It’s too early to call a bullish rally in gold, the Fed is still the biggest unknown

It's too early to call a bullish rally in gold, the Fed is still the biggest unknown

The gold market will remain very sensitive to the Federal Reserve's rate outlook, so it is too premature to call a bullish rally in gold after prices gained more than $30 on the week, according to analysts.

Gold got a boost after June's U.S. inflation report showed price pressures rising at the slowest pace in two years. The U.S. CPI was up 3% last month from a year ago, while the core CPI, which excludes volatile food and energy prices, was at 4.8%, both below estimates.

The August Comex gold futures last traded at $1,961.70, up just over $30 on the week, after firmly holding the $1,900 an ounce level.

"The fact that gold held above $1,900 despite everyone expecting the Fed to hike interest rates in July is a vote of confidence," Gