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Gold up a bit on still-friendly charts

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Gold up a bit on still-friendly charts teaser image

(Gold prices are a bit higher and silver a bit weaker in midday U.S. trading Tuesday. Technical-based buying is featured in gold as the charts still firmly favor the bulls. Higher crude oil prices are also bullish for the metals today. However, gains in the metals are being limited by a firmer U.S. dollar index and a slight up-tick in U.S. Treasury yields on this day. February gold was last up $3.50 at $2,036.90. March silver was last down $0.12 at $23.19.

U.S. stock index futures are mixed at midday.

In overnight news, reports said China’s central bank has indicated it may lower its reserve requirement ratio to boost lending and support economic growth, the head of the central bank’s monetary policy department told a local news agency. The PBOC official’s remark does not suggest an imminent cut but may indicate such action is on the table in the coming months, Bloomberg reported. Similar comments were made last July before the central bank reduced the reserve requirement ratio for major banks in September of last year. The metals markets may also be getting some support from this news, which could promote better consumer and commercial demand for metals from China in the coming months.

The U.S. data points of the week will be the December consumer price index report on Thursday and the December producer price index report on Friday. U.S. inflation has cooled in recent months, which has allowed the Federal Reserve to back off on its tighter monetary policy. The CPI report is seen up 3.3%, year-on-year versus a rise of 3.1% in the November report.

The key outside markets today see the U.S. dollar index moderately higher. Nymex crude oil prices are solidly higher and trading around $72.75 a barrel. Meantime, the yield on the benchmark U.S. Treasury 10-year note is presently fetching 4.011%.

Technically, February gold futures bulls have the overall near-term technical advantage. Prices are in a three-month-old uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at $2,100.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $2,000.00. First resistance is seen at this week’s high of $2,053.30 and then at last Friday’s high of $2,071.10. First support is seen at this week’s low of $2,022.70 and then at $2,015.00. Wyckoff's Market Rating: 6.5.

March silver futures bears have the overall near-term technical advantage. A five-week-old downtrend is in place 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 the November low of $22.26. First resistance is seen at today’s high of $23.565 and then at $23.715. Next support is seen $23.00 and then at the December low of $22.785. Wyckoff's Market Rating: 4.0.

March N.Y. copper closed down 320 points at 377.80 cents today. Prices closed nearer the session low today and hit a three-week low. Prices also scored a bearish “outside day” down on the daily bar chart. The copper bulls have lost their slight overall near-term technical advantage. A choppy, 2.5-month-old uptrend on the daily bar chart has been negated. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the December high of 397.40 cents. The next downside price objective for the bears is closing prices below solid technical support at 365.00 cents. First resistance is seen at today’s high of 384.05 cents and then at 386.60 cents. First support is seen at today’s low of 377.40 cents and then at 372.90 cents. Wyckoff's Market Rating: 5.0.

Try out my “Markets Front Burner” email report. My next one is due out today and is going to be entitled, “When China sneezes…” Front Burner is my best writing and analysis, I think, because I get to look ahead at the marketplace and do some market price forecasting. And it’s free! Sign up tomy new, free weekly Markets Front Burner newsletter, at https://www.kitco.com/services/markets-front-burner.html .

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Jim Wyckoff

Time to Buy Gold and Silver

David

Gold weaker as crude oil price slumps

Kitco News

The Leading News Source in Precious Metals

Gold weaker as crude oil price slumps teaser image

(Kitco News) – Gold prices are down in midday U.S. trading Monday but well up from their session lows. The yellow metal hit a three-week low early on today. Amid a lack of major fresh, fundamental news to start the trading week, precious metals traders are focusing on the outside markets, and raw commodity sector leader crude sees its price sharply down. February gold was last down $10.90 at $2,038.70. March silver was last up $0.065 at $23.385.

Asian and European stock markets were mixed overnight. U.S. stock index futures are mixed at midday.

In weekend news, U.S. congressional leaders have agreed upon a bipartisan federal budget plan for the next year. The House and Senate now have about two weeks to pass the measure, which may not be easy.

The key outside markets today see the U.S. dollar index lower. Nymex crude oil prices are strongly lower and trading around $70.25 a barrel. Reports said Saudi Arabia has lowered the price of its oil to some of its customers, in a signal of a weaker demand outlook. Meantime, the yield on the benchmark U.S. Treasury 10-year note is presently fetching 3.974%.

