Gold hits 12-mo. high, falls back a bit on profit taking

Gold hits 12-mo. high, falls back a bit on profit taking

Gold and silver prices are slightly up in midday U.S. trading Monday, with gold notching a 12-month high of $2,014.90 overnight, basis April Comex futures, and silver a six-week high. Some normal profit-taking pressure and chart consolidation are seen on the price pullbacks from the overnight highs. Still, safe-haven demand for the metals is present in a shaky general marketplace amid the U.S. and European banking crisis. The technical charts are also bullish for gold and silver, which continues to invite chart-based speculators to the long sides. April gold was last up $1.70 at $1,975.30 and May silver was up $0.108 at $22.565.

Global stock markets were mixed to lower overnight. U.S. stock indexes are higher near midday. Banking stocks across the globe dropped Monday. Risk aversion is again keener early this week. The Swiss banking firm UBS acquired Credit Suisse over the weekend to try to stabilize the European banking system, following the collapse of two big U.S. banks in early March. The move did little to boost trader and investor confidence. "There is a general sentiment that is trending increasingly negative," said one market analyst. Said noted investor Mark Grant on CNBC when asked about the banking crisis: "It's going to get worse. It's going to be messy."

Now focus is on the Federal Reserve's FOMC meeting that begins Tuesday and concludes Wednesday afternoon. There is still some debate in the marketplace regarding whether the Fed will raise its main interest rate by 25 basis points or stand pat amid the U.S. and European banking crisis. Most market watchers, however, are leaning toward a 0.25% rate increase. The 0.5% rate hike by the European Central Bank last week makes a 0.25% increase by the FOMC more likely.

Once $2,000 breaks, gold is off to the races – Willem Middelkoop

The key outside markets today see the U.S. dollar index lower. Nymex crude oil futures prices are lower, hit a 15-month low and are trading around $66.25 a barrel. The benchmark 10-year U.S. Treasury note yield is presently fetching 3.4%.

There was no major U.S. economic data released Monday.

Technically, April gold futures prices hit a 12-month high early on today. Bulls have the solid overall near-term technical advantage. Bulls' next upside price objective is to produce a close above solid resistance at the all-time high of $2,078.80. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,900.00. First resistance is seen at $2,000 and then at today's high of $2,014.90. First support is seen at today's low of $1,970.00 and then at $1,950.00. Wyckoff's Market Rating: 8.5

May silver futures bulls have the overall near-term technical advantage. Prices are in a fledgling uptrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $23.50. The next downside price objective for the bears is closing prices below solid support at $21.00. First resistance is seen at today's high of $22.855 and then at $23.00. Next support is seen at today's low of $22.35 and then at $22.00. Wyckoff's Market Rating: 6.5.

May N.Y. copper closed up 565 points at 394.90 cents today. Prices closed near the session high and scored a bullish outside day up. The copper bears have the overall near-term technical advantage. Prices are in a two-month-old downtrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the March high of 417.25 cents. The next downside price objective for the bears is closing prices below solid technical support at 372.00 cents. First resistance is seen at today's high of 396.10 cents and then at 400.00 cents. First support is seen at today's low of 385.50 cents and then at the March low of 382.20 cents. Wyckoff's Market Rating: 4.0.

Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

‘Original fear of missing out’: Gold price explodes and could test $2k after best week in 3 years – analysts

'Original fear of missing out': Gold price explodes and could test $2k after best week in 3 years – analysts

The gold market surged as prices saw their best week in three years amidst the fallout of the banking sector. Analysts are not ruling out a test of the $2,000 an ounce level next week as markets look past the Federal Reserve monetary policy meeting scheduled for Wednesday.

The precious metal rose from $1,867 an ounce to above $1,980 this week, posting a gain of more than $110 and its best performance since March 2020. April Comex gold futures were last trading at $1,988 an ounce, up $65 on the day.

