Gold challenges record high but declines after hitting a high of $2078.80

Today gold spiked with a massive gain of $82, taking gold futures within $10 of the record high at $2088, which occurred in August 2020. Just as quickly as gold rose dramatically higher profit-taking and a recovery of U.S. equities resulted in gold trading off of the highs giving up over half of the gains from the intraday high. New York's trading session just ended, and as of 1:30 PM EST, April futures are currently fixed at $2050, a net increase of $55 on the day.

We are witnessing extremely fast market conditions and it will be interesting to see how gold trades after the half-hour break, at which time (2:00 PM EST) Globex trading will begin remaining open until 8:00 AM EST.

Gold's massive gains today are a continuation of investors' flight to safety, incorporating gold as the go-to safe-haven asset. Today's gains occurred with moderate tailwinds from dollar weakness which added to the dynamic gain.

Geopolitical tensions continue to grow as the Russian invasion of Ukraine continues to escalate. The Russian army is now disrupting routes that have been used for civilians fleeing through “humanitarian corridors."

Now in its 11th day since the onset of the invasion, Russia's military continues to struggle to capture major cities and incur losses of aircraft and armored vehicles. This has hardened Vladimir Putin's resolve, resulting in the use of missiles and rocket strikes rather than using their 150,000 troops. After three rounds of negotiations, the only achievement was an agreement to continue to negotiate in an attempt to reach a cease-fire.

Another major factor fueling gold pricing higher is the current level of inflation with the CPI index up 7.5% year-over-year in January. The current level of inflation at a 40-year high most likely will continue higher based upon rising prices of both oil and food. Crude oil continues its historical rise today, gaining just over $3 and is currently fixed at $122.77 per barrel.

Food costs have also been rising globally. As oil rises so does the cost of producing and transporting food from farm to table. Europe is witnessing even greater increases in food costs as Ukraine exports a large portion of its agricultural products. Ukraine's agricultural exports to Europe have been dramatically affected by the current military action by Russia.

On Thursday, March 10, the U.S. government will release the latest data on the current level of inflation and based upon the dramatic rise in oil and higher food costs, it most certainly will increase from its current levels.

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

David

'Tremendous momentum' in gold price -Watch out for next week's U.S. inflation number as geopolitics continue to drive metals

(Kitco News) There is strong momentum in the gold space as investors repositioned themselves going into another uncertain weekend with all eyes on Russia's intensified attack on Ukraine.

Gold gained more than $35 on Friday as Russian forces took control over Europe's biggest nuclear power plant in Ukraine in a very alarming assault.

"Unfortunately, there are no signs that you are going to see a de-escalation of the war in Ukraine any time soon. As we take a look at the impact that is having on the global economy, you'll see global growth concerns and inflationary pressures become dominant themes," OANDA senior market analyst Edward Moya told Kitco News. "That will likely lead to further safe-haven flows, and gold is going to shine."

The macro picture is set up for gold to hit $2,000 an ounce as other commodities, including oil, palladium, nickel, wheat, and corn surge.

"The way things are looking, you have too many key commodities that are likely to continue to keep on rising — grains, metals, energy. We'll see elevated prices for the foreseeable future," Moya said.

If commodity spikes have a lasting impact on inflation, central banks will be forced to hike rates more aggressively. But that doesn't mean that's bad for gold, Moya added.

"While the U.S. central bank showed resistance to rapid rounds of rate hikes as they assess the impact of the war, you should not rule out a chance of a half-a-point increase later this year. I'm still in the camp of four or five rate hikes this year," said Moya. "We could see the Fed becoming more aggressive in fighting inflation this summer. That uncertainty and that debate should be positive for gold and help gold rally to $2,000."

One key metric to watch next week will be the latest U.S. consumer price index (CPI), which is scheduled to be released on Thursday.

"We could see $150 oil soon. Inflation will be much higher because of energy. Wait until you see the next CPI number. It is going to be above 8%," Phoenix Futures and Options LLC president Kevin Grady told Kitco News. "And if they were using the old metrics, annual inflation would be running at 12%-15%."

On Friday, market participants positioned themselves for another uncertain weekend ahead, said Grady.

"You just don't know what's going to happen over the weekend. Investors are nervous about the nuclear reactor and Russia capturing some Ukrainian cities. They are positioning long gold, short stocks, and long crude oil," he said.

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Gold price levels to watch

The levels to watch on the way to $2,000 are $1,980 on the upside and $1,882 on the downside, said Grady.

