Gold rises as investors brace for Tuesday’s CPI inflation report

As of 4:44 PM EDT gold futures basis, the most active June 2022 contract is trading up $11.70, a gain of 0.60% at $1949.50. There were some alarming forecasts for the upcoming release of the latest inflationary data vis-à-vis the CPI (Consumer Price Index) on Tuesday, March 12. Just last week estimates were released by the Federal Reserve Bank of Cleveland which revealed a detailed estimate of the upcoming CPI report indicating that the level of inflation in March could run as high as 8.41%. Furthermore, estimates for the first quarter of 2022 predict inflationary pressures quarter over quarter could swell as high as 9.1%.

The chart above is a 240-minute candlestick chart of gold futures. We have included are trendlines highlighting a series of lower highs, as well as a series of higher lows. This has created a compression triangle and breakout above the current resistance level. This indicates that gold has concluded its consolidation period and moved back into a solid rally mode. This puts our next target for potential resistance at $1967.60. Above that price point, there is resistance at $2000 and major resistance at $2016.

While the Federal Reserve maintains that inflationary levels are peaking and should begin to decline throughout the rest of the year, this assumption is not written in stone as many variables could continue the rise of inflationary pressures throughout the year. One of the primary unknowns is the current crisis in Ukraine which resulted in global inflationary pressures due to supply chain issues regarding their agricultural exports to countries in the European Union, as well as the continuing boycott of Russian goods, oil of course but also much more, in response to Russia’s invasion of Ukraine. This has had a dramatic impact on the cost of crude oil worldwide. It also led to the release of over 200 million barrels from the strategic oil reserves of the United States and the European Union.

Russia’s escalated military action following its invasion of Ukraine continues to create geopolitical uncertainty and could prolong the rise of inflationary pressures which began as countries around the world allocated massive amounts of capital to stave off the recession which was a result of the global pandemic.

There is now concern that future actions of the Federal Reserve in its attempt to lessen the rise of inflation will lead to an end to the economic recovery, resulting in a return to a recession in the United States.

James Knightley, chief international economist at ING, said, “With the Fed seemingly feeling the need to ‘catch up’ to regain control of inflation and inflation expectations, a rapid-fire pace of aggressive interest rate increases heightens the chances of a policy miss-step that could be enough to topple the economy into a recession.”

Bloomberg News recently reported that economists polled have raised their U.S. inflation forecast again and downgraded their expectations for economic growth through most of 2023. This forecast is based upon the potential risks that result from the Federal Reserve’s attempt to reduce the current level of inflation.

Many uncertainties will continue to increase inflationary pressures globally. The confidence that the Federal Reserve can effectively execute a soft landing is waning among many economists. The assumption that the Federal Reserve will not have the ability to pull it off without causing damage leads to one of two things. The return of global economic recession, or the continuation of rising inflation. Either of these outcomes will have an enormous impact on economies worldwide and will continue to be highly supportive of safe-haven assets such as gold, moving them to higher prices.

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

David

Gold moves higher as investors refocus on inflation and Ukraine

Unquestionably market sentiment oscillates amongst the investment community focusing upon inflationary pressures and Ukraine or on the Federal Reserve’s tightening of their monetary policy. Inflationary pressures and the war in Ukraine create bullish market sentiment for the safe-haven asset class, specifically gold. In contrast, reactions to the Federal Reserve’s monetary policy, which includes a series of rate hikes and runoff of their balance sheet assets, lead to bearish market sentiment in gold.

It seems that from day to day, market participants will move back and forth between these factors. As for today, market participants are once again putting their primary focus on the inflation continuing to move higher and the war in Ukraine. In regards to the war, it seems highly unlikely that a peaceful resolution will be forthcoming any time soon. Rather concerns have emerged over the excessive military action and targeting of civilians in Ukraine. The war in Ukraine has also affected levels of global inflation, taking them higher. Currently, Ukraine and Russia collectively export a large percentage of wheat and other agricultural products to countries in the European Union, and the war has pressured agricultural products such as wheat higher.

