Waterfall decline in gold induces miner capitulation

Waterfall decline in gold induces miner capitulation

The headwinds from persistent strength in the U.S. dollar and 10-year bond yields moving closer to 5% have proved too much for the gold market as prices have fallen to their lowest level since March. Gold lost key support at $1900 in September, when the month and quarter ended last Friday. With the Chinese market being closed during "Golden Week," Western bullion banks were primed to continue covering short positions into October during a waterfall decline in Gold Futures down towards its rising 200-week moving average at $1820.

Yet, once you step back to look at the bigger macro picture that is currently unfolding, it is not hard to see that the stars are aligning for gold. Although the bears have been able to break through the six-month gold floor at $1900, rising energy prices coupled with slower economic growth are creating a stagflationary environment which will eventually push Gold Futures back above $2000 an ounce.

As we transition through the final quarter of 2023, the list of known risk factors is expanding as an unrelenting selloff in government bonds has sent global treasury yields to levels last seen prior to the Global Financial Crisis in 2008. Government borrowing costs influence everything from mortgage rates for homeowners to loan rates for companies.

Rising debt and geopolitical instability could also make U.S. bonds less attractive to foreign investors. The risk now is that the Federal Reserve loses control of yields and is forced to be a buyer of last resort. If yields continue to climb, the world's most powerful central bank may be forced to increase its balance sheet with new quantitative easing measures before cutting rates. Not to mention the Fed publicly giving up on its fantasy of getting back to 2% inflation, which would be a major positive for the gold price.

The speed of the bond rout has spooked stock investors as well, with all major equity indexes wiping out their gains for the year. The S&P 500 erased all its gains for 2023 and tumbled into correction territory this week. Some analysts have compared the strong run-up in stocks in 2023 to the price action leading up to the 1987 crash.

In 1987, the S&P 500 rallied about 39%, peaked in August, the crashed in October to erase all its gains in just two weeks. The current rally that started in October 2022 gained about 31% into July, and is now setting up a potential panic move lower. If the S&P 500 closes below critical support at 4200 later today, the odds of a waterfall decline during crash season would increase significantly.

The gold price has been incredibly resilient in the face of skyrocketing bond yields. The 10-year bond rate was around 2.5% a year ago, and gold was trading around $1820. Now, after rates have nearly doubled up to 4.8%, gold is still trading at $1820 as Eastern central banks continue to add more bullion to their reserves.

According to the latest data from the World Gold Council this week, central banks bought 77 tonnes of gold in August, a 38% increase compared to buying in July. Over the last three months, central banks have bought 219 tonnes of gold. This comes after record purchases during the first half of the year.

The continued buying shows central bank gold demand is far from being saturated. The U.S. dollar's persistent strength means that nations with U.S. dollar-denominated debt continue to face high financing costs. The only way to reduce those costs is to diversify away from the U.S. dollar and gold remains the most attractive global monetary asset.

As 10-year bond yields move closer to 5%, Western investors may be close to waking up to the growing debt risks in the U.S. Once Western investors begin to become more defensive as recession fears grow, we will start to see investment demand for gold pick up.

Most economists have felt over the past several months that the Federal Reserve has gone one rate hike too far. And with the odds increasing of another rate hike coming next month, the biggest risk is that the Fed may commit yet another policy error after insisting inflation was "transitory" for a year before beginning to hike rates in March 2022.

By waiting far too long before hiking rates as inflation raged, the Fed has boxed itself into a corner after raising rates at its fastest pace in over 40 years – while government eliminated the debt ceiling. The further the central bank goes into restrictive territory, the more likely it becomes that we begin to see black swan events – just like we saw recently with the second, third and fourth largest bank failures in U.S. history.

If the Fed pushes too hard on rates, the 10-year could spike above 5% and this would raise the odds of breaking something in the financial system. The regional banking crisis in March sparked an over $250 move higher in the gold price from levels it has come back to test this week. But if the central bank stands pat, back-to-back pauses would support an end to the tightening cycle, which would also be bullish for gold.

