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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Looking at fundamentals

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

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

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

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

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

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

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

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

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

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

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

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

The missing puzzle piece: investment demand

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

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

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

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

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

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

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

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

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

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

Price predictions

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

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

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

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

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

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

By Anna Golubova

For Kitco News

Time to Buy Gold and Silver

David

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Price levels

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

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

Data to watch

Tuesday: U.S. building permits and housing starts

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

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

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

By Anna Golubova

For Kitco News

Time to Buy Gold and Silver

David

Hawkish central banks will test gold bulls’ resolve into year-end

Hawkish central banks will test gold bulls' resolve into year-end

he gold market is holding its ground at around $1,800 an ounce despite growing hawkish rhetoric from central banks around the world; the bullish sentiment in the marketplace is pointing to a positive end for the precious metal for 2022.

The latest Kitco News shows that retail investors are still significantly bullish on gold heading into the final full trading week of the year. At the same time, Wall Street analysts are slightly more cautious, with many saying that lower gold prices represent a strategic buying opportunity.

Although the Federal Reserve has signaled that it is nowhere near ready to halt its tightening cycle, analysts note that the market is starting to discount the hawkish stance. Some analysts have said that investors are now shifting their focus to the growing recession fears and away from the inflation threat.

"The Fed is not pumping the breaks just yet, but it is taking its foot off the gas, and that should help gold consolidate around $1,800," said Frank Cholly, senior market strategist at RJO Futures.

Christopher Vecchio, head of futures and forex at Tastylive.com, said that weaker economic growth is helping to bring down real yields, which continues to support gold around $1,800 an ounce.

"I think gold right now is well positioned to start the new year on a strong note," he said.

This week, 20 Wall Street analysts participated in the Kitco News Gold Survey. Among the participants, nine analysts, or 45%, were bullish on gold in the near term. At the same time, five analysts, or 25%, were bearish for next week and six analysts, or 30%, saw prices trading sideways.

Meanwhile, 772 votes were cast in an online Main Street poll. Of these, 437 respondents, or 57%, looked for gold to rise next week. Another 202, or 26%, said it would be lower, while 133 voters, or 17%, were neutral in the near term.

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The gold market is looking to end the week in roughly neutral territory, with prices down 0.5% from last Friday. February gold futures last traded at $1,800 an ounce.

Adam Button, head of currency strategy at Forelive.com, said he expects to see lower prices next week as hawkish central bank comments could weigh on prices.

Not only is the Federal Reserve not done raising interest rates, but European Central Bank President Christine Lagarde warned investors that the ECB is expected to continue to raise interest rates by 50 basis points well into 2023.

However, Button added that any dip in the price could be a buying opportunity as this is seasonally a strong period for gold.

"Even holding steady for the remainder of the month would be a win and set up gold for a nice rally in January," he said.

While gold has remained resilient as central banks tighten monetary policies worldwide, some analysts have noted that bullish momentum is starting to weigh as resistance holds around $1,800 an ounce.

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Downside risks for gold and silver prices in 2023 – Natixis' Dahdah

"The momentum indicators have not recovered. I still think a bigger pullback may be coming, but so far [gold has been] more resilient than I thought," said Marc Chandler, managing director at Bannockburn Global Forex. "This seems to be corresponding to a U.S. dollar, which seems better offered into rallies than bought on dips."

Darin Newsom, senior market analyst at Barchart, said that he sees the U.S. dollar entering a short-term uptrend helping to push gold prices lower.

"Last week's call for a lower market is still working, unless Feb gold posts a strong rally to close out Friday. If it doesn't, then the contract will have completed a bearish spike reversal on its weekly chart, confirming the secondary (intermediate-term) trend has turned down," he said.

