Gold’s not afraid of the Fed or seven rate hikes

Gold's not afraid of the Fed or seven rate hikes

The humanitarian crisis caused by Russia's invasion of Ukraine continues to build. According to the United Nations 816 civilians have been killed and 1,333 more have been wounded in the fighting.

It looks like, the war is not going to end anytime soon and people will continue to suffer. At the same time the gold market is starting to lose its geopolitical safe-haven premium. Analysts have said that it looks like the conflict will be contained within the country.

At the same time, the impact of the war in Eastern Europe will be felt worldwide and will continue to roil commodity markets. At the start of the week, the International Monetary Fund, warned that the war would lower global growth expectations and increase consumer prices.

"The war may fundamentally alter the global economic and geopolitical order should energy trade shift, supply chains reconfigure, payment networks fragment, and countries rethink reserve currency holdings. Increased geopolitical tension further raises risks of economic fragmentation, especially for trade and technology," the IMF warned.

So even as gold's safe-haven premium starts to wane, there are still plenty of reasons for investors to have the precious metal in their portfolio.

"You don't know when the next geopolitical event will happen. You don't know when the next inflation threat hits, so having long-term exposure to commodities and gold makes sense," said Kristina Hooper, chief investment strategist at Invesco, in an interview with Kitco News.

Many analysts have pointed out that rising inflation remains the biggest reason why investors should hold some gold. Some analysts have recommended an overweight position in the precious metal of between 10% and 15%.

300 Gold has proven its value as a diversified asset – Invesco's Hooper

Adding to the bullish sentiment in gold is that fact that Federal Reserve has unveiled a clear monetary policy plan. Many analysts have noted that gold traditionally performs poorly ahead of a new tightening cycle but rallies higher once the path has been laid out.

We can see the underlying strength in the gold market. Prices have managed to hold support above $1,900 an ounce even as the U.S. central bank looks to raise interest rates seven times this year and could start to reduce its balance sheet at the next meeting.

Inflation is the biggest reason why gold has been able to withstand the Federal Reserve's new tightening cycle. The latest CPI numbers showed annual inflation rising 7.9% in February.

"If indeed the Federal Reserve does follow through with its plan that will put interest rates at 1.75% by the end of the year. Interest rates will remain under 2% this year. I don't think markets have much to worry about," said George Milling-Stanley, chief gold strategist at State Street Global Advisors. "Now that we've got the reality of the first-rate and we know what's in store for next nine months, we will focus much more closely on inflation numbers. That's probably the right thing to be focusing on."

By Neils Christensen

For Kitco News

Time to buy Gold and Silver on the dips

David

Commodity chaos triggers double-digit gains for gold price as war in Ukraine enters fourth week

Precious metals are back at the top of the leader board, posting double-digit gains as the volatile commodity space keeps investors looking at gold, palladium, silver, and platinum.

On Thursday, the commodity space surged as oil prices rose on fears of possible supply shortages due to the Russia-Ukraine conflict.

"Volatility has been the defining feature across all asset classes in recent weeks, catalyzed by the Russian invasion of Ukraine," said DailyFX senior strategist Chris Vecchio. "The global supply chain is in disarray; commodity prices have surged, threatening both companies' margins and consumers' spending power; and central banks are pressing ahead with reducing stimulus and tightening monetary policy."

The big news still being digested by markets is the Federal Reserve's 25 basis point hike with projections of another six hikes for this year. On top of this hawkish stance, Fed Chair Jerome Powell told reporters that the U.S. economy "can handle" tighter monetary policy and that recession risk is not elevated.

"Gold prices are firming despite the undeniably hawkish FOMC, lending a lifeline to trend followers should prices close above $1,920/oz," said strategists at TD Securities. "The price action also suggests that a contingent sees the Fed's hiking profile as too slow given the inflation pressures facing the economy … While a coordinated buying impulse from a broad group of gold traders had helped gold prices rise dramatically in past weeks, we could still see a coordinated reversal inflows."

The Fed's hawkish view contrasts the warnings from organizations such as the International Monetary Fund (IMF), which stated that Russia's invasion of Ukraine would hurt the global economy by slowing growth and putting upward pressure on already red-hot inflation.

"The conflict is a major blow to the global economy that will hurt growth and raise prices," the IMF said Tuesday.

The global lender also noted Russia's invasion of Ukraine "may fundamentally alter" global economic and geopolitical order "should energy trade shift, supply chains reconfigure, payment networks fragment, and countries rethink reserve currency holdings."

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What's this year's 'potential end game'? Gold price at $2,500, oil price at $50 – Bloomberg Intelligence

Price standouts: palladium, silver, and gold

As oil prices rose above $100 again, metals also surged. Palladium jumped more than 5%, silver surged more than 3%, and gold rose 1.5% on the day.

"Oil prices are rising once again, with Brent and WTI now back above $100. It has been pushing higher throughout the day after the Kremlin pushed back against reports of substantial progress in ceasefire talks. It feels like a real setback just as things appeared to be heading in the right direction, which had allowed oil prices to fall considerably from the highs," said OANDA senior market analyst Craig Erlam. "Also contributing to the uplift is IEAs assessment of the oil market with Russian exports seen declining by around three million barrels per day."

At the time of writing, April Comex gold futures were up more than $30 and trading at $1,940.80 an ounce, May silver futures were at $25.49 an ounce, and June palladium was at $2,520 an ounce.

Analysts see gold's rally as dependent on the oil price performance for the time being. "If gold prices are to make another attempt to climb to and through their all-time highs, we're going to need to see another spike in oil prices and wheat prices to help revitalize inflation expectations. Otherwise, what's shaping up to be an ugly monthly candle for gold prices warns that the highs are in, and more downside is ahead," Vecchio said.

Also, it is not surprising that gold could stage another rally after the Fed embarked on a tightening cycle, said Commerzbank analyst Carsten Fritsch.

"A glance at previous rate hike cycles shows that gold tended to gain once the cycle began. The same appears to be happening this time too, though comparisons with past rate hike cycles are difficult in view of the war in Ukraine," Fritsch explained. "The gold ETFs tracked by Bloomberg registered inflows of 11 tons yesterday. Inflows since the start of the war in Ukraine three weeks ago total 117 tons."

On top of that, gold's downside is limited for the time being because of fears around high inflation and geopolitical uncertainty. "A combination of economic concerns, high inflation, and a dip in risk-appetite on the Kremlin comments have contributed to the spike in the yellow metal. At least two of these aren't going away any time soon, and there's nothing predictable about the actions of Vladimir Putin, so gold should remain relatively well supported for some time yet," Erlam added.

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

David

Gold price down but not out as Federal Reserve starts tightening cycle and lowers 2022 growth forecast and raises inflation expectations

The gold market remains under selling pressure but has pushed off its session lows as the Federal Reserve starts a new tightening cycle even as it lowers its growth forecasts and raises its inflation outlook.

As expected, the Federal Reserve raised interest rates by 25 basis points, increasing the range to between 0.25 and 0.50%.

Gold prices were testing support just above $1,900 an ounce and have cut some of its losses in initial reaction as the U.S. treads a delicate course within a sea on instability, created by Russia’s war with Urkaine.

“The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The implications for the U.S. economy are highly uncertain, but in the near term the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity,” the Federal Reserve said in its monetary policy statement.

Not only is the Federal Reserve rasing interest rates but it is also planning to reduce its balance sheet "at a coming meeting."

Despite the growing uncertainty, the U.S. central bank signals that it continues to move forward with rate hikes in an environment of rising inflation and lower economic growth.

Federal Reserve’s interest rate projections, also known as the dot plots, have jumped from December’s forecast. The committee sees the Fed funds rate at 1.9% by the end of the year, up from December’s projections of 0.9%. The new media rate indicates at around seven rate hikes this year.

The Federal Reserve sees slightly slower growth this year as the conflict in Eastern Europe raises economic uncertainty. The Federal Reserve sees the U.S. gross domestic product growing 2.8% this year, down sharply from 4.0% forecasted in December. However, GDP growth is unchanged in 2023 and 2024 at 2.2% and 2.0% respectively.

At the same time, inflation pressures have risen sharply. The U.S. central bank sees core inflation, which strip out volatile food and energy prices, rising 4.1% this year, up compared to December’s estimate of 2.7%. Core inflation will remain elevated, rising 2.6% in 2023, up from the previous forecast of 2.3%. Looking to 2024, inflation is also higher at 2.3%, up from December’s projection of 2.1%.

Overall consumer prices are expected to rise 4.3% this year, up from December’s forecast of 2.6%. Next year headline inflation is expected to rise 2.7%, up from the previous estimate of 2.3%. for 2024 inflation is expected to rise 2.3%, up from the previous forecast of 2.1%.