The U,S, ADP report this week revealed a twelfth straight weekly decline in wages on a debt-saddled population. We should expect to see further volatility and uncertainty in the U.S. dollar as the country's government debt continues to grow along with its citizenry.

Consumer credit card balances and personal interest payments are soaring. U.S. credit card balances crossed the $1 trillion mark this summer as more Americans turned to debt to fund their everyday needs. With interest on credit cards now over 22% the average debt-laden consumer is getting crushed, resulting in delinquencies also climbing as that strategy becomes increasingly untenable.

U.S. debt is approaching $33.5 trillion. At the same time, the deficit is on pace to increase by $2 trillion this year. The eventual economic consequences of the burgeoning government debt include slower growth as more resources get used and allocated by the government.

A likely monetary consequence is that regardless of what senior members of the Fed currently say and think (they naturally insist that the Fed is independent), there is a high probability that the Fed eventually will yet again be called upon to help finance the government.

Historically, the biggest positive for the gold price has been loss of confidence in Fed policy and government. The looming U.S. government shutdown may still be a catalyst for gold even after the current crisis has been pushed out for 45 days.

A split Congress is at loggerheads yet again over government funding just as U.S. bond markets are pricing the most expensive Treasury borrowing in 16 years – while also rethinking the long-term trajectory for interest rates and fiscal policy.

A near-miss on a debt ceiling showdown in the Spring led to the loss of another Triple-A sovereign credit rating, followed by further brinkmanship over next year's spending bills. According to a recent warning from Moody's, the dysfunction in public financing and potential for debt servicing disruption may threaten the last remaining AAA credit rating of the main three agencies.

Furthermore, the U.S. House of Representatives for the first time in its history has booted its speaker out of the job, as infighting in the narrow and bitterly divided Republican majority toppled Kevin McCarthy from the position. This unprecedented action now creates a political crisis, plunging the House of Representatives into inevitable confusion and uncertainty, not to mention a highly contentious battle over the speaker position.

Until a House speaker is installed, it is unlikely that further action will be taken on bills to fund the government, with lawmakers facing a Nov. 17 deadline to provide more money or face a partial government shutdown. Republican lawmakers said they would need at least a week to choose a new speaker, which will eat into the time necessary to pass that needed legislation.

This dilemma coincides with Republicans simultaneously battling the calendar to complete the appropriations process and continues its impeachment investigation into President Joe Biden.

Meanwhile, gold stocks are presenting the best risk/reward situation we have seen since late 2015 after Gold Futures have now printed nine consecutive daily red candles to become deeply oversold. Both GDX and GDXJ are testing the lower boundary of their respective downtrend channels as a final capitulation by worn out gold stock investors takes place.

A similar correction pattern amid sector capitulation occurred into the second week of 2016. The exact low back then came in the form of an intra-day bear-trap reversal to the upside, which took many bottom-fishers accumulating quality juniors since early Q4 2015 quickly out of position.

There was no major news to trigger the event, it was just the algorithm switch being flipped after a similar capitulation had run its course. And those investors who sold were left to watch many of the juniors they capitulated go 5-10x higher in just six months, while refusing to buy them back at higher prices along the way after being burned.

In anticipation of the incredible gains the junior sector should begin to experience once the gold price prints a technical breakout above $2100, the Junior Miner Junky (JMJ) newsletter has accumulated a basket of quality juniors with 3x-10x upside potential into 2025-26.

If you require assistance in accumulating the best in breed precious metals related juniors, and would like to receive my research, newsletter, portfolio, watch list, and trade alerts, please click here for instant access.

By

David Erfle

Contributing to kitco.com

Time to Buy Gold and Silver

David

Gold price down after much stronger U.S. jobs growth in Sept.

Gold price down after much stronger U.S. jobs growth in Sept.

