Gold, silver boosted by weaker greenback, bullish charts

Gold, silver boosted by weaker greenback, bullish charts

Gold and silver prices are higher in midday trading Thursday, supported by a sell-off in the U.S. dollar index on this day. Bullish near-term chart postures for both metals continue to invite the technically based speculators to the long sides. February gold was last up $7.10 at $1,823.10 and March silver was up $0.36 at $24.20.

Global stock markets were flat to weaker overnight. U.S. stock indexes are solidly higher at midday. The marketplace has been quieter this week following the Christmas holiday and just ahead of the new year. There has also been a dearth of major fundamental news and economic data this week.

The World Gold Council reports central bank gold buying at the highest rate since 1967, with Russia and China likely the leaders. “Sanctions on Russia and strained relations between the West and China have led to both countries adopting a policy of ‘de-dollarization’ to rely less on the policies of the U.S. central bank and government,” said broker SP Angel in a morning email dispatch. According to the World Gold Council, central banks bought 399 metric tons of gold in the third quarter, compared to 186 metric tons in the first quarter and 88 metric tons in the first quarter of 2022. Officially, Turkey led buying with 29 metric tons in the third quarter, though many central banks including China and Russia do not always report gold holdings.

The other key outside market today sees Nymex crude oil prices lower and trading around $78.00 a barrel. Meantime, the yield on the benchmark U.S. 10-year Treasury note is presently 3.83%.

Technically, February gold futures bulls have the firm overall near-term technical advantage. A seven-week-old uptrend is in place on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at the $1,875.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,782.00. First resistance is seen at today’s high of $1,825.00 and then at this week’s high of $1,841.90. First support is seen at today’s low of $1,811.20 and then at $1,800.00. Wyckoff's Market Rating: 7.0.

March silver futures bulls have the solid overall near-term technical advantage. Prices are in a four-month-old uptrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at $22.735. First resistance is seen at the December high of $24.525 and then at $24.80. Next support is seen at $24.00 and then at this week’s low of $23.645. Wyckoff's Market Rating: 7.5.

March N.Y. copper closed down 140 points at 382.85 cents today. Prices closed near mid-range. The copper bulls have the overall near-term technical advantage. Prices are in a three-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 November high of 394.70 cents. The next downside price objective for the bears is closing prices below solid technical support at 370.00 cents. First resistance is seen at Wednesday’s high of 387.30 cents and then at 394.70 cents. First support is seen at 380.00 cents and then at 375.00 cents. Wyckoff's Market Rating: 6.0.

By Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Gold prices are holding support above $1,800 an ounce as U.S. pending home sales fall 4% in November

 

Gold prices are holding support above $1,800 an ounce as U.S. pending home sales fall 4% in November

Rising U.S. mortgage rates, due to the Federal Reserve’s aggressive monetary policy stance continues to take its toll on the U.S. housing sector as fewer consumers start the process of buying a new home in November.

The U.S. pending home sales fell 4% in last month following a drop of 4.6% in October, the National Association of Realtors (NAR) said on Wednesday. The data was weaker than expected as consensus forecast called for a decline of around 1%.

The gold market has seen technical selling pressure Wednesday and has not been able to attract any bullish traction following the disappointing home sales data. February gold futures last traded at $1,812.20 an ounce, down 0.60% on the day.

This is the sixth consecutive month of falling pending home sales. The report noted that the index has fallen to second lowest monthly reading in 20 years.

However, the association added that it hopes sales will pick up as 2022 comes to a close.

“With mortgage rates falling throughout December, home-buying activity should inevitably rebound in the coming months and help economic growth,” the report said.

Economists pay close attention to the pending home sales numbers because the index is seen as a forward-looking barometer for the housing market. A lag of a month or two usually exists between a contract and a completed sale.

The U.S. housing sector, which is a significant contributor to GDP growth, has been hard hit this past year as the Federal Reserve has raised interest rates by 425 basis points, its most aggressive monetary policy stance in 40 years.

Along with rising mortgage rates, rising home prices due to a lack of supply has also priced many potential new home owners out of the market.

Although the Federal Reserve is expected to continue to raise interest rates in 2023, many economists see the tightening cycle closer to peak rates. A light at the end of the tunnel could ease some pressure in the housing market, according to economists.

