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.

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

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%

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.

Ernest Hoffman

For Kitco News

Time to Buy Gold and Silver

David

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

Corrective price gains for gold, silver on short covering

Gold prices are a bit firmer and silver solidly up in early U.S. trading Friday. Short covering in the futures markets is featured after December gold hit a 6.5-month low Thursday. A lower U.S. dollar index and a dip in U.S. Treasury yields today are friendly daily outside market elements for the metals markets. December gold was last up $5.60 at $1,884.20 and December silver was up $0.519 at $23.26.

Asian and European stocks were mixed to firmer overnight. U.S. stock indexes are pointed to higher openings when the New York day session begins. The stock indexes are seeing corrective rebounds from recent selling pressure. Reads a Wall Street Journal headline today: "The 2023 stock market rally sputters in new world of yield.";

Today is the last trading day of the week, of the month and of the quarter. That makes it an extra important trading day for markets, from a technical perspective.

The clock is ticking at the month of September winds down and the U.S. Congress has not come to agreement to fund the U.S. government. A shutdown looks likely this weekend. This matter still has traders and investors more risk averse.

In overnight news, the Euro zone September consumer price index came in at up 4.3%, year-on-year, compared to the August reading of up 5.2%. The August CPI was slightly below market expectations.

Gold's selloff doesn't change the long-term bullish outlook – Saxo Bank

The key outside markets today see the U.S. dollar index lower on a downside correction after hitting a 10-month high earlier this week. Nymex crude oil prices are higher and trading around $92.50 a barrel. Meantime, the benchmark U.S. Treasury 10-year note yield is presently fetching 4.549%.

U.S. economic data due for release Friday includes personal income and outlays, advance economic indicators, the ISM Chicago business survey and the University of Michigan consumer sentiment survey.

Technically, the gold futures bears have the solid overall near-term technical advantage. Prices are in a 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 $1,950.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,850.00. First resistance is seen at Thursday's high of $1,896.80 and then at $1,900.00. First support is seen at the overnight low of $1,879.60 and then at this week's low of $1,874.50. Wyckoff's Market Rating: 2.0

The silver bears have the overall near-term technical advantage. However, there are stiff technical support layers just below the market that may halt the decline. Silver bulls' next upside price objective is closing December futures prices above solid technical resistance at this week's high of $24.05. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at the overnight high of $23.345 and then at $23.50. Next support is seen at $23.00 and then at the overnight low of $22.815. Wyckoff's Market Rating: 3.5.

If you have not done so, I encourage you to try out my new "Markets Front Burner"; email report. I think it's one of my best products yet (free!) in my 40-year quest to help you become a better trader and investor. It's a weekly email report that highlights the latest developments in the marketplace, and how you can better manage those developments in your own trading/investing. Just try it for one week—I guarantee you will want to keep it coming. Sign up to my new, free weekly Markets Front Burner newsletter.

Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Slight price rebounds in gold, silver on short covering

Gold and silver prices are just a bit firmer in early U.S. trading Thursday, after this week's solid selling pressure that drove December gold futures to a 6.5-month low Wednesday. Some tepid short covering in the futures markets is featured in both metals today. A lower U.S. dollar index today is also a friendly daily outside market element for the metals markets. December gold was last up $2.40 at $1,893.30 and December silver was up $0.081 at $22.805.

Asian and European stocks were mixed overnight. U.S. stock indexes are pointed to narrowly mixed openings when the New York day session begins. Risk appetite remains dented as the U.S. government shutdown this weekend looms. The Associated Press reports: "As the Senate marches ahead with a bipartisan approach to prevent a government shutdown, House Speaker Kevin McCarthy is back to square one — asking his hard-right Republicans to do what they have said they would never do: approve their own temporary House measure to keep the government open." Goldman Sachs reportedly estimates the shutdown will probably last three weeks.

A Barron's headline today reads: "Forget the shutdown. Why stocks have plenty more to worry about." The story goes on to say the main reason for recent stock market declines is changing perceptions about interest rates. Now the thinking in much of the marketplace is higher for longer, maybe much longer, including potential stagflation, as pointed out by JP Morgan CEO Jamie Dimon in the press recently.

Striking union workers in the U.S., led by the United Auto Workers, are also starting to weigh more heavily on trader and investor sentiment.