At the time of writing, April Comex gold futures were trading at $1,971.20, up 1.82% on the day.

Moya pointed out that the $1,980 will act as short-term resistance, adding that gold can easily swing $50 in any direction. But once that level is reached, the market will become fixated on $2,000 an ounce.

"The catalysts are all there. Once we break $2,000, then $2,050-70 is the trading range where you'll see gold find some good resistance. Gold has underperformed a lot of these other commodities. There is still tremendous momentum here," he said.

Next week's data

Thursday will be the key data day for macro releases, with February's CPI and U.S. jobless claims scheduled for then. The ECB interest rate decision will also take place on Thursday.

"The risk of stagflation has clearly increased, complicating the ECB's dilemma: how to react to accelerating inflation that cannot be softened by monetary policy. No one can seriously expect the ECB to start normalizing monetary policy at such a moment of high uncertainty," said economists at ING.

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

David

Inflation and the crisis in Ukraine cause gold to surge, now only $27 away from $2,000

Gold prices have been moving to a higher value at a pace not witnessed in quite some time. On Monday, gold futures basis most active April 2022 contract opened at $1920 and closed at $1900 after recovering from a low of $1893. On Tuesday gold prices gained over $40 and accelerated the defined uptrend that began the first week of January. The rally has continued today.

As of 4:22 PM EST, April futures are currently up by $39.40 (2.00%) and fixed at $1974.90, which means that gold gained $74.90 this week resulting in a net weekly gain from Monday’s low to today’s current price of 4.3264%.

When added to the price advance of January 31, that accomplishment reveals a profound fact. In just over one month (January 31 to February 4) gold prices have gained $194.90, a percentage gain of 10.94%.

Gold is one of the most intrinsic safe-haven assets

Gold is both an excellent hedge against inflationary pressures and reacts quickly to geopolitical uncertainty and rising inflation. The recent gains in gold are based upon its sensitivity to both a surge in inflation and a geopolitical crisis.

In this instance it is the combination of these two events occurring simultaneously. This synergistic effect of both geopolitical uncertainty and the existing inflationary pressures simultaneously has magnified gold’s influence on the global economy.

Most alarming is that the geopolitical crisis in Ukraine has added another layer to inflationary pressures. The invasion by Russia into Ukraine was unthinkable just a few months ago. Not since World War II has a sovereign country invaded another sovereign country under false pretext. While Russia claimed their actions were to act as peacekeepers to protect the pro-Russian separatists in eastern Ukraine, they announced that these two areas are now independent countries. But the truth is that the intention of Russia was to destroy its military and overthrow its government to install a puppet government sympathetic to Russia.

Prior to the invasion by Russia into Ukraine inflationary levels were already at a 40-year high. Recent data has shown that the CPI (consumer price index) has reached 7.5% YOY. This is the highest level of inflations since February 1982. Based upon recent events it is an absolute certainty that inflationary levels will spiral to yet an even higher level.

The primary catalyst which will take inflation higher will be directly attributable to two primary factors first the rising cost of crude oil, which is now trading at $115 per barrel. Secondly, Ukraine’s ability to produce agricultural products to export to Europe has been diminished or obliterated.

Recent surge in oil

In December 2021, crude oil futures traded to a low of $62.51. By the first week of January 2022, crude oil futures had risen to $74.58. By the end of February oil had climbed as high as $90 per barrel.

From December to February, in the short span of three months, a barrel of crude oil cost rose 43.97% more. Even more alarming is that oil has gained 19.60% in the first four trading days of this month. That equates to an average daily gain of 4.9% from Tuesday, February 1 to Friday, February 4.

Recent surge in food costs

it’s a fact that higher prices in oil dramatically influence the cost of growing and transporting food. These costs have risen dramatically exacerbated by the current conflict in Ukraine. Ukraine has in essence been a major component supplying agricultural products to Europe. The current crisis has had a dramatic impact on the ability of Ukraine to continue providing agricultural necessities to Europe.

Conclusion – spiraling inflation and a prolonged invasion will be devastating

The obvious takeaway from the effect of the Ukraine conflict on current levels of inflation is profound. It most certainly almost guarantees that inflationary pressures will continue to spiral to higher levels causing extreme hardship to global citizens who require these goods for survival.