The Federal Reserve sees a fairly stable labor market in the next two years with the unemployment rate holding steady at 3.5% this year and next, unchanged from December’s projections. The unemployment rate is expected to tick higher to 3.6% in 2024, up from the previous estimate of 3.5%.

While the Federal Reserve didn’t raise rates by 50 basis points as was expected earlier in the year, economists note that the central bank has come out with a strong hawkish stance.

“The Fed threw down the gauntlet as it confronted a broad inflation upsurge, twinning a widely expected and tame quarter point rate hike with a much sterner message about what lies ahead,” said Avery Shenfeld, senior economist at CIBC.

Shenfeld noted that not only does the Fed see seven rates hikes this year but are expected to rise 2.8% by the end of 2023.

Paul Ashworth, chief U.S. economist, also said that the Federal Reserve’s projections are on the hawkish side.

“The Fed's new economic projections suggest that officials are particularly worried about the potential for core inflation to remain high,” Ashworth said. “Even after the rally in rate expectations in recent days, the Fed's own projections are on the hawkish side.”

By Neils Christensen

For Kitco News

Time to buy Gold and Silver on the dips

David

Gold, silver in price downdrafts amid plunging oil, deteriorating charts

Gold and silver prices are sharply lower in midday U.S. trading Tuesday. A huge drop in crude oil prices that sees Nymex futures trading back below $100 a barrel is bearish for the metals markets and the entire raw commodity sector. The near-term technical postures for gold and silver have also deteriorated significantly recently, which is inviting the chart-based speculative sellers to step in. April gold futures were last down $34.60 at $1,926.20 and May Comex silver was last down $0.188 at $25.11 an ounce.

Global stocks markets were mostly lower overnight. The U.S. stock indexes are solidly higher at midday. Trader and investor risk appetite remains elevated, overall, but there are some glimmers of hope that are pressing oil and gold prices down and bond yields up. Russia-Ukraine talks are continuing despite Russia stepping up its war campaign against Ukrainian citizens. Also, reports said high-level U.S.-China talks on the matter Monday were constructive.

China has locked down more cities due to the Covid virus again spreading rapidly. That has put price pressure on raw commodity futures markets early this week, on notions of reduced demand coming from the world’s second-largest economy.

The U.S. data point of the week is the Federal Reserve’s FOMC meeting that begins Tuesday morning and ends Wednesday afternoon with a statement. It’s widely believed the Fed will raise its Fed funds rate by 0.25%. The Fed and chairman Jay Powell’s comments on the war and inflation will be closely scrutinized by the marketplace.

Gold price and risk: metal off daily lows but surging yields, risk sentiment, and oil price crash weigh

Today’s latest U.S. inflation report out Tuesday morning saw the producer price index for February come at up 0.8% from January, which was just slightly less than expected. Still, the annual PPI rate is running very hot, at up 10%.

The key outside markets see Nymex crude oil prices sharply lower and trading around $96.50 a barrel. Crude prices have backed way off from last week’s 14-year highs. That strongly suggests oil prices may have put in at least near-term tops. The U.S. dollar index is a bit higher at midday. The benchmark U.S. 10-year Treasury note is presently yielding 2.10%. U.S. Treasury yields are on the rise and hit a 2.5-year high Monday.

Technically, April gold futures bulls have the overall near-term technical advantage but are fading fast. A V-Top reversal pattern appears to be forming on the daily bar chart and a six-week-old uptrend on the daily bar chart has been negated. Recent price action strongly suggests a market top is in place. Bulls' next upside price objective is to produce a close above solid resistance at $2,000.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,900.00. First resistance is seen at $1,950.00 and then at today’s high of $1,956.90. First support is seen at today’s low of $1,908.60 and then at $1,900.00. Wyckoff's Market Rating: 6.0

700

May silver futures bulls still have the overall near-term technical advantage but are fading fast. A six-week-old uptrend on the daily chart has been negated. Silver bulls' next upside price objective is closing prices above solid technical resistance at the March high of $27.495 an ounce. The next downside price objective for the bears is closing prices below solid support at $24.00. First resistance is seen at today’s high of $25.315 and then at $25.50. Next support is seen at today’s low of $24.75 and then at $24.50. Wyckoff's Market Rating: 6.0.

