Gold, silver surge as USDX sinks, U.S. Treasury yields slip

Gold and silver prices are sharply higher in midday U.S. trading Thursday, boosted by a solidly lower U.S. dollar index and a dip in U.S. Treasury yields on this day. August gold was last up $24.60 at $1,983.00 and July silver was up $0.796 at $24.325.

The marketplace is starting to zero in on next week's FOMC meeting of the Federal Reserve. The majority of the marketplace thinks the Fed will pause in its interest-rate-tightening cycle. But now many market watchers think the U.S. central bank will follow the Bank of Canada's recent moves. The BOC this week raised interest rates by 0.25% after a four-month pause. The BOC's move “brings home the reality that a pause needn't be a pivot. It can also be a way to slow down increases while fresh data come in,” said a Wall Street Journal story today.

Asian and European stock markets were mostly weaker overnight. U.S. stock indexes are firmer at midday.

In other news, the Euro zone reported its first-quarter GDP was revised down to -0.1% from the fourth quarter. Meantime, the fourth-quarter GDP was revised down to -0.1%. That means the Euro zone technically entered a recession in the first quarter, albeit just barely.

The Turkish lira hit a new record low against the U.S. dollar, prompting some worries of a possible currency contagion at some point, if the lira continues to weaken.

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The key outside markets today see the U.S. dollar index sharply down. Nymex crude oil prices are sharply lower and trading around $70.00 a barrel. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 3.73%.

Technically, August gold futures bulls have the overall near-term technical advantage amid recent choppy trading. Bulls' next upside price objective is to produce a close above solid resistance at $2,000.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the May low of $1,949.60. First resistance is seen at this week's high of $1,986.50 and then at $2,000.00. First support is seen at 1,970.00 and then at this week's low of $1,953.80. Wyckoff's Market Rating: 6.5

July silver futures prices hit a four-week high today. The silver bulls have regained the overall near-term technical advantage. 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 May low of $22.785. First resistance is seen at today's high of $24.46 and then at $24.75. Next support is seen at $24.00 and then at today' low of $23.51. Wyckoff's Market Rating: 6.0.

July N.Y. copper closed up 195 points at 377.55 cents today. Prices closed nearer the session high today and closed at a four-week high close. The copper bears still have the overall near-term technical advantage. However, a six-week-old downtrend on the daily bar chart has been negated. 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 May low of 354.50 cents. First resistance is seen at this week's high of 381.15 cents and then at 385.00 cents. First support is seen at today's low of 373.45 cents and then at this week's low of 368.60 cents. Wyckoff's Market Rating: 4.0.

By

Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Gold and silver prices look vulnerable as seasonal summer weakness kicks in – DeCarley Trading's Carley Garner

The gold market has shown resilience with prices holding critical support around $1,950 an ounce even as the Federal Reserve is expected to maintain a tight grip on its monetary policy; however, despite the relative buoyancy in the marketplace, one strategist said that now is not the time.

In an interview with Kitco News, Carley Garner, co-founder of the brokerage firm DeCarley Trading, said that while she remains bullish on gold in the long term, now is not the time to buy.

She explained that gold is entering a traditionally weak seasonal period that could weigh on prices, and she expects that gold will have one more correction before it starts its rally to all-time highs.

"If we break below support at $1,950, we could see prices fall significantly lower," she said. "There is not much holding up the market before $1,880. It's a big air gap lower. If you are bullish and you want to start building a position now, you should only nibble at the market, not load up."

She added that gold's 200-day moving average of $1,880 represents a significant support level.

Garner said that investors looking to play the market might want to buy weekly options. However, she said that she wouldn't look to buy gold until at least late July or even early September, depending on where prices are.

Although Garner expects to see gold fall lower in the short term, she added that she is not actively shorting the market. She said that elevated levels of market uncertainty continue to provide some support for the precious metal.

"I would rather be a little bit late to the gold rally than be caught short," she said.

As to what would shift her near-term sentiment in gold, Garner said that she would need to see a clear break above $2,000 an ounce.