Technically, February gold futures bulls have the overall near-term technical advantage but have faded a bit. Prices are still in a three-month-old uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at $2,100.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $2,000.00. First resistance is seen at today’s high of $2,053.30 and then at last Friday’s high of $2,071.10. First support is seen at today’s low of $2,022.70 and then at $2,015.00. Wyckoff's Market Rating: 6.5.

March silver futures bears have the overall near-term technical advantage. A five-week-old downtrend is in place 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 the November low of $22.26. First resistance is seen at Friday’s high of $23.715 and then at $24.00. Next support is seen $23.00 and then at the December low of $22.785. Wyckoff's Market Rating: 4.0.

March N.Y. copper closed up 130 points at 381.90 cents today. Prices closed nearer the session high today and hit a three-week low early on. The copper bulls have the slight overall near-term technical advantage but have faded. Prices are still in a choppy, 2.5-month-old uptrend on the daily bar chart, but just barely. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the July high of 404.45 cents. The next downside price objective for the bears is closing prices below solid technical support at the December low of 372.90 cents. First resistance is seen at Friday’s high of 386.60 cents and then at last week’s high of 391.20 cents. First support is seen at today’s low of 378.95 cents and then at 372.90 cents. Wyckoff's Market Rating: 5.5.

Try out my “Markets Front Burner” email report. My next one is due out today and is going to be entitled, “When China sneezes…” Front Burner is my best writing and analysis, I think, because I get to look ahead at the marketplace and do some market price forecasting. And it’s free! Sign up to my new, free weekly Markets Front Burner newsletter, at https://www.kitco.com/services/markets-front-burner.html .

Kitco Media

Jim Wyckoff

Time to Buy Gold and Silver

David

Gold stuck around $2,050 as markets look for guidance on Fed cuts next week

Kitco News

The Leading News Source in Precious Metals

Gold stuck around $2,050 as markets look for guidance on Fed cuts next week teaser image

According to many analysts, the gold market is off to a decent start after the first trading week of 2024 even as the price lost some ground as it consolidated at elevated levels between $2,000 and $2,050 an ounce.

February gold futures are ending the week around $2,050 an ounce, down 1% from last week.

According to some analysts, the market remains caught in a tug-of-war as investors try to anticipate the Federal Reserve’s next move. Markets are currently pricing in a 68% chance of the first rate cut at the March monetary policy meeting.

However, some economists have said that after December’s employment numbers, it is unlikely that the U.S. central bank will be ready to cut rates that early in the new year. The latest employment data shows 216,000 jobs were created last month and wages grew by 0.4%.

“The jobs report lends credence to the view that the Fed is likely to continue pushing back against the early rate cuts being priced in by the market until the signal becomes clearer,” said fixed income analysts at TD Securities. “With that said, we do expect inflation to continue softening over the next few reports, which should keep the door open for rate cuts in Q2.”

At the same time, Philip Streible, chief market strategist at Blue Line Futures, said that rate cut expectations remain elevated because some analysts believe the latest jobs report shows cracks in the labor market are starting to appear. He noted that a high number of government jobs in the December report appear to be skewing the data.

Streible added that with a March rate cut on the table, gold should be well supported above $2,000 an ounce; however, he added that he doesn’t know if there is enough momentum to push prices solidly above $2,050 an ounce.

“Right now is a coin flip and that will keep gold in this consolidation range,” he said.

James Stanley, senior market strategist at Forex.com, said that the price action this week indicates that gold is capped at $2,050 in the near-term; however, he added that the gold bears will find a difficult path on the downside as the Federal Reserve is still expected to lower interest rates this year.

“Think this resistance will hold long enough to give a dip… but that may take a month or two,” Stanley said. “When the Fed does formally pivot this thing can take off. But real rates will need to get higher first before they can declare a ‘W’ on inflation, and with an election year I think they'd want to have that pivot a little closer to November. Ideally [gold] should push below 2k and wash out some longs first. Then, more money on the sidelines could further propel higher.”

Although markets are back to a full five-day week next week, investors are expected to continue to digest December’s employment numbers. The main highlight comes late next week with December’s Consumer Price Index report. According to some economists, inflation data could solidify the Federal Reserve’s move in March.

Some economists have pointed out that although consumer prices have dropped from their 2022 highs, the Federal Reserve still has work to do to bring inflation down to its target of 2%.

The expectations are that headline inflation will remain around 3%; however, core inflation is expected to remain around 4%, double the central bank’s target.