As of 4:10 PM EDT, gold futures basis most active June 2022 contract is up to $11.50 or 0.60% and is currently fixed at $1934.80. Gold traded to a high today of $1941.70 and a low of $1923.30. Concurrently the dollar has been extremely strong this weekend, providing moderate headwinds for gold prices. The entire precious metals complex on the futures markets has shown gains on the day.

Silver futures are up almost a full percent (+0.97%) or $0.23 and are currently fixed at $25.695. Palladium futures are trading 2.62% higher on the day at $2242 per ounce. However, it must be noted that there has been exceedingly high volatility and downside selling pressure over the last five weeks. During the week of March 7, palladium traded to a record high just above $3400 an ounce and, compared to current pricing, has given up roughly 30% in value. Russia is one of the primary producers of platinum and palladium and provides roughly 30% of the palladium used in the automotive industry’s production of catalytic converters.

Additional sanctions by the United States and the European Union further isolate Russia. Still, it also increases the probability of dramatic military action as a response or rationale for escalating their military campaign.

Lastly, market participants continue to focus on the minutes from the March FOMC meeting, which were released yesterday, and statements made by Federal Reserve members, which indicate a much more hawkish tone and pace at which they will tighten their monetary policy to decelerate the pace at which inflation is rising.

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

David

VanEck sees extreme scenario where gold is $31K and Bitcoin is $1.3 million

Russia's war in Ukraine has created what some economists see as irrevocable shifts in the geopolitical landscape; lines are being drawn among allies and opponents that won't easily be undone.

Fund managers at VanEck looked at how this new landscape will impact financial markets and the makeup of reserve currencies as nations look to diversify their holdings. Taking the current trend to an extreme conclusion, Natalia Gurushina and Eric Fine, the authors of the latest report, see significant upside for Bitcoin and gold.

"The bottom line is that the upside for gold and Bitcoin is potentially dramatic. Specifically, the framework estimates gold prices of around $31,000 per ounce and potential Bitcoin prices of around $1,300,000 per coin," the analyst said in their report. " Precious metals are the original reserve asset, but cryptocurrencies are a possible addition/replacement/portion."

Gurushina and Fine noted that this is the first time in recent history that significant economic sanctions have been placed on a world power.

"Something big has happened, and we are attempting to quantify its impact," the analysts said. "China is watching and sees a U.S./Eurozone/Japan that has gone 'nuclear'in its economic war with Russia. 'Stories'about the future of money are interesting, but if one agrees that this is a potentially new paradigm, an attempt at quantification is needed.

VanEck developed its gold and bitcoin price scenarios by comparing current gold reserves with the global money supply: M0 and M2. The asset management firm noted that there are a lot of central banks that don't hold any gold. For example, the implied price of gold in Japan would be nearly $200,000. For the United Kingdom, the implied gold price would be more than $133,000.

Central banks sell 6 tonnes of gold in February

"On a by-country basis, Japan is off the charts. It has a lot of money and very little gold," the analysts said. "The U.K. is another developed market (DM) with very low gold reserves relative to money liabilities. China's gold reserves also appear low relative to their money liabilities."

Using the same calculations based on global M0 money supply, VanEck sees an extreme Bitcoin price of $1.3 million. At the same time, using calculations based on global M2 money supply, the price jumps to $4.8 million.

Although Bitcoin has significantly more upside than gold, VanEck said that central banks would probably prefer the precious metal over the digital currency.

"Our opinion right now is that gold is the easiest thing for central banks," the analysts said.

Gurushina and Fine reiterated several times in the report their outlook is based on extreme scenarios to establish a starting point and a discussion on the evolution of reserve currencies. They noted that probabilities need to be heavily weighed against their forecast.

