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Gold, silver bulls gaining a head of steam this week

Gold and silver futures prices are firmer and hit two-week highs in midday U.S. trading Wednesday, as the technical charts for both metals have seen improvement this week, which is inviting speculators to the long side of the markets. April gold futures were last up $7.90 at $1,835.70 and March Comex silver was last up $0.14 at $23.34 an ounce.

Metals traders are awaiting the U.S. data point of the week, which is Thursday morning’s consumer price index report for January, expected to come in at up 7.2%, year-on-year. That would be a hot reading if the CPI number meets market expectations.

Global stock markets were mostly up overnight. U.S. stock indexes are higher at midday. Attention remains on the release of corporate earnings reports. While the earnings reports have been generally upbeat, traders and investors are still wary about rising inflation and the timing of the Federal Reserve’s tightening of its monetary policy. Rising U.S. Treasury yields this week suggest the marketplace is placing its bets on a more aggressive path of rate hikes from the Fed over the coming months.

'Dramatic' improvement in Bitcoin and Ethereum sentiment as prices rally – analysts

The marketplace is still closely watching the Russia buildup of troops and weapons on the Ukrainian border. However, there are growing notions Russia may not invade Ukraine, amid a flurry of diplomacy from European nations.

The key outside markets today see crude oil prices a bit higher and trading around $89.75 a barrel. The U.S. dollar index is lower today. The U.S. Treasury 10-year note yield is presently fetching 1.925%.

Technically, April gold futures prices hit a two-week high today. Bulls have the firm overall near-term technical advantage. Bulls' next upside price objective is to produce a close above solid resistance at the January high of $1,856.70. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the January low of $1,780.60. First resistance is seen at $1,840.00 and then at $1,850.00. First support is seen at today’s low of $1,825.50 and then at $1,816.00. Wyckoff's Market Rating: 7.0

March silver futures prices hit a two-week high today. The silver bulls and bears are now on a level overall near-term technical playing field. Silver bulls' next upside price objective is closing prices above solid technical resistance at $24.00 an ounce. The next downside price objective for the bears is closing prices below solid support at the January low of $21.985. First resistance is seen at $23.48 and then at $23.75. Next support is seen at $23.00 and then at Tuesday’s low of $22.77. Wyckoff's Market Rating: 5.0.

March N.Y. copper closed up 1,435 points at 460.50 cents today. Prices closed near the session high today and hit a 3.5-month high. The copper bulls have the firm overall near-term technical advantage and gained fresh power today. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the October high of 477.70 cents. The next downside price objective for the bears is closing prices below solid technical support at the January low of 428.20 cents. First resistance is seen at today’s high of 461.40 cents and then at 465.00 cents. First support is seen at 455.00 cents and then at 450.00 cents. Wyckoff's Market Rating: 7.0.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

David

Gold price remains near $1,800 following 3.8% drop in U.S. pending home sales

The gold market remains solidly in negative territory and can’t find any bullish traction even as fewer U.S. consumers start the process of buying a home, according to the latest data from National Association of Realtors (NAR).

U.S. pending home sales dropped 3.8% in December, following November’s drop of 2.2%, the NAR said on Thursday. The data was much worse than expected as consensus forecasts called for a decline of 0.9%.

For the year pending home sales are down 6.9%.

The gold market is not seeing much movement following the latest U.S. housing sales data. February gold futures last traded at $1,805 an ounce, down 1.35% on the day.

This was the second consecutive month pending home sales declined, the report said.

Fed in focus as IMF cuts U.S. growth outlook, cites tighter monetary conditions

"Pending home sales faded toward the end of 2021, as a diminished housing supply offered consumers very few options," said Lawrence Yun, NAR's chief economist. "Mortgage rates have climbed steadily the last several weeks, which unfortunately will ultimately push aside marginal buyers."

Looking ahead, Yun said that the housing market could struggle as rising interest rates wil push mortgages higher.