May N.Y. copper closed down 155 points at 450.65 cents today. Prices closed near mid-range today. The copper bulls have lost their slight overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 480.00 cents. The next downside price objective for the bears is closing prices below solid technical support at the January low of 428.80 cents. First resistance is seen at this week’s high of 461.55 cents and then at 468.00 cents. First support is seen at today’s week’s low of 446.85 cents and then at 445.00 cents. Wyckoff's Market Rating: 5.0.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

David

Gold trades under pressure but currently holding the 38.2% retracement as support

As of 3:30 PM, EST gold is trading off by $29.20, or 1.46%, with the April 2022 Comex contract currently fixed at $1956.00. On a technical basis, today’s low of $1952 is just below the 38.2% Fibonacci retracement, which is currently at $1953.80. The data set used for this retracement begins at the low created in December 2021 when gold hit $1752.60 and began a dynamic rally which took pricing to a high of $2078.20 during the first week of March 2022. If gold breaks below the 38.2% Fibonacci retracement level, the next logical place that gold could trade to is the 50% retracement which is currently at $1915.40.

While Russia’s invasion of Ukraine continues, its massive assault market participants are focusing upon what actions the Federal Reserve will take this week. Traders are focusing on the amount of the Fed will raise rates, whether they will raise rates by ¼% as many Fed members have suggested, including Chairman Powell, or a more aggressive move to ½ a percent due to the ever-increasing rate of inflation. This would be the first interest rate hike since March 2020, when the Federal Reserve reduced the Fed’s fund rate between zero and 25 basis points (¼%).

According to the CME’s FedWatch tool, the probability that the Fed will raise interest rates from 0 – 25 basis points to 25 – 50 basis points is 98.3%. With a 1.7% probability that the rate hike will be more aggressive totaling ½ a percent hike to 50 – 75 basis points. However, it is widely believed that a ¼% rate hike has been, for the most part, factored into the current pricing of both precious metals and U.S. equities. U.S. equities continued their price decline as the first trading day of the week began.

With approximately 15 minutes remaining in the trading session, the Dow Jones Industrial Average is relatively unchanged, currently up nine points or 0.03% and fixed at 32,949.60. The NASDAQ composite does appear that it will close strongly lower as the tech-heavy index is currently down by 2.01%, a decline of 259 points and fixed at 12,584.99. The S&P 500 is also indicating that it will result in a decline today, currently trading off by 0.9%, which is a decline of 37 points, with the S&P currently fixed at 4166.92 points.

U.S. debt instruments are also trading lower, reflecting higher yields in anticipation of the Federal Reserve initiating liftoff or interest rate normalization. They almost certainly will announce an interest rate hike after this month’s FOMC meeting which begins tomorrow and concludes on Wednesday. The thirty-year U.S. government bond is currently yielding 2.47%, and the 10-year is currently yielding 2.13% after factoring in today’s drop in U.S. bonds and bills taking yields higher.

Unless there is some peaceful resolution to the Russian invasion of Ukraine, we can expect to see moderate to strong support of gold pricing even at these current levels, which reflect pricing that is near the top of the range resulting from the $300 rally which began in December of last year. Sadly, it does not appear that Russia in any way has de-escalated their attack even as they resumed negotiations via video links this morning.

While the goal of Ukraine continues to be securing a cease-fire leading to the immediate withdrawal of Russian troops from Ukraine, it appears that Russia is unbending, seeking that Ukraine surrender and its troops lay down its arms. With a divide between both sides so deep, it seems unlikely that a peaceful resolution to the conflict will be forthcoming in any short time.

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

David

Gold, oil open lower

On Sunday open spot gold dropped $20 hitting $1,970 a ounce.

Oil was down, too, with Brent crude off 0.87% to $111.7 a barrel.

April gold futures last traded at $1,979.3 an ounce, down 0.29%.

Hong Kong's Hang Seng index opened lower, down 1.61% on Monday local time.

Major action in the Ukraine-Russia war over the weekend was a Ukrainian base near Poland getting hit by cruise missiles fired by Russia. Thirty-five people were killed, and 134 were wounded.

By Michael McCrae

For Kitco News

Time to buy Gold and Silver on the dips

David

What’s next for gold price after making a run for record highs? Fed, Ukraine updates on deck

What's next for gold price after making a run for record highs? Fed, Ukraine updates on deck

The Federal Reserve's interest rate decision and developments in Ukraine will dominate gold's price direction next week after the precious metal made a run for record highs.