Gold could fall to $1,850 and then $1,800 after breaking below August lows

The key outside markets today see the U.S. dollar index weaker after hitting a 10-month high on Wednesday. Nymex crude oil prices are weaker and trading around $93.25 a barrel. A Dow Jones Newswires headline today reads: "Saudi Arabia and Russia win big in gamble on oil production cuts."

Meantime, the benchmark U.S. Treasury 10-year note yield is at a 16-year high this week and presently fetching 4.647%.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the third estimate of second-quarter GDP, revised corporate profits, pending home sales and the Kansas City Federal Reserve manufacturing survey.

Technically, the gold futures bears have the solid overall near-term technical advantage. Prices are in a 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 $1,950.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,850.00. First resistance is seen at $1,900.00 and then at $1,913.60. First support is seen at this week's low of $1,890.30 and then at this year's low of $1,883.80. Wyckoff's Market Rating: 2.0

]

The silver bears have the overall near-term technical advantage. However, there are stiff technical support layers just below the market that may halt the decline. Silver bulls' next upside price objective is closing December futures prices above solid technical resistance at this week's high of $24.05. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at Wednesday's high of $23.12 and then at $23.39. Next support is seen at this week's low of $22.64 and then at the September low of $22.555. Wyckoff's Market Rating: 3.0.

If you have not done so, I encourage you to try out my new "Markets Front Burner" email report. I think it's one of my best products yet (free!) in my 40-year quest to help you become a better trader and investor. It's a weekly email report that highlights the latest developments in the marketplace, and how you can better manage those developments in your own trading/investing. Just try it for one week—I guarantee you will want to keep it coming. Sign up to my new, free weekly Markets Front Burner newsletter .

Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Gold, silver getting hammered by rising bond yields, strong greenback

Gold and silver prices are solidly lower in midday U.S. trading Wednesday, with December gold futures notching a 6.5-month low and dropping below psychological support at $1,900.00. An up-trending U.S. dollar index that hit a 10-month high overnight and a 10-year U.S. Treasury note yield that scored a 16-year high this week are bearish outside market elements for the two precious metals. December gold was last down $23.40 at $1,896.40 and December silver was down $0.381 at $22.815.

A still-hawkish Fed continues to squelch the metals market bulls. Today in my weekly “Front Burner" email report I mentioned respected JP Morgan CEO Jamie Dimon recently said the marketplace needs to be prepared for a 7% Fed funds rate in the coming months. The Federal Reserve's FOMC last week held the Fed funds rate steady, at a range of 5.25% and 5.50%. The present consensus of the marketplace is one more 0.25% rate increase, or maybe no more rate hikes at all. “Going from zero to 5% caught some people off guard, but no one would have taken 5% out of the realm of possibility. I am not sure if the world is prepared for 7%," Dimon said in an interview with the Times of India. Dimon added he is worried about stagflation setting in, whereby interest rates rise but economic growth stagnates. The JP Morgan chief is presently on the marketplace fringes in his thinking about much higher interest rates. However, I'm generally in Dimon's camp. Although the Fed funds rate may not reach 7% next year, I think the Federal Reserve remains stubbornly hawkish on U.S. monetary policy, which means there is a good chance for a 6% Fed funds rate or a bit more in 2024. That's a bearish scenario for the metals. (If you have not read today's Front Burner report, email me at jim@jimwyckoff.com and I'll forward that report to you. Just put “Front Burner" in the subject line. In today's report I provided forecasts for major markets' price action in the coming months.)

Politics are behind spot Bitcoin ETF delays, BTC price to re-test record highs in the next 18 months – Mike Belshe

U.S. stock indexes are lower and hit multi-month lows today. Risk appetite is still dented at mid-week, as a likely U.S. government shutdown this weekend is weighing on marketplace sentiment.

The key outside markets today see the U.S. dollar index higher and hit 10-month high. Nymex crude oil prices are sharply higher, hit a 13-month high and trading around $93.75 a barrel. A Wall Street Journal headline today reads: “Quiet Western drills set stage for $100 oil." Meantime, the benchmark U.S. Treasury 10-year note yield is presently near this week's multi-year high and fetching 4.587%.

Technically, December gold futures prices hit a 6.5-month low today. Bears have the solid overall near-term technical advantage and gained more power today. A five-month-old downtrend is in place on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at $1,950.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,850.00. First resistance is seen at $1,913.60 and then at today's high of $1,921.70. First support is seen at the February low of $1,883.80 and then at $1,875.00. Wyckoff's Market Rating: 2.0.