Gold prices are modestly lower in the immediate aftermath of a U.S. employment report for September that showed much-stronger-than-expected non-farm payrolls jobs gains that suggest the Federal Reserve will maintain its hawkish stance on U.S. monetary policy. December gold hit a 10-month low and was last down $5.40 at $1,825.90 and December silver was up $0.006 at $21.00.

Friday morning's September U.S. employment situation report from the Labor Department showed the key non-farm payrolls number come in at up 336,000, which is way above expectations for a rise of 170,000 and compares to the August report showing a gain of 187,000 non-farm jobs. However, some of the internals of the jobs report were a bit weaker, such as the overall unemployment rate staying at 3.8% versus expectations of a 3.7% reading. Wednesday's big downside miss in the ADP jobs report had many thinking the jobs report Friday morning would also be a miss to the downside. Not the case. The new marketplace narrative of the Federal Reserve's interest rate policy that is "much higher for much longer" appears to be still intact.

Asian and European stocks were mixed but mostly higher overnight. U.S. stock indexes are pointed to lower openings when the New York day session begins, following the stronger jobs report. The U.S. stock indexes were firmer overnight.

  Bond yields can't keep gold down forever as ING sees higher prices in 2024

The key outside markets today see the U.S. dollar index solidly higher after the jobs report and after being slightly down overnight. Nymex crude oil prices are weaker and trading around $81.50 a barrel. Just last week Nymex crude prices poked just above $95.00 a barrel. Meantime, the benchmark U.S. Treasury 10-year note yield is presently fetching 4.84% and is up more after the jobs report.

Other U.S. economic data due for release Friday includes the consumer credit report.

Technically, the gold futures bears have the solid overall near-term technical advantage. Prices are in an accelerating four-month-old downtrend on the daily bar chart. Bulls' next upside price objective is to produce a close in December futures above solid resistance at $1,900.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at the overnight high of $1,848.80 and then at $1,850.00. First support is seen at $1,815.00 and then at $1,800.00. Wyckoff's Market Rating: 1.0

The silver bears have the solid overall near-term technical advantage. Prices are trending lower on the daily bar chart. Silver bulls' next upside price objective is closing December futures prices above solid technical resistance at $23.00. The next downside price objective for the bears is closing prices below solid support at $20.00. First resistance is seen at Tuesday's high of $21.595 and then at $22.00. Next support is seen at this week's low of $20.85 and then at $20.50. Wyckoff's Market Rating: 2.0.

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By

Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Gold, silver see mild pressure ahead of U.S. jobs data Friday

Gold, silver see mild pressure ahead of U.S. jobs data Friday

Gold and silver prices are modestly weaker in midday U.S. trading Thursday. The precious metals traders are tentative ahead of Friday's important U.S. employment report. December gold was last down $3.50 at $1,831.10 and December silver was down $0.201 at $20.945.

Traders are looking ahead to Friday morning's September employment situation report from the Labor Department. The key non-farm payrolls number is expected to come in at up 170,000 compared to a rise of 187,000 in the September report. Wednesday's big downside miss in the ADP jobs report has many now thinking the more important jobs report Friday will also be a miss to the downside. A weakening U.S. economy would actually be a good thing of sorts for the marketplace, in that it would likely cool the ascent in bond yields.

Asian and European stocks were mixed overnight. U.S. stock indexes are lower at midday. Risk aversion is still present late this week. The recent rise in U.S. Treasury yields and other interest rates have soured the global economic outlook, evidenced by the big drop in crude oil prices this week. Reads a Barrons headline today: "8% mortgage rates are on the horizon—and may stick around."

  Central banks buy 77 tonnes of gold, helping the precious metal resist rising bond yields

`The key outside markets today see the U.S. dollar index down after hitting a 10-month high Tuesday. Nymex crude oil prices are lower again and trading around $83.00 a barrel. Just last week Nymex crude prices poked just above $95.00 a barrel. Meantime, the benchmark U.S. Treasury 10-year note yield is presently fetching 4.712%.

