Gold trades under pressure but currently holding the 38.2% retracement as support

As of 3:30 PM, EST gold is trading off by $29.20, or 1.46%, with the April 2022 Comex contract currently fixed at $1956.00. On a technical basis, today’s low of $1952 is just below the 38.2% Fibonacci retracement, which is currently at $1953.80. The data set used for this retracement begins at the low created in December 2021 when gold hit $1752.60 and began a dynamic rally which took pricing to a high of $2078.20 during the first week of March 2022. If gold breaks below the 38.2% Fibonacci retracement level, the next logical place that gold could trade to is the 50% retracement which is currently at $1915.40.

While Russia’s invasion of Ukraine continues, its massive assault market participants are focusing upon what actions the Federal Reserve will take this week. Traders are focusing on the amount of the Fed will raise rates, whether they will raise rates by ¼% as many Fed members have suggested, including Chairman Powell, or a more aggressive move to ½ a percent due to the ever-increasing rate of inflation. This would be the first interest rate hike since March 2020, when the Federal Reserve reduced the Fed’s fund rate between zero and 25 basis points (¼%).

According to the CME’s FedWatch tool, the probability that the Fed will raise interest rates from 0 – 25 basis points to 25 – 50 basis points is 98.3%. With a 1.7% probability that the rate hike will be more aggressive totaling ½ a percent hike to 50 – 75 basis points. However, it is widely believed that a ¼% rate hike has been, for the most part, factored into the current pricing of both precious metals and U.S. equities. U.S. equities continued their price decline as the first trading day of the week began.

With approximately 15 minutes remaining in the trading session, the Dow Jones Industrial Average is relatively unchanged, currently up nine points or 0.03% and fixed at 32,949.60. The NASDAQ composite does appear that it will close strongly lower as the tech-heavy index is currently down by 2.01%, a decline of 259 points and fixed at 12,584.99. The S&P 500 is also indicating that it will result in a decline today, currently trading off by 0.9%, which is a decline of 37 points, with the S&P currently fixed at 4166.92 points.

U.S. debt instruments are also trading lower, reflecting higher yields in anticipation of the Federal Reserve initiating liftoff or interest rate normalization. They almost certainly will announce an interest rate hike after this month’s FOMC meeting which begins tomorrow and concludes on Wednesday. The thirty-year U.S. government bond is currently yielding 2.47%, and the 10-year is currently yielding 2.13% after factoring in today’s drop in U.S. bonds and bills taking yields higher.

Unless there is some peaceful resolution to the Russian invasion of Ukraine, we can expect to see moderate to strong support of gold pricing even at these current levels, which reflect pricing that is near the top of the range resulting from the $300 rally which began in December of last year. Sadly, it does not appear that Russia in any way has de-escalated their attack even as they resumed negotiations via video links this morning.

While the goal of Ukraine continues to be securing a cease-fire leading to the immediate withdrawal of Russian troops from Ukraine, it appears that Russia is unbending, seeking that Ukraine surrender and its troops lay down its arms. With a divide between both sides so deep, it seems unlikely that a peaceful resolution to the conflict will be forthcoming in any short time.
 

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

David

Gold, oil open lower

On Sunday open spot gold dropped $20 hitting $1,970 a ounce.

Oil was down, too, with Brent crude off 0.87% to $111.7 a barrel.

April gold futures last traded at $1,979.3 an ounce, down 0.29%.

Hong Kong's Hang Seng index opened lower, down 1.61% on Monday local time.

Major action in the Ukraine-Russia war over the weekend was a Ukrainian base near Poland getting hit by cruise missiles fired by Russia. Thirty-five people were killed, and 134 were wounded.
 

By Michael McCrae

For Kitco News

Time to buy Gold and Silver on the dips

David

What's next for gold price after making a run for record highs? Fed, Ukraine updates on deck

The Federal Reserve's interest rate decision and developments in Ukraine will dominate gold's price direction next week after the precious metal made a run for record highs.

