Gold’s recent short-term trend is in a defined cycle – Rally, Consolidate, Repeat

Gold has shifted gears from extended rallies followed by a multi-month correction to its current almost parabolic upside move. This move began during the first week of November and continues to this day. In fact, we are getting the first indications that the extended correction at least for now has concluded and a new stage has begun. The best way to describe the characteristics of this recent rally is using a short-term 60-minute chart which clearly shows that gold is in a defined cycle. That cycle has three components; rally, consolidate, and repeat. The chart below is a 60-minute candlestick chart of gold futures which visibly illustrates that characteristic.

Gold has in all likelihood concluded the multi-month correction that began in March 2022. This extended correction began after gold completed a dynamic rally. This rally took gold futures from approximately $1780 during the first week of January to gold’s highest value in 2022 at approximately $2078, resulting in a $300 gain per ounce. After gold traded $10 below the record high of $2088 the precious yellow metal began an extended multi-month correction from March to November.

The chart below is a daily candlestick chart of gold futures from the beginning of January to November 16. After hitting $2078 in mid-March gold would trade through a series of lower highs and lower lows. Gold would trade to four consecutive lower highs and two consecutive lower lows before finding potential support defined by a near triple bottom that began at the end of September and concluded at the beginning of November at $1621.

Concurrently the Federal Reserve dramatically changed its extremely accommodative monetary policy during the FOMC meeting in March. On March 16, the Federal Reserve implemented its first interest rate hike since 2018. The Fed raised their benchmark “Fed funds” rate by 25 basis points taking the rate from 0 to 25 basis points to between 25 and 50 basis points. During the next FOMC meeting on May 4, the Fed would raise rates by 50 basis points taking Fed funds rates to between 75 and 100 basis points.

The Federal Reserve adjusted the size of each rate hike beginning at the June FOMC meeting. For the next three consecutive FOMC meetings (June, July, and September) the Federal Reserve raised its benchmark rate by 75 basis points after each of their Federal Open Market Committee meetings. Currently, the Federal Reserve has set its benchmark rate between 375 and 400 basis points.

The chart below is also a daily Japanese candlestick chart of gold futures with the timeline of rate hikes added to the chart. There is not an exact correlation between the timeline of rate hikes and the lower lows that resulted from them, gold’s price decline of approximately $457 or -21.99% was for the most part the direct result of an exceedingly aggressive series of rate hikes.

It is now anticipated that the Federal Reserve will begin to change the size of any additional rate hikes beginning in December. According to the CME’s FedWatch tool, there is an 85.4% probability that the Fed will only raise rates by 50 basis points rather than 75 at the December FOMC meeting. The thought of the Federal Reserve easing the amount of each rate hike has given a tremendous boost to the price of gold.

The recent climb from $1621 to $1777 (the current price of December futures) is directly attributable to the belief that the Fed will ease the magnitude of the rate hikes in December and 2023. This is why we have seen such a strong rise which has taken gold futures to a higher high than its previous high for the first time since March. In under two weeks, gold has moved over $150 by having a rally, then consolidating, and then repeating the process.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

 

David

Gold advances on geopolitical trepidation as Russian missiles hit Poland

Russia’s invasion of Ukraine has been escalating to accelerated levels of military action. According to sources in Ukraine and reported by Reuters news, “Russia rained missiles on cities across Ukraine on Tuesday in what Ukraine said was the heaviest wave of missile strikes in nearly nine months of war, echoing a pattern in recent weeks of Moscow lashing out far from the front after battlefield losses.”

Today the Russian military launched over 100 missiles and drone attacks into Ukraine in the latest escalation of its invasion.

This escalation has led to missiles landing in Poland and killing two people in an explosion in Przewodow, a village in eastern Poland approximately 10 km from the border with Ukraine. Concerns have emerged that because Poland is a member of NATO, the Russian missile strike could certainly risk widening the war in Ukraine.

In a report by Reuters today, “Ukraine's President Volodymyr Zelenskiy said on Tuesday, without producing evidence, that Russian missiles had hit Poland, a NATO country, in what he called a "significant escalation" of the conflict.”

However, the Pentagon and the US State Department said they could not confirm the report but were working with the Polish government to gather information. The State Department did acknowledge that the report was “incredibly concerning”.