December silver futures bears have the overall near-term technical advantage. However, there are solid technical support levels just below the market that begin to suggest a market bottom is in place. Silver bulls' next upside price objective is closing prices above solid technical resistance at last week's high of $24.05. 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 $23.12 and then at $23.39. Next support is seen at today's low of $22.64 and then at the September low of $22.555. Wyckoff's Market Rating: 3.0.

December N.Y. copper closed down 115 points at 363.75 cents today. Prices closed near mid-range and closed at a four-month low close today. The copper bears have the solid overall near-term technical advantage. Prices are in a choppy, seven-week-old downtrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 380.00 cents. The next downside price objective for the bears is closing prices below solid technical support at the May low of 358.60 cents. First resistance is seen at Tuesday's high of 368.35 cents and then at this week's high of 370.55 cents. First support is seen at this week's low of 362.75 cents and then at 360.00 cents. Wyckoff's Market Rating: 2.0.

Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Gold remains well supported as potential credit risk events drive safe-haven demand – MarketVector’s Joy Yang

Gold remains well supported as potential credit risk events drive safe-haven demand – MarketVector's Joy Yang

The gold market is trading near a five-week low as the U.S. dollar and 10-year bond yields consolidate at elevated levels; however, according to one market strategist, gold still remains an essential safe-haven asset.

In a recent interview with Kitco News, Joy Yang, global head of index product management at MarketVector Indexes, said that despite gold's lackluster performance, she doesn't see any significant shift from where gold started the year.

The comments come as gold prices look to test support at its August lows, just above $1,900 an ounce. December gold futures last traded at $1,919.40 an ounce, down nearly 1% on the day.

Although a resilient economy and persistently high inflation are forcing the Federal Reserve to maintain a "higher-for-longer" monetary policy, Yang said that uncertainty remains elevated and should keep safe-haven assets like gold well supported.

"Despite what the Federal Reserve has said, it's still not clear to me that we're headed for a soft landing," she said. "Investors are in a ‘wait-and-see' mode and that is why we have not seen any major momentum in gold."

In this market complacency, Yang said that investors are underpricing event risks. She pointed out that higher interest rates could make it difficult for consumers to weather any financial turmoil. She added that inflation risks are not going away as gasoline prices rise again and food prices remain elevated.

"Cash isn't as widely available as it used to be, and we are starting to see some cooling in the labor market," she said. "A lot of consumers will soon face some economic challenges, so I'm not optimistic that we will see a soft landing."

Yang said that while the U.S. economy has been resilient, it might not be able to withstand the global slowing trend. She noted that both China and Europe are seeing weaker economic activity.

She said that this uncertainty is helping gold prices hold long-term support above $1,900 an ounce, and added that although prices can go lower in the near term, it would not take a significant risk-off event to shift the momentum in the precious metal.

"I think gold is holding support at these elevated levels because it is positioning itself for some global macro risk event that may materialize despite the current strength of the U.S. economy," she said.

Yang said that one problem starting to creep back into the marketplace is the potential for another credit risk event as the Federal Reserve's aggressive monetary policies drive bond yields higher. Yang's comments come as U.S. 10-year bond yields push solidly above 4.5% to a fresh 16-year high.

While the current bond market selloff has been reasonably orderly, according to some economists there are growing risks that the bond market will become unanchored as U.S. debt continues to grow.

Gold to hit $2k by end of 2023, reach $2,200 an ounce in 2024 as dollar weakens – SocGen

Late Monday, rating agency Moody's said that a government shutdown, as Congress has been unable to pass any funding bills, could threaten the nation's sovereign debt rating.

"A shutdown would be credit negative for the US sovereign," Moody's said in its report.

"In particular, it would demonstrate the significant constraints that intensifying political polarization put on fiscal policymaking at a time of declining fiscal strength, driven by widening fiscal deficits and deteriorating debt affordability."

Moody's is the last of the 'big three' credit rating agencies that still gives the US a AAA rating with a stable outlook.

"There are still significant risks for the economy that investors just aren't pricing in," she said. "Gold is an attractive asset because we are not in a state where we can relax. There is still a real need for safe-haven assets."