Gold rallied on its safe-haven appeal this week as sanctions against Russia were stepped up to import bans and the war in Ukraine escalated, creating chaos in the commodities space. April Comex gold futures were last trading at $1,990.50 an ounce after briefly rising above $2,070 an ounce earlier in the week.

"Gold will continue to hover around $2,000 in the short-term. If gold closes at $1,980 an ounce, then I am bullish. If gold rises to $2,010, then I am neutral," OANDA senior market analyst Edward Moya told Kitco News.

The trading range for gold remains pretty broad due to the current volatility in many financial markets. The two leading drivers will be the Federal Reserve's meeting on Wednesday and any new developments regarding sanctions against Russia and the war in Ukraine.

"Gold could trade over the next week between $1,960 and $2,050. It is looking at a pretty wide range given the sensitivity of the situation in Ukraine. And we have the Fed policy meeting, which could provide some big shifts as to how the U.S. central bank will address the inflation outlook and more importantly what will be the path of tightening going forward," Moya said.

Wednesday's afternoon announcement will be followed by Fed Chair Jerome Powell's press conference. All eyes will be on the new economic projections, the dot plot, and Powell's take on the "unintended consequences" of the conflict in Ukraine.

"Powell has to provide clarity. He needs to set market expectations. After this, we'll get a better sense if there could be a risk of a super-sized rate hike over the summer."

Markets are currently pricing in a 95.1% chance of a 25-basis-point hike next week. These expectations were further cemented by the recent inflation data, which showed the U.S. Consumer Price Index (CPI) rising to 7.9% in February, a new 40-year high. Also, Powell testified last week that he would be supporting a traditional 25-basis-point hike at the March meeting.

"Investors have done a U-turn in their assessment of what Russia's invasion of Ukraine will mean for U.S. monetary policy ahead. A brief flirtation with the idea that the war's economic costs would temper the rate hike path has been quickly reversed, with the February CPI data being a further reminder that inflation is breaking out in just about every major category of goods and services," said CIBC World Markets chief economist Avery Shenfeld.

Capital Economics is forecasting new projections to point to at least five interest rate hikes in 2021 and an additional four rate hikes in 2023. This would take the Fed Funds rate to between 2.25% and 2.50%.

"Fed Chair Jerome Powell may offer more details in his press conference about the Fed's plans for quantitative tightening (QT), but we don't expect QT to be launched until closer to the middle of this year," said Capital Economics chief North America economist Paul Ashworth.

'Commodities are better investment than gold' as inflation could hit 10%, says billionaire 'Bond King' Jeff Gundlach

What about gold's pullback after hitting $2,000?

Consolidation after rising above $2,000 an ounce is a good thing for gold, said RJO Futures senior market strategist Frank Cholly.

"A pullback correction is good. It is testing the strength of the market. Gold will continue to march higher to the $2,050 area. I don't think that a rate hike next week is going to hurt the market," Cholly told Kitco News. "Now that we have the big breakout, I remain bullish. The uptrend is still intact. And right now, it is a good buying opportunity."

Gold will easily get back to $2,050 an ounce level in the short-term, he added. Plus, the Fed is now unlikely to surprise with a 50-basis-point hike since it has signaled a more cautious approach when raising rates to avoid throwing the economy into a recession.

Cholly also does not see the war in Ukraine lasting for many months as many fear, which could potentially see gold return to $1,900.

"There will be some resolution sooner rather than later. This is not going at all how Putin planned," he said. "Possible that we have a pullback to $1,900. But even before February 24, when Russia invaded Ukraine, the gold market was starting to take on a bullish tone. Now that we've broken out and are above these levels, I don't think gold is going back down to $1,800."
 