Technically, December gold futures prices hit another 10-month low today. Bears have the solid overall near-term technical advantage. An accelerating five-month-old price downtrend is in place on the daily bar chart. However, the market is still well short-term oversold and due for a decent corrective bounce very soon. Bulls' next upside price objective is to produce a close above solid resistance at $1,900.00. 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 $1,843.50 and then at $1,850.00. First support is seen at today's low of $1,826.20 and then at $1,815.00. Wyckoff's Market Rating: 1.0.

December silver futures prices were poised to close at a 6.5-month low close today. The silver bears have the solid overall near-term technical advantage. A nine-week-old downtrend is in place on the daily bar chart. However, the market is short-term oversold and due for a corrective bounce very soon. Silver bulls' next upside price objective is closing prices above solid technical resistance at $23.00. The next downside price objective for the bears is closing prices below solid support at the March low of $20.615. First resistance is seen at today's high of $21.455 and then at $22.00. Next support is seen at this week's low of $20.85 and then at $20.50. Wyckoff's Market Rating: 2.0.

December N.Y. copper closed down 285 points at 356.05 cents today. Prices closed nearer the session low and closed at a 10-month low close today. The copper bears have the solid overall near-term technical advantage. Prices are in a choppy, 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 last week's high of 378.60 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 360.30 cents and then at Tuesday's high of 364.80 cents. First support is seen at this week's low of 354.90 cents and then at 350.00 cents. Wyckoff's Market Rating: 2.0.

By

Jim Wyckoff

For Kitco News

Contact jwyckoff@kitco.com

www.kitco.com

Time to Buy Gold and Silver

David

Gold, silver down even as USDX, bond yields see corrective pullbacks

Gold, silver down even as USDX, bond yields see corrective pullbacks

Gold and silver prices are modestly lower in midday U.S. trading Wednesday and not far above this week's multi-month lows. Technical selling is featured amid fully bearish near-term charts. Downside corrections in the U.S. dollar index and in U.S. Treasury yields today did not help out the precious metals bulls. December gold was last down $3.00 at $1,838.30 and December silver was down $0.242 at $21.14.

Today's big downside miss for the ADP National Employment Report—at up 89,000 jobs versus the consensus forecast of up 160,000—gave the bond market bulls some hope Friday morning's more important U.S. jobs report shows a cooling U.S. economy. Traders are indeed starting to look ahead to Friday's September employment situation report from the Labor Department. The key non-farm payrolls number is expected to come in at up 170,000 compared to a rise of 187,000 in the September report.

Risk appetite is not keen at mid-week, following the ouster of the U.S. Speaker of the House of Representatives Tuesday afternoon. The AP said "it was a stunning moment for Speaker Kevin McCarthy, a punishment fueled by growing grievances but sparked by his decision to work with Democrats to keep the federal government open rather than risk a shutdown. Removing the speaker launches House Republicans into chaos heading into a busy fall when Congress will need to fund the U.S. government again or risk a mid-November shutdown."

And then there's the U.S. Treasury sell off that has the marketplace spooked. A Barron's headline today reads: "The bond and stock sell off has momentum. Here's how it could end." The story goes on to say "markets have decided to pay attention to the prospect of the Federal Reserve keeping interest rates higher for longer. And now that's all they can see." The story said the ways the bond market rout can end would be if the Fed stops or reduces its bond selling. Or, "something breaks." The article added weakening U.S. economic data may be needed to help turn the tide of the higher rates narrative. "Friday's September jobs report could be the place for that to begin."

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Asian and European stocks were mixed overnight. U.S. stock indexes are higher at midday on corrective bounces after hitting four-month lows earlier this week.