By Neils Christensen

For Kitco News

Buy, Sell Gold and Silver, with Free Storage and Monthly Yields

David

Gold is hit hard even though the Fed’s updated monetary policy came in as expected

Gold is hit hard even though the Fed's updated monetary policy came in as expected

The FOMC meeting concluded today and as many expected, extreme volatility came into both the U.S. equities markets as well as gold. What was unexpected was the statement released by the Federal Reserve and how gold reacted to their updated monetary policy. Clearly, market participants had not factored in analysts' and economists' consensus of the outcome. The expectations were that interest rates would remain where they are, and the Federal Reserve would complete its tapering process in March and implement its first-rate hike immediately following the completion of the tapering process.

The updated monetary policy statement released by the Federal Reserve today announced its updated monetary policy, which was almost exactly what economists had anticipated. The Fed vowed to keep interest rates where they are, near zero for the time being. Although they did not specify an exact liftoff date, Chairman Powell used the word "soon" to describe the timeline for liftoff.

Many analysts interpreted the meaning of "soon" as a signal that they would begin to raise the Fed funds rate which is currently near zero in March. The new piece of information released by the Federal Reserve today was a document regarding its plan for its balance sheet reduction.

When the statement was released, gold was trading off by approximately $24 with the February contract trading around $1830. Gold prices remained steady until Chairman Powell began his press conference. However, as he began to speak the selling pressure reignited and took gold to a low of $1814.10. The same occurrence was seen in what will be the next front month, the April 2022 contract month.

Silver futures also traded lower in reaction to the FOMC meeting, basis the most active March 2022 contract. Silver lost $0.40 or 1.68% and is currently fixed at $23.49 ½.

However, there were two precious metals that continued to gain value, although based upon a completely different development. Palladium basis the most active April 2022 contract, gained $34.60 which is a net gain of 6.15% and is currently fixed at $2323.50. Platinum basis the most active April gained $5.70 or 0.56% and is currently fixed at $1031.40. Since the vast majority of palladium is mined in Russia and a large percent of platinum is also mined there. According to Provident metals, palladium is mined throughout the world but the vast majority comes from only two countries; Russia and South Africa.

Collectively these two countries account for 93% of the yearly output. Overall, Russia is responsible for mining approximately 40% of the yearly production. While the United States and Canada both mine palladium, their output is minuscule when compared to Russia.

With the increased tensions between Russia and Ukraine, there is the concern that there could be a shortage of the palladium supply needed for industrial users worldwide. Platinum is also mined in Russia, but they are only minor players when it comes to global production, with South Africa being the dominant force providing platinum used in industry.

By Gary Wagner

Contributing to kitco.com

Buy, Sell Gold and Silver, with Free Storage and Monthly Yields

David

Gold price rises as inflation looks to have peaked

The gold market is holding on to gains near session highs as inflation pressures look to have peaked, meeting economist expectations.

Wednesday The U.S. Labor Department said its U.S. Consumer Price Index rose 0.5% in July, after a 0.9% rise in June. The data was in line with consensus forecasts. For the year, the report said that headline inflation rose 5.4%.

Meanwhile, core CPI, which strips out food and energy costs, increased 0.3% last month, down from June’s 0.9% increase. The rise in inflation was weaker than expected. Economists were expecting to see an increase of 0.4%. For the year, core CPI is up 4.3%, the report said.

At first blush the weaker price pressure should be negative for gold, which is seen as an inflation hedge; however, the yellow metal is adding to its morning gains trading near session highs in initial reaction. December gold futures last traded at $1,746.60 an ounce, up 0.86% on the day.

Some markets analysts have said that although inflation pressures are weak, it gives the Federal Reserve room to maintain its ultra-accommodative monetary policies, which is supportive for the precious metal.

Adam Button, chief currency strategist at Forexlive.com said that the U.S. dollar is losing some ground as the latest data reduces some expectation of Fed tightening.

“If inflation falls back down to target without the Fed hiking rates, why would they need to hike rates?” he said.

Avery Shenfeld, senior economist at CIBC, said that although inflation “has seen the mountaintop,” investors should expect to see a sharp decent anytime soon.