Gold rallied on its safe-haven appeal this week as sanctions against Russia were stepped up to import bans and the war in Ukraine escalated, creating chaos in the commodities space. April Comex gold futures were last trading at $1,990.50 an ounce after briefly rising above $2,070 an ounce earlier in the week.

"Gold will continue to hover around $2,000 in the short-term. If gold closes at $1,980 an ounce, then I am bullish. If gold rises to $2,010, then I am neutral," OANDA senior market analyst Edward Moya told Kitco News.

The trading range for gold remains pretty broad due to the current volatility in many financial markets. The two leading drivers will be the Federal Reserve's meeting on Wednesday and any new developments regarding sanctions against Russia and the war in Ukraine.

"Gold could trade over the next week between $1,960 and $2,050. It is looking at a pretty wide range given the sensitivity of the situation in Ukraine. And we have the Fed policy meeting, which could provide some big shifts as to how the U.S. central bank will address the inflation outlook and more importantly what will be the path of tightening going forward," Moya said.

Wednesday's afternoon announcement will be followed by Fed Chair Jerome Powell's press conference. All eyes will be on the new economic projections, the dot plot, and Powell's take on the "unintended consequences" of the conflict in Ukraine.

"Powell has to provide clarity. He needs to set market expectations. After this, we'll get a better sense if there could be a risk of a super-sized rate hike over the summer."

Markets are currently pricing in a 95.1% chance of a 25-basis-point hike next week. These expectations were further cemented by the recent inflation data, which showed the U.S. Consumer Price Index (CPI) rising to 7.9% in February, a new 40-year high. Also, Powell testified last week that he would be supporting a traditional 25-basis-point hike at the March meeting.

"Investors have done a U-turn in their assessment of what Russia's invasion of Ukraine will mean for U.S. monetary policy ahead. A brief flirtation with the idea that the war's economic costs would temper the rate hike path has been quickly reversed, with the February CPI data being a further reminder that inflation is breaking out in just about every major category of goods and services," said CIBC World Markets chief economist Avery Shenfeld.

Capital Economics is forecasting new projections to point to at least five interest rate hikes in 2021 and an additional four rate hikes in 2023. This would take the Fed Funds rate to between 2.25% and 2.50%.

"Fed Chair Jerome Powell may offer more details in his press conference about the Fed's plans for quantitative tightening (QT), but we don't expect QT to be launched until closer to the middle of this year," said Capital Economics chief North America economist Paul Ashworth.

'Commodities are better investment than gold' as inflation could hit 10%, says billionaire 'Bond King' Jeff Gundlach

What about gold's pullback after hitting $2,000?

Consolidation after rising above $2,000 an ounce is a good thing for gold, said RJO Futures senior market strategist Frank Cholly.

"A pullback correction is good. It is testing the strength of the market. Gold will continue to march higher to the $2,050 area. I don't think that a rate hike next week is going to hurt the market," Cholly told Kitco News. "Now that we have the big breakout, I remain bullish. The uptrend is still intact. And right now, it is a good buying opportunity."

Gold will easily get back to $2,050 an ounce level in the short-term, he added. Plus, the Fed is now unlikely to surprise with a 50-basis-point hike since it has signaled a more cautious approach when raising rates to avoid throwing the economy into a recession.

Cholly also does not see the war in Ukraine lasting for many months as many fear, which could potentially see gold return to $1,900.

"There will be some resolution sooner rather than later. This is not going at all how Putin planned," he said. "Possible that we have a pullback to $1,900. But even before February 24, when Russia invaded Ukraine, the gold market was starting to take on a bullish tone. Now that we've broken out and are above these levels, I don't think gold is going back down to $1,800."

Data to watch next week

Tuesday: PPI, NY State manufacturing index

Wednesday: Retail sales, Fed interest rate decision, Powell's press conference

Thursday: Building permits, housing starts, jobless claims, Philadelphia Fed manufacturing index, industrial production

Friday: Existing home sales

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

David

Gold corrects after unsuccessfully challenging its record high

On Tuesday, March 8, gold traded to an intraday high of $2078, roughly $10 below the all-time high of $2088, which was achieved in August 2020. The current decline in gold is the first real price decline since January when gold hit a low of approximately $1780. Until Tuesday of this week, what followed in February was a dynamic rally resulting in gold gaining approximately $300 when gold traded to $2078. On Wednesday, March 9, gold opened above Tuesday’s closing price of $2043 but closed dramatically lower, resulting in a price decline of $72. Tuesday’s strong decline resulted in gold losing 3.49% in value, the largest single-day loss in 2022.