"Unless we get a break above that resistance level, gravity will take hold of the price," she said.

Garner is also short-term bearish on silver. She said she expects one more selloff before a long-term rally.

"I think we need to see some weak longs shaken out of silver before we see a sustainable move higher. I think prices could fall to $20 an ounce before they move back to $30," she said.

Along with seasonal factors, Garner said that the Federal Reserve's monetary policy stance continues to keep investors out of the gold market. Although markets are priced in for the central bank to hold interest rates unchanged next week, there are still expectations that rates will go higher before the summer is done.

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However, a growing chorus of analysts and economists have said that further economic weakness will keep the Federal Reserve on the sidelines in July as well.

"I hope that the Fed is done raising interest rates," she said. "They have a habit of becoming fixated on one idea. They want to see inflation down to 2%, but I think that is going to get them in trouble. They should look at a target of 3% for now and go from there."

Despite her growing concerns, Garner said that if the Federal Reserve can pull back on the monetary policy reins, it would support sluggish economic growth through the rest of the year, avoiding a recession. She said that in this environment, the asset she is watching is copper.

Along with fears of a U.S. recession, copper has also been held back this year by volatile economic activity in China; however, Garner said that she expects the base metal to have priced in that weakness.

"I like copper on the upside. The price is holding $3.50, which is a critical trend line. There is potential for copper prices to push to $4.50," she said.

By

Neils Christensen

For Kitco News

Time to Buy Gold and Silver

David

The Federal Reserve will hold its 11th FOMC meeting since they began rate-hikes

The Federal Reserve will begin its Federal Open Market Committee (FOMC) meeting exactly one week from today on Tuesday, June 13th. On the morning of the 13th, the government will release its latest report on inflationary pressures vis-à-vis the CPI (Consumer Price Index). This will be the last important piece of data that Fed officials will use to make their final decisions regarding monetary policy.

While their preferred inflation index is the PCE, the CPI will contain the most recent assessment of inflationary pressures. Inflation was above 9% just one month after the Federal Reserve initiated its first rate hike back in March 2022. In just over a year inflationary pressure has had a strong contraction.

Although the extremely hawkish and restrictive monetary policy of 10 consecutive rate hikes that took the Fed’s benchmark rate to between 5 and 5 ¼% has dramatically lowered inflation but it is still well above the Federal Reserve’s target. Fed members have been waiting for the data to indicate if inflationary pressures are headed toward their goal. However, while headline inflation has had a significant decline the core inflation index which omits food, energy, and housing has remained persistent and sticky between 5% and 6% since December 2022. Housing costs make up a large portion (about one-third) of the Consumer Price Index, and if you strip out food and energy costs housing costs are about 40% of the total CPI index.

Currently, there is an 81.1% probability that the Federal Reserve will initiate its first interest rate hike pause with under a 5 to 1 probability that the Fed will raise rates next week.

The Federal Reserve Bank of Cleveland “Nowcast” provides real-time daily estimates of the PCE and CPI levels. It uses daily oil prices, and weekly gasoline retail prices and combines them with monthly consumer prices to offer a time-sensitive forecast of inflation providing real-time insight.

According to Forbes, “Nowcasts of U.S. inflation for May suggest that headline inflation will slow, but that core inflation will remain well above the Fed’s target. On June 13, the U.S. Bureau of Labor Statistics will release the Consumer Price Index report for May. Headline inflation has decelerated sharply since last summer, but core inflation has remained in a narrower range. The latest nowcasts don’t imply that this will change much.”

The current assessment by the Cleveland Fed’s Nowcast is predicting that inflation will rise 0.19% month over month and core inflation will also rise by 0.45%. If these predictions are correct the annualized rate of inflation would be 4.1% and 5.3% respectively.

Although this would confirm that headline inflation is dropping below core inflation it is clear that components remain persistent, a dilemma for the Federal Reserve. Persistent inflation has also been highly supportive of gold. As of 6 PM EDT, gold futures basis the most active August contract is down $1.60 from the New York close and fixed at $1979.70.