The key outside markets today see the U.S. dollar index weaker on a corrective pullback after hitting a 10-month high Tuesday. Nymex crude oil prices are sharply lower and trading around $85.25 a barrel. Meantime, the benchmark U.S. Treasury 10-year note yield is presently fetching 4.868% and has hit a 16-year high this week.

Technically, December gold futures prices were poised to close at a 10-month low close today. Bears have the solid overall near-term technical advantage. An accelerating five-month-old downtrend is in place on the daily bar chart. However, the market is well short-term oversold and due for a decent corrective bounce very soon. Bulls' next upside price objective is to produce a close above solid resistance at $1,900.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at $1,850.00 and then at this week's high of $1,864.70. First support is seen at this week's low of $1,830.90 and then at $1,825.00. Wyckoff's Market Rating: 1.0.

December silver futures prices hit another 6.5-month low today. The silver bears have the solid overall near-term technical advantage. A nine-week-old downtrend is in place on the daily bar chart. However, the market is short-term oversold and due for a corrective bounce very soon. Silver bulls' next upside price objective is closing prices above solid technical resistance at $23.00. The next downside price objective for the bears is closing prices below solid support at the March low of $20.615. First resistance is seen at today's high of $21.57 and then at $22.00. Next support is seen at today's low of $20.85 and then at $20.50. Wyckoff's Market Rating: 2.0.

December N.Y. copper closed down 350 points at 358.60 cents today. Prices closed near mid-range and hit another 10-month low today. The copper bears have the solid overall near-term technical advantage. Prices are in a choppy, 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 last week's high of 378.60 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 Tuesday's high of 364.80 cents and then at 370.00 cents. First support is seen at today's low of 354.90 cents and then at 350.00 cents. Wyckoff's Market Rating: 2.0.

By

Jim Wyckoff

For Kitco News

Contact jwyckoff@kitco.com

www.kitco.com

Time to Buy Gold and Silver

David

Relentless rise in USDX, bond yields keep stranglehold on metals bulls

Relentless rise in USDX, bond yields keep stranglehold on metals bulls

Gold and silver prices are lower again at midday Tuesday, with December gold futures hitting another 10-month low and December silver futures another 6.5-month low. A very strong U.S. dollar and rising U.S. Treasury yields that are at 16-year highs, with both showing no signs of backing down, are keeping precious metals in a tailspin. December gold was last down $7.90 at $1,839.10 and December silver was down $0.031 at $21.40.

The metals market bears are pouncing on the “higher for longer” U.S. interest rate scenario. The benchmark 10-year Treasury note yield is at its highest level since 2007. A Barron’s headline today reads: “The bond sell off is gathering pace. Why the Fed isn’t intervening.” The story suggests the Federal Reserve is content with rising Treasury yields as it helps in the inflation battle the central bank is presently waging.

U.S. stock indexes are solidly lower and are at or near their for-the-move lows, on worries about rising interest rates choking economic growth. The sell off in the stock market is likely limiting losses in the gold and silver markets, as it appears some safe-haven demand is surfacing.

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The key outside markets today see the U.S. dollar index higher and hitting another 10-month high. Nymex crude oil prices are higher and trading around $90.00 a barrel. Meantime, the benchmark U.S. Treasury 10-year note yield is presently fetching 4.754% and hit a 16-year high.

Technically, December gold futures prices hit another 10-month low today. Bears have the solid overall near-term technical advantage. An accelerating five-month-old downtrend is in place on the daily bar chart. However, the market is well short-term oversold and due for a decent corrective bounce very soon. Bulls’ next upside price objective is to produce a close above solid resistance at $1,900.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at $1,850.00 and then at this week’s high of $1,864.70. First support is seen at today’s low of $1,830.90 and then at $1,825.00. Wyckoff's Market Rating: 1.0.