"We believe most investors will and should use expected value frameworks to make these numbers practical. For example, an investor who sees a 10% chance of gold becoming the reserve asset might say that our "extreme scenario" price of $31,000 per ounce represents a practical price target of $3,100 per ounce. They may see that as an attractive upside relative to current prices," the analysts said.

By Neils Christensen

For Kitco News

Time to buy Gold and Silver on the dips

David

Gold up as crude oil rebounds, inflation worries linger

Gold prices are higher in midday U.S. trading Monday, supporting by continued worries about problematic price inflation which will likely get worse before it gets better. A rebound in crude oil prices today also supports the metals markets. June gold futures were last up $13.10 at $1,936.60 and May Comex silver was last down $0.029 at $24.625 an ounce.

Global stocks markets were mixed but mostly firmer overnight. The U.S. stock indexes are higher at midday. The U.S. stock indexes are in near-term price uptrends. Markets in mainland China were closed for a holiday Monday.

The Russia-Ukraine war drags on, with the atrocities inflicted by Russian dictator Putin’s aggression becoming more apparent to the world. Such may prompt the U.S. and European Union to implement even more sanctions on Russia, including on its oil and natural gas exports. Still, from a markets perspective, not much has changed in the war the past couple weeks. That has allowed many markets to stabilize and become less volatile. It has also allowed the metals markets to focus more on rising inflation and its implications on markets and world economies. History shows that problematic price inflation has been bullish for metals market prices.

Gold price kicks off Q2 with $30 losses, but $2k mark expected to be hit soon – analysts

Nymex crude oil prices are solidly up and trading around $101.50 a barrel. Meantime, the U.S. dollar index is higher today. The benchmark U.S. 10-year Treasury note is presently yielding 2.4%.

Technically, April gold futures bulls have the overall near-term technical advantage amid recent sideways and choppy trading. Bulls' next upside price objective is to produce a close above solid resistance at $1,967.20. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the March low of $1,888.30. First resistance is seen at $1,950.00 and then at $1,955.00. First support is seen at today’s low of $1,918.20 and then at $1,900.00. Wyckoff's Market Rating: 6.0

May silver futures bulls have the slight overall near-term technical advantage. However, prices are in a three-week-old downtrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $26.16 an ounce. The next downside price objective for the bears is closing prices below solid support at $23.50. First resistance is seen at $25.00 and then at $25.285. Next support is seen at today’s low of $24.385 and then at the March low of $24.045. Wyckoff's Market Rating: 5.5.

May N.Y. copper closed up 890 points at 477.80 cents today. Prices closed nearer the session high today. The copper bulls have the overall near-term technical advantage. 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 the March low of 446.85 cents. First resistance is seen at last week’s high of 482.80 cents and then at 490.00 cents. First support is seen at 470.00 cents and then at last week’s low of 464.20 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 kicks off Q2 with $30 losses, but $2k mark expected to be hit soon – analysts

After a stellar first quarter, gold's April trading started on a sour note as prices dropped $30 on the day amid rising yields. But analysts are keeping a close eye on the 2-year and the 10-year Treasury yields and what the inversion means for gold.

The main event Friday was not the highly-anticipated employment report but an inversion of the 2-year and the 10-year Treasury yield spread. Many market participants view this as a possible warning sign that recession could be around the corner.

"The inversion of the 10y-2y Treasury yield spread this week led to predictable speculation that the Fed's interest rate hikes would quickly push the U.S. economy into recession," said Capital Economics chief North America economist Paul Ashworth. "Given its impressive track record in predicting U.S. recessions – it's been almost 50 years since the last false positive – it would seem foolish to doubt that bearish recession speculation."

The inversion of the yield curve is a red flag, but it is not a timing tool, explained DailyFX strategist Michael Boutros. "It doesn't mean that we are heading into recession for sure. But it does highlight the threat that the environment is right for such a move. You will see that spread wobbling in the near term," Boutros said.