Gary S. Wagner

Time to Buy Gold and Silver

David

Gold gains as USDX slips, crude oil rallies

Gold prices are modestly up and silver a bit weaker in midday U.S. trading Monday. Both markets pushed well off their early session lows when the U.S. dollar index lost its good early gains and as crude oil prices rallied. August gold was last up $6.00 at $1,975.50 and July silver was down $0.092 at $23.655.

Asian and European stock markets were mixed today. U.S. stock indexes are mixed near midday. Gains in the metals were limited today in the aftermath of a stronger U.S. non-farm payrolls jobs rise in last Friday’s May employment report. That data reminded the marketplace that the Federal Reserve is likely to remain hawkish on its monetary policy for longer—even if it does do a pause in the rate-hike cycle at the June FOMC meeting.

In weekend news, Saudi Arabia decided to unilaterally cut its crude oil production by around 1 million barrels per day, starting in July. Meantime, the OPEC-plus cartel at its meeting decided to leave its collective crude oil output unchanged.

The key outside markets today see the U.S. dollar index near steady. Nymex crude oil prices are higher and are trading around $72.75 a barrel. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 3.887%.

Technically, August gold futures bulls have the overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at $2,000.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the May low of $1,949.60. First resistance is seen at $1,985.00 and then at $2,000.00. First support is seen at today’s low of $1,953.80 and then at $1,949.60. Wyckoff's Market Rating: 6.5.

July silver futures bulls and bears are on a level overall near-term technical playing field. 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 May low of $22.785. First resistance is seen at $24.00 and then at last week’s high of $24.12. Next support is seen at today’s low of $23.32 and then at $23.00. Wyckoff's Market Rating: 5.0.

July N.Y. copper closed up 450 points at 377.25 cents today. Prices closed nearer the session high. Short covering was featured. The copper bears still have the overall near-term technical advantage. However, a six-week-old downtrend on the daily bar chart has been negated. 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 May low of 354.50 cents. First resistance is seen at last week’s high of 378.90 cents and then at 385.00 cents. First support is seen at 370.00 cents and then at 365.00 cents. Wyckoff's Market Rating: 4.0.

By

Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Central banks' gold holdings drop for the first time in over a year in April, says World Gold Council

Global central bank gold holdings fell for the first time in more than a year in April, as Turkey sold over 80 tonnes of gold, the World Gold Council (WGC) said in a report.

Total central bank gold reserves dropped by 71 tonnes in April. The last time central bank gold holdings declined was in March 2022, and the net drop was one tonne, the report pointed out.

The monthly decrease is not representative of a trend reversal, said WGC's senior analyst Krishan Gopaul. "Country-level data reveals that, far from a sudden wave of central bank selling, the drop in reserves was primarily due to Türkiye," Gopaul said Friday.

The Central Bank of Turkey sold 81 tonnes of gold in April, reducing its gold holdings to 491 tonnes. This was after the central bank already sold 15 tonnes in March.

Last year, Turkey bought the most gold out of all central banks, purchasing 148 tonnes and increasing its gold reserves to 542 tonnes — the highest level on record.

The report explained that country-specific circumstances led Turkey to offload some of its gold.

"This was a specific response to local dynamics rather than a change to their long-term gold policy: the gold was sold into Türkiye's domestic market to satisfy very strong bar, coin and jewelry demand following a temporary partial ban on gold bullion imports," the report noted. "It remains to be seen if this selling will continue and, if so, at what pace."

Other sales in April were significantly smaller tonnage-wise. The National Bank of Kazakhstan sold 13 tonnes, the Central Bank of Uzbekistan offloaded two tonnes, and the National Bank of the Kyrgyz Republic sold 0.6 tonnes.

While massive gold selling is not likely to become the new trend, central bank gold purchases are slowing down.

Only four central banks bought gold in April, with Poland reporting additional 15 tonnes, the People's Bank of China buying eight tonnes (its sixth monthly purchase in a row), the Czech National Bank adding two tonnes, and the Central Bank of Mongolia purchasing an additional tonne.