Economic data for next week:

Thursday: US CPI, weekly jobless claims

Friday: U.S. PPI

Kitco Media

Neils Christensen

Time to Buy Gold and Silver

David

Gold slightly up but strong greenback limits gains

The Leading News Source in Precious Metals

Gold slightly up but strong greenback limits gains teaser image

(Kitco News) – Gold prices are just slightly higher in midday U.S. trading Tuesday. Silver prices are slightly lower. Some modest safe-haven demand was featured today, but solid gains in the U.S. dollar index and lower crude oil prices have squelched buyer interest in the metals. February gold was last up $2.30 at $2,073.90. March silver was last up $0.021 at $24.075.

U.S. stock index futures are lower at midday as risk appetite in the marketplace is less robust on this first trading day of 2024. Reports say merchant ships in the Red Sea are still coming under attack from Iranian-backed Houthi rebels. The U.S. Navy sunk three Houthi boats on Sunday, killing its occupants. That has prompted some mild safe-haven demand for gold and silver.

In other news, there was more weak economic data coming out of China, as its official purchasing managers index (PMI) came in at 49.0 in December from 49.4 in November. The services sector PMI was unchanged at 49.3 in December. Readings below 50.0 suggest contraction in the sector. This report was also a negative for the metals markets, as China is a major consumer of metals.

The key outside markets today see the U.S. dollar index strongly higher on a rebound after hitting a five-month low last week. The USDX is still in a downtrend, however. Nymex crude oil prices are lower, still trending down and trading around $70.75 a barrel. The yield on the benchmark U.S. Treasury 10-year note is presently fetching 3.929%.

U.S. economic data due out Tuesday includes the U.S. manufacturing purchasing managers index (PMI), the global manufacturing PMI and construction spending.

Technically, February gold futures bulls have the solid overall near-term technical advantage. Prices are in a three-month-old uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at the contract high of $2,152.30. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $2,000.00. First resistance is seen at today’s high of $2,088.10 and then at $2,100.00. First support is seen at today’s low of $2,064.30 and then at $2,058.20. Wyckoff's Market Rating: 7.5.

March silver futures bulls have the overall near-term technical advantage. Prices are in a three-month-old uptrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $26.00. The next downside price objective for the bears is closing prices below solid support at the December low of $22.785. First resistance is seen at today’s high of $24.335 and then at $24.50. Next

support is seen at last week’s low of $23.76 and then at $23.50. Wyckoff's Market Rating: 6.0.

March N.Y. copper closed down 120 points at 387.85 cents today. Prices closed nearer the session low today. The copper bulls have the overall near-term technical advantage. Prices are in a choppy, 2.5-month-old uptrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the July high of 404.45 cents. The next downside price objective for the bears is closing prices below solid technical support at the December low of 372.90 cents. First resistance is seen at today’s high of 391.20 cents and then at the December high of 397.40 cents. First support is seen at today’s low of 386.10 cents and then at 382.00 cents. Wyckoff's Market Rating: 6.5.

Try out my “Markets Front Burner” email report. My next one is due out today and is going to be entitled, “When China sneezes…” Front Burner is my best writing and analysis, I think, because I get to look ahead at the marketplace and do some market price forecasting. And it’s free! Sign up to my new, free weekly Markets Front Burner newsletter, at https://www.kitco.com/services/markets-front-burner.html .

Kitco Media

Jim Wyckoff

Time to Buy Gold and Silver

David

Gold closes out 2023 above $2063, technicals point to price gains in January

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Gold closes out 2023 above $2063, technicals point to price gains in January teaser image

(Kitco News) – If you told investors in September of last year that by the end of 2023, the gold price would be closing higher than the year, many would have dismissed it out of hand. At the time, gold was trading in the $1,640 range, well off its highs following the Russian invasion of Ukraine, and high interest rates were providing additional headwinds for the precious metal.

Well, interest rates rose even higher this year, but spot gold still managed to finish the final trading day of 2023 trading at $2,063.45 at the time of writing, with many analysts predicting hundreds more in gains during the year to come.

Veteran trader CEO Technician noted in a post on X that gold had a solid year.

Kevin Wadsworth of NorthStarCharts hearkened back to those September 2022 doldrums to reflect on how far the precious metal has come, and why he was so confident in his bullish predictions.

pic

In another post, he shared an annual chart showing gold breaking to the upside ahead of 2024. “This will be gold's highest yearly close EVER,” he wrote.

And all of this comes ahead of what should be a very strong start to the new year, if history is any indication.