The biggest event markets were gearing up for all week – the Federal Reserve monetary policy meeting – is now on the periphery. Markets are pricing in a 25-basis-point hike for Wednesday, but investors are more focused on the potential pause and rate cuts that could follow.

After wild swings in rate hike expectations this week, the gold market is in a winning position, according to analysts.

"Markets are concluding that we'll see the Fed go for another 25bps increase and then probably sit on it for a while and see what happens. The view from the gold perspective is that given disruptions in the banking system and the U.S. Treasury Department's willingness to help, we might get accommodation that allows inflation to hang around longer at a higher level. This is a good thing for gold," TD Securities global head of commodity strategy Bart Melek told Kitco News.

The consensus in the gold market is that the Fed will have to ease up before inflation is tamed, Melek added. And that is a massive shift in perspective from just a few weeks ago.

Another 25 bps hike might be interpreted as nothing more than a move by the Fed to keep its credibility, said Gainesville Coins precious metals expert Everett Millman. "They don't want to be seen as abandoning higher rates so quickly," Millman told Kitco News.

After Wednesday's decision, the Fed is unlikely to keep raising rates, Millman added. "Something will surely break if the Fed keeps its foot on the pedal," he said.

What the ECB told us

The European Central Bank raised the rate by 50 basis points this week, holding onto its hawkish stance despite the banking sector worries and market turbulence. RJO Futures senior market strategist Frank Cholly told Kitco News that this gave markets confidence that the Fed would also proceed with its existing plans.

"The market got its answer yesterday when ECB raised by 50 bps. Lagarde hammered the point that inflation has been too high for too long. I don't think 2% inflation is realistic. They know now they will break some things along the way," Cholly said.

Fed's new lending program

The Fed has been helping banks with liquidity issues this week, raising concern that the tightening from last year will be somewhat reversed. According to the latest data from the Fed, banks loaned $164.8 billion from two Federal Reserve backstop facilities this past week.

JPMorgan Chase & Co. estimated that the additional funding from the U.S. central bank's new 'Bank Term Funding Program' could add up to a maximum of $2 trillion in liquidity.

"It puts quantitive tightening on a bit of pause, with more money slashing around," Melek noted.

And the whole idea does not square with the Fed's efforts to tighten monetary policy, nor does it bode well in the fight against inflation, said Millman.

Testing $2,000 an ounce

With the fear of banking contagion risk spreading further, gold is very likely to test $2,000 an ounce next week before seeing some major profit-taking, analysts said.

"I would not be surprised if gold re-tested the highs from last year of above $2,000 an ounce. We can't see the future, but the banking situation gets more concerning by the day. The Fed is stuck between a rock and a hard place of trying to rescue vulnerable banks and fighting inflation," Millman explained. "Those two goals seem to be at cross purposes. Hard to raise rates higher without causing more stress in the banking system."

Melek pointed out that there is no reason why gold couldn't test $2,000 an ounce next week. "A good portion of this move higher is short-covering. But longs might have started getting in as well," Melek described.

The next big test for the gold market will be $1,975 an ounce, said Cholly. And if the precious metal gets a close above $1,950 an ounce, the momentum will continue.

Also, the fear of missing out is pushing prices higher, Cholly added. "This is the original fear of missing out. When gold gets cheap, people tend to stay away from it. But when prices go higher, people buy more," he said.

This is the opposite of what happens with other commodities, which see demand destruction once a certain price level is reached. "I thought gold would reach $2,000 sometime this year. Now, I am convinced it will be over $2,000 and will happen faster than I thought as people begin to chase the market," Cholly noted.

Next week's data

Tuesday: U.S. existing home sales

Wednesday: Fed decision

Thursday: U.S. jobless claims, new home sales

Friday: U.S. durable goods orders

Anna Golubova

For Kitco News

Time to Buy Gold and Silver

David

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Gold surges to $1982.8 as investors rethink the banking crisis and accommodative Fed

Gold futures surged to the highest value of 2023 taking out the former high of $1976 achieved in February. As of 4:09 PM EST, the most active April contract of gold futures is up $58.10 or 3.02% and fixed at $1981.10. Although dollar weakness contributed to today’s dramatic ascent it was only a small factor in a much larger picture. Considering that gold futures had a net gain of over 3% and the dollar softened by 0.52%, roughly 5/6 of today’s gains in gold are directly attributable to market participants bidding the precious yellow metal higher.