Data to watch next week

Tuesday: PPI, NY State manufacturing index

Wednesday: Retail sales, Fed interest rate decision, Powell's press conference

Thursday: Building permits, housing starts, jobless claims, Philadelphia Fed manufacturing index, industrial production

Friday: Existing home sales
 

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

David

Gold corrects after unsuccessfully challenging its record high

On Tuesday, March 8, gold traded to an intraday high of $2078, roughly $10 below the all-time high of $2088, which was achieved in August 2020. The current decline in gold is the first real price decline since January when gold hit a low of approximately $1780. Until Tuesday of this week, what followed in February was a dynamic rally resulting in gold gaining approximately $300 when gold traded to $2078. On Wednesday, March 9, gold opened above Tuesday’s closing price of $2043 but closed dramatically lower, resulting in a price decline of $72. Tuesday’s strong decline resulted in gold losing 3.49% in value, the largest single-day loss in 2022.

As of 4:45 PM EST gold futures basis, the most active April Comex contract is currently fixed at $1990.20, a net decline of $10.30 or 0.51%. However, this decline can be largely attributed to dollar strength. Currently, the dollar is up by 0.63% and with the dollar index fixed at 99.12. While gold pricing is lower today it is completely the result of dollar strength and fractional buying of gold.

Currently, spot gold is fixed at $1988.60, a net decline of $8.60 on the day. The Kitco Gold Index shows that dollar strength resulted in gold declining $12.40, and fractional buying resulted in a gain of $3.80 resulting in the net change today of -$8.60.

This week’s price action marked the beginning of the first correction since the end of January. Currently, gold has declined approximately 0.382% from Tuesday’s intraday high at $2078 to today’s low of $1960. 0.382% is an important Fibonacci retracement number. A shallow price correction based on Fibonacci retracement levels will begin at 0.236%, followed by a decline of 0.382% with a strong correction retracing as much as 0.618%, or 0.78%. On a technical basis, these four Fibonacci retracement levels are the most important numbers to focus on. Technical traders use these levels to monitor possible support levels that could indicate a conclusion of a correction.

That being said, based on a study of three different moving averages (50-day, 100-day, and 200-day), gold is still in full bullish alignment. Market technicians use the 50-day, 100-day, and 200-day moving averages as a benchmark to determine its short-term, interim term, and long-term market sentiment. If the current pricing of a stock or commodity is above the 50-day moving average market technicians interpret the short-term market sentiment as bullish. The 100-day moving average is used to determine interim term market sentiment, and the 200-day moving average reveals long-term market sentiment. If the 50-day is above the 100-day and the 100-day above the 200-day, it is interpreted as a full bullish demeanor.

Chart number two is a daily candlestick chart of gold futures, clearly illustrating that gold is in full bullish alignment. The 50-day moving average is currently fixed at $1861.70, followed by the 100-day moving average at $1832.20 and the 200-day moving average fixed at $1816.10. Gold pricing went into full bullish alignment during the last week of February when the 100-day moving average crossed above the 200-day moving average. As gold pricing continues to rise, we can see that the three moving averages are in a period of divergence, which simply means that the price between each moving average is increasing.

Based on the two technical studies we discussed above, we can derive the following conclusion. First, on a technical basis, the low in gold futures has touched upon the 0.382% Fibonacci retracement level, which is an acceptable level if this current correction will unfold as a shallow correction, as seen in chart 1. It does not confirm that pricing will stabilize here, but it is an important level to watch if gold prices hold this level ($1964) or trade below it. Secondly, even with this week’s correction resulting in a 5.48% decline in pricing from Tuesday’s high to today’s low, the three moving averages are still in full bullish alignment, as seen in chart 2.

Lastly, while we could see a further price decline on a technical basis, this week’s price decline has not resulted in major chart damage but has resulted in a price correction from Tuesday’s intraday high.

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

David

Gold challenges record high but declines after hitting a high of $2078.80

Today gold spiked with a massive gain of $82, taking gold futures within $10 of the record high at $2088, which occurred in August 2020. Just as quickly as gold rose dramatically higher profit-taking and a recovery of U.S. equities resulted in gold trading off of the highs giving up over half of the gains from the intraday high. New York's trading session just ended, and as of 1:30 PM EST, April futures are currently fixed at $2050, a net increase of $55 on the day.