“Looking ahead, a stabilizing in oil prices and a likely drop in used car prices at some point will help cool the headline inflation rate, but production bottlenecks and shipping delays remain as upside threats in upcoming months,” he said. “But the more important issue for the Fed is that solid wage gains this year, ample consumer purchasing power, and tighter labour markets come 2022, could keep core inflation from descending enough to achieve the roughly 2% core PCE price pace that it has penciled in for next year.”

Rising gasoline prices helped to contribute to a strong rise in energy prices. The report said that the energy index rose 1.6% with the gasoline index rising 2.4%.

By Neils Christensen

For Kitco News

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There’s one major reason why you shouldn’t sell gold right now, strategist says

Gold prices have recently hovered at seven-year highs after the U.S. killing of Iranian military commander Qasem Soleimani, which spiked tensions between Washington and Tehran in the Middle East.

Analysts have been broadly bullish on gold of late, with Goldman Sachs setting a base case for it to trade at $1,600 per troy ounce (toz) in the coming months.

GP: Gold and Silver Casting at the Perth Mint 190918

Gold bars sit in a vault at the Perth Mint Refinery in Perth, Australia, on August 9, 2018.

There are lots of reasons to bet against the gold price rally at the moment but one key reason not to, according to Longview Economics CEO Chris Watling.

Gold prices have recently hovered at seven-year highs after the U.S. killing of Iranian military commander Qasem Soleimani, which spiked tensions between Washington and Tehran in the Middle East and forced investors into traditional safe-haven assets.

Speaking to CNBC’s “Squawk Box Europe” Friday, Watling cited one of the reasons to “short” the precious metal was the beginnings of a cyclical recovery in the global economy.

“What really determines the gold price is typically real interest rates, Fed funds interest rate expectations and things like that, and I think we can price out a cut from the Fed funds curve, I think we’re going to get TIPS (Treasury Inflation Protected Securities) yields moving up this year, and actually it’s quite a consensus ‘long’ now, so all of that is a good reason to sell it,” Watling said. Shorting an asset refers to a trading strategy where investors bet that its price will fall, rather than rise.

Gold is often used as a hedge against inflation, in other words, to protect the decreased purchasing power of a currency resulting from its loss of value due to rising prices.

The U.S. Federal Reserve has halted its cutting cycle, keeping its benchmark overnight lending rate in a range between 1.5% and 1.75% in December and projecting no moves in 2020. The central bank had cut rates three times in 2019.

Three reasons to like gold, says Goldman Sachs

However, he suggested that the one key reason not to bet against gold prices continuing to climb would be the Fed’s repo program, an ongoing operation to soothe the overnight lending market.

“It is putting a lot of liquidity, a lot of dollar money, into the system, and that is supporting the price,” he added.

Analysts have been broadly bullish on gold of late, with Goldman Sachs expecting a base case for it to trade at $1,600 per troy ounce (toz). Spot gold was trading down around 0.2% at $1,549/toz on Friday after tensions between the U.S. and Iran slightly abated.

However, Goldman’s Global Head of Commodities Research Jeff Currie told CNBC’s “Street Signs” on Friday that with the right combination of circumstances, gold could push even higher through 2020.

“Gold is a hedge against debasement and what we saw in 2011 was debasement, printing too many dollars and the real rate goes down, down, down, which then pushes up the price of gold,” Currie explained, adding that another crucial factor in play on that occasion was a substantial weakening of the dollar, which further propelled gold prices.

“If you do see that, the potential to push gold back up into that $1,800-$1,900 range becomes pretty realistic,” he added.

Elliot Smith

David

Crypto Will Eventually Replace Fiat, but How Soon and Where?

ANALYSIS

A recently unveiled Deutsche Bank “Imagine 2030” report boldly puts a date on the eventual fiat–crypto “social consensus flip,” citing the Asian continent and, in particular, China, to have already recognized the trend. If true, then what every cryptocurrency speculator and investor would like to know is, when will it happen? The current landscape is a predictor of the future.

Analysts talk of the social consensus flip

The classification of crypto by Deutsche Bank includes central bank digital currencies, or CBDCs, which is worth keeping in mind while results are discussed. Certainly, the analysts behind the research hold a more positive belief that these moves toward centralized cryptocurrency solutions will replace fiat currencies.