Next Tuesday, the Federal Reserve will hold its second Open Market Committee meeting of the year. This will be followed by an FOMC statement and press conference by Chairman Jerome Powell on the following day March 22.

However, this FOMC meeting will be quite different in that there is an additional major component that must be factored into their decision that they will announce next Wednesday, March 22. Not only will the Federal Reserve continue to be laser-focused on reducing inflation which remains sticky or persistent in many sectors, but now they need to factor in a banking crisis that was first reported last week.

On March 10, 2023, reports began to surface about the Silicon Valley Bank failing after a bank run by depositors challenging the solvency and leading to an inevitable bankruptcy announcement today. The SVB was unique in that its primary business was funding venture capitalists and start-up tech companies. To raise the capital they liquidated a major portion of their assets on their balance sheet at a loss of $1.8 billion.

Immediately the FDIC and banking regulators stepped in to guarantee that depositors' money would become available. Then yesterday 11 major US banks created a $30 billion fund held at the first Republic Bank to create a backstop to keep banks like SVB and signature Bank of New York solvent. Federal banking regulators applauded the support of this large bank group because it validates the resilience of the banking system in the United States.

This brings us to next week’s FOMC meeting. It is anticipated that the Federal Reserve will approve a ¼% rate hike with the banking crisis ultimately backstopping the opinion that the Federal Reserve would step up its rate hikes with a ½% rate hike next week. Although it has been rumored that the Fed might pause many analysts believe that the Fed needs to continue to raise rates even with the banking crisis to maintain its credibility.

Gary S. Wagner

Time to Buy Gold and Silver

David

A global rush to safe-haven moves gold higher

Gold prices surged today with gold futures trading to a high of $1942.50. Multiple assets traded sharply higher including gold, the dollar, and U.S. Treasuries. These gains were directly attributed to another crisis in the banking sector. This caused market participants to lighten their riskier assets and move that capital into safe-haven assets.

Today’s global rush into safe-haven assets began in Europe and then moved across the pond into Wall Street as news surfaced of a new bank failure this time in Europe. Shares of Credit Suisse initially dropped 31% and when the dust settled its stock shares had declined by 13.91%. This is because of a report of a potential plan to stabilize the bank from Swiss banking regulators.

According to Bloomberg News, “Swiss authorities and Credit Suisse Group AG are discussing ways to stabilize the bank, according to people familiar with the matter, after comments by its biggest shareholder and broader financial market jitters helped trigger a plunge in the stock on Wednesday.”

The article in Bloomberg stated that the first move to shore up confidence in the Credit Suisse bank is being led by Switzerland's central bank and its financial regulator announced that Credit Suisse will receive a “liquidity backstop if needed”.

Issues with Switzerland's second-largest lender, Credit Suisse have been ripe with problems over the last several years due to a “series of blowups, scandal sips, leadership changes, and legal issues.” Last year Credit Suisse lost $7.9 billion which eroded the profits from the previous year. Over the last three months credit Suisse depositors have withdrawn over $100 billion in assets as concerns over the multiple issues cited above.

Gold futures were extremely volatile today with tremendously large price swings from the high of $1942.50 to its intraday low of $1889.50 before settling higher. As of 5:30 PM EST gold futures basis the most active April contract is currently up $12.40 or 0.85% and fixed at $1923.30. The dollar gained 1.15% and the dollar index is currently fixed at 104.40.