December silver futures prices hit another 6.5-month low today. The silver bears have the solid overall near-term technical advantage. A nine-week-old downtrend is in place on the daily bar chart. However, the market is short-term oversold and due for a corrective bounce very soon. Silver bulls' next upside price objective is closing prices above solid technical resistance at $23.00. The next downside price objective for the bears is closing prices below solid support at the March low of $20.615. First resistance is seen at today’s high of $21.595 and then at $22.00. Next support is seen at $21.00 and then at today’s low of $20.87. Wyckoff's Market Rating: 2.0.

December N.Y. copper closed down 225 points at 361.90 cents today. Prices closed near mid-range and hit a 10-month low today. The copper bears have the solid overall near-term technical advantage. Prices are in a choppy, 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 last week’s high of 378.60 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 364.80 cents and then at 370.00 cents. First support is seen at today’s low of 358.15 cents and then at 355.00 cents. Wyckoff's Market Rating: 2.0.

By

Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Gold bulls can look forward to a bright future despite headwinds – Heraeus

Gold bulls can look forward to a bright future despite headwinds – Heraeus

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Even as markets watch gold prices fall into the low 1830s as the fourth quarter gets underway, interest rate history favors gold bugs in the medium and long term, according to the latest precious metals report from Heraeus.

“The gold price tends to rise following the first cut of US interest rate cycles,” the analysts write. “On average since 1984, one calendar year after the Federal Reserve first cuts its rate after a hiking cycle, gold is 10% higher than the day of the decision to reduce interest rates, and after two years is 18% higher. The dollar tends to weaken, yields on U.S. Treasuries fall, and the economy tends to have deteriorated. All of these elements can act as a tailwind for the gold price.”

The analysts say that after the yield on the 10-year treasury note peaks, it’s only a matter of time before Fed Chair Jerome Powell begins to cut. “The last rate hike of the cycle also tends to coincide with the peak in the yield on 10-year U.S. Treasuries,” they write. “Since 1984, interest rate cuts have never lagged the peak in 10-year U.S. Treasury notes by more than one year and seven months – this being the outlier in 1989. Excluding 1989, cuts have followed the peak by an average of ~10 months.”

They note, however, that this does not constitute a guarantee. “Two years after the first interest rate reduction in 1995, gold was 16% lower at $325.50/oz,” they say. “On the other hand, gold’s relative performance to the upside following interest rate cuts has grown since the 2001 cycle.”

U.S. government bond yields are now at the highest rate in 16 years, hitting a fresh high of 4.7% just after noon EDT on Monday. “The yield on longdated US Government debt has not hit 4.5% since September 2007, the month that interest rates were lowered 50 bp from 5.25% to 4.75% and the US was on the brink of recession,” note the Heraeus analysts. “This suggests the higher-for-longer message from the Fed may now be sinking in for investors, and raises the expectation that for this cycle there could be a more prolonged period before interest rates begin to fall.”

They acknowledge that gold’s short-term outlook is challenged by the surge in yields. “The average rate tightening cycle has lasted for 21 months with a total Federal Funds increase of 3.02%, but this point is clearly past,” the analysts write. “Historically, long-term yields peak shortly before the Fed stops increasing short-term rates. Inflation may continue to climb well after the Fed curtails rate hikes. The uptick in consumer prices in August highlights that despite a Fed pause in September, inflation may not be tamed just yet, and that gold is likely to face headwinds until at least the new year or until yields flag.”

Another key headwind for the yellow metal is the strength of the U.S. dollar, which continues to outperform, with DXY flirting with 107 on Monday afternoon, a level it has not breached since Nov. 22. “The strength in the U.S. dollar in the last week may be a sign that traders are beginning to accept that interest rates may be higher for longer,” they write, noting that the dollar index “is up ~7% since mid-July, against other major currencies.”

The Heraeus analysts believe the next significant technical support for gold is all the way down at $1,800 per ounce, a price the precious metal has not seen since the days before Christmas last year.

