy session.

It was another mixed session in the Asia Pac area. The ASX (0.90%) and Shanghai Composite (0.73%) traded well but the Nikkei 225 lost -0.96%. Futures in Europe are pointing towards a positive cash open.

In FX markets, the dollar index trades just under flat and the biggest mover overnight was NZD/USD which rose 0.15%. In the crypto space, bitcoin trades marginally higher at $34,763 but remains in consolidation mode.

Looking at some of the news stories from overnight China's state media has said don't bet on further declines for the yuan.

On the COVID front, Sydney’s lockdown extension was officially confirmed for at least one more week.

In China, the PBOC stepped up its ban on cryptocurrency operations. The price of bitcoin held up well considering the news.

The San Rafael mine in Mexico is said to be reopening after unions and reps finally had some positive conversations following months of tough talks.

Germany May industrial production -0.3% vs +0.5% m/m expected.

UK June Halifax house prices -0.5% vs +1.5% m/m expected.

Looking ahead to the rest of the session highlights include the FOMC minutes, U.S. Jolts jobs data, Candian Ivey PMI and comments from Fed's Bostic, ECB's Enria. U.K. listed iron ore miner Ferrexpo also has earnings.
 

By Rajan Dhall

For Kitco News

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