By Neils Christensen

For Kitco News

Time to Buy Gold and Silver

David

Gold rallies to 6-mo. high on bullish technicals, outside markets

Gold rallies to 6-mo. high on bullish technicals, outside markets

Gold and silver prices are sharply higher in midday U.S. trading Tuesday, boosted by chart-based buying and by two key outside markets are in a daily bullish posture for the precious metals–the U.S. dollar index is weaker and crude oil prices firmer. Gold prices hit a six-month high today. February gold was last up $25.50 at $1,829.70 and March silver was up $0.395 at $24.31.

Bullish near-term charts fueled the solid gains in gold and silver today. Many bullish speculators are reckoning the bigger hedge funds will be more active on the long sides of the two precious metals markets in early 2023, and wanted to buy in before the funds do.

Global stock markets were mixed to firmer overnight. U.S. stock indexes are mixed at midday. The general marketplace is quieter following the Christmas holiday weekend that saw markets closed Monday.

China’s relaxation of its strict Covid policies remains in focus, with the marketplace wondering if the pivot by Chinese authorities will prompt faster growth in the world’s second-largest economy. Or, will the pivot prompt such a surge in Covid infections that China’s economy will be further damaged in the near term?

The yield on the benchmark U.S. 10-year Treasury note is presently 3.849%, which is higher. However, the gold and silver bulls chose to ignore that bearish outside element on this day.

Technically, February gold futures prices hit a six-month high today. Bulls have the firm overall near-term technical advantage. A seven-week-old uptrend is in place on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at the $1,875.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,782.00. First resistance is seen at today’s high of $1,841.90 and then at $1,850.00. First support is seen at today’s low of $1,808.00 and then at $1,800.00. Wyckoff's Market Rating: 7.0.

March silver futures prices hit an eight-month-high last week. The silver bulls have the firm overall near-term technical advantage. Prices are in a four-month-old uptrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at $22.735. First resistance is seen at the December high of $24.525 and then at $25.00. Next support is seen at $24.00 and then at $23.55. Wyckoff's Market Rating: 7.0.

March N.Y. copper closed up 815 points at 389.05 cents today. Prices closed near mid-range and hit a six-week high today. The copper bulls have the overall near-term technical advantage. Prices are in a three-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 November high of 394.70 cents. The next downside price objective for the bears is closing prices below solid technical support at 370.00 cents. First resistance is seen at 394.70 cents and then at 400.00 cents. First support is seen at today’s low of 383.80 cents and then at 380.00 cents. Wyckoff's Market Rating: 6.0.

 This is what investors face in 2023

By Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Gold price weighs incoming data and hawkish Fed comments as 2023 quickly approaches

Gold price weighs incoming data and hawkish Fed comments as 2023 quickly approaches

With just one week to go until 2023, gold is down just over 1% year-to-date after a very volatile year that saw the precious metal rise above $2,000 an ounce in the spring and hit lows near $1,630 an ounce in the fall.

February Comex gold futures were looking to close Friday at around $1,809 an ounce, up 0.5% on the week.

Gold may have put in an enduring price bottom in 2022, according to Bloomberg Intelligence senior macro strategist Mike McGlone. "We see gold as a top performer in 2023, particularly if weakening broad commodities goad the Federal Reserve to begin easing," McGlone said Thursday.

Gold could move above $2,000 an ounce in 2023 and "never look back," McGlone added. "This is our base case for the precious metal, notably as the Fed shifts from the highest-velocity tightening period in 40 years toward easing … Gold has had an upper-performance hand vs. the industrial metal since 2006, when the U.S. two-year/10-year curve last recovered from a period of inversion," he said.

The focus this week was on digesting the latest GDP, PCE price index, durable goods, and home sales data.

"This week's data showed that the U.S. economy is ending the year on a mixed note. The housing market generally showed further signs of deterioration in November, and data on durable goods orders were generally weaker than expected, when backward revisions to previously released data are taken into account. That said, data on consumer confidence shows that consumers are less downbeat at present than they were a few months ago," economists at Wells Fargo said.

Markets are trying to put together an outlook for the beginning of next year, with data showing mixed signs of a slowing economy, cooling inflation, and a still hawkish Federal Reserve.