As of 4:45 PM EST gold futures basis, the most active April Comex contract is currently fixed at $1990.20, a net decline of $10.30 or 0.51%. However, this decline can be largely attributed to dollar strength. Currently, the dollar is up by 0.63% and with the dollar index fixed at 99.12. While gold pricing is lower today it is completely the result of dollar strength and fractional buying of gold.

Currently, spot gold is fixed at $1988.60, a net decline of $8.60 on the day. The Kitco Gold Index shows that dollar strength resulted in gold declining $12.40, and fractional buying resulted in a gain of $3.80 resulting in the net change today of -$8.60.

This week’s price action marked the beginning of the first correction since the end of January. Currently, gold has declined approximately 0.382% from Tuesday’s intraday high at $2078 to today’s low of $1960. 0.382% is an important Fibonacci retracement number. A shallow price correction based on Fibonacci retracement levels will begin at 0.236%, followed by a decline of 0.382% with a strong correction retracing as much as 0.618%, or 0.78%. On a technical basis, these four Fibonacci retracement levels are the most important numbers to focus on. Technical traders use these levels to monitor possible support levels that could indicate a conclusion of a correction.

That being said, based on a study of three different moving averages (50-day, 100-day, and 200-day), gold is still in full bullish alignment. Market technicians use the 50-day, 100-day, and 200-day moving averages as a benchmark to determine its short-term, interim term, and long-term market sentiment. If the current pricing of a stock or commodity is above the 50-day moving average market technicians interpret the short-term market sentiment as bullish. The 100-day moving average is used to determine interim term market sentiment, and the 200-day moving average reveals long-term market sentiment. If the 50-day is above the 100-day and the 100-day above the 200-day, it is interpreted as a full bullish demeanor.

Chart number two is a daily candlestick chart of gold futures, clearly illustrating that gold is in full bullish alignment. The 50-day moving average is currently fixed at $1861.70, followed by the 100-day moving average at $1832.20 and the 200-day moving average fixed at $1816.10. Gold pricing went into full bullish alignment during the last week of February when the 100-day moving average crossed above the 200-day moving average. As gold pricing continues to rise, we can see that the three moving averages are in a period of divergence, which simply means that the price between each moving average is increasing.

Based on the two technical studies we discussed above, we can derive the following conclusion. First, on a technical basis, the low in gold futures has touched upon the 0.382% Fibonacci retracement level, which is an acceptable level if this current correction will unfold as a shallow correction, as seen in chart 1. It does not confirm that pricing will stabilize here, but it is an important level to watch if gold prices hold this level ($1964) or trade below it. Secondly, even with this week’s correction resulting in a 5.48% decline in pricing from Tuesday’s high to today’s low, the three moving averages are still in full bullish alignment, as seen in chart 2.

Lastly, while we could see a further price decline on a technical basis, this week’s price decline has not resulted in major chart damage but has resulted in a price correction from Tuesday’s intraday high.

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

David

Gold, silver up on safe-haven buying as U.S. equities sell off

Gold and silver prices are are higher in midday U.S. trading Thursday, on more safe-haven demand amid risk aversion that is still keen in the marketplace. Global stock markets and the U.S. stock indexes are still on shaky ground amid the biggest geopolitical crisis in decades that appears to be worsening. Some hot U.S. inflation data today was also bullish for the metals markets. April gold futures were last up $21.50 at $2,009.70 and May Comex silver was last up $0.554 at $26.385 an ounce.

The U.S. data point of the day Thursday was the consumer price index report for February, which was up 7.9%, year-on-year. That number is hot, at a four-decade high, and continues to stoke inflation that threatens to derail global economic growth just as most countries are finally getting past the Covid pandemic.

Global stocks markets were mixed overnight, with European shares mostly down and Asian shares mostly up. The U.S. stock indexes are lower at midday. Some stock market bears are calling Wednesday’s U.S. rally a "dead-cat bounce" in a bear market. The U.S. stock indexes remain in near-term price downtrends on the daily charts. Risk aversion remains elevated amid the ongoing Russia-Ukraine war. Talks between the two warring nations have produced no positive results, including those held today.