According to analysis by the World Gold Council, gold tends to perform very well in the first month of the year, posting an average return of 1.79% in January since 1971, nearly three times the precious metal’s long-term monthly average.

“This doesn’t mean that gold prices rise every January,” the WGC said. “There’ve been several years when it hasn’t, most recently in 2021 and 2022. Years with negative returns in January generally coincided with periods when the US dollar has strengthened – often significantly.”

But with the greenback seeing a recent pullback, and with rate cuts and treasury yields set to fall in the new year, January is shaping up to be one of the strong ones.

Alastair MacLeod, Head of Research for Goldmoney and SchiffGold, shared the following chart summarizing his perspective on gold’s likely trajectory in 2024. “It puts the price relationship in the right perspective!” he said.

Kitco Media

Ernest Hoffman

Time to Buy Gold and Silver

David

(Kitco News) – After spot gold set an all-time record daily closing price on Wednesday, the precious metal continued to trade at elevated levels on Thursday, with some analysts predicting the strength is likely to extend into the new year.

“In the first week of December, it looked like gold was set for a bit of a reality check after the rally above $2,100 fizzled rather quickly,” said Justin Low, currency analyst at ForexLive. “That saw price dip back below $2,000 but gold bugs have definitely salvaged the situation in a push to a record high close this week.”

Looking at gold’s current climb from $1,982 on Dec. 13 to yesterday’s high above $2,088, Low said that “[t]hinner liquidity conditions may still cast some doubts over the latest move higher” but he said there are still good arguments for gold to move even higher as 2024 approaches.

“And the seasonal tailwind in January is arguably one of the strongest points there could be in advocating for an extension higher,” he said.

Spot gold is currently trading at $2,068.37 per ounce at the time of writing, down 0.41% on the session but up 1.8% over the last five days, and up nearly 2.7% during the month.

“The way I see it, gold is poised for one of two things now,” Low said. “It is either we go off to the races to start the new year i.e. fresh record highs, or we get a notable squeeze lower before buyers reload on long positions. It would really surprise me if we got a quiet and slow January, all things considered.”

He added that his reticence to predict which outcome is more likely “is to do with the fact that I heavily detest reading too much into year-end and thin liquidity moves such as what we're seeing this week. As such, I still do hold some reservations about the high points for gold on the week currently.”

Other analysts are looking through the liquidity concerns at the geopolitical and macroeconomic environments, both of which suggest continued strength for gold prices, with the potential for new all-time highs in January.

“The most likely scenario in the current context points towards a continued upward trajectory, with the initial target in the vicinity of $2100 per ounce,” said analyst Damian Nowiszewski at Investing.com.

“The recent strong demand shot established a new historical high in the $2150 per ounce price area, but these were quickly negated,” he wrote. “Buyers are not short of fuel, however, and all indications are that they will be able to permanently overcome the key resistance area tested several times over the past few years located near the round barrier of $2100.”

“The natural target for demand is the area around $2150 and the next round barrier of $2200,” Nowiszewski said. “Possible corrective movements should be limited by the local upward trend line and demand zones near $2000 and $1950 per ounce.”

Kitco Media

Ernest Hoffman

Time to Buy Gold and Silver

David

Gold up a bit on bullish outside markets, technical buying

Gold up a bit on bullish outside markets, technical buying teaser image

(Kitco News) – Gold prices are slightly higher and silver prices slightly lower in midday U.S. trading Tuesday. Quieter, post-holiday trading is featured. Bullish charts are prompting some mild speculator buying interest in both precious metals. The key outside markets were also bullish for the metals today, as the U.S. dollar index was modestly weaker and crude oil prices were solidly higher. Some profit-taking from the shorter-term futures traders did limit gains in gold and silver today. February gold was last up $1.70 at $2,070.60. March silver was last down $0.07 at $24.50.

Asian and European stock markets were mixed overnight. U.S. stock index futures slightly higher at midday. Some markets, including those in the U.K., Germany and France, remained closed Tuesday after the Christmas holiday Monday.

Reports said the U.S. military carried out retaliatory air strikes on Monday in Iraq after a drone strike from Iran-aligned militants left one U.S. serviceman in critical condition and wounded two others. Markets showed no significant price reactions to the news.

The yield on the benchmark U.S. Treasury 10-year note is presently fetching 3.906%.