Russia’s invasion of Ukraine is now in its ninth month and has worsened with the largest wave of missile strikes many of which have targeted the Ukrainian civilian population. This most recent missile strike into Poland if confirmed triggers treaty articles by NATO under which NATO members will meet to assess the threat and if necessary take concrete action.

 

NATO Secretary General Jens Stoltenberg said on Monday, “It is up to Ukraine to decide what terms are acceptable for negotiations to bring an end to the war Russia is waging against the country, warning Moscow's strength should not be underestimated despite Kyiv's recent battlefield successes.

This is raised geopolitical uncertainty in the region to a new and heightened level which is been highly supportive of gold prices today. As of 4:54 PM EST gold futures basis, the most active December 2022 contract is up $4.90 and fixed at $1781.80. Today’s geopolitical uncertainty took gold to an intraday high of $1791.80. The dollar was trading higher earlier in the trading session but is currently trading fractionally lower. The dollar index is currently trading down 0.10% and fixed at 106.42.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

Gold sharply up as USDX, U.S. bond yields plummet after cooler CPI

Gold and silver prices are solidly higher in midday U.S. trading Thursday, with gold scoring a 2.5-month high and silver a 4.5-month high, following a U.S. inflation report that came in just a bit cooler than market expectations and in turn pushed the U.S. dollar index and U.S. Treasury yields sharply lower. December gold was last up $38.60 at $1,737.90 and December silver was up $0.323 at $21.66.

The U.S. consumer price index report for October came in up 7.7%, year-on-year, versus expectations for a rise of 7.9%, year-on-year, and compares to the 8.2% rise seen in the September report. This report may be the most important data point of the month, if not the quarter. A slightly cooler reading in the CPI print may influence the Federal Reserve"s decision-making process ahead of its December FOMC meeting. The Wall Street Journal is reporting the Fed is likely to raise its Fed funds rate by 0.5% in December, following a string of 0.75% increases at past FOMC meetings.

The U.S. stock indexes soared on the cooler CPI print, with Bitcoin also posting solid gains after the report. However, the crypto currency markets remain in turmoil late this week, with fears of a contagion effect and more illiquidity in the cryptos. Broker SP Angel this morning reports in an email dispatch: A proposed takeover of likely insolvent FTX crypto exchange by rival Binance is set to fail, sending Bitcoin down 26% this week and triggering concerns of wider market contagion. FTX exchange, whose founder Sam Bankman-Fried (likened to John Pierpont Morgan during the banking crisis of 1907), is looking for support for a reported $8 billion debt shortfall. The exchange"s insolvency has triggered a further step down in crypto market values, with the total crypto market cap standing at $914 billion, down from over $3 trillion in November 2021. JP Morgan are reporting crypto market participants are facing a "cascade" of margin calls, although it is unclear whether this will feed into wider equity markets.

 Gold and manipulation: The Ultimate Gold Panel with Frank Giustra & Rick Rule

The key outside markets today see the U.S. dollar index sharply down and hit a two-month low after the cooler CPI. Nymex crude oil prices are higher and trading around $87.25 a barrel. The 10-year U.S. Treasury note is yielding 3.852% and has fallen sharply in the wake of the cooler CPI report.

Technically, December gold futures prices hit a 2.5-month high today. The gold futures bulls and bears are back on a level overall near-term technical playing field. Bulls have momentum as a price downtrend on the daily bar chart has been negated. Prices this week have also seen a bullish upside breakout from a trading range, to suggest still more upside in the near term. Bulls" next upside price objective is to produce a close above solid resistance at $1,800.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the November low of $1,618.30. First resistance is seen at today"s high of $1,757.20 and then at $1,775.00. First support is seen at $1,738.70 and then at $1,725.00. Wyckoff's Market Rating: 5.0.

December silver futures prices hit a 4.5-month high today. The silver bulls have the overall near-term technical advantage and have momentum. Prices are in a choppy nine-week-old uptrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $23.00. The next downside price objective for the bears is closing prices below solid support at $20.00. First resistance is seen at today"s high of $21.94 and then at $22.50. Next support is seen at $21.00 and then at this week"s low of $20.435. Wyckoff's Market Rating: 6.5.