The report concludes that the next step to avoid falling behind in the world’s economy will be a result of the fiat–crypto flip. The concept, while interesting, still comes with its flaws, such as the fact that global adoption, government acceptance, and massive leaps and bounds in cybersecurity technology would need to occur in order to even consider replacing traditional fiat with centralized (or decentralized) crypto assets.

If a CBDC currency from a major country turns out to be successful and the centralization strategy is implemented by other countries, most of these investors and traders will likely begin to look in its direction. All this movement is likely to drastically affect the blockchain industry, but may not necessarily drive mass adoption in the direction of decentralized currencies.

China, the frontrunner?

On the heels of Chinese President Xi Jinping’s announcement regarding the government’s interest in blockchain tech, the country has made clear its strong efforts to implement feasible plans that ensure individuals and businesses can make national and international transactions using this fast-growing technology.

However, the idea is not to trigger Chinese crypto enthusiasts to invest more in Bitcoin and any other decentralized currencies with an immutable ledger, but rather to mirror a more centralized focus in the direction of the People’s Bank of China, or PBoC, which plans to launch the world’s first national cryptocurrency.

The plan has been in motion for some years, and the PBoC has completed the prototype according to local officials. With the government’s support over the years, the pace of development can increase, scaling the creation and testing of this national currency to become a part of the closed Chinese system.

Gantig Bayarmagnai, CEO of Bitmonex LLC — a digital asset exchange based in Mongolia — discussed the future of the Chinese yuan and prospects of the social consensus flip with Cointelegraph:

“With the Chinese government taking the initiative by introducing their crypto Yuan early next year, we will most likely see other countries following suit. Countries like China, South Korea, and Japan will most likely see a quick transition to a crypto-based payment system because of their existing infrastructures and developed culture in accepting digital payments as the norm, as opposed to using cash for payments. It also gives the government full autonomy in monitoring all transactions with ease.”

Although clampdowns may loom from centralized currencies, the number of potential financial transactions that can be carried out through transitioning the Chinese economy to the blockchain is strong, with over 775 million employed persons in the country. But why exactly does the government want to create a centralized technology?

Aamir Sohail, director of Blockchain Smart Solutions — an international Distributed Ledger Consultancy — discussed the future of CBDC with Cointelegraph:

“Central bank tokens have a potential for mass adoption if done right. Driving a right balance between decentralization and inflationary measures is pivotal for central banks. These stable cryptocurrencies and central bank tokens may exist with fiat by 2030 but I do not think these will completely replace fiat but may coexist.

Rather than allowing the natural progression of decentralized currencies, centralized currencies on the blockchain are being touted as acceptable options for mass adoption. It is a small step, but carries significant risk.

The warning signs for the future of these pseudo cryptocurrencies is present though, since the PBoC deputy director, Mu Changchun, made the statement at the China Finance 40 forum. He indicated that the new national currency to be launched would be operated in a two-tier system, with the PBoC on top, and commercial banks allowed in the second tier of the centralized system. This allows for full power of currency manipulation between banks, with the government overseeing it all.

Related: US and China Battle for Blockchain Dominance

During a conversation with Cointelegraph, Miko Matsumura, the co-founder of Evercoin, highlighted that given the power the People’s Bank of China seems to have, the report estimate is accurate. He further believes that the same phenomenon may occur in half of all countries by 2025. He went on to add:

“Only the top 20 national or regional (e.g., Euro) currencies will survive. As far as internet currencies the Pareto principle will enable the dominant currency to take 80 percent of the internet market. Bitcoin will be the dominant value store but not the dominant Internet currency protocol. It’s not clear who wins [between centralized and decentralized currencies].”

Currently, the Chinese government can monitor all transactions and assets of individuals, similar to what their CBDC would be capable of. This is still very unlike what happens in a decentralized system, where everything that happens in the public ledger, like transactions, can remain anonymous.