For the reasons we have spoken about above, gold has had such a stellar performance and dramatic price increase. The precious yellow metal is truly acting as a safe-haven asset that should continue to gain value as a hedge against other investment classes in times of political uncertainty and high inflation levels. The sad truth is that the current conflict in Ukraine most likely will not have a quick and peaceful resolution. It will take an extended period of time to come to an end.

Based upon that assumption that the Ukraine/Russia crisis will not be resolved quickly and that current levels of inflation will continue to spiral to higher levels is almost a certainty. If that assumption is correct, it is easy to assume that at some point soon gold will challenge its all-time high of $2088 and trade to a new record high price.
 

By Gary Wagner

Contributing to kitco.com

 

Time to buy Gold and Silver on the dips

 

 

David

Safe-haven demand continues to push gold price higher

Gold prices are moderately higher in midday U.S. trading Thursday, on continued safe-haven demand as risk appetite remains squelched by the Russia-Ukraine geopolitical situation. April gold futures were last up $11.20 at $1,933.70 and May Comex silver was last down $0.035 at $25.155 an ounce.

Risk aversion remains elevated amid the Russia-Ukraine war that has intensified. Crude oil and grain prices are soaring and that’s also stoking inflation fears. In a stunning inflation report coming from the Euro zone, its January producer price index rose 30.6%, year-on-year, mostly due to rising energy prices.

Bloomberg in an email dispatch Thursday morning reported, “With traders continuing to avoid Russian oil supplies over sanctions uncertainty, OPEC-plus not hiking their scheduled quota increase Wednesday and Iran talks still not resolved, traders are paying the biggest premium in more than two years to bet on higher prices. Aluminum, nickel, zinc and wheat all continue to rise, putting the Bloomberg Commodity Spot Index on course for its biggest weekly gain since 1960.”

On Friday comes the February U.S. employment situation report from the Labor Department. The key non-farm payrolls number is seen coming in at up 440,000 after a gain of 467,000 in January.

The key outside markets today see Nymex crude oil prices near steady and trading around $110.50 a barrel after hitting an 13.5-year high of $116.57 overnight. The U.S. dollar index is higher again today. The benchmark U.S. 10-year Treasury note is presently yielding 1.854%.

Technically, April gold futures bulls have the solid overall near-term technical advantage. Prices are in a four-week-old uptrend on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at the February high of $1,976.50. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,882.50. First resistance is seen at today’s high of $1,941.40 and then at this week’s high of $1,952.60. First support is seen at today’s low of $1,923.10 and then at $1,916.00. Wyckoff's Market Rating: 8.0.

May silver futures bulls have the firm overall near-term technical advantage. Prices are in a four-week-old uptrend on the daily chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $26.00 an ounce. The next downside price objective for the bears is closing prices below solid support at $23.50. First resistance is seen at the February high of $25.705 and then at $26.00. Next support is seen at Wednesday’s low of $24.96 and then at $23.50. Wyckoff's Market Rating: 7.0.

May N.Y. copper closed up 915 points at 475.85 cents today. Prices closed nearer the session high today and hit a 10-month high. The copper bulls have the solid overall near-term technical advantage and gained more power today. Prices are in a choppy, two-month-old uptrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 500.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 450.00 cents. First resistance is seen at today’s high of 478.25 cents and then at 480.00 cents. First support is seen at 470.00 cents and then at today’s low of 466.15 cents. Wyckoff's Market Rating: 8.0.
 

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

 

 

David

Gold, silver power higher amid keen marketplace anxiety

Gold and silver prices are sharply higher in midday U.S. trading Tuesday, with gold poised to close at a 1.5-year high close. More safe-haven demand amid a very spooked marketplace is featured as the Russia-Ukraine geopolitical situation appears to be deteriorating by the day. April gold futures were last up $35.80 at $1,936.60 and May Comex silver was last up $0.909 at $25.27 an ounce.

The West’s very heavy sanctions have crippled Russia’s economy. Add that to the unexpectedly strong resistance being put up by the Ukrainian military to its Russian aggressors and Russian President Putin has been put on very thin ice. Some pundits are calling him “unhinged” based upon his recent comments and television appearances. If the demoralized Russian public becomes seriously disenchanted with Putin, the marketplace wonders what he will do. Will his generals attempt a coup? Will Putin attack Western countries? In a desperate move to save his hide or to safe face, would Putin resort to using his nuclear missiles? These are questions that will keep markets on edge for likely some time to come.

U.S. President Biden will address the Russian situation Tuesday evening in his annual state of the union address.