This is the puzzle that gold is trying to get ahead of as it enters the new year.

"Federal Reserve Chairman Jerome Powell has been trying to sell investors a notion that interest rates will have to be higher for longer than previously assumed to keep inflation under control," said CIBC Capital Markets senior economist Andrew Grantham. "However, financial markets aren't buying it, with interest rate cuts still being priced in for late 2023 and bond yields well off their earlier highs."

Powell told markets in December that after raising rates by 425 basis points in 2022, the Fed is still not restrictive enough, and rates will have to remain higher for longer.

But analysts are interpreting that in different ways. "What higher-for-longer does mean is that central banks will likely react later and less aggressively to downside growth surprises and recession risks than they have in the past, due to lingering inflationary concerns. That new reaction function is the reality that markets will have to start buying into at some point during 2023," Grantham said Friday.

The trend market participants are watching is how fast inflation cools down, and growth slows. "Data on Friday confirmed that PCE inflation fell further in November, and a new rent inflation series published this week by researchers at the Cleveland Fed adds further weight to our view that inflation will continue falling sharply in 2023," said Capital Economics senior U.S. economist Andrew Hunter.

This week's macro surprise was the final reading of the Q3 GDP, which showed growth at 3.2% versus the previous estimate of 2.9%. The stronger-than-expected result weighed on gold, pushing prices closer to the $1,800 line.

In the meantime, the Fed's preferred measure of inflation — the annual core PCE number — cooled to 4.7% in November after October's 5% reading.

Next week is a holiday week between Christmas and the New Year, and it promises to be quiet. But the first week of the new year kicks off with several key releases, including nonfarm payrolls, which the Fed is currently monitoring very closely.

Market consensus calls are looking for the U.S. economy to have added 200,000 positions in December and for the unemployment rate to remain at 3.7%.

Other data to keep an eye on is the ISM manufacturing and services PMI, which are also scheduled for the first week of January.

"We expect both of the ISM activity surveys to have fallen in December, pointing to a continued slowdown in GDP growth, and we are provisionally penciling in a softer 200,000 gain in nonfarm payrolls," Hunter noted Friday.

Gold's technical set-up shows a six-week-old uptrend, according to Kitco's senior analysts Jim Wyckoff.

"Bulls' next upside price objective is to produce a close in February futures above solid resistance at $1,900.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,775.00. First resistance is seen at $1,823.00 and then at this week's high of $1,833.80. First support is seen at this week's low of $1,892.70 and then at $1,882.00," Wyckoff said Friday.

 

Data to watch in the next two weeks:

December 28: U.S. pending home sales

December 30: U.S. jobless claims

January 4: U.S. ISM Manufacturing PMI

January 5: ADP nonfarm employment change, U.S. jobless claims

January 6: U.S. nonfarm payrolls, U.S. factory orders, U.S. ISM non-manufacturing PMI
 

By Anna Golubova

For Kitco News

Time to Buy Gold and Silver

David

Gold futures remain above $1800 as spot gold still attempts to breach that key level

Gold futures remain above $1800 as spot gold still attempts to breach that key level

As of 4:55 PM EST gold futures basis, the most active February 2023 contract is fixed at $1805.90 after factoring in a net gain of $10.80. Spot gold gained $6.00 and is currently fixed at $1798.51. Silver gained 1.37% or $0.32 with the most active March 2023 futures contract currently fixed at $23.935. A golden cross was identified today with silver’s short-term 50-day moving average crossing above its 200-day moving average.

Gains in the precious metals were fractionally driven by dollar weakness but the majority of today’s gains were the result of buying by market participants. The US dollar declined by 0.10 % with the dollar index currently fixed at 104.025.

According to the KGX (Kitco Gold Index) at 5:00 PM EST spot gold was fixed at $1798.60 after factoring in a net gain of $6.40. A gain of $5.50 was attributed to normal trading and the remaining gain of $0.90 was the result of dollar weakness.

Our technical studies indicate that the support levels for gold futures are at $1792 which corresponds to the longest-term moving average used by market technicians, the 200-day MA. Major support occurs just below that at $1784.80 which is based upon the 23.6% Fibonacci retracement. The data set used to create the retracement begins at $1618 and concludes at $1837 which is the highest value gold has traded to since August.