For gold, this should mean greater appeal from risk aversion. But so far, the sentiment hasn't translated into broader trading, said Gainesville Coins precious metals expert Everett Millman.

And this is why, despite these risk-off signs, gold's Friday price action was driven by the metal's reactions to rising bond yields and a stronger U.S. dollar. June Comex gold futures were last down $30 on the day and trading at $1,924.20 an ounce.

"There is too much volatility in the Treasury market right now," said Gainesville Coins precious metals expert Everett Millman. The Treasury market is selling off because of expectations of the Fed raising rates. So, bonds at lower yields are not as attractive, which is why we see the inversion," Millman said. "Markets are getting ahead of themselves with their lack of fear and expectations that the Fed can get inflation under control. We need to see how it plays out from the Fed first."

This Russian bank sold 1 ton of gold in March

What's next after gold's Q1 rally?

The first quarter of 2022 was an impressive turnaround for gold, with prices rising more than 6% and posting their best gains since Q3 2020. More of this kind of price action is expected in the second quarter, with the $2,000 an ounce target looking within reach, said RJO Futures senior market strategist Frank Cholly.

"Gold has had a tendency to do a lot of consolidation before making a move up. We had a nice rally from February to mid-March. Now, gold is going through a bit of a correction. Markets are basing a bottom where we peaked out in mid-November. And $1,900-1,925 is showing to be good value. The market is bouncing along that range," Cholly said. "If we could get a close or a good pop above $1,950-75, we won't have trouble getting above $2,000. And in Q2, we can get above $2,000."

The broader picture for gold is still very constructive on the fundamental and technical levels, Boutros noted. But there could be more selloffs ahead for the precious metal, especially if the $1,828-49 level doesn't hold. "Gold's story will be balanced by the speed of Fed rate hikes. Any pullbacks in Q2 should be limited to the $1,828-49 range. Anything below that, and you are risking a much larger washout that will take serious dollar strength," he pointed out.
 

Next week's data

One major event next week will be Wednesday's release of the FOMC meeting minutes from March. "The minutes are expected to reveal details of the Fed's plans to shrink its balance sheet. Although we estimate that the trade deficit narrowed in nominal terms in February, in real terms, it appears to have widened markedly," Ashworth said.

In March, Powell signaled that the run-off could be similar to 2017-19 but would likely happen at a faster pace.

Friday's employment number was also good enough to reinforce the idea that the 50-basis point hike in May is not off the table. The CME FedWatch Tool is pricing in a 71% chance of that happening.

Other data releases to keep a close eye on include ISM non-manufacturing PMI on Tuesday and jobless claims on Thursday.

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

David

Nothing beats gold as real money

The devastation created by Russia's invasion of Ukraine continues unabated and it is now starting to have significant implications for the global economy. According to some economists, we are witnessing the end of globalization.

Lines are being drawn between allies and opponents that won't easily be undone, even if the conflict in Eastern Europe were to end. Gold, it appears, is playing an essential role in this new environment, where currencies and commodities are being weaponized.

Global commodity markets remain in chaos as nations look to establish their own domestic supply chains. The biggest impact is being felt in the energy sector as Russia's nat gas represents 40% of European demand.

There is a growing threat that Russia could weaponize its commodity markets as it demands 'unfriendly nations' pay for their energy in rubles. Russia is also looking to accept gold and even bitcoin for its oil and gas. According to some economists, Europe, already teetering on edge, could fall into a full-blown recession if Russia decides to withhold supply.

As pressure mounts, Europe is looking to wean itself off of Russia's oil and gas, but that won't happen until the end of this decade. Energy is just one commodity, but it's not alone; agriculture and base metals are also impacted by rising geopolitical tensions caused by the conflict.

Looking at the broader picture, many economists and market analysts see a growing trend where nations warry of the U.S. and its western allies start to reduce their exposure to the U.S. dollar. This is not going to happen overnight. The U.S. dollar presents about 60% of total global reserve assets. It could take decades for the U.S. to lose its reserve currency status, but that will not stop some governments and central banks from diversifying their holdings now.