Some point to Facebook’s Libra as the reason behind the increasing pace of China’s blockchain development. Libra itself is centralized through the wallet function, and as Mark Zuckerberg knows, the value is in Know Your Customer data.

Related: China’s CBDC Showcases Interoperability as Centralization’s Weakness

The Chinese government likely sees the value of knowing and controlling valuable transaction data that can now include the flow of finances for the general population. Regarding this, entrepreneur and managing partner at Morgan Creek Capital, Anthony Pompliano, exclusively told Cointelegraph:

“The choice currency of drug dealers, money launderers, and terrorists is still cash.”

With all of this in mind, how crypto is classified will need to be more defined as more CBDCs enter the picture because they are (from a decentralized viewpoint) still fiat and centralized, just on the blockchain.

Assuming the 2030 date, decentralized mass adoption will lag

So, theoretically, what would need to happen for the Chinese CBDC to take over as the national fiat and eliminate the necessity for the original yuan to exist?

In short, the government would have to rid their nation of the yuan, giving citizens access to the resources needed to utilize the new digital currency. Thus, by eventually onboarding their citizens, the blockchain would gain billions of users. So, assuming Deutsche Bank is correct in projecting this to happen by 2030, the transition merely adds a pool of blockchain users which are one step closer to adopting decentralized currencies.

In analyzing the potential for CBDC, the question arises, Will centralized parties allow users to offboard and invest in decentralized currencies? By allowing fiat onboarding to centralized CBDC, an entirely new market of blockchain users will emerge. So, if the Deutsche Bank prediction is accurate, adoption toward true decentralized currency may still take time beyond 2030, as CBDCs still have fiat protections where decentralized currencies do not.

In a Cointelegraph exclusive discussion with fintech venture studio Draper Goren Holm’s founding partner, Alon Goren, he discussed the Deutsche Bank report’s prediction:

“Since central bank coins are counted in [the Deutsche Bank 2020] prediction, then I totally agree [on the eventual fiat–crypto social consensus flip]. Just as large financial institutions are experimenting with digitizing securities and creating their own tokens and coins, I think progressive governments will start doing that more and more. It’s a natural progression for everything to be digitized and I think that the cat is now out of the bag and they will have to create their own tokens to (try and) retain control of financial systems.”

Therefore, as blockchain users are onboarded to centralized currencies they become one step closer to decentralized currencies, but still not directly involved. By reducing barriers to access the entire capital market (including centralized currencies), a system may emerge where instead of trading into different centralized currencies, users will begin to utilize more decentralized currencies.

In a situation like this, a currency swap between centralized currencies that can also provide access to the decentralized currency ecosystem on the blockchain will add the most value. Enterprise solutions like XRP or consumer solutions like Element Zero Network serve as the middle ground between currencies at little cost without spreads, unlike the current forex trading model.

Maintaining the value between the two currency systems — centralized and decentralized — is important in ensuring success of users transitioning from fiat (or centralized currencies). Technologies that follow fair and free decentralized access to blockchain fiat currencies and decentralized currencies will add the greatest value to achieving mass adoption past the 2030 Deutsche Bank prediction.

On the matter, Cointelegraph spoke to Michael Creadon, the head of institutional sales at DrawBridge Lending. Creadon believes that, “Decentralization is a noble goal but it has its limits.” He went on to clarify that if one wants to engage with Bitcoin in the United States, they would have to deal with multiple governmental agencies and watchdogs. He continued:

“This is not a good thing or bad thing. It’s reality. You can see the pendulum swinging back away from decentralization towards centralization at a blinding speed. Look at Libra; how’s decentralization working for them? But like anything, the answer is probably closer to the middle.”

Apart from this, the CBDC is not intended to be a quiet coin, as PBoC’s director asserted; it is such that in years to come, this centralized cryptocurrency can fullysubstitute fiat.

PBoC never at any point mentioned that it would ban other cryptocurrencies from functioning in the country once its new currency is launched. This is a positive sign if a decentralized future is resting on the progression of fiat to centralized currency and then onto a decentralized currency. Centralized currencies will exist, but decentralized ones will hopefully not be banned, leaving the choice to the people.

By Kyle White

David