Gold prices could hold around $2,000 for the next two years – ABN AMRO

Meantime, in the Euro zone the European Central Bank made no major changes in ECB monetary policy, as expected.

The key outside markets see Nymex crude oil prices lower and trading around $106.00 a barrel. The U.S. dollar index is higher today. The benchmark U.S. 10-year Treasury note is presently yielding around 1.95%. U.S. Treasury yields are on the rise this week.

Technically, April gold futures bulls have the firm overall near-term technical advantage. Prices are in a five-week-old uptrend on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at the record high of $2,178.80. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,950.00. First resistance is seen at today’s high of $2,015.10 and then at $2,025.00. First support is seen at $2,000.00 and then at today’s low of $1,975.00. Wyckoff's Market Rating: 8.5

May silver futures bulls have the solid overall near-term technical advantage. Prices are in a five-week-old uptrend on the daily chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at this week’s high of $27.495 an ounce. The next downside price objective for the bears is closing prices below solid support at $24.00. First resistance is seen at $26.50 and then at $27.00. Next support is seen at this week’s low of $25.465 and then at $25.00. Wyckoff's Market Rating: 7.0.

May N.Y. copper closed up 885 points at 466.05 cents today. Prices closed nearer the session high today. Prices this week scored a bearish and huge "key reversal" down on the daily bar chart, which is one clue that a market top is in place. The copper bulls still have the overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 490.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 444.00 cents. First resistance is seen at 470.00 cents and then at 475.00 cents. First support is seen at this week’s low of 455.30 cents and then at 450.00 cents. Wyckoff's Market Rating: 6.5.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

David

Is the long-term upside move in gold over?

Today was an absolute game-changer. Given that the recent ascent in gold to just under the record high of $2088 was absolutely news and headline-driven, changes in those headlines will have a dramatic and profound impact on the direction and price gains or losses in gold.

The President of Ukraine, Volodymyr Zelensky, said he is open to a compromise with Russia. That single statement had a profound impact on multiple asset classes. It resulted in U.S. equities having a strong rally with the Dow Jones industrial average gaining 653 points or 2%. The NASDAQ composite gained 3.58%, and the S&P 500 had a net gain of 2.57%.

Crude oil tumbled over 15% after reaching a 14-year high yesterday. Crude oil futures lost $14.17 today, a decline of 11.46%, and are currently fixed at $109.53 per barrel.

The safe-haven assets such as gold and the dollar also sustained strong price declines. The dollar lost 1.12%, and the dollar index is currently fixed at 97.97. Gold sustained a strong selloff and as of 5:15 PM EST, the most active August futures contract has declined by $47.60, or 2.33%, and is currently fixed at $1995.70. Silver lost 3.1%, and after factoring in today's price decline of $0.84, it is currently fixed at $26.06.

In an exclusive interview by the German newspaper "Bild," the Ukrainian President acknowledged that he is open to a compromise to end the war between Russia and Ukraine.

In this interview, President Volodymyr Zelensky said, "The question here is not what I can give. In every negotiation, my goal is to end the war with Russia. And I'm also ready to take certain steps. Compromises can be made, but they must not be a betrayal of my country. And the other side must also be willing to make compromises – that's why they're called compromises. This is the only way we can get out of this situation. We can't talk about the details yet."

It was this interview that caused many markets to pivot from bullish to bearish, as seen in gold, the dollar, and crude oil. It also caused U.S. equities to pivot from bearish to bullish.

So, the question becomes in the case of gold, "has the rally in gold concluded?" The short-term answer is that it is very likely that we will see gold continue to drop in price as long as there is hope that a peaceful resolution can be accomplished through negotiations between Russia and Ukraine. However, the long-term answer is quite different.

This is because the recent climb in gold pricing was based on the geopolitical tension caused by the crisis in Ukraine as well as inflationary pressures at a 40-year high with the CPI for January currently at 7.5% when compared to a year earlier. Tomorrow the government will release its most current CPI index data and currently, analysts polled by various news organizations predict inflation will rise from 7.5% to 7.9% year-over-year. With the recent rise in crude oil pricing and food, there is almost no possibility or scenario in which inflationary pressures have declined from January to February.

Gold has moved on two major issues, the war in Ukraine and spiraling inflation. Higher inflation levels would be highly supportive of gold and make it likely that after this correction, it will return to rally mode and exceed the record high of $2088 achieved in August of 2020.

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

David