Powell addresses House stressing data dependency before making decisions

Today Chairman Jerome Powell finished his semiannual congressional testimony. The chairman warned that the Fed could be more aggressive because "The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated."

In yesterday's testimony, he opened the door for a 50-BPS rate hike at the upcoming March FOMC meeting (March 21 – 22).

"If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes."

According to the CME's FedWatch, the probability of a more aggressive rate hike of 50-BPS has increased since yesterday from 70.5% to 79.4% today, diminishing the probability of a 25-BPS hike from 29.5% to 20.6%.

However, Powell stressed the fact that the Federal Reserve will not make any final decision about the size of a potential interest rate hike until data from Friday's jobs report and next Tuesday's CPI report have been released.

"We have not made any decision about the March meeting. We're not going to do that until we see the additional data." Adding that, "We will be guided by the incoming data and the evolving outlook."

Today ADP released its US private payroll report revealing that an additional 242,000 private sector jobs were added last month. Currently, it is forecasted that Labor Department's jobs report on Friday will show an additional 203,000 to 225,000 jobs added to the payroll last month. Additionally, economists expect the unemployment rate to rise from 3.4% in January to 3.5% in February.

Early forecasts from next week's Bureau of Labor Statistics consumer price index for February are expected to show a modest decrease in inflation down 0.1% month over month. If correct this would take the monthly gain in February to 0.4% a decrease from January which revealed headline inflation increased by 0.5%.

The extreme volatility resulting in a sharp decline in gold and increase of value in the dollar index yesterday has abated. This is as market participants along with the Federal Reserve wait for the release of these next two critical reports from the government.

As of 5:00 PM EST, gold futures basis most active April contract is down $2.00 Or 0.11% and fixed at $1818. The dollar is up 0.08% and the dollar index is fixed at 105.68.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

Gold, silver punished by still-hawkish Powell

Gold and silver prices are sharply lower in midday U.S. trading Tuesday, as the metals market bulls are feeling the pressure of a still significantly hawkish U.S. central bank. April gold was last down $34.80 at $1,819.80 and May silver prices hit a five-month low and were last down $0.925 at $20.21.

Focus of the marketplace today was on Fed Chairman Jerome Powell’s testimony on U.S. monetary policy to a Senate committee. Powell leaned hawkish, which was not surprising to many, but the marketplace did deem his remarks as being more hawkish than the central bank chief had been in the recent past. Powell said the Fed will likely have to keep U.S. interest rates higher for longer to win the war against problematic price inflation. He said recent stronger U.S. economic data has likely rolled back some of the softening the U.S. had seen on the inflation front the past few months. The U.S. dollar rallied sharply on Powell’s remarks and hit a three-month high. However, U.S. Treasury yields did not react much to Powell’s comments. The U.S. stock indexes sold off sharply on his remarks, as did crude oil. Powell speaks to a House of Representatives panel on Wednesday. The hawkish Powell is bearish for the metals markets because of the implications of softening consumer and commercial demand as the tighter central bank policies squeeze their respective economies in order to reduce demand.

 Pierre Lassonde: Gold to reach $2,400 by 2028 as geopolitical tensions mount, central banks purchase more bullion

Traders and investors are also looking forward to 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.

The key outside markets see the U.S. dollar index sharply up and hitting a three-month high. Nymex crude oil futures prices are sharply down and trading around $78.00 a barrel. The yield on the benchmark U.S. 10-year Treasury note is presently fetching around 3.93%.

Technically, April gold futures bulls have lost their slight overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at this week’s high of $1,850.50. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at $1,835.00 and then at $1,850.00. First support is seen at the February low of $1,810.80 and then at $1,800.00. Wyckoff's Market Rating: 5.0.

May silver futures prices hit a five-month low today. The silver bears have the firm overall near-term technical advantage and gained fresh power today. 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 $20.50 and then at $21.00. Next support is seen at $20.00 and then at $19.50. Wyckoff's Market Rating: 3.0.

March N.Y. copper closed down 1,205 points at 398.00 cents today. Prices closed near the session low today. 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 423.70 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 405.00 cents and then at 410.00 cents. First support is seen at the February low of 393.45 cents and then at 390.00 cents. Wyckoff's Market Rating: 5.5.

By Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Traders are cautious as reflected in fractional declines in gold and the dollar

Market participants are trading cautiously with a wait-and-see attitude as this week contains multiple events that could have a deep impact on the financial markets across the board. Cautiousness is the overall demeanor of market sentiment as traders and investors await Chairman Powell's appearance before both the Senate and House beginning on Tuesday. This will be followed by the Labor Department's jobs report for February on Friday.

As of 4 PM EST, gold futures basis most active April contract is down $2.50 or -0.13% and fixed at $1852. Concurrently, the US dollar is also trading fractionally lower down 0.18% or 18 points with the dollar index currently fixed at 104.30.