By Neils Christensen

For Kitco News

Time to Buy Gold and Silver

David

The Fed’s made its move and now it’s gold’s turn

The Fed's made its move and now it's gold's turn
The gold market appears to be taking the Federal Reserve’s hawkish stance in stride as the precious metal’s price continues to hold on to support around $1,800 an ounce.
This week the Federal Reserve signaled it will continue to raise interest rates in 2023 even if the pace of its rate hikes slows. Last week we warned that an adjustment to the Fed’s interest rate expectations presented a risk to gold. But the meeting has come and gone and gold investors are shrugging off the Fed’s new forecast that their key interest rate will peak above 5% in 2023. Heading into the weekend, February gold futures are down only 0.5% since last Friday.
According to market analysts, there could be a few reasons why gold has remained reasonably resilient following the Federal Reserve’s hawkish stance. One scenario is that investors are now becoming less concerned about inflation and more worried about a recession.
Economic data, from disappointing holiday retail sales to slowing activity in the manufacturing and service sectors, are highlighting a slowing U.S. economy. The concern is that the more hawkish the Fed is, the deeper the impending recession will be.
Many analysts have noted that a recession is a positive environment for gold as investors look for assets, which preserve their wealth. George Milling-Stanley, chief gold strategist at State Street Global Advisors, noted in an interview with Kitco News this week that in the last seven recessions, gold has seen an average return of roughly 20%. The deeper the recession, the better gold does, he said.
The second scenario that could be bolstering gold is that as hawkish as the Fed is, a lot of that is now already priced into the market. Some analysts believe that the U.S. dollar has peaked as the Fed starts to slow the pace of its rate hikes. At the same time, the European Central Bank has just started its hawkish long game, according to ECB President Christine Lagarde.
On Thursday, less than 24 hours after the Fed’s monetary policy announcement, Lagarde came out and said that the ECB will have to raise interest rates by 50 basis points for a prolonged period to bring inflation down. A narrowing of the monetary policy gap between the two major central banks should weigh on the U.S. dollar, which in turn should support gold prices.
Hawkish central banks will test gold bulls' resolve into year-end
There is also a third theory floating around: that the market and investors just don’t believe the Fed. It’s easy to talk tough when the economy and the labor market are still relatively healthy, but what happens when the Fed’s monetary policy action really starts to bite?
Some market analysts have said that if the U.S. enters a deep recession, the Fed will quickly loosen its monetary policies, which will be good for gold.
If you want to find out what’s in store for gold, silver, cryptocurrencies, financial markets and the global economy in 2023, don’t forget to check out Kitco News’ annual outlook coverage. Investors will continue to navigate a world of extreme uncertainty, an ongoing energy crisis, the continuous inflation threat and the potential for a deep recession, and we’ll be looking at how all of these factors impact key markets.
This is also Kitco News’ final newsletter of 2022, so on behalf of the new team, we would like to wish everyone a wonderful holiday season and a prosperous and safe new year.
By Neils Christensen
For Kitco News
Time to Buy Gold and Silver

David

Gold, silver hit hard by hawkish Fed, surge in greenback

Gold and silver prices are sharply lower in midday U.S. trading Thursday. The precious metals bulls were running for cover today amid sharp gains in the U.S. dollar index and in the aftermath the FOMC meeting that sees the Federal Reserve still leaning hawkish on U.S. monetary policy. February gold was last down $32.00 at $1,786.00 and March silver was down $0.836 at $23.305.

A still-hawkish Federal Reserve had traders and investors in a "risk-off" stance Thursday. Two months of better-than-expected U.S. inflation data were not enough to convince the Fed to let its foot off the monetary-policy-tightening gas. "Higher for longer" is the marketplace takeaway from this week's FOMC meeting—meaning higher interest rates for a longer period of time—to ensure the Fed tamps down hard on inflation.

Global stock markets were lower overnight. U.S. stock indexes are lower at midday.

The European Central Bank and the Bank of England monetary policy meetings on Thursday saw both the BOE and ECB raise their main interest rate by 0.5%. That follows the U.S. Federal Reserve's half-point rate hike. The central banks of Switzerland and Norway also raised their interest rates Thursday but also in smaller increments of policy tightening.