Technically, February gold futures bulls have the solid overall near-term technical advantage. Prices are in a 2.5-month-old uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at $2,100.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $2,000.00. First resistance is seen at today’s high of $2,076.30 and then at last week’s high of $2,083.00. First support is seen at today’s low of $2,065.10 and then at last Friday’s low of $2,058.20. Wyckoff's Market Rating: 7.5.

March silver futures bulls have the overall near-term technical advantage. Prices are in a 2.5-month-old uptrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $26.00. The next downside price objective for the bears is closing prices below solid support at the December low of $22.785. First resistance is seen at today’s high of $24.70 and then at last week’s high of $24.895. Next support is seen at today’s low of $24.34 and then at $24.00. Wyckoff's Market Rating: 6.5.

March N.Y. copper closed down 10 points at 390.40 cents today. Prices closed nearer the session low today. The copper bulls have the overall near-term technical advantage. Prices are in a choppy, two-month-old uptrend on the daily bar chart. Copper bulls' next upside price objective

is pushing and closing prices above solid technical resistance at the July high of 404.45 cents. The next downside price objective for the bears is closing prices below solid technical support at the December low of 372.90 cents. First resistance is seen at the December high of 394.50 cents and then at 400.00 cents. First support is seen at last week’s low of 384.10 cents and then at 380.00 cents. Wyckoff's Market Rating: 6.5.

Try out my “Markets Front Burner” email report. My next one is due out today and is going to be entitled, “When China sneezes…” Front Burner is my best writing and analysis, I think, because I get to look ahead at the marketplace and do some market price forecasting. And it’s free! Sign up to my new, free weekly Markets Front Burner newsletter, at https://www.kitco.com/services/markets-front-burner.html .

Jim Wyckoff

Time to Buy Gold and Silver

David

Interest rate decisions give gold and silver a Christmas boost

The final interest rate decisions of 2023 have given precious metals a further price boost today. The US dollar has fallen to a four-month low as markets anticipate 2024 will see rate cuts, pushing gold back above $2,000.

The Federal Reserve have spent previous months pushing back against the idea of rate cuts in 2024, stating that rates would need to be ‘higher for longer’ to bring inflation down to the Fed’s 2% target. With inflation falling however, and the US economy so far proving resilient to higher interest rates, it seems the Fed’s monetary policy committee have turned dovish.

Although the Fed left interest rate unchanged last night as expected, the dot plots from its members (charting expectations for rates in the year ahead) suggested that the Fed itself expects that rates will begin to fall next year. Despite Chairman Jerome Powell cautioning that rates could still rise if needed, markets took the dot plots as the sign they were looking for. Stock markets rose, and the US Dollar Index has dropped 1.2% since last night’s announcement.

14123 USD Chart

The gold price saw a spike as the Federal Reserve announced their latest rate decision.

Gold gained more than 2.5% as a result, jumping from $1,978 to $2,040 in just a few hours, and has so far stabilised in the $2,030 – $2,040 range. Silver gained over 6% in the same period, climbing from $22.53 to push past $24 per ounce. US rate cuts will be a key driver for gold and silver in 2024, and last night was the clearest indication that such cuts are on their way.

The Bank of England also left UK rates on hold today, but with a more hawkish tone. Three of the committee’s eight members even voted to hike rates up to 5.5% but were outvoted by the other five. The UK is in a very different position to the US, with UK core inflation still at 5.6% in October, and the BoE will likely have to keep rates at current levels further into 2024 than the US.

Thanks to a falling dollar, and the more hawkish tone of the BoE, the pound has enjoyed a strong 24 hours. Sterling has climbed to a high of $1.27221 since the Bank’s latest decision was announced, the highest GBP has been against the dollar in over three months.

Although the stronger pound has slightly reduced gold and silver’s gains both metals have still benefitted from the weaker dollar. Gold has risen 1.7% in less than 24 hours and is currently just holding onto £1,600 per ounce. Silver gained 5.5% in the same period, climbing from £17.99 to pass £19 per ounce.

With the UK economy showing increasing signs of weakness, the Bank could perhaps be acting more hawkish than necessary, while the strength of the US economy could leave the Fed looking too optimistic. Despite markets winding down for the holidays, it won’t be too long to wait for the next rate decisions, which will only become increasingly important for gold and silver as anticipation builds for the first rate cut. The Fed will make their next announcement on January 31st with the BoE following suit on February 1st.