This weekend marks the beginning of the year-end holiday season. All cultures celebrate the beginning of a new year, although not on the same date, however, this year is special. It is special because every person alive has been greatly impacted (some much, much more than others) by the same event which began in 2020.

This is why this year-end holiday season is a time we all should be thankful for. Hopefully, this year-end holiday season will mark the beginning of a new era, an era defined as a time of rebuilding, rather than a time of hardship.
 

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

Gold, silver pressured by upbeat U.S. data

Gold, silver pressured by upbeat U.S. data

Gld and silver prices are solidly lower in midday U.S. trading Thursday. The metals market bulls today are feeling the heat of a U.S. economy that does not seem like it wants to slide into a recession any time soon, following stronger-than-expected U.S. data released this morning. February gold was last down $21.10 at $1,804.30 and March silver was down $0.399 at $23.795.

Weekly U.S. jobless claims did not rise as much economists were expecting. Initial jobless claims rose slightly to 216,000, lower than the 222,000 forecast. The final third-quarter gross domestic product readings were surprisingly strong. The Q3 GDP came in at up 3.2%, versus the consensus forecast for a rise of 2.9%. Personal consumption expenditures were up 4.3% in the third quarter and the core PCE was a bit higher than expected at up 4.7 percent.

Today's U.S. data falls into the camp of the U.S. monetary policy hawks, who want the Federal Reserve to keep their foot on the policy-tightening accelerator. "Wall Street still is pricing in one more rate hike at the February FOMC meeting, but if the U.S. data does not break, a March hike should start to get priced in," said Edward Moya of OANDA.

Global stoPICck markets were mixed overnight. U.S. stock indexes are pointed solidly lower at midday. Trading volumes are likely to wane on Friday, just ahead of the Christmas holiday over the weekend and as a massive winter storm pounds much of the U.S. and is heading for the east coast.

'This time is different' for uranium, which could reach $80 in 2023 – Lobo Tiggre

Rising Covid infections in China have the marketplace pensive late this week. Bloomberg reported China is experiencing 1 million new infections and 5,000 virus deaths each day, following the Chinese government's relaxation of Covid restrictions.

The key outside markets today see the U.S. dollar index higher. Nymex crude oil prices are near steady trading around $78.25 a barrel. Meantime, the yield on the benchmark U.S. 10-year Treasury note is presently 3.675%.

Technically, February gold futures bulls still have the overall near-term technical advantage. A six-week-old uptrend is in place on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at the December high of $1,850.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,775.00. First resistance is seen at $1,820.00 and then at this week's high of $1,833.80. First support is seen at $1,800.00 and then at this week's low of $1,793.20. Wyckoff's Market Rating: 6.5

March silver futures saw some profit taking today after prices hit an eight-month-high on Wednesday. The silver bulls still have the firm overall near-term technical advantage. Prices are in a choppy 3.5-month-old uptrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at the December low of $22.19. First resistance is seen at $24.00 and then at today's high of $24.215. Next support is seen at $23.50 and then at $23.00. Wyckoff's Market Rating: 7.0.

March N.Y. copper closed down 445 points at 376.55 cents today. Prices closed near the session low and scored a bearish outside day down today. The copper bulls and bears are on a level overall near-term technical playing field. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the November high of 394.70 cents. The next downside price objective for the bears is closing prices below solid technical support at 354.70 cents. First resistance is seen at today's high of 384.90 cents and then at the December high of 392.90 cents. First support is seen at this week's low of 372.30 cents and then at 370.00 cents. Wyckoff's Market Rating: 5.0.

By Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Gold, silver up a bit on mild safe-haven demand, technical buying

Gold, silver up a bit on mild safe-haven demand, technical buying

Gold and silver prices are slightly higher in midday U.S. trading Wednesday, with silver scoring an eight-month high. Both markets are pausing after posting solid gains Tuesday, amid wobbly global stock and financial markets that prompted some safe-haven demand for the metals, especially on Tuesday. Chart-based buying was also featured in the two precious metals market today. Rising bond yields this week are a bearish element for gold and silver. February gold was last up $2.40 at $1,827.80 and March silver was up $0.014 at $24.285.