Global stocks markets were mixed to lower overnight and the U.S. stock indexes are solidly lower at midday. Reports say Russian has stepped up its military campaign against Ukraine Tuesday, including shelling civilian targets.

The key outside markets today see Nymex crude oil prices posting sharp gains and trading around $106.50 a barrel. The U.S. dollar index is sharply higher today. The benchmark U.S. 10-year Treasury note is presently yielding 1.709%. U.S. Treasuries are seeing strong safe-haven buying interest.

Technically, April gold futures prices are poised to close at a 1.5-year high close today. Bulls have the solid overall near-term technical advantage. Prices are in a four-week-old uptrend on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at the February high of $1,976.50. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,850.00. First resistance is seen at $1,950.00 and then at $1,976.50. First support is seen at today’s low of $1,903.00 and then at this week’s low of $1,892.20. Wyckoff's Market Rating: 8.5.

May silver futures bulls have the firm overall near-term technical advantage. Prices are in an uptrend on the daily chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $26.00 an ounce. The next downside price objective for the bears is closing prices below solid support at $23.00. First resistance is seen at the February high of $25.705 and then at $26.00. Next support is seen at $25.00 and then at today’s low of $23.345. Wyckoff's Market Rating: 7.0.

May N.Y. copper closed up 1,260 points at 458.30 cents today. Prices closed near the session high today. The copper bulls have the overall near-term technical advantage. Prices are in a choppy, two-month-old uptrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the February high of 469.95 cents. The next downside price objective for the bears is closing prices below solid technical support at 440.00 cents. First resistance is seen at 460.00 cents and then at 463.80 cents. First support is seen at 450.00 cents and then at this week’s low of 445.00 cents. Wyckoff's Market Rating: 6.5.
 

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

David

Gold price to hit $2,150 on Russian invasion, 'very high inflation path' – Goldman Sachs

As the West steps up sanctions against Russia in the aftermath of a full-scale invasion of Ukraine, Goldman Sachs raised its commodities price forecasts, citing supply disruptions and an even more problematic inflation outlook.

The commodities to pay close attention to are the ones Russia is a major producer of — oil, gas, aluminum, palladium, nickel, wheat and corn.

"The range of near-term price outcomes for commodities has become extreme, given the concern of further military escalation, energy sanctions or potential for a cease-fire," Goldman said in a note to clients on Sunday. "We expect the price of consumed commodities that Russia is a key producer of to rally from here."

Gold is another safe-haven commodity that is due for a much bigger rally going forward, according to Goldman.

"The recent escalation with Russia create clear stagflationary risks to the broader economy, driven by higher energy prices, which reinforce our conviction in higher gold prices in coming months and our $2,150/toz (troy ounce) price target," Goldman said.

In reaction to additional sanctions against Russia, gold surged above $1,916 an ounce on Monday. Some gains were lost as the trading session progressed, with April Comex gold last at $1,905.70. But the precious metal is still set for the best monthly performance since May.

Goldman explained that gold would play a central role in this conflict as Russia turns to the precious metal for leverage amid sanctions. Russia's gold reserves total 2,298.53 tonnes, according to World Gold Council.

"Gold's unique role as the currency of last resort will likely be apparent if restrictions on Russia's central bank accessing its offshore reserves leave it leveraging its large domestic gold stockpiles to continue foreign trade, most likely with China," the bank said.
 

Gold price could hit $2,000 'in only a matter of days' – analysts

Also, Goldman increased its one-month Brent crude oil price projection to $115 a barrel from $95, adding that Russia is becoming more isolated as the West's sanctions kick in. "[For Brent, there is] significant upside risks on further escalation or longer disruption," the note added.

At the time of writing, Brent was trading above $100 per barrel and the U.S. West Texas Intermediate (WTI) was at around $96.

From the macro perspective, Goldman raised its inflation outlook, stating that it is "increasingly concerned" about the pace of inflation in 2022. "A very high inflation path in 2022 should make an easy case for steady rate hikes at all seven remaining" Federal Reserve meetings in 2022, said Goldman economist David Mericle said in another note to clients.

The bank now expects core inflation to run at 3.7% through the end of this year. Its previous estimate was at 3.1%. In light of this, Goldman is estimating to see seven rate hikes in 2022 and another four in 2023.

The first rate hike will likely come on March 16, with the CME Fed WatchTool projecting a 92.5% chance of a 25-basis-point hike.

 

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

 

David