The more hawkish faction of the Federal Reserve continues its strong narrative that was evident last weekend. On Saturday the San Francisco Federal Reserve President Mary Daly discussed economic and policy issues with Michael Strain, director of Economic Policy Studies at the American Enterprise Institute.

The first question presented to Mary Daly was, "how do you think things are going with the economy right now?" To which she replied, "I really think of it as a yes and situation. And what I mean by that is, yes, the economy has good momentum. Yes, the economy looks like monetary policy is starting to have an effect. We see some slowing in interest-sensitive sectors, we see that we feel a slowdown coming in a way that would be predicted by us raising interest rates."

Throughout the interview, she continued to underscore the narrative of the more hawkish faction of Federal Reserve officials by expressing that the policy of the Federal Reserve most likely will continue to tighten and maintain the more restrictive policy for a longer time.

Although hawkish members of the Federal Reserve are in the minority Chairman Powell is expected to maintain that more rate hikes are needed for a longer time than previously anticipated when he addresses the Senate Banking Committee tomorrow and testifies before the House Financial Services Committee on Wednesday.

Chairman Powell's testimony will be followed by two extremely important economic reports beginning on Friday when the Labor Department releases the most current data in the January jobs report which will be followed by the inflation data vis-à-vis the CPI report on Tuesday, March 14.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

Gold Price to New Heights ?

Since its low in November 2022, the price of gold in dollars has climbed nearly +15% (compared to +4.5% in euros). The rising cost of gold production and the declining profitability of mining companies largely explain this movement. As early as November 2022, we were insisting on the strong probability of an effective gold reversal in 2023. This movement has now been confirmed. But will this rise be enough to drive new highs?

Throughout this publication, we will see that despite the slight drop in the dollar price of gold in 2022, demand is clearly on the rise. At the same time, production costs are rising and mining companies are less profitable. This context largely explains the strong rebound of gold. But what is most impressive is the appetite of central banks for gold, whose demand has increased at a rate not seen since 1967… Behind the structural changes in the market, gold seems to hide a geopolitical confrontation of considerable magnitude.

Strong increase in demand for gold in 2022

Contrary to what many had suggested, demand for gold was boosted considerably in 2022. Demand for the physical metal increased by 18% between 2021 and 2022, while supply increased by only 2%. The stability of the gold price in 2022 once again shows the lack of a link between the price and actual demand.

We should also note the particular case of Russia. The demand for coins and bars in Russia jumped by 374% in 2022 to 25 tons! This is a very significant increase for the reasons we know. In France, the increase in demand for coins and bars is still 21%, or 14% in Germany. The chart shows a clear interest in gold in European countries, mainly due to the fall of the euro in 2022. But the interest in gold is even stronger in the Middle East and Russia, driven by a desire for monetary independence.

Central banks are massively buying gold

One thing that catches our attention is the sudden and massive revival of interest in the yellow metal by central banks. Central bank demand for gold jumped 152% between 2021 and 2022! This is simply the largest amount of gold ever purchased by central banks in one year in decades. The equivalent of 1,135 tons.

These massive purchases are questionable, as they run counter to the trend observed in recent years. In 2019 and 2020, central bank demand had fallen by 7.7% and 5.8%, respectively. Central banks' purchases are taking place against a backdrop of balance sheet reduction, which seems contradictory. Turkey has thus increased its gold reserves by 147 tons in 2022, followed by 62 tons for China, and 44 tons for Egypt.

According to the World Economic Forum, the pace of gold accumulation by central banks is unprecedented since 1967! In a WEF article published on November 10, 2022, the WEF states that: “Gold is regarded as an effective inflation hedge, although some analysts believe this to be true only over extremely long time horizons stretching over a century or more.”

Gold is primarily considered in the same way as foreign exchange reserves. In order for the balance of payments between countries to be balanced, central banks must change their reserves. Foreign exchange reserves thus tend to decrease when a country experiences either capital outflows, a deterioration of its trade balance, or a decrease in prices. It is understandable why, in an inflationary context, the demand for foreign exchange reserves increases, and with it, the demand for gold. The case of Turkey, which has seen inflation rise to over 80%, is revealing. Faced with a rising dollar, many central banks are buying gold to ensure liquidity on the international scene. The real interest of gold for central banks is, above all, to guarantee a source of confidence and independence.

Time to Buy Gold and Silver

David

Gold price to take direction from Powell's testimony, U.S. jobs report next week

After five consecutive weeks of losses, the gold market posted its first weekly gain. Analysts say the precious metal will now take direction from the upcoming Federal Reserve Chair Jerome Powell's testimony and the February employment report.

After testing the lows at $1,810 an ounce, gold bounced back to the mid-$1,800s range. At the time of writing, April Comex gold futures were at $1,852.70 an ounce, up $35 on the week.

"I am impressed with how gold performed, especially when you look at yields, with the 10-years above 4%," OANDA senior market analyst Edward Moya told Kitco News. "It will be pretty wild next week because of the hawkish Powell testimony and U.S. payrolls data. We might see some gold weakness initially, but then some strength after payrolls."