Having set a short-lived but significant new record less than two weeks ago, gold is still seeing historically high levels, and rate cuts resulting in a weaker dollar will only be to gold’s benefit. Whether gold can surpass the $2,200 needed for a new all-time high remains to be seen, but all the pieces are there as 2024 progresses.

Contributing to kitco.com

Time to Buy Gold and Silver

David

Gold Price News: Gold Nudges Higher as Markets Watch Central Banks

Market Analysis

Gold prices firmed slightly on Tuesday, showing signs of stability after a decidedly bearish start to the week.

KAU/USD 1-hourly

Prices moved in a range of $1,983 to $1,997 an ounce through the day, after falling as low as $1,976 an ounce on Monday.

Looking ahead this week, the US Fed is widely expected to maintain interest rates at the current 22-year high of 5.5% in a decision scheduled for Wednesday, with the markets looking for further clues on the outlook ahead of the Fed’s next meetings in December, January and March.

Data from interest rate traders currently indicates a 54% probability that the central bank will hold rates unchanged at its March meeting, and a 44% chance of a 25-basis point cut. It should be cautioned that these implied probabilities fluctuate on a day-to-day basis as the trading environment evolves. Interest rates matter for gold prices because they affect the opportunity cost of holding non-interest-bearing assets.

Interest rate decisions are also due on Thursday by the ECB and Bank of England – both expected to hold rates unchanged at 4.5% and 5.25% respectively as central banks seek to keep inflation under control.

Gold also continues to take support from ongoing geopolitical tensions in the Middle East. A cruise missile launched from Houthi-controlled Yemen hit a Norwegian-flagged oil and chemical tanker in the Red Sea off the coast of Yemen on Tuesday, according to news reports. This latest incident serves to highlight the risk that the conflict between Israel and Palestine could spill over into other regions. Heightened geopolitical risks tend to drive investment into safe havens such as precious metals.

Looking further out, Friday will see the release of Chinese industrial production figures and German manufacturing PMI flash data, which are likely to provide the latest indicators of economic health in those major economies.

Contributing to kitco.com

Time to Buy Gold and Silver

David

Did today’s statement by Fed President Williams cause a sell-off in gold?

After trading to a high of $2059.60 today, gold futures closed lower. As of 4:20 PM, gold futures basis the most active February 2024 contract is down $17.90 or 0.87% and fixed at $2033.40. Today’s selloff follows two days of strong gains that occurred immediately after the conclusion of this month’s FOMC meeting. On Wednesday, gold futures opened at $1995 and surged higher by $48.10 closing at $2043.30. Yesterday gold gained an additional $8.20 after trading to a high of $2062.90 and closing at $2051.30.

The price surge that occurred on Wednesday and Thursday was in response to the release of the FOMC statement, Summary of Economic Projections (SEP), and comments by Chairman Powell on Wednesday. All the information from the Fed indicated a major pivot in their monetary policy.

This pivot from interest rate hikes by the Federal Reserve to combat spiraling inflation above 8 ½% in March 2022 has been highly anticipated recently. Their aggressive pivot to a restrictive monetary policy included 11 rate hikes, taking their benchmark interest rates from near zero to between 5 ¼% and 5 ½ % in just over a year. Although the Federal Reserve stopped raising rates a few months ago and announced a series of rate hike pauses, comments by Federal Reserve officials remained close to the chest avoiding any information about when they planned to begin rate cuts.

That changed on Wednesday with the release of their economic projections which contained detailed information revealing that central bank officials almost unanimously are anticipating interest rate cuts to begin next year, with the expectations of a ¾% cut taking Fed funds rates to approximately 4.6%.

The immediate reaction was a strong decline in the dollar, which set into motion strong gains in gold as a result of bullish market sentiment and dollar weakness. Today, dollar strength was all that was needed for traders to pull profits on the recent advance in gold prices. The dollar gained 0.62% and gold dropped by 0.88% revealing that today’s price decline in gold futures was primarily due to dollar strength with a smaller component the result of market participants actively selling gold.

The question becomes whether this will be a one-off or a pivot from the recent gains in gold, or the beginning of a price correction. An important factor in today’s price decline was a recent statement by New York Fed President Williams. Speaking on CNBC’s Squawk Box today, Williams said, “We aren’t really talking about rate cuts right now,”.

This contrasts with Chairman Powell’s comments on Wednesday, as well as the dot plot that was released on Wednesday. The dot plot revealed that there were only two voting members who did not believe they would cut rates next year, making this author believe that Fed President John Williams was one of those two voting members, and if so, he represents a small minority.

Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David