By

Ernest Hoffman

For Kitco News

Time to Buy Gold and Silver

David

Analysts expect gold to kick off Q4 with gains, while retail investors are evenly split

Analysts expect gold to kick off Q4 with gains, while retail investors are evenly split

Gold prices underwent a dramatic selloff this week, continuing and accelerating the downtrend that began after the Federal Reserve left interest rates unchanged on the 20th and reiterated that rates would remain higher for longer than previously anticipated.

The latest Kitco News Weekly Gold Survey sees most market analysts optimistic that gold will see a bounce in the near term, while retail investors are more evenly divided after experiencing seven straight sessions of losses.

Everett Millman, Chief Market Analyst at Gainesville Coins, attributed gold's recent slide largely to seasonal factors and options contracts expiring, and sees the precious metal rebounding to start the fourth quarter.

"My initial reaction to the downturn this week was that it had a lot to do with the options expiry on Comex, which does usually lead to a lot of downside volatility as people are closing out or rolling over contracts," he said. "But given that this price action continued throughout the rest of the week, I'm also going to attribute that a bit to seasonality. The gold market usually goes into a slumber in the late summer, early autumn months. We saw that exact same pattern last year. Unless markets are interpreting the FOMC to be extremely hawkish, which I don't think is what's going on, I think you have to chalk it up to seasonality and just the regular trading dynamics that come at this time of year."

"Usually October, the beginning of the fourth quarter, is when you see the tide turn the opposite direction," Millman said. "It's when we get a lot of gold buying events out East, in both India and China. India has the Diwali festival coming up in early November, a lot of buyers over there start accumulating gold in the weeks preceding that."

"I would expect to see gold, if not at the beginning of October, certainly by the beginning of November, to see prices on the rise again."

James Stanley, senior market strategist at Forex.com, believes gold could fall further in the first week of October. "The rates theme has markets on edge and gold's behavior since FOMC has been aggressively bearish with both spot and futures taking out a number of supports along the way," Stanley said. "There's no evidence that's finished yet."

This week, 13 Wall Street analysts participated in the Kitco News Gold Survey. Seven experts, or 54%, expected to see higher gold prices next week, while four analysts, or 31%, predicted a drop in price. Only two analysts, or 15%, were neutral on gold for the coming week.

Meanwhile, 540 votes were cast in online polls. Of these, 245 retail investors, or 45%, looked for gold to rise next week. Another 219, or 41%, expected it would be lower, while 76 respondents, or 14%, were neutral about the near-term prospects for the precious metal.

Kitco Gold Survey

Wall Street

Bullish54%

Bearish31%

Neutral15%

VS

Main Street

Bullish45%

Bearish41%

Neutral14%

The latest survey shows that retail investors expect gold to trade around $1,872 per ounce next week, which is $64 below last week's prediction, but which would still represent a gain of $23 from the current spot price.

The coming week will see the release of the ISM Manufacturing and Services PMIs for September along with over a dozen speeches by U.S. and European central bankers, including Fed chair Jerome Powell and ECB president Christine Lagarde. The highlight of the week will be the Nonfarm Payrolls report for September, which is slated for release on Friday morning, but which could be canceled if the U.S. government shuts down.

Mark Leibovit, publisher of the VR Metals/Resource Letter, sees gold prices rising next week as the greenback pulls back. "Bullish, as it appears the U.S. dollar may be forming a trading top," he said.

Darin Newsom, Senior Market Analyst at Barchart.com, shared a technical case in favor of gold gaining ground next week.

"While the long-term trend and intermediate-term trends remain down, Dec gold's short-term daily chart is showing the contract to be sharply oversold," Newsom said. "Daily stochastics established a bullish crossover below 20% at Thursday's close, a signal the short-term trend is set to turn up. It's possible, maybe not probable, Dec23 completes a bullish 2-day reversal Friday. To do so, it would need to rally and close near the daily high. If that doesn't happen, a bullish reversal pattern will be delayed for a bit."