The marketplace Wednesday has mostly digested the Bank of Japan move Tuesday to tighten its monetary policy by raising the cap for the interest rate on its 10-year bond by 0.25 percent. The Japanese yen surged against the U.S. dollar. Global bond and stock markets were rattled on the news because Japan is a big player in global bond markets. Japanese citizens are big savers and put much of their money into global stocks and bonds. With the higher domestic bond yield cap, Japanese citizens and companies may opt to keep more of their money at home. Speculators worldwide had for years been putting on a yen-based "carry trade" that has suddenly become very shaky. With world financial markets so highly intertwined, all of the above at least temporarily spooked the global marketplace. Some Fed watchers are saying the BOJ move underscores the notion that global inflation remains problematic and that the Fed won't be able to do any pivot on its hawkish monetary policy in 2023.

Global stock markets were mixed overnight. U.S. stock indexes higher at midday. Trading volumes are likely to wane ahead of the Christmas holiday over the weekend and as a massive winter storm pounds much of the U.S. and is heading for the east coast.

Copper prices to find their groove in the second half of 2023

The key outside markets today see the U.S. dollar index higher. Nymex crude oil prices are solidly up and trading around $78.25 a barrel. Meantime, the yield on the benchmark U.S. 10-year Treasury note is presently 3.694%.

Technically, February gold futures bulls have the firm overall near-term technical advantage. A six-week-old uptrend is in place on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at the December high of $1,850.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,775.00. First resistance is seen at today's high of $1,833.80 and then at the December high of $1,836.90. First support is seen at $1,820.00 and then at $1,800.00. Wyckoff's Market Rating: 7.0Live 24 hours silver chart [

March silver futures prices hit an eight-month-high today. The silver bulls have the solid overall near-term technical advantage. Prices are in a choppy 3.5-month-old uptrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at the December low of $22.19. First resistance is seen at today's high of $24.525 and then at $25.00. Next support is seen at $24.00 and then at $23.50. Wyckoff's Market Rating: 7.5.

March N.Y. copper closed up 140 points at 381.35 cents today. Prices closed near mid-range today. The copper bulls have the slight overall near-term technical advantage. 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 354.70 cents. First resistance is seen at 386.75 cents and then at the December high of 392.90 cents. First support is seen at this week's low of 372.30 cents and then at 370.00 cents. Wyckoff's Market Rating: 5.5.

By Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Gold moves higher as the dollar falls on the news of a BOJ policy revision

Gold moves higher as the dollar falls on the news of a BOJ policy revision

The Bank of Japan's surprise decision that they would raise their benchmark interest rate cap from 0.25% to 0.50% sent ripples through the global financial markets. Since 2016 the Japanese Central Bank has set its target range for the yield of 10-year Japanese government bonds near zero, with a cap of 0.25%. As other major central banks began to enact interest rate hikes this year the BOJ maintained their cap on its benchmark rate near zero.

According to Reuters News, "The Bank of Japan shocked markets on Tuesday with a surprise tweak to its bond yield control that allows long-term interest rates to rise more, a move aimed at easing some of the costs of prolonged monetary stimulus…But the central bank kept its yield target unchanged and said it will sharply increase bond buying, a sign the move was a fine-tuning of existing ultra-loose monetary policy rather than a withdrawal of stimulus."

The move by the BOJ astounded financial markets globally. The value of the Japanese yen rose dramatically to a four-month high against the U.S. dollar which in turn resulted in strong gains across-the-board in the precious metals. Gold gained approximately 1.7%, silver gained 5.22%, palladium gained 3.79%, and platinum gained 2.53%.

As of 4:15 PM EST gold futures basis, the most active February 2023 contract is fixed at $1828.20 after factoring in a net gain of $30.50. Spot gold gained $31 and is currently fixed at $1818.40. Silver had the largest percentage gain of over 5% with the most active March 2023 futures contract gaining $1.20 and is fixed at $24.39.

Gains in the precious metals were partially driven by dollar weakness but the vast majority of today's moves were the result of strong buying in the markets.