December N.Y. copper closed up 720 points at 377.15 cents today. Prices closed nearer the session high and hit a four-month high today. The copper bulls have gained the overall near-term technical advantage. Prices are in a six-week-old uptrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 400.00 cents. The next downside price objective for the bears is closing prices below solid technical support at the October low of 330.30 cents. First resistance is seen at 380.00 cents and then at 390.00 cents. First support is seen at today"s low of 362.85 cents and then at this week"s low of 356.25 cents. Wyckoff's Market Rating: 6.0.

By Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Gold price surges $50, should investors be selling into the rally?

Gold prices surged nearly $50 on Friday as the latest U.S. jobs report clarified some of the Federal Reserve's mixed messages, and China signaled a possible easing of its Covid-Zero policy. But caution is still advised as all previous quick rallies have been used as selling opportunities.

Gold has had a spectacular start to November after reporting the longest streak of monthly losses in more than five decades.

The news-filled week led to confusion in the marketplace after the Fed raised rates by 75 basis points for the fourth time in a row.

On the dovish end of things, Powell said that the U.S. central bank is now paying close attention to "the cumulative tightening" and potential "lags" with which monetary policy affects inflation and economic activity.

But on the hawkish side, the Fed chair stressed that the "ultimate level" of rates will need to be higher than previously expected and added that the window for a soft landing has "narrowed."

Things looked up for gold on Friday morning when the October U.S. jobs report showed the unemployment rate rising to 3.7% despite the higher-than-expected job gains.

"This report shows that the labor market is cooling, and that is good news. Gold is surging as the dollar is having its worst day since March 2020," OANDA senior market analyst Edward Moya told Kitco News. "The market now believes that the Fed has got a good handle on things and could go at a slower pace."

But a slowdown in the pace of rate hikes does not mean that the Fed won't go higher. "Markets are starting to price in the Fed going to 5.25%, and 2-year yield is nowhere near that," Moya said.

Following the news, the 2-year Treasury yield rose more than 50 basis points and pushed above the 10-year yield — a key recession gauge that is now sitting near 40-year highs.

"The market is thinking that the economy is slowing down, and that is reflected in the yield curve here, with the 2-year and the 10-year," TD Securities global head of commodity markets strategy Bart Melek told Kitco News.

But that is not even the whole picture. Market expectations of China easing up on its Covid-Zero policy also pushed gold higher. "We are getting speculation that China will lift those Covid-Zero restrictions or at least ease up on them, which is rallying the entire market," Melek said.

Views on the rally

Despite the stellar performance on Friday, many analysts don't believe this rally will last, as the longer-term trend for gold has been bearish.

"This is most likely a short squeeze type of rally that should be sold here," Melek said. "It's too early for gold to move up. The Fed is not finished yet."

TD Securities is projecting for gold to fall below $1,600 in the next few months as it sees the federal funds rate peaking at 5.5% instead of the previous projections of below 5%. "As the economy slows, you will start seeing real rates jump. And central banks won't be buying as much gold as they did this last quarter. The cost of carrying will be expensive," Melek added.

Every time gold has rallied recently, selling came into the market, Phoenix Futures and Options president Kevin Grady told Kitco News. "We saw a lot of people getting out of gold earlier, and this is a short-covering rally. Gold is still going to have a tough time," he said.

All eyes are now on gold's "pivotal level," which is at around $1,685 an ounce. "This is the high end of the range we've been stuck in," said RJO Futures senior market strategist Frank Cholly. "We'll probably see a rejection of this rally."

At the time of writing, December Comex gold futures were trading at $1,676.40, up 2.79% on the day.

Cholly advised getting out of long positions and taking some profits before the dollar strength came back. But if gold moves above the $1,685 an ounce level, then the outlook changes. "If we are above $1,685, then I'll rethink that strategy," he told Kitco News.

Whether or not gold can get above the next key resistance level and then move to $1,700 an ounce will depend on next week's inflation data. If the data shows price pressures coming down, gold could move up into that territory, said Moya. But a hotter-than-expected number would set a bearish tone.

Market consensus calls are looking for the October CPI number to slow to 8% from September's 8.2%.