China and its fight against Covid remains near the front burner of the marketplace. Broker SP Angel this morning said in an email dispatch there is increasing evidence that China is now "allowing Covid to rip through the population." There is relatively little vaccination and almost no effective vaccination against Omicron in China. "That means the virus will bypass most of the Covid controls left in place." The Wall Street Journal said today that "China's economy took a big hit in November" due to strict Covid lockdown policies.

The ECB's aggressive monetary policy stance gives gold a lifeline as euro makes a move against U.S. dollar

The key outside markets today see the U.S. dollar index sharply higher. Nymex crude oil prices are weaker and trading around $76.75 a barrel. Meantime, the yield on the benchmark U.S. 10-year Treasury note is presently around 3.45%.

Technically, February gold futures bulls are fading late this week but still have the overall near-term technical advantage. However, a five-week-old uptrend on the daily bar chart is in jeopardy. Bulls' next upside price objective is to produce a close above solid resistance at this week's high of $1,836.90. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,750.00. First resistance is seen at $1,800.00 and then at today's high of $1,819.70. First support is seen at today's low of $1,782.00 and then at $1,778.10. Wyckoff's Market Rating: 6.0

March silver futures bulls have the firm overall near-term technical advantage. Prices are in a choppy 3.5-month-old uptrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at $24.00 and then at this week's high of $24.39. Next support is seen at today's low of $23.155 and then at $23.00. Wyckoff's Market Rating: 6.5.

March N.Y. copper closed down 1,125 points at 376.55 cents today. Prices closed nearer the session low today. The copper bulls have the slight overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 400.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 354.70 cents. First resistance is seen at today's high of 386.75 cents and then at this week's high of 392.90 cents. First support is seen at 370.00 cents and then at 360.00 cents. Wyckoff's Market Rating: 5.5.

By Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Tough talk by Chairman Powell signaling more rate hikes over a longer time span

As expected, the Fed announced its decision to raise its benchmark rate by 50-bps. This takes the central bank’s “Fed funds” rate to between 425 – 450 bps (4 ¼% – 4 ½%). However, it was Chairman Powell’s comments regarding his policy outlook during the press conference that garnered the most attention. Market participants and analysts were looking for insight into the forward guidance of the Federal Reserve as it pertains to their monetary policy, inflation, and future rate hikes. Which revealed that the Federal Reserve will continue its policy of monetary tightening by continuing to raise rates in 2023.

The Federal Reserve released a statement as well as its summary of economic projections for 2023 through 2025 after today’s FOMC meeting. One component of their economic projections was the most current “dot plot” which reveals assessments made by each Fed official. When the Fed is fully staffed the dot plot will contain 19 individual projections.

2023 – All of the 19 Federal Reserve members who added their “dot” to the Fed’s projections reflected higher interest rates in 2023. The majority of members (10 votes) anticipate rates to be at 5 ¼%, with four members anticipating rates to go to 5 ½%, two members anticipating rates at 5 ¾% and two members anticipating rates at 4 ¾%.

2024 -seven members anticipate that interest rates will remain elevated above the current rate of 4 ½%, with the remaining 12 members anticipating rate reductions from ¼% to 1 ½%.

2025 – all Federal Reserve members anticipate that fed funds rates will be 4 ½% to 3% by the end of 2025.

Chairman Powell delivered a strong message reinforcing the information contained in their economic outlook and the Fed’s policy outlook saying, “Fed policymaker projections are best assessment of where Fed policy rates will be.”

Chairman Powell’s press conference

Chairman Powell acknowledged that the last two CPI reports were promising but incomplete. “Data we have received so far on inflation for October and November do show a welcome reduction in price pressures; need substantially more evidence though to be confident inflation coming down.” He also said that “recent data gives us greater confidence in our forecast.”