Our technical studies indicate that the support levels for gold futures are first at $1795, which corresponds to the longest-term moving average used by market technicians. Followed by the 200-day MA, major support occurs just below the 200-day SMA at $1785 which is also based upon the 23.6% Fibonacci retracement. The Fibonacci retracement uses a data set that begins at $1619 the low hit two months ago and concludes at $1837, the highest value gold made since August.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

Silver price to beat gold in 2023? Precious metal plays catch-up on strong demand, ETFs remain missing puzzle piece

Silver price to beat gold in 2023? Precious metal plays catch-up on strong demand, ETFs remain missing puzzle piece

sIver is gearing up to outperform gold in 2023 after a mixed year, according to analysts, who point to a more positive macro environment, strong physical demand, and a good technical set-up.

Next year looks promising for both gold and silver, but many analysts expect silver to rally more than the yellow metal because of its volatility profile and the lack of attention it received in the prior two years.

Year-to-date, spot silver is up 0.21%, trading at $23.40 an ounce, and spot gold is down 1.8%, trading at $1,797.60 an ounce.

Silver saw most of its gains in the first quarter of this year, hitting $27 an ounce, which is similar to gold's trading pattern. Then it saw losses for six months, hitting a 2-year low of $17.50 in September. In the fourth quarter, prices started to pick up as investors began to anticipate a pivot by the Federal Reserve.

"I'm a little more positive on silver in that we're back to $23 an ounce. It's the high beta play," Wells Fargo head of real asset strategy John LaForge told Kitco News. "In a year where stocks are down, precious metals essentially follow stocks down. In that kind of environment, you'd expect silver not to be flat, which is better than gold's performance."

One major driver that held silver and other precious metals back this year was the Federal Reserve's aggressive tightening cycle with a total of 425 basis points for 2022.

"This increased cost of carry for pretty much everything. The U.S. dollar increased to 20-year highs, and inflation continued to rise this year. All of that created a perfect storm, and managed money has been moving away from non-yielding assets, which have been a drag on their portfolios in this high-interest rate environment," explained Mitsubishi Corporation head of business development Jonathan Butler.

LaForge noted that commodities have been in a supercycle since 2020, with silver looking to play a special role, especially considering how cheap it is relative to other commodities. "When you are in supercycle, you often find high-beta plays do better. Between 1999-2011, silver did much better than gold."

Silver has been neglected by investors, which is why it has a lot of potential at current price levels, Gainesville Coins precious metals expert Everett Millman told Kitco News. "Silver will outperform gold — that is the pattern that tends to play out during bull runs for precious metals. And its recent action is encouraging," Millman said.

Plus, the available supply for silver investment products is rather tight. "Silver sitting in vaults, which can be used for bullion products and investment products, has been getting tighter and tighter. A major issue for 2023," Millman explained.

Macro drivers are shifting, and it's good for the price

The macro environment is shifting from a negative to a positive one for the precious metals, and silver is already running ahead of gold.

"Silver gives signs that whatever weakness we see in gold is probably short-lived. Usually, when silver starts beating gold, we are closer to a bull market in precious metals versus the other way," LaForge said. "You can see it in the last couple of months, with all the talk of the Fed pivoting and things changing in 2023, precious metals perked up. I think next year they'll both do well."

The biggest macro driver supportive of higher prices is a Fed pivot. Even though an actual pause, a slowdown, or even cuts might be months away, precious metals are already anticipating that and are starting to move.

"Silver should benefit from the end of the Fed's interest rate hikes and the speculation on interest rate cuts that will start thereafter. The expected economic recovery following the end of the recession should additionally benefit silver as a precious metal with a high industrial use. With the easing of corona restrictions in China, silver demand should receive a further boost, as China is the largest consumer of silver," said Commerzbank analyst Carsten Fritsch.

 

Looking at fundamentals

According to Metals Focus, global silver demand is up 16% at 1.2 billion ounces as of mid-November.

And the silver market remains tight, with the Silver Institute and Metals Focus stating that the physical silver market, which excludes ETFs, is projected to show the most significant supply deficit in decades this year.

"This is expected to amount to 194 million ounces (6 thousand metric tons), meaning demand will outstrip supply by nearly 20%," Fritsch said. "The driving factor behind this is a 16% surge in silver demand to a record level."