Next week's data to watch

Thursday: U.S. CPI, jobless claims

Friday: Michigan consumer sentiment
 

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

David

Gold price sharply up after "Goldilocks" U.S. jobs report

Gold and silver prices are sharply higher in early U.S. trading Friday, boosted by a U.S. jobs report that landed in the sweet spot of marketplace expectations for the report. Silver prices notched a three-week high. Strong gains in crude oil prices and a weaker U.S. dollar index are also bullish outside market forces for the metals on this day. Short covering by futures traders is featured in both precious metals markets to end the trading week. December gold was last up $28.40 at $1,659.60 and December silver was up $0.785 at $20.22.

The just-released monthly U.S. employment report for October from the Labor Department showed the key non-farm payrolls number up 261,000, which was above the expected rise of 205,000 and compares to the gain of 263,000 seen in the September report. Gold prices added to their solid overnight gains after the release of the report, as analysis are saying this is a Goldilocks report that is "not too hot and not too cold"—meaning it is not too strong to prompt the Federal Reserve to become more aggressive in tightening its monetary policy, nor is it too weak to cause more concern about a U.S. economic recession.

Global stock markets were mostly higher overnight. U.S. stock indexes are headed for higher openings when the New York day session begins, on corrective bounces from the selling pressure seen the past three sessions, and on the U.S. job report numbers landing in the "sweet spot" of the marketplace expectations.

In overnight news, the Euro zone September producer price index came in at up 41.9%, year-on-year, which was near expectations. Soaring energy costs in Europe are driving the PPI sharply up.

Gold price to trade at $1,700 next year as Fed, dollar outlooks shift, says Capital Economics

The silver market bulls have outperformed gold bulls recently. One reason may be rising demand for India. Broker SP Angel today said in an email dispatch: "Silver India's insatiable appetite for silver eats into global warehouse inventories. Analysts expect Indian silver consumption to haveincreased over 80% this year. Indian silver buying was hit hard over the two covid years but 2022 purchases have seen a major jump in demand. Traders are reporting London and Hong Kong warehouse inventory levels, as pent-up demand feeds into the market."

The key outside markets today see the U.S. dollar index lower on a corrective pullback from strong gains Thursday. Nymex crude oil prices are sharply higher and trading around $91.50 a barrel. The 10-year U.S. Treasury note is yielding around 4.2%.

Other U.S. economic data due for release Friday includes the global services purchasing managers' index.

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Technically, the gold futures bears have the solid overall near-term technical advantage. Bulls' next upside price objective is to produce a close above solid resistance at $1,700.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,600.00. First resistance is seen at this week's high of $1,673.10 and then at $1,679.40. First support is seen at $1,650.00 and then at the overnight low of $1,631.10. Wyckoff's Market Rating: 2.0

The silver bulls have regained the overall near-term technical advantage. A choppy uptrend is in place on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at the October high of $21.31. The next downside price objective for the bears is closing prices below solid support at $18.00. First resistance is seen at $20.50 and then at $21.00. Next support is seen at $20.00 and then at the overnight low of $19.425. Wyckoff's Market Rating: 6.0.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

David

Gold, silver down amid strong greenback, rising bond yields

Gold and silver prices are lower in midday U.S. trading Thursday, with gold hitting a six-week low in overnight dealings. Silver prices have rebounded well off daily lows. Very sharp gains in the U.S. dollar index and rising U.S. Treasury yields, along with lower crude oil prices, pressured the precious metals markets today. December gold was last down $22.20 at $1,627.80 and December silver was down $0.239 at $19.36.

A still-hawkish Federal Reserve is keeping the metals market bulls squelched. The Fed's Open Market Committee (FOMC) statement Wednesday afternoon initially was viewed as less hawkish. The U.S. central bank raised its main Fed funds rate by 0.75%, to 4.0%, as expected. The FOMC statement said the Fed will take into consideration the health of the U.S. economy after its recent "cumulative tightening." The markets initially read that statement as leaning less hawkish on U.S. monetary policy going forward. The U.S. dollar index sold off and U.S. Treasury yields dropped, while U.S. stock indexes and gold rallied. However, once Fed Chairman Powell started speaking at his press conference and took a still-hard line on the Fed's intent to keep raising rates to stop problematic price inflation, the aforementioned markets promptly reversed course. "Powell dropped the hammer," quipped one business TV anchor. Powell in his presser implied the Fed's terminal interest rate may have to rise higher than earlier Fed expectations—likely above 5%–and stay at that higher level for longer. Notions of a Fed pivot on its aggressive monetary policy tightening were dashed at Powell's presser. More hawkish central banks and in turn weaker economies also suggest less consumer and commercial demand for the metals.