Marc Chandler, Managing Director at Bannockburn Global Forex, also sees upside potential for gold as the fourth quarter gets underway. "I look for gold to bottom shortly," Chandler said. "Soft US core inflation helping US rates stabilize and the dollar's pullback should help the yellow metal. Month-end and quarter-end flows may be distorting the immediate picture, but the headwinds on the US economy look set to intensify: tightening of credit, the cumulative effect of rising rates, deposits still leaving banks, the resumption of student debt servicing, the likely partial closure of the US federal government, and the high energy price may sap the strength of the US economy."

Looking at the technical picture, Chandler said, "I would be inclined to buy gold on further weakness and look for a move to $1885 to stabilize the technical tone and a move $1892 to boost confidence a low is in place."

"Funds are still holding a net-long futures position, not changing it much over the course of September," Newsom noted, "so with the end of the quarter in sight, it could lead to some long-liquidation."

Adam Button, Chief Currency Analyst at Forexlive.com, still believes bonds and the U.S. dollar will dictate the precious metal's trajectory in the near term, but he sees a silver lining to gold's recent weakness.

"There's a wonderful seasonal gold trade that kicks off in November, and this is setting up very nicely for a test of $1800, and then strength November through January," Button said. "Obviously the bonds are the catalyst here. Right now, you can buy a three-month T-bill, five and a half percent, 10-years, four and a half percent, and gold still yielding zero. The yield difference between gold and other traditional safe havens is painful at the moment, especially in an environment with a rising dollar."

He said gold bulls believed the Fed would be signaling an end to rate hikes by this point. "Instead, there was talk this week about extending the hiking cycle into 2024, Kashkari was a pretty big catalyst saying that, a 40 percent chance that they have to keep hiking, perhaps significantly, in 2024."

Button believes gold will need to see weakness in U.S. economic data before any kind of sustained rally. "I suspect it's coming, but we may not be getting any economic data starting next week if the shutdown happens, at least not the top tier data," he said. "That stokes some economic weakness later. But now, say the shutdown last two weeks in October, then can you really trust the October data? Because it's all going to be skewed. I don't know… I think the market will probably figure out whether it's real or fake weakness, but it might look like weakness at least, which should be bullish for gold."

Button also agreed that quarter-end factors were in play this week, and he thinks there's a decent chance gold sees a bounce early next week. The price action today isn't particularly promising, but the day's not over," he said. "I don't have a huge amount of confidence we'll get a big bounce, but I'd say I'm neutral for next week."

And Kitco Senior Analyst Jim Wyckoff sees downside risks for the precious metal. "Steady-lower. Technicals bearish," Wyckoff said. "That means the path of least resistance for prices remains sideways to lower."

Gold prices are currently down 0.84% on the day and 4% on the week, with spot gold last trading near session lows at $1,849.09 an ounce at the time of writing.

By

Ernest Hoffman

For Kitco News

Time to Buy Gold and Silver

David

GOLD FIXES

GOLD FIXES

For almost 100 years, the main gold benchmark price was set by the London Gold Fix. The price was determined in a closed physical auction among bullion banks. A price is determined after most buy orders matched most sell orders.

These auctions would take place twice daily, once in the morning and once in the afternoon in London, England.

However, the London Gold Fix shut down in 2015 and the responsibility for maintaining the process fell to the LBMA, which created the LBMA Gold Price on March 2015. The association shifted the price matching mechanism from a physical auction to an open electronic auction among its members.

The benchmark is still set twice a day at 10:30 a.m. and then at 3 p.m. London time.

There are thirteen participating banks, including the Bank of China, Bank of Communications, China Construction Bank, Goldman Sachs International, HSBC Bank USA NA, ICBC Standard Bank, JP Morgan, Morgan Stanley, Société Générale, Standard Chartered, The Bank of Nova Scotia – ScotiaMocatta, The Toronto Dominion Bank and UBS.

Time to Buy Gold and Silver

David