We are witnessing extremely fast market conditions and it will be interesting to see how gold trades after the half-hour break, at which time (2:00 PM EST) Globex trading will begin remaining open until 8:00 AM EST.

Gold's massive gains today are a continuation of investors' flight to safety, incorporating gold as the go-to safe-haven asset. Today's gains occurred with moderate tailwinds from dollar weakness which added to the dynamic gain.

Geopolitical tensions continue to grow as the Russian invasion of Ukraine continues to escalate. The Russian army is now disrupting routes that have been used for civilians fleeing through “humanitarian corridors."

Now in its 11th day since the onset of the invasion, Russia's military continues to struggle to capture major cities and incur losses of aircraft and armored vehicles. This has hardened Vladimir Putin's resolve, resulting in the use of missiles and rocket strikes rather than using their 150,000 troops. After three rounds of negotiations, the only achievement was an agreement to continue to negotiate in an attempt to reach a cease-fire.

Another major factor fueling gold pricing higher is the current level of inflation with the CPI index up 7.5% year-over-year in January. The current level of inflation at a 40-year high most likely will continue higher based upon rising prices of both oil and food. Crude oil continues its historical rise today, gaining just over $3 and is currently fixed at $122.77 per barrel.

Food costs have also been rising globally. As oil rises so does the cost of producing and transporting food from farm to table. Europe is witnessing even greater increases in food costs as Ukraine exports a large portion of its agricultural products. Ukraine's agricultural exports to Europe have been dramatically affected by the current military action by Russia.

On Thursday, March 10, the U.S. government will release the latest data on the current level of inflation and based upon the dramatic rise in oil and higher food costs, it most certainly will increase from its current levels.

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

David

'Tremendous momentum' in gold price -Watch out for next week's U.S. inflation number as geopolitics continue to drive metals

(Kitco News) There is strong momentum in the gold space as investors repositioned themselves going into another uncertain weekend with all eyes on Russia's intensified attack on Ukraine.

Gold gained more than $35 on Friday as Russian forces took control over Europe's biggest nuclear power plant in Ukraine in a very alarming assault.

"Unfortunately, there are no signs that you are going to see a de-escalation of the war in Ukraine any time soon. As we take a look at the impact that is having on the global economy, you'll see global growth concerns and inflationary pressures become dominant themes," OANDA senior market analyst Edward Moya told Kitco News. "That will likely lead to further safe-haven flows, and gold is going to shine."

The macro picture is set up for gold to hit $2,000 an ounce as other commodities, including oil, palladium, nickel, wheat, and corn surge.

"The way things are looking, you have too many key commodities that are likely to continue to keep on rising — grains, metals, energy. We'll see elevated prices for the foreseeable future," Moya said.

If commodity spikes have a lasting impact on inflation, central banks will be forced to hike rates more aggressively. But that doesn't mean that's bad for gold, Moya added.

"While the U.S. central bank showed resistance to rapid rounds of rate hikes as they assess the impact of the war, you should not rule out a chance of a half-a-point increase later this year. I'm still in the camp of four or five rate hikes this year," said Moya. "We could see the Fed becoming more aggressive in fighting inflation this summer. That uncertainty and that debate should be positive for gold and help gold rally to $2,000."

One key metric to watch next week will be the latest U.S. consumer price index (CPI), which is scheduled to be released on Thursday.

"We could see $150 oil soon. Inflation will be much higher because of energy. Wait until you see the next CPI number. It is going to be above 8%," Phoenix Futures and Options LLC president Kevin Grady told Kitco News. "And if they were using the old metrics, annual inflation would be running at 12%-15%."

On Friday, market participants positioned themselves for another uncertain weekend ahead, said Grady.

"You just don't know what's going to happen over the weekend. Investors are nervous about the nuclear reactor and Russia capturing some Ukrainian cities. They are positioning long gold, short stocks, and long crude oil," he said.