Expect a '75 bps hike,' as Powell zeroes in on inflation – Chance Finucane

Global stock markets were mostly lower overnight. U.S. stock indexes are lower at midday. Risk-off attitudes are keener in the marketplace late this week.

The key outside markets today see the U.S. dollar index very sharply higher. Nymex crude oil prices are lower and trading around $89.00 a barrel. The 10-year U.S. Treasury note is yielding 4.149%.

Focus quickly turns to Friday's monthly U.S. employment report for October from the Labor Department. The key non-farm payrolls number is expected to come in at up 205,000, compared to a rise of 263,000 in the September report.

Technically, the gold futures bears have the solid overall near-term technical advantage. Prices are in a longer-term downtrend on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at $1,700.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,600.00. First resistance is seen at today's high of $1,643.20 and then at $1,650.00. First support is seen at today's low of $1,618.30 and then at $1,600.00. Wyckoff's Market Rating: 1.0.

The silver bulls have the slight overall near-term technical advantage. Prices are still in a choppy two-month-old uptrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at the October high of $21.31. The next downside price objective for the bears is closing prices below solid support at $18.00. First resistance is seen at $19.60 and then at this week's high of $20.11. Next support is seen at $19.00 and then at today's low of $18.805. Wyckoff's Market Rating: 5.5.

December N.Y. copper closed down 385 points at 342.95 cents today. Prices closed near mid-range today. The copper bears have the overall near-term technical advantage. However, recent price action suggests a market bottom is in place. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the September high of 369.25 cents. The next downside price objective for the bears is closing prices below solid technical support at the September low of 324.30 cents. First resistance is seen at this week's high of 350.85 cents and then at the October high of 359.30 cents. First support is seen at this week's low of 336.15 and then at the October low of 330.30 cents. Wyckoff's Market Rating: 4.0.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

David

Gold prices move near session highs as Federal Reserve raises interest rates 75 basis points

The gold market is seeing some new buying momentum as the Federal Reserve looks to slightly adjust its aggressive monetary policy stance.

In a widely anticipated move, the Federal Reserve raised its Fed Funds rate by 75 basis points. This is the fourth consecutive supersized rate hike this year. While the central bank remains focused on bringing inflation down, it does appear to be adjusting its stance.

"The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.

Analysts and economists expected the Federal Reserve to signal a slowdown in its tightening cycle in December and through the early part of 2023

December gold futures last traded at $1,661.70 an ounce, up 0.77% on the day. "The market read that statement as leaning less hawkish on U.S. monetary policy going forward," said Jim Wyckoff, senior technical analyst at Kitco.com.

Katherine Judge, senior economist at CIBC, said that the more nuanced messaging in the statement gives the central bank a platform to slow the pace of rate hikes. However, she added that terminal rate expectations remain in place.

"Today's statement is still consistent with the median dot plot projections released back in September, which showed rates reaching 4.25-4.50% by year end (i.e. a further 50bp hike in December), and between 4.50-4.75% next year," she said in a note. "Our own forecast doesn't include that final 25bp hike in 2023, as we expect to see evidence that GDP and employment growth is slowing more than the Fed previously anticipated by then."

Some economists note that the Federal Reserve still sees resilient strength and high inflation in the economy. The Fed reiterated its stance that it is committed to brining inflation back down to its 2% objective.

"Recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures," the statement said. "The Committee is highly attentive to inflation risks."

Paul Ashworth, Chief North America Economist at Capital Economics, said that with interest rates in restrictive territory the U.S. central bank has room to slow the pace of its tightening.

“Barring another upside inflation surprise in the October and November CPI reports, which we can’t completely rule out, it looks like the Fed is laying the groundwork to shift down to a 50bp hike in December and, if we’re right that core inflation will start to show signs of slowing soon, a 25bp rate hike at the January meeting next year,” he said.

By Neils Christensen

For Kitco News

Time to buy Gold and Silver on the dips

David