His statements supported the Federal Reserve’s resolve and commitment to keep interest rates at their current level and higher until the Fed reaches its inflation target of 2%. Addressing the possibility of a recession he simply said “no one knows if we are going to have a recession or not.”

Today’s FOMC meeting statement, economic projections, and press conference resulted in declines in the dollar, US equities, and precious metals. As of 5:20 PM EST gold futures basis, the most active February 2023 contract is currently fixed at $1818.80 after factoring in today’s decline of $6.70 or 0.37%. Concurrently the dollar declined by 0.33% and is currently fixed at 103.595. Dollar weakness added $6.70 to the price of spot gold and normal trading indicated that traders moved gold pricing lower by $9.40, according to the Kitco gold index.

It was clear that Chairman Powell's statements today delivered a hard-hitting truth to Americans that inflation will remain persistent for longer than anticipated and interest rates will follow the same course.

By Gary Wagner

Time to Buy Gold and Silver

David

Slightly cooler U.S. inflation report boosts gold, silver

Gold and silver prices are solidly higher in midday U.S. trading Tuesday, but down from daily highs, following a slightly tamer-than-expected U.S. inflation report. Gold surged to a five-month high and silver a seven-month high right after the report’s release. February gold was last up $26.70 at $1,818.90 and March silver was up $0.407 at $23.81.

The U.S. consumer price index report for November showed a rise of 0.1% from October and was up 7.1%, year-on-year. CPI was forecast to come in up 0.3% from October and up 7.3%, year-on-year. The slightly cooler-than-expected inflation data was enough to rally the stock and financial markets, and the metals, while tanking the U.S. dollar index. The CPI report lands in the camp of the U.S. monetary policy doves, who want to see the Federal Reserve back off the accelerator on its aggressive monetary policy tightening path.

U.S. stock indexes are mixed at midday and have lost early strong gains in the aftermath of the CPI report. After the initial euphoria from the CPI report, traders and investors realized the Federal Reserve still has some tightening of monetary policy in their sights. The Fed’s Open Market Committee (FOMC) meeting began Tuesday morning and ends Wednesday afternoon with a statement and press conference from Fed Chair Powell. The FOMC is very likely to raise U.S. interest rates by 0.5%. The European Central Bank and the Bank of England meet on Thursday and are likely to follow the U.S. Federal Reserve with half-point rate hikes.

Deutsche Bank wants back in the gold market after eight-year absence

The key outside markets today see the U.S. dollar index sharply down and hitting a 5.5-month low. Nymex crude oil prices are sharply higher and trading around $75.85 a barrel. A major oil pipeline in the U.S. has been shut due to a leak, and that’s supporting Nymex crude oil prices this week. Meantime, the yield on the benchmark U.S. 10-year Treasury note is presently 3.492% and fell after the cooler CPI report.

Technically, February gold futures prices hit a five-month high today. The gold futures bulls have the firm overall near-term technical advantage. Prices are in a five-week-old uptrend on the daily bar chart. 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 $1,775.00. First resistance is seen at $1,822.90 and then at today’s high of $1,836.90. First support is seen at $1,800.00 and then at this week’s low of $1,789.00. Wyckoff's Market Rating: 7.0

March silver futures prices hit a seven-month high today. The silver bulls have the firm overall near-term technical advantage. Prices are in a choppy 3.5-month-old uptrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at today’s high of $24.39 and then at $25.00. Next support is seen at this week’s low of $23.32 and then at $23.00. Wyckoff's Market Rating: 7.0.

March N.Y. copper closed up 425 points at 364.25 cents today. Prices closed nearer the session low today. The copper bulls have the overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 400.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 354.70 cents. First resistance is seen at today’s high of 392.90 cents and then at the November high of 394.70 cents. First support is seen at this week’s low of 378.60 cents and then at 370.00 cents. Wyckoff's Market Rating: 6.0.

By Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Gold, silver see routine profit taking

Gold and silver prices are solidly lower in midday U.S. trading Monday. Normal corrective pullbacks and some profit taking by the shorter-term futures traders were featured to start the trading week, following recent good price gains for both metals. A firmer U.S. dollar index on this day also worked against the metals market bulls. February gold was last down $17.70 at $1,792.90 and March silver was down $0.287 at $23.435.

Traders await a major U.S. data point on Tuesday–the consumer price index report for November, out at 8:30 a.m. EST. The CPI is seen coming in up 7.3%, year-on-year.

Major central banks will this week complete the most aggressive year for interest-rate hikes in four decades with their fight against inflation still not over even as their economies slow. The Federal Reserve’s Open Market Committee (FOMC) meeting begins Tuesday morning and ends Wednesday afternoon with a statement and press conference from Fed Chair Powell. The FOMC is mostly likely to raise U.S. interest rates by 0.5%. Then, the European Central Bank and the Bank of England meet on Thursday and are likely to follow the U.S. Federal Reserve with half-point rate hikes.

Outlook 2023 LIVE with Gareth Soloway

The key outside markets today see the U.S. dollar index modestly up. Nymex crude oil prices are higher and trading around $72.75 a barrel. Prices last Friday hit an 11-month low. Meantime, the yield on the benchmark U.S. 10-year Treasury note is presently 3.593%.

Technically, February gold futures bulls still have the overall near-term technical advantage. Prices are in a five-week-old uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at the December high of $1,822.90. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,750.00. First resistance is seen at $1,800.00 and then at today’s high of $1,809.30. First support is seen at last week’s low of $1,778.10 and then at $1,770.00. Wyckoff's Market Rating: 6.0

March silver futures bulls have the overall near-term technical advantage. Prices are in a choppy 3.5-month-old uptrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at the December high of $23.90 and then at $24.00. Next support is seen at $23.00 and then at $22.50. Wyckoff's Market Rating: 6.5.

March N.Y. copper closed down 830 points at 379.55 cents today. Prices closed nearer the session low today. The copper bulls have the overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 400.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 354.70 cents. First resistance is seen at today’s high of 385.95 cents and then at 390.00 cents. First support is seen at last week’s low of 377.30 cents and then at 370.00 cents. Wyckoff's Market Rating: 6.0.

By Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Hawkish Fed surprise could knock down gold price next week

Even though gold is looking to end the week above $1,800 an ounce, there is a high chance for a move lower as the Federal Reserve can still surprise on the hawkish side, according to analysts.

Despite the rally, the precious metal is trading essentially flat on the week, with February Comex gold futures last at $1,815 an ounce.

All eyes are now on the November inflation figure after the Producer Price Index (PPI) rose more than expected.

The CPI print is scheduled to be released on Tuesday, with analysts warning that inflation will likely remain elevated and be slow to decelerate.

"Next week, the CPI is anticipated to trend in the right direction, but it won't come down as quickly as many anticipate. I'm partially bearish on gold next week," OANDA senior market analyst Edward Moya told Kitco News. "Post-Fed, gold could be reeling but then eventually settling higher. Looking at a potential downside for next week, but that will be short-lived."

What to expect from the Fed

The Fed will announce another rate hike on Wednesday, with markets looking for a slower tightening pace of 50 bps versus 75 bps. But a slower pace does not necessarily mean the U.S. central bank is pivoting away from its plan. Fed Chair Jerome Powell has already warned that rates might have to stay higher for longer.

Investors will be paying close attention to the updated dot plot, economic projections, and the language Powell uses during the press conference.

"The new dot plot and new economic forecasts are risk factors for gold. Message from Powell and other Fed speakers has been that the pace of hikes may slow, but we may still see a terminal rate that is somewhat higher," TD Securities commodity strategist Daniel Ghali told Kitco News.

Ghali added that gold has been benefiting from a short-covering rally that is now close to its end. "We've seen a substantial amount of short-covering, which contributed to the rise in gold prices. As the year draws to a close, money managers are reluctant to put on a substantial amount of risk on the table. From this point on, most short covering is now in the rearview, and prices are still at risk of a more hawkish Fed on the horizon," he noted.

How investors interpret the Fed's messaging will also be important, Moya explained. "It will be interesting to see how investors feel about the Fed. Will this be the last hike followed by a pause? You could still make a case that they could go another 50 bps in February. And then, in March, it would be a toss-up. It still seems that more tightening is warranted," he said.

Aside from the macro data, geopolitics might start playing a bigger role for gold again as the war in Ukraine could escalate further, Moya warned.

"That is something we need to stay on top of. Risks of the war escalating further are once again circulating. That is going to give gold some safe haven value," he said.

Russian forces stepped up activity on Friday, shelling the entire front line in the Donetsk region of eastern Ukraine. Meanwhile, Russia's President Vladimir Putin accused the West of "exploiting" Ukraine and using its people as "cannon fodder."

Gold price levels to watch

For gold to make another significant move higher, it needs to cross its 200-day moving average at $1,821, RJO Futures senior market strategist Frank Cholly told Kitco News. "The $1,821 level is very critical. If the market can close above it, then I get bullish. Right now, gold is struggling to get above the 200-day moving average. This is also where it topped out last week," he said.

The outlook on where rates will be next year is what will give gold its direction next week, Cholly added, noting that he is keeping a close eye on the U.S. dollar as well.

Ghali said that more buying would come in at the $1,830 an ounce level, while a drop to $1,740 an ounce could trigger a selloff.

Moya sees $1,775 as key support for gold and $1,830 as an upper boundary in the current price range.

Data to watch next week

Tuesday: U.S. CPI

Wednesday: Fed rate decision with FOMC economic projections

Thursday: ECB rate decision, Bank of England decision, U.S. retail sales, U.S. jobless claims, N.Y. Empire State manufacturing index, Philly Fed Manufacturing index

By Anna Golubova

For Kitco News

Time to Buy Gold and Silver

David

Russia’s gold reserves a target in U.S. defense spending bill

Russia's gold reserves a target in U.S. defense spending bill

The U.S. continues to target Russia's massive gold reserves in an effort to sanction the country for its nearly year-long invasion of Ukraine.

Thursday, the U.S. House of Representatives passed the annual National Defense Authorization Act, which will boost defense spending to a record $858 billion next year.

However, the spending bill also includes an amendment that makes it difficult for Russia to use its massive horde of gold. The proposed legislation would directly sanction any U.S. entities that transact with or transport gold from Russia's central bank reserves.

The amendment is similar to a bill introduced in March by independent Senator from Main Angus King, Republican Senators John Cornyn of Texas and Bill Hagerty of Tennessee and Democratic Senator from New Hampshire Maggie Hassan.

"Russia's massive gold supply is one of the few remaining assets that Putin can tap to bankroll his country's violent, bloody expansionism," King told CNN in a statement. "By sanctioning these reserves, we can further isolate Russia from the world's economy and increase the difficulty of Putin's increasingly-costly military campaign."

Russia's central bank has the fifth largest gold reserves in the world at 2,298.50 tonnes, currently valued at $133.6 billion.

"Having this national security imperative in a national defense bill is a clear and powerful way to undercut Putin's illegal, amoral acts and make the financial pinch tighter," King added in his statement.

Sentiment in gold evenly split as prices end the week at a four-month high

Russia's gold has been the target of sanction through 2022. In March, just after Russia invaded Ukraine, the London Bullion Market Association suspended six Russian gold and silver refineries from its Good Delivery list, effectively cutting Russia off from the London precious metals market. In June, leaders of the seven largest economies in the world banned imports of Russian gold.

However, some analysts have said that the western sanctions on Russia have had a negligible effect on the gold market. Russia can still sell its gold to China and Middle Eastern nations.

After passing the House, the legislation will now move to the Senate for a vote.

By Neils Christensen

For Kitco News

Time to Buy Gold and Silver

David