When gold's volatility calms down, prices will rally back to $2,000 – DeCarley's Garner

Gold is the most attractive asset because it is seen as a store of value and has no counter-party risk.

Not only are nations trying to insulate themselves by diversifying, but we can also expect that the development of domestic supply chains will lead to elevated consumer prices. We can no longer reply on global markets for cheap goods and gold is an attractive asset for consumers looking to preserve their purchasing power. We are already seeing this in Russia.

This week, according to a report from Kitco's Anna Golubova, the state-controlled VTB Bank, Russia's second-largest lender, sold one tonne of gold to consumers in March. The most in-demand product is its one-kilogram gold bar, worth about $68,000.

As long as chaos reigns, gold will shine as solid currency.

By Neils Christensen

For Kitco News

Time to buy Gold and Silver on the dips

David

Gold up as traders buy the early dip – U.S. jobs data looms

Gold prices are modestly higher in midday U.S. trading Thursday, as the bulls stepped in to buy the early slight dip in prices. Oil prices pushing well up from their daily lows after trading sharply down early on also supported the metals markets. Now, the marketplace awaits what is arguably the most important U.S. data point of the month on Friday morning. April gold futures were last up $6.60 at $1,940.30 and May Comex silver was last down $0.073 at $25.04 an ounce.

Nymex crude oil prices are still solidly lower at midday and trading around $104.00 a barrel. However, prices overnight did trade sharply down to a low of $100.16. Reports said the Biden administration is mulling releasing up to 1 million barrels a day in the coming months from its strategic petroleum reserve, for a total of 180 million barrels. An OPEC meeting Thursday saw the cartel decide to stick to its strategy of gradually reopening the taps. OPEC agreed to raise its output targets by 432,000 barrels per day from May 1. Energy analysts had widely expected OPEC to rubber-stamp another modest monthly increase despite sustained pressure from top consumers calling for the group to pump more.

Meantime, the U.S. dollar index is higher today. The benchmark U.S. 10-year Treasury note is presently yielding 2.322%. For perspective, the German 10-year bund is yielding 0.597% and the 10-year U.K. gilt is fetching 1.616%.

This Russian bank sold 1 ton of gold in March

Global stocks markets were mixed overnight. The U.S. stock indexes are weaker at midday. The U.S. stock indexes are in near-term price uptrends. Today is the last trading day of the month and of the quarter, which makes it an extra important day from a technical charts perspective.

Traders are now awaiting Friday’s key monthly U.S. employment situation report for March, which is expected to see the key non-farm payrolls number come in at up 490,000, compared to a rise of 678,000 seen in the February report.

Technically, April gold futures bulls have the overall near-term technical advantage. However, prices are in a three-week-old downtrend on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at last week’s high of $1,967.20. Bears' next near-term downside price objective is pushing futures prices below solid technical support at this week’s low of $1,888.30. First resistance is seen at $1,950.00 and then at $1,967.20. First support is seen at today’s low of $1,919.10 and then at $1,900.00. Wyckoff's Market Rating: 6.0

May silver futures bulls have the slight overall near-term technical advantage. However, prices are in a three-week-old downtrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at last week’s high of $26.16 an ounce. The next downside price objective for the bears is closing prices below solid support at $23.50. First resistance is seen at today’s high of $25.285 and then at $25.50. Next support is seen at today’s low of $24.67 and then at $24.55. Wyckoff's Market Rating: 5.5.

May N.Y. copper closed down 50 points at 474.50 cents today. Prices closed nearer the session high today. The copper bulls have the overall near-term technical advantage. 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 the March low of 446.85 cents. First resistance is seen at this week’s high of 482.80 cents and then at 490.00 cents. First support is seen at 470.00 cents and then at this week’s low of 464.20 cents. Wyckoff's Market Rating: 6.5.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

David