This has led some former Federal Reserve officials to suggest that the two most important central banks put a pause on further rate hikes until concerns over banking issues are resolved. This dramatically changed the CME’s FedWatch probability that the Fed will not raise rates at this month’s FOMC meeting to 50.5%. The probability of no rate hike in March was 30.6% yesterday, and zero before that. This probability indicator also anticipates that there is a 49.5% probability that the Federal Reserve will go ahead with another ¼% rate hike this month.

Gary S. Wagner

Time to Buy Gold and Silver

David

Headline CPI fractionally lower as gold futures hold key $1,900 level

Today’s CPI report revealed that inflation continues to be troublesome and elevated in some sectors, with a fractional decline overall from 0.5% in January to 0.4% last month. Headline inflation continues to slowly dissipate from 6.4% year-over-year in January to 6% in February. Core inflation also remains elevated coming in at 5.5% year-over-year compared to 5.6% in January. Housing which includes mortgages and rentals composed the largest category and accounted for more than 70% of last month’s increase in the CPI.

The repercussions of today’s CPI report are that the Federal Reserve is likely to raise their terminal rate by ¼% at the next FOMC meeting (March 21 – 22). According to the CME’s FedWatch tool, the probability of a 25-bps rate hike is 81.9% and the probability that the Fed will not raise rates is 18.1%. It is noteworthy that according to the FedWatch tool, the probability that the Fed will not raise rates at its next meeting was 35% yesterday versus 0% one week and one month ago.

The Federal Reserve has been caught between a rock and a hard place attempting to raise rates enough (which intrinsically results in a contracting economy) to lessen the current level of inflation but not too much to result in a recession. It seems more and more unlikely that the Federal Reserve will be able to pull off a “soft landing”. The banking crisis that was reported this weekend further exacerbates the ability of the Fed to reduce inflation and not lead the country into a recession.

Continued rate hikes by the Federal Reserve create bearish market sentiment for gold prices because gold does not yield interest. However, higher inflation has the opposite effect creating bullish market sentiment for gold. Collectively these two forces work against each other with elevated inflation pushing prices higher and rising interest rates pulling prices lower. That being said, gold futures were able to hold above the key psychological level of $1900 per ounce.

Today gold futures opened at $1919.40 which was also the high, and traded to a low of $1899.80. As of 5:15 PM EST, the most active April contract is currently fixed at $1908.30. Concurrently, the US dollar is trading fractionally higher up 0.08% with the dollar index currently fixed at 103.265.

Although there are a couple of economic reports that will come out before the next FOMC meeting, the Federal Reserve now has the most important data it will use to make its final decision regarding the level of the next rate hike.

Gary S. Wagner

Time to Buy Gold and Silver

David

Gold prices soar as investors fearing more bank meltdowns move into safe havens

Gold has gained almost $100 in the last two days of trading. Gold futures basis most active April contract opened at $1835 on Friday and closed at $1867. Today gold opened at $1877 and as of 5:30 PM EST is currently fixed at $1917.30 after factoring in today’s gain of $50.10 or 2.66%.

Gold’s dramatic rise is largely the byproduct of a potential banking crisis with two banks showing “systemic risk” according to bank regulators. California’s Silicon Valley Bank and Signature Bank of New York required immediate action over the weekend to protect depositors’ capital. The banking meltdown resulted in the two-year Treasury yields having the largest three-day decline since black Monday in 1987.

The Federal Deposit Insurance Corporation Improvement Act of 1991 granted the Treasury Secretary after consulting the president to take steps to protect uninsured depositors in the presence of systemic risk. Originally this legislation was a component of the banking act of 1933 which created the FDIC.

Gold’s dramatic gain over the last two days was a combination of investors and large money managers flocking to gold as a haven asset, dollar weakness, and the belief that the Federal Reserve could pivot its aggressive interest rate hikes.

According to Burton Schlichter, Vice President of global clearing and execution at StoneX Financial said, “After the news on Friday about the uncertainty of customer funds at SVB Bank we noticed some traders covering short positions and some reversing their positions heading into the weekend.” StoneX currently serves more than 32,000 commercial, institutional, and payments clients, and more than 330,000 active retail accounts across 180 countries.