The WGC is looking past April's drop in central bank gold holdings and projects more buying throughout 2023.

"Our view is also supported by findings from our latest Central Bank Gold Reserves survey, which shows reserves managers remain broadly positive towards gold," Gopaul said. "It's also worth noting that the Central Bank of Iraq recently announced a 2.5t purchase in May and signaled more to come."

Turkey's case is unique

Turkey has seen a surge in gold demand in the past year as citizens embraced the precious metal as a hedge against inflation, political and economic uncertainty, and local currency devaluation.

"Local demand for gold in Turkey is simply a desire to protect their purchasing power from a declining Lira," William Stack, financial advisor at Stack Financial Services LLC, told Kitco News. "Gold is a great asset to own when you are in a financial pinch because it can be sold when necessary."

Rising gold demand led to a jump in gold imports, which weighed on Turkey's widening current-account deficit. In response, Turkey introduced steps to curb gold imports in February and began selling its gold reserves to meet domestic demand.

But the move to offload some of its gold is not necessarily a losing scenario for the Turkish central bank, Stack pointed out.

"One reason Turkey is selling is that gold has risen 10% from a year ago, in dollar terms. In Lira-terms, the gain is more dramatic — 70-85%," he explained. "If Turkey sold gold internationally, it would weaken the Lira further. But when they sell gold to Turkish residents for Lira, it reduces the amount of Lira in the marketplace, thereby helping to strengthen the currency."

By

Anna Golubova

For Kitco News

Time to Buy Gold and Silver

David

Gold, silver gain on ideas FOMC will pause at next meeting

Gold and silver prices are solidly higher in midday U.S. trading Thursday, amid a big U.S. economic data dump that culminates with Friday morning's U.S. jobs report. The precious metals are boosted today by ideas the Federal Reserve may pause in its interest-rate-hiking cycle. August gold was last up $15.80 at $1,997.90 and July silver was up $0.403 at $23.985.

The Wall Street Journal reported today the Fed is likely to pause in its rate-hiking cycle at the June FOMC meeting, before raising rates again later this summer. That's a shift from the consensus marketplace belief just recently that the Fed would again raise rates at the June FOMC meeting. However, a "sizzling jobs report" on Friday would throw cold water on the Fed pause, said the Journal report.

There was a very heavy U.S. economic data slate Thursday. The data was a mixed bag but the ADP national employment report for May did run hot, showing a rise of 278,000 jobs—well above market expectations. Traders are now looking ahead to the Labor Department's employment situation report for May on Friday morning. The key non-farm payrolls number is seen coming in at up 190,000 compared to the April non-farm jobs number of up 253,000.

Asian and European stock markets were mostly higher overnight. U.S. stock indexes are higher at midday. The marketplace has been assuaged by the U.S. House of Representatives handily passing the government debt-ceiling-extension deal reach between Republicans and Democrats. The measure now goes before the Senate and is expected to also pass.

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The key outside markets today see the U.S. dollar index solidly lower. Nymex crude oil prices are solidly higher and trading around $71.00 a barrel. These two outside markets were also bullish elements for the metals markets today. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 3.677%.

Technically, August gold futures bulls have the overall near-term technical advantage. Bulls' next upside price objective is to produce a close above solid resistance at $2,050.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at this week's low of $1,949.60. First resistance is seen at $2,008.00 and then at $2,020.00. First support is seen at $1,985.00 and then at today's low of $1,970.10. Wyckoff's Market Rating: 6.5

July silver futures bulls and bears are back on a level overall near-term technical playing field. A four-week-old downtrend on the daily bar chart has been negated. 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 $22.00. First resistance is seen at $24.40 and then at $24.75. Next support is seen at today's low of $23.355 and then at $23.00. Wyckoff's Market Rating: 5.0.

July N.Y. copper closed up 800 points at 371.70 cents today. Prices closed nearer the session high. Short covering was featured. The copper bears still have the overall near-term technical advantage. Prices are still in a six-week-old downtrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 390.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 350.00 cents. First resistance is seen at today's high of 373.15 cents and then at 377.50 cents. First support is seen at this week's low of 362.20 cents and then at 360.00 cents. Wyckoff's Market Rating: 4.0.