Neils Christensen

For Kitco News

Time to Buy Gold and Silver

David

Some things are better, some stay the same – Lundin Group’s Adam Lundin on mining gaining favor

Some things are better, some stay the same – Lundin Group's Adam Lundin on mining gaining favor

Governments are more responsive but some organizational issues persist, said Lundin Group chair Adam Lundin when asked if mining is any easier due to the sector gaining favor due to energy transition.

Lundin spoke to Kitco mid-September at the Canadian Securities Exchange office in Vancouver, B.C.

The Lundin Group has a controlling stake in a number of miners and juniors, such as Lundin Mining, Lundin Gold and Filo. All are up sharply over the past year, countering a tough commodity market.

Governments in the Americas and Europe have been more supportive of mining to ensure a flow of critical minerals needed for electric vehicles. Lundin noticed some benefits.

"You can get access to government officials and people you need to talk to. That's extremely helpful," said Lundin. "At the same time I still find the U.S. very challenging when it comes to permitting. You have a bunch of agencies saying let's support the metals business, but they're not necessarily all talking with each other. It still takes time to get that permit."

Lundin is re-organizing the businesses geographically. Energy and renewable business will be run out of Geneva. Mining businesses will be located in Vancouver.

"What we're really trying to establish is a center of excellence," said Lundin, noting that business challenges can be tackled more effectively as a group. "It's easier when you're all in the same town."

Lundin said the junior sector is tough.

"I admire and respect everybody who wants to have a go at it," said Lundin. "It takes deep pockets, and if you miss the cycle, it can be tough. Make sure you cater to your shareholders and local communities. You can have success but obviously exploration is a challenging game."

Kitco Mining’s coverage of the Precious Metals Summit 2023 was sponsored by Newcore Gold.

Lawrence Lepard, founder of Equity Management Associates, on why gold companies have performed poorly

Michael McCrae

For Kitco News

Time to Buy Gold and Silver

David

Economic risks supporting gold in neutral territory around $1,950

Economic risks supporting gold in neutral territory around $1,950

Federal Reserve chair Jerome Powell maintained his hawkish bias this week, saying that interest rates will have to remain in restrictive territory for the foreseeable future; however, the gold market remains firmly in neutral territory as uncertainty supports the precious metal.

Some analysts have said that gold has been able to withstand the Fed's posturing as risks for the global economy grow.

"Consumers are spending the last of their savings and higher interest rates will start to take their toll," said Ed Moya, senior market analyst at OANDA. "We think it's only a matter of time before we see a weaker economy, and that will not be good news for the U.S. dollar."

Heading into the weekend, December gold prices last traded at $1,944.90 an ounce, roughly unchanged from last Friday. Although gold is caught in a tight trading range, it has held firm against major headwinds as the 10-year bond yield pushed to a fresh 16-year higher at 4.5%. At the same time, the U.S. dollar is ending the week at its highest level since November 2022.

Ole Hansen, head of commodity strategy at Saxo Bank, said in his weekly commentary that economic uncertainty continues to support gold as a safe-haven asset.

"We conclude that the breakdown in normal correlations is likely due to a market in search of a hedge against the FOMC failing to deliver a soft as opposed to a hard landing, or even stagflation," he said.

Although gold is holding its ground, analysts have said it will be difficult for prices to rally in the current environment.

Carsten Fritsch, precious metals analyst at Commerzbank, noted that the rise in U.S. bond yields has pushed real yields 50 basis points higher compared to last month. He added that this is taking a toll on investment demand as investors liquidate positions in gold-backed exchange-traded products.

"Last week alone, they sold holdings totaling 16 tons," he said. "Holdings in the world's largest and most liquid gold ETF have meanwhile dropped to their lowest level since January 2020."

However, Fritsch also sees long-term bullish potential for the precious metal when sentiment starts to shift.

Gold investment potential remains healthy despite Fed's hawkish stance – State Street's Milling-Stanley

"Net longs have plummeted by almost 75% within the past four reporting weeks," he said. "Against this backdrop, gold will doubtless find it difficult to come out of the defensive in the near future. That said, sentiment is now already so bearish that it wouldn't take much to spark a price recovery."

As for what could spark a new rally in gold, Daniel Ghali, senior commodity strategist at TD Securities, said investors should pay close attention to the data.

He added that disappointing GDP data will create fears that the U.S. economy could be in for a hard landing.

Markets will also be sensitive to further inflation data as the Personal Consumption Expenditures Index will be released on Friday.