---

Gold price levels to watch

The levels to watch on the way to $2,000 are $1,980 on the upside and $1,882 on the downside, said Grady.

At the time of writing, April Comex gold futures were trading at $1,971.20, up 1.82% on the day.

Moya pointed out that the $1,980 will act as short-term resistance, adding that gold can easily swing $50 in any direction. But once that level is reached, the market will become fixated on $2,000 an ounce.

"The catalysts are all there. Once we break $2,000, then $2,050-70 is the trading range where you'll see gold find some good resistance. Gold has underperformed a lot of these other commodities. There is still tremendous momentum here," he said.

Next week's data

Thursday will be the key data day for macro releases, with February's CPI and U.S. jobless claims scheduled for then. The ECB interest rate decision will also take place on Thursday.

"The risk of stagflation has clearly increased, complicating the ECB's dilemma: how to react to accelerating inflation that cannot be softened by monetary policy. No one can seriously expect the ECB to start normalizing monetary policy at such a moment of high uncertainty," said economists at ING.

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

David

Inflation and the crisis in Ukraine cause gold to surge, now only $27 away from $2,000

Gold prices have been moving to a higher value at a pace not witnessed in quite some time. On Monday, gold futures basis most active April 2022 contract opened at $1920 and closed at $1900 after recovering from a low of $1893. On Tuesday gold prices gained over $40 and accelerated the defined uptrend that began the first week of January. The rally has continued today.

As of 4:22 PM EST, April futures are currently up by $39.40 (2.00%) and fixed at $1974.90, which means that gold gained $74.90 this week resulting in a net weekly gain from Monday’s low to today’s current price of 4.3264%.

When added to the price advance of January 31, that accomplishment reveals a profound fact. In just over one month (January 31 to February 4) gold prices have gained $194.90, a percentage gain of 10.94%.

Gold is one of the most intrinsic safe-haven assets

Gold is both an excellent hedge against inflationary pressures and reacts quickly to geopolitical uncertainty and rising inflation. The recent gains in gold are based upon its sensitivity to both a surge in inflation and a geopolitical crisis.

In this instance it is the combination of these two events occurring simultaneously. This synergistic effect of both geopolitical uncertainty and the existing inflationary pressures simultaneously has magnified gold’s influence on the global economy.

Most alarming is that the geopolitical crisis in Ukraine has added another layer to inflationary pressures. The invasion by Russia into Ukraine was unthinkable just a few months ago. Not since World War II has a sovereign country invaded another sovereign country under false pretext. While Russia claimed their actions were to act as peacekeepers to protect the pro-Russian separatists in eastern Ukraine, they announced that these two areas are now independent countries. But the truth is that the intention of Russia was to destroy its military and overthrow its government to install a puppet government sympathetic to Russia.

Prior to the invasion by Russia into Ukraine inflationary levels were already at a 40-year high. Recent data has shown that the CPI (consumer price index) has reached 7.5% YOY. This is the highest level of inflations since February 1982. Based upon recent events it is an absolute certainty that inflationary levels will spiral to yet an even higher level.

The primary catalyst which will take inflation higher will be directly attributable to two primary factors first the rising cost of crude oil, which is now trading at $115 per barrel. Secondly, Ukraine’s ability to produce agricultural products to export to Europe has been diminished or obliterated.

Recent surge in oil

In December 2021, crude oil futures traded to a low of $62.51. By the first week of January 2022, crude oil futures had risen to $74.58. By the end of February oil had climbed as high as $90 per barrel.

From December to February, in the short span of three months, a barrel of crude oil cost rose 43.97% more. Even more alarming is that oil has gained 19.60% in the first four trading days of this month. That equates to an average daily gain of 4.9% from Tuesday, February 1 to Friday, February 4.