Industrial demand for silver was at a record in 2022, reaching 539 million ounces, according to Metals Focus managing director Philip Newman. With so many countries focused on energy security, silver saw new demand come from solar panel installations, which hit new highs this year, Newman added during an LBMA webinar summarizing silver.

The automotive sector also contributed to additional demand, particularly the electrification of vehicles, added Butler. "The average silver content per vehicle is increasing," he said.

Physical demand for silver from retail investors has also been strong this year. Demand for jewelry and silverware is at record highs — jewelry is up 29% at 235 million ounces, and silverware is up 72% at 73 million ounces, according to Metals Focus. And India is responsible for at least half of each category.

Retail bar and coin investment demand are up 18% at 329 million ounces, also at a record peak, added Metals Focus.

The outlook for next year sees all these factors remaining in place. "Industrial demand should continue to benefit from electrification of the vehicle fleet, 5G technology, and the government-driven rollout of green infrastructure such as photovoltaics. Physical investment demand should be buoyed unabated by fears of high inflation," said Fritsch.

Analysts warned that there are several headwinds to monitor for 2023, including a recessionary slowdown impacting the industrial side of silver.

"China's regional lockdowns are a threat to some of the demand for next year and possibly beyond in terms of PV and conventional chemical application for silver," Butler explained. "There is an increased risk of 2023 being a recessionary year for Europe. That will impact some industrial sectors as well."

A recession could put a damper on industrial demand but not enough to make silver a recessionary casualty, said OANDA senior market analyst Edward Moya. "Silver is going to do well next year, just like gold, Moya told Kitco News.

The U.S. market remains a solid support factor, especially with additional funding coming from the Inflation Reduction Act, Butler pointed out. "We are seeing a great deal of investments into PV and electrification. That is ultimately good for silver. Meanwhile, the U.S. economy is bubbling along with some decent growth rates, which helps lift up conventional applications for silver in electronics and chemical applications."

 

The missing puzzle piece: investment demand

In contrast to robust physical demand is the lack of interest from institutional investors.

There were strong outflows from silver ETFs, amounting to more than 4,000 tons year-to-date in mid-November, Fritsch said, citing Bloomberg's data. "The year that is coming to an end is likely to show by far the strongest ETF outflows since the launch of this investment product 16 years ago," said Fritsch.

Global exchange stocks fell by around 400 million ounces year-to-date, touching 1.3 billion ounces, including London and COMEX markets, according to Metals Focus. "Quite staggering figures that you had depleted from these two locations alone," Newman said.

Disinterest from the professional side is one of the reasons why silver has not done better this year, according to StoneX's Head of Market Analysis for EMEA and Asia Regions Rhona O'Connell.

Other reasons included anemic gold price performance, LBMA silver vaults providing ample supply, and the physical market being much smaller than the professional market, O'Connell pointed out.

The price of silver does not always respond to higher physical demand. When there is more demand, the local premiums go up instead.

This is why this year, premiums skyrocketed in the silver market. For example, the retail premium on U.S. Eagles was $17 an ounce, noted Butler. "The end-consumer seems quite happy paying basically 100% markup for a silver Eagle," he said.

These high premiums for the physical metal across the globe also led to a shift in how the precious metal is getting delivered.

In 2022, 60% was delivered by air, which was unprecedented. "Silver usually travels by sea freight. [Freight by air is now] possible because of the high premium. Demand is so insatiable, they don't want to wait two or three months for a sea container to arrive," Newman pointed out.

In India, people are paying 25 cents an ounce to have silver flown in from London storage, which typically takes two days. In comparison, silver delivered by sea would cost 5 cents an ounce and take about four weeks or more, explained BullionVault's director of research Adrian Ash during an LBMA webinar on silver.

 

Price predictions

Many analysts are not ruling out silver hitting new record highs within this commodities supercycle or within this decade. But for next year, predictions vary, with the trading range remaining fairly wide.

"Silver could very well hit record highs in this supercycle. Average cycles last about 15-16 years. They are getting shorter. The new highs in silver could still be five years away. We are in year three of the supercycle. New highs are common in all supercycles. But it doesn't happen right away," LaForge said.

Millman's high-end target for next year is around $28-$30 an ounce. "Even though silver tends to outperform gold, it is also volatile. The trading range is wider than gold. Investors should also be cautious of major pullbacks where we get back to $20 or lower," he warned.

Fritsch sees silver at $25 an ounce by the end of the year.

Bank of America forecasts silver peaking at $25 an ounce next year. "While upside may be limited near-term, mine supply is constrained, so a rebound of commercial purchases is set to ultimately push prices higher," the bank said in its outlook. "[Supply] should also be supported by rising demand from solar panel and electric vehicle manufacturers, as the global community focuses on tackling climate change."

Participants of the LBMA's latest conference saw silver at $28.30 next year. "That's an awful lot of anticipation around silver," said Ash.

By Anna Golubova

For Kitco News

Time to Buy Gold and Silver

David

Can gold price finish strong as markets enter the last full week of the year?

Can gold price finish strong as markets enter the last full week of the year?

hawkish Federal Reserve has knocked gold back below $1,800 an ounce, but the precious metal is starting to retrace its gains heading into the weekend. Analysts warn of additional volatility during the last full week of the year.

The big news markets are still digesting is the aggressive Fed message, with rates peaking above 5% next year. The median forecast for next year shows that rates could go up to 5.1%, with Fed Chair Jerome Powell saying that rates will stay there "for some time."

Despite cooler inflation numbers from November, the Fed is staying on track with no pivot or pause signaled for the beginning of next year. Surprising many on the hawkish side, Powell said Wednesday that rates are not "restrictive enough" even after 425 basis points worth of hikes this year.

"It's now not so important how fast we go. It's far more important to think what is the ultimate level. And then, at a certain point, the question will become, how long do we remain restrictive? That will become the most important question," Powell said.

For the February Fed meeting, markets are looking for a 75% chance of a 25 bps hike and a 25% chance of a 50 bps increase, according to the CME FedWatch Tool.

"[Powell] played down the degree of cuts that are being forecast in the dot plot for 2024, suggesting they wouldn't ideally cut until they saw 2% inflation," said Pepperstone's head of research Chris Weston.

In response to a tighter monetary policy path ahead, gold tumbled from multi-month highs and dropped below $1,800 an ounce. At the end of the week, the precious metal retraced some of the lost gains, with February Comex gold futures last at $1,799.30, down 0.63% on the week.

"Gold is sending out a lot of mixed signals. It seems to like uncertainty and the idea that Fed is struggling to strike the right balance with rate hikes. The idea that interest rates will remain higher for longer, is pretty negative for the gold price on balance," Gainesville Coins precious metals expert Everett Millman told Kitco News.

The Fed is also projecting GDP to grow just 0.5% and core PCE at 3.5% in 2023.

The context of the Fed's message is also very important to consider. And markets are entering the last full week of the year. "We are entering a period where it is the last full trading week of the year. Gold is trading fairly choppy," OANDA senior market analyst Edward Moya told Kitco News.

Short-term Moya is bearish on the gold price, but longer-term, the outlook is bullish. "We are going to see gold traders being cautious here. Because of lighter liquidity and it will still be more of a one-way trade and pressure gold," Moya said. "Right now, we need to price in more Fed tightening, more ECB tightening, and interest rates going up."

Next year, gold will become safe heaven, Moya added. "As you start to see more strains on crypto and more pressures with economic data deteriorating quickly, gold will start to see more safe-haven flows next year."

One signal to watch is the ETF buying, Moya pointed out. "You need to see that trade gain one momentum. The first half of next year — I am bullish gold."

Price levels

Going into next week, gold's support is at $1,750, and gains are likely to be capped at $1,840, Moya noted.

Millman added that the first resistance is at $1,800 an ounce, and that level will remain pretty stubborn. Meanwhile, the first support is at $1,775. But if that level fails, gold could fall to $1,715 an ounce, Millman warned.
 

Data to watch

Tuesday: U.S. building permits and housing starts

Wednesday: U.S. CB consumer confidence, existing home sales

Thursday: U.S. Q3 GDP, U.S. jobless claims,

Friday: U.S. PCE price index, U.S. durable goods, U.S. new home sales

By Anna Golubova

For Kitco News

Time to Buy Gold and Silver

David