Market participants are under the assumption that the Federal Reserve may pivot by not implementing the anticipated ¼% rate hike at the March FOMC meeting. Some investors are under the assumption that the Federal Reserve might pivot and cut rates. This seems to be based on unrealistic optimism and conjecture rather than facts.

Tomorrow the government will release the latest inflation numbers vis-à-vis the CPI (Consumer Price Index) which combined with last week’s jobs report will be used by the Federal Reserve to make it’s final decision that will be announced on March 22 when the FOMC meeting concludes

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

Thursday’s Charts for Gold, Silver and Platinum and Palladium, March 9

Thursday's Charts for Gold, Silver and Platinum and Palladium, March 9

Kitco Commentaries | Opinions, Ideas and Markets Talk

Featuring views and opinions written by market professionals, not staff journalists.

Understanding the charts:

Due to popular demand, we have added Palladium to the list of Analytical Charts that Metals Analyst Jim Wyckoff features.

Sharpening Your Trading Skills: Using Bollinger Bands

Sharpening Your Trading Skills: The MACD Indicator

Sharpening Your Trading Skills: Moving Averages

Sharpening Your Trading Skills: The Relative Strength Index (RSI)

"Wyckoff's Market Rating" System Explained

By Jim Wyckoff

Contributing to kitco.com

Time to Buy Gold and Silver

David

Gold rallies on financial stability risks as investors rush to safety, analysts are watching inflation report, Fed reaction

The gold market posted an unexpected weekly gain on potential contagion risks from the Silicon Valley Bank (SVB) meltdown.

The precious metal is once again the safe-have trade, with investors rushing in after Friday's SVB collapse. California banking regulators moved quickly to close SVB Financial Group in what is the largest bank failure since the financial crisis.

SVB was one of the leading technology financiers, and its failure showcases potential unintended consequences of the aggressive hiking cycle pursued by the Federal Reserve in its fight against inflation, according to analysts. The fear is that the startup-focused lender's troubles could ripple through the rest of the global markets.

"Gold is seeing safe-haven flows on these financial instability concerns," OANDA senior market analyst Edward Moya told Kitco News. "Startups and debt refinancing are some of the biggest financial risks that traders are analyzing."

It is a dramatic turnaround for gold. Earlier this week, the precious metal was steadily falling on the outlook that the Federal Reserve will hike rates by 50 basis points at its March meeting.

Gold is now rallying and it is reacting to several drivers — the SVB and financial stability risk, the higher unemployment rate from February, and a reversal of the 50-basis-point hike expectations.

"The NFP report had a strong headline beat, but the rest of the report supported the idea that the labor market is ready to cool. Wage pressures came in much softer than forecasts, and the unemployment rate rose from 3.4% to 3.6%," Moya said. "Gold is surging as Fed rate hike bets get scaled down and as SVB contagion risks trigger some safe-haven buying. The bond market is now starting to price in rate cuts by the end of the year, and that is triggering a major collapse with yields."

The U.S. dollar index fell, and the two-year yield posted its biggest two-day decline since 2008, which is very supportive of higher gold prices.

"Gold is becoming everyone's favorite trade again, and that could continue as liquidity risk concerns won't be quickly answered for that corner on Wall Street," Moya added.

One thing to keep in mind is how sustainable this move in gold is, Gainesville Coins precious metals expert Everett Millman told Kitco News.

"This is broadly a short-term reaction. You do see safe-haven demand come in fits and starts. There is fear over the stability of banking systems, and the dollar is sharply lower today. That is driving gold higher in the short term," Millman said.

Only next week can tell whether gold can hold at these levels, especially in light of Tuesday's inflation report. "I don't think gold bottomed yet, and [prices] might have further to fall during the first half of this year. I wouldn't be surprised to see gold stuck in a range between $1,800 and $1,900," Millman said.

Trading has been very volatile, and with the inflation report coming up, the key thing to pay attention to is how markets react to the data versus the data itself, noted Millman.