On Tuesday, Powell will testify on the U.S. central bank's semiannual monetary policy report to the Senate Banking Committee. This will be followed by his testimony on the same topics to the House Financial Services Committee on Wednesday.

Markets will also digest the latest U.S. nonfarm payrolls report from February, with consensus calls projecting 200,000 new positions and the unemployment rate remaining at 3.4%.

"The February employment report and Fed Chair Jerome Powell's testimony to Congress next week should give a clearer indication of whether recent talk of interest rates going 'higher for longer' is justified," said Capital Economics' deputy chief U.S. economist Andrew Hunter.

Powell is likely to remain aggressive in his language, Moya noted. "He can't change that right now. It could weigh gold down in the first half of the week," he said. "The message 'higher for longer' will be firmly implemented."

One development that could move gold prices higher is the downward revision to January's strong employment report.

"We might have a significant downward revision. January's 517,000 positions could get revised. We're likely to see a sharper slowdown in hiring. The February number could also come in below the consensus," Moya said.

Gold's strong rally at the start of the year was reversed when the markets received the January employment news, RJO Futures senior market strategist Frank Cholly told Kitco News.

"Strong employment report was followed up with inflationary news — CPI, PPI, and retail sales," Cholly added. "All this data indicated that the Fed has to continue to raise rates, and gold fell."

The gold market continued to trend downward until it hit the $1,810s level, which coincided with the metal's 200-day moving average, Cholly pointed out. At that point, gold got a bounce.

"The market might do some consolidation here and wait for direction. But we probably found a bottom. There is value in gold between the $1,800-$1,825 range," Cholly noted.

Once gold can close above $1,860, more buying would kick in. And above $1,880 an ounce, Cholly sees the $1,900 level at play again.

"It will depend on how the data comes out over the next two weeks. The employment number and then the CPI and PPI the week after that. If we continue to see that the Fed will have to be aggressive with rate hikes, gold will re-test last week's lows," he said.

Moya added that gold's resistance is $1,880, and support is $1,820 an ounce.

In the short-term, gold remains very data-depended — just like the Fed. "It was all about payrolls last month. This time, the nonfarm payrolls, the CPI, and PPI will also be critical for the direction of interest rates and precious metals. If we are getting such good yields on fixed incomes, it is hard for gold to move higher," Cholly stated.
 

Next week's data

Monday: U.S. factory orders

Tuesday: Fed Chair Powell testifie

Wednesday: ADP nonfarm employment, Fed Chair Powell testifies, BoC rate decision

Thursday: U.S. jobless claims,

Friday: U.S. nonfarm payrolls

By Anna Golubova

For Kitco News

Time to Buy Gold and Silver

David

Gold/Silver -he next bull wave begins

It was a turning point for Precious Metals this week as Gold, Platinum, and Silver all rose after six straight down weeks. The rally came on the heels of a stronger U.S. Dollar and another cycle high in Treasury Yields. The physical buying this year has been robust, and once the Fed concludes hiking rates, news of the pivot will spark an additional buying frenzy. I expect Gold to take a forward-looking approach as it begins its recovery while the long end of U.S. rates makes another lower high.

Daily Gold Chart

While the upside momentum has been strong, it will take a move back through $1891 to neutralize the downward trend and, ultimately, a move through $1900 to get the bulls back on track. $1785 is where the 200 day moving average comes in and acts as long-term support. To further help you develop a trading plan, I went back through 20 years of my trading strategies to create a Free New "5-Step Technical Analysis Guide to Gold that can easily apply to Silver." The guide will provide you with all the Technical analysis steps to create an actionable plan used as a foundation for entering and exiting the market. You can request yours here: 5-Step Technical Analysis Guide to Silver.

Our Strategy

By systematically purchasing regular intervals of the 10-ounce Gold contract or 1000-ounce Silver contract, you can layer in over time and preposition for the next rally. One example with a $25,000 account size would be to focus on the December 2023 10-ounce Gold contract and use a dollar-cost average approach by purchasing 10 ounces of Gold at 1850/oz, 10 oz at 1800, and 10 oz at 1750 with a year-end target of $2100/oz.

If filled on all three contracts, your average price will be $1800/oz; therefore, every dollar move Gold makes on the three contracts will be $30 since you control 30 ounces. If the $2100/oz price objective is achieved by year-end, this will result in a gain of approximately $9,000 (30 oz times $300 rise). Traders should also consider proper risk management while using a dollar-cost averaging approach, such as a hard stop on three contracts at $1700. If that were to occur under this scenario, it would likely result in a loss of $3,000. If you have never traded futures or commodities or would like to learn more about taking delivery of Silver, I just completed a new educational guide that answers all your questions on transferring your current investing skills into trading "real assets," such as the 1000 oz Silver futures contract. You can request yours here: Trade Metals, Transition your Experience Book.

By Phillip Streible

Contributing to kitco.com

Time to Buy Gold and Silver

David