By

Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Gold posts first loss in three months, but markets focus on Fed's 'hawkish pause'

 The gold market posted its first monthly loss since February, wrapping May down about $36. As markets eye the crucial Congress vote to lift the debt ceiling, some Federal Reserve speakers are pushing for a "hawkish pause" at the June 13-14 meeting.

The House of Representatives is set to vote on a bill to lift the $31.4 trillion debt limit on Wednesday – a critical step to avoid a default before the June 5 deadline provided by U.S. Treasury Secretary Janet Yellen. Voting is said to start late afternoon and end before 9 pm ET time.

"The far wings of both parties are expected to show some resistance, but this bill is expected to advance," said OANDA senior market analyst Edward Moya. "The Senate might have some difficulty passing the bill, but expectations are elevated that the U.S. will avoid defaulting on its debt."

For gold, a debt deal does not necessarily mean lower prices, Moya said in a note Wednesday. "The details behind the proposed piece of legislation include significantly lower spending, which will be a major blow to the economic outlook and likely trigger a much harder-hitting recession," he noted.

The more significant risk to the gold price is what the Fed decides to do in June and July, with market expectations shifting drastically in the last few weeks.

At the time of writing, the CME FedWatch Tool was back to projecting a 70% chance of a pause at the June meeting. The market leaned towards another 25-basis-point hike only a few trading sessions ago.

U.S. rate futures also started to price in a 70% chance of a pause by the Fed Wednesday, which is a u-turn from earlier in the session, according to Refinitiv's FedWatch.

Fed speakers trigger re-pricing

Expectations shifted after several Fed speakers leaned towards pausing or skipping a rate hike in June, which is a reversal from previous hawkish sentiments.

Philadelphia Fed President Patrick Harker said Wednesday that he supports a "skip" in rate hikes.

"I am in the camp increasingly coming into this meeting thinking that we really should skip," Harker said. But Friday's employment data "may change my mind," he added.

Fed Governor and vice chair nominee Philip Jefferson also said skipping a rate hike makes sense because it gives policymakers time to examine more data.

"Skipping a rate hike at a coming meeting would allow the (Federal Open Market) Committee to see more data before making decisions about the extent of additional policy firming," Jefferson said at a financial stability conference in Washington.

But not all Fed officials share this view. Federal Reserve Bank of Cleveland President Loretta Mester said no "compelling" evidence exists not to raise rates. "I don't really see a compelling reason to pause," Mester told Financial Times in an interview Wednesday. "I would see more of a compelling case for bringing the rates up and then holding for a while until you get less uncertain about where the economy is going."

In the meantime, macro data releases have supported more tightening by the U.S. central bank. The Federal Reserve's preferred inflation measure — the annual core PCE price index — accelerated to 4.7% in April versus the consensus forecast of 4.6%.

And the latest JOLTS job openings data showed that the labor market remains tight.

All eyes are on the U.S. April nonfarm payrolls report, scheduled to be published on Friday. "Market calls that the Fed is done hiking won't be able to shake off this labor market strength if Friday's NFP report confirms this trend," Moya said.

Despite gold's failure to maintain its gains after testing record highs earlier in May, analysts say it is a good sign that gold can trade above $1,950 an ounce. But the risk of falling back to the $1,900 remains, said Kinesis Money market analyst Rupert Rowling.

"Assuming the U.S. does ratify its new debt ceiling agreement, then June looks set to be a more challenging month for gold with more bearish factors than bullish ones," Rowling said Wednesday. "Attention will quickly switch to the U.S. jobs data and then the inflation data that comes out before the Federal Reserve meets to decide its June interest rate decision in the middle of the month."

At the time of writing, August Comex gold futures were trading at $1,981.20, up 0.21% on the day.

By

Anna Golubova

For Kitco News

Time to Buy Gold and Silver

David