"The CPI print itself is not as important as the reaction to it. There has often been a bit of disagreement about whether certain data or comments from the Fed are dovish or hawkish. The Fed will also be watching how markets react and digest the CPI," Millman said.

Market consensus calls are projecting for inflation to slow to 6% from 6.4% in February.

Gold price levels to watch

This flight to safety pushed gold to levels where traders are getting more bullish, RJO Futures senior market strategist Frank Cholly told Kitco News. At the time of writing, April Comex gold futures were trading at $1,869.70 an ounce, up 1.91% on the day.

"I am watching $1,875-$1,880. We might have a bit of trouble getting there. It is the 50-day moving average. The 200-day moving average held for gold, and the $1,800 was good value," Cholly noted.

With the economy probably hitting a rougher patch sooner, Moya remains bullish on gold but anticipates the precious metal will first settle around its current levels.

"I am considering $1,865 right now. The macro backdrop has changed. Immediate resistance is at $1,880. And then everyone will have their eyes on the $1,900 an ounce," Moya said. "If we get a cooler inflation report next week and continued financial instability concerns are still being talked about, we could have a good old fashioned gold rally, with $50-$70 daily moves to the upside."

Next week's data

Tuesday: U.S. CPI

Wednesday: U.S. retail sales, U.S. PPI, NY Empire State manufacturing index

Thursday: ECB rate decision, U.S. jobless claims, building permits and housing starts, Philadelphia Fed manufacturing index

Friday: U.S. industrial production, Michigan consumer sentiment

By Anna Golubova

For Kitco News

Time to Buy Gold and Silver

David

Short covering, position evening in gold ahead of U.S. jobs data

Gold prices are higher in midday U.S. trading Wednesday, with silver near steady. Short covering and some position squaring are featured in the precious metals futures markets just ahead of an important U.S. economic data point Friday morning. April gold was last up $13.20 at $1,831.70 and May silver was up $0.024 at $20.175.

The general marketplace was quieter Thursday, ahead of the February U.S. employment situation report from the Labor Department on Friday morning. The key non-farm payrolls component of the report is expected to show a rise of 225,000 jobs, following a mammoth rise of 517,000 in the January report. Look for higher volatility in many markets is the non-farm jobs print misses expectations.

Global stock markets were mixed to weaker overnight. U.S. stock indexes are narrowly mixed at midday.Silver mines will likely be bought by automakers like Tesla, silver to $125 per ounce – Keith Neumeyer

The key outside markets today see the U.S. dollar index lower. Nymex crude oil futures prices are slightly up and trading around $76.75 a barrel. The yield on the benchmark U.S. 10-year Treasury note is presently fetching 3.964%.

Technically, April gold futures bulls and bears are back on a level overall near-term technical playing field. Bulls’ next upside price objective is to produce a close above solid resistance at the March high of $1,864.40. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at today’s high of $1,839.40 and then at $1,850.00. First support is seen at $1,820.00 and then at the February low of $1,810.80. Wyckoff's Market Rating: 5.0

May silver futures prices hit a four-month low Wednesday. The silver bears have the firm overall near-term technical advantage. Prices are in a steep five-week-old downtrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $21.50. The next downside price objective for the bears is closing prices below solid support at $19.00. First resistance is seen at $20.505 and then at $21.00. Next support is seen at this week’s low of $19.955 and then at $19.50. Wyckoff's Market Rating: 3.0.

May N.Y. copper closed down 15 points at 402.60 cents today. Prices closed near mid-range. The copper bulls have the slight overall near-term technical advantage but trading has been choppy and sideways recently. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the February high of 423.40 cents. The next downside price objective for the bears is closing prices below solid technical support at 380.00 cents. First resistance is seen at this week’s high of 409.50 cents and then at 415.00 cents. First support is seen at 400.00 cents and then at this week’s low of 396.10 cents. Wyckoff's Market Rating: 5.5.

By Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David