Last week to visit a national park?

Along with economic data, some analysts have said that gold could attract some safe-haven demand as the U.S. government faces a potential shutdown as Congress has been unable to approve funding for the fiscal year starting Oct. 1.

Although a shutdown wouldn't impact the nation's sovereign debt, it would affect how it could conduct business domestically. Government employees would be furloughed.

Markets could be impacted as the Securities and Exchange Commission and the Commodity Futures Trading Commission would have to furlough most of their employees.

National parks and museums would also be closed during the shutdown.

Kristina Hooper, chief investment officer at Invesco, said that while economic growth might not be impacted in a short-term shutdown, it does increase uncertainty.

She added that it also brings attention to the United States' growing debt problem. The U.S. deficit has already exceeded $1.5 trillion in the 12 months to October of this year.

"Any concerns about the government's ability to handle its growing deficit is a positive for gold," she said.

Next week's data:

Tuesday: U.S. Consumer Confidence, new home sales

Wednesday: Durable goods

Thursday: Final GDP reading, weekly jobless claims, pending home sales, Jerome Powell speaks at Washington DC town hall event

Friday: Personal Income and Spending

Neils Christensen

For Kitco News

Time to Buy Gold and Silver

David

Gold is well-positioned for when the Fed breaks something

The gold market may not be able to break out of its neutral trading channel around $1,950 just yet, but it is well positioned to benefit when sentiment turns, which could be sooner than some are expecting.

Yes, the U.S. has been able to avoid a recession and expectations of a soft landing continue to grow; however, many analysts remain doubtful that this optimistic goal can be achieved.

For many analysts, gold’s price action proves that investors are taking a more cautious stance to protect themselves against a downturn.

Gold’s position is even more impressive when you look at what it faced this week. Although the Federal Reserve did not raise interest rates on Wednesday, it maintained its hawkish bias. Federal Reserve Chair Jerome Powell said that although the interest rates are close to a peak, the central bank will keep interest rates at restrictive levels for the foreseeable future.

He added that the central bank will only know when rates are sufficiently restrictive when they see it.

The biggest surprise for many economists in this week’s decision is that the central bank sees only two potential rate cuts next year, down from the four rate cuts projected in June. This fits the growing “higher-for-longer” narrative that is building.

The Fed’s stance pushed 10-year bond yields to a fresh 15-year high at 4.5%. At the same time, the U.S. dollar index pushed above 105 points to its highest level since November 2022. Analysts at Commerzbank noted that real yields have reached 2%, an increase of 50 basis points from last month.

Despite all this, gold continues to hold around $1,950 an ounce, which has become an important psychological level.

In an interview with Kitco News, George Milling-Stanley, chief gold strategist at State Street Global Advisors, said that gold remains an important portfolio diversifier as the Fed continues to put pressure on the economy to cool down inflation.

Economic risks supporting gold in neutral territory around $1,950

"At the start of the year, I said that equity markets have more to fear from the Fed than gold does, and I still believe that," he said. "Yes, the economy has been very resilient so far this year, but Powell said on Wednesday that they still need below-trend growth to get inflation down to the 2% target. Investors should believe Powell when he says that, because he means it."

And it’s not just the Federal Reserve that is entering the end game. The Swiss National Bank, the Bank of England, and the Bank of Japan also left interest rates unchanged this week.

Both the SNB and the BOE said that they are close to getting inflation under control as economic growth starts to weaken. Gold performed well against both currencies after their monetary policy decisions.

Although the gold market lacks momentum while investors sit on the sidelines, Milling-Stanley noted that there is still significant growth potential in the marketplace. This week State Street released an update to its gold investor survey published in June. The updated analysis looked at the role financial advisors can play in developing the gold market.

The survey showed that 20% of respondents said they held some gold. In further analysis, the report said that roughly one-third of investors didn't invest in gold because they didn't know enough about how to invest in the precious metal.

"The main message from the analysts is that the future of gold investment seems to be safe. That is very, very good news," said Milling-Stanley.

Finally, let’s not forget central bank demand continues to provide a solid base. Analysts at The World Gold Council reported that Russia’s central bank bought 3 tonnes of gold last month, and Russia’s gold reserves are now back to their 2022 levels.

That is it for this week, have a great weekend.

Neils Christensen

For Kitco News

Time to Buy Gold and silver

David