Recent surge in food costs

it’s a fact that higher prices in oil dramatically influence the cost of growing and transporting food. These costs have risen dramatically exacerbated by the current conflict in Ukraine. Ukraine has in essence been a major component supplying agricultural products to Europe. The current crisis has had a dramatic impact on the ability of Ukraine to continue providing agricultural necessities to Europe.

Conclusion – spiraling inflation and a prolonged invasion will be devastating

The obvious takeaway from the effect of the Ukraine conflict on current levels of inflation is profound. It most certainly almost guarantees that inflationary pressures will continue to spiral to higher levels causing extreme hardship to global citizens who require these goods for survival.

For the reasons we have spoken about above, gold has had such a stellar performance and dramatic price increase. The precious yellow metal is truly acting as a safe-haven asset that should continue to gain value as a hedge against other investment classes in times of political uncertainty and high inflation levels. The sad truth is that the current conflict in Ukraine most likely will not have a quick and peaceful resolution. It will take an extended period of time to come to an end.

Based upon that assumption that the Ukraine/Russia crisis will not be resolved quickly and that current levels of inflation will continue to spiral to higher levels is almost a certainty. If that assumption is correct, it is easy to assume that at some point soon gold will challenge its all-time high of $2088 and trade to a new record high price.
 

By Gary Wagner

Contributing to kitco.com

 

Time to buy Gold and Silver on the dips

 

 

David

Safe-haven demand continues to push gold price higher

Gold prices are moderately higher in midday U.S. trading Thursday, on continued safe-haven demand as risk appetite remains squelched by the Russia-Ukraine geopolitical situation. April gold futures were last up $11.20 at $1,933.70 and May Comex silver was last down $0.035 at $25.155 an ounce.

Risk aversion remains elevated amid the Russia-Ukraine war that has intensified. Crude oil and grain prices are soaring and that’s also stoking inflation fears. In a stunning inflation report coming from the Euro zone, its January producer price index rose 30.6%, year-on-year, mostly due to rising energy prices.

Bloomberg in an email dispatch Thursday morning reported, “With traders continuing to avoid Russian oil supplies over sanctions uncertainty, OPEC-plus not hiking their scheduled quota increase Wednesday and Iran talks still not resolved, traders are paying the biggest premium in more than two years to bet on higher prices. Aluminum, nickel, zinc and wheat all continue to rise, putting the Bloomberg Commodity Spot Index on course for its biggest weekly gain since 1960.”

On Friday comes the February U.S. employment situation report from the Labor Department. The key non-farm payrolls number is seen coming in at up 440,000 after a gain of 467,000 in January.

The key outside markets today see Nymex crude oil prices near steady and trading around $110.50 a barrel after hitting an 13.5-year high of $116.57 overnight. The U.S. dollar index is higher again today. The benchmark U.S. 10-year Treasury note is presently yielding 1.854%.

Technically, April gold futures bulls have the solid overall near-term technical advantage. Prices are in a four-week-old uptrend on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at the February high of $1,976.50. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,882.50. First resistance is seen at today’s high of $1,941.40 and then at this week’s high of $1,952.60. First support is seen at today’s low of $1,923.10 and then at $1,916.00. Wyckoff's Market Rating: 8.0.

May silver futures bulls have the firm overall near-term technical advantage. Prices are in a four-week-old uptrend on the daily chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $26.00 an ounce. The next downside price objective for the bears is closing prices below solid support at $23.50. First resistance is seen at the February high of $25.705 and then at $26.00. Next support is seen at Wednesday’s low of $24.96 and then at $23.50. Wyckoff's Market Rating: 7.0.

May N.Y. copper closed up 915 points at 475.85 cents today. Prices closed nearer the session high today and hit a 10-month high. The copper bulls have the solid overall near-term technical advantage and gained more power today. 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 500.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 450.00 cents. First resistance is seen at today’s high of 478.25 cents and then at 480.00 cents. First support is seen at 470.00 cents and then at today’s low of 466.15 cents. Wyckoff's Market Rating: 8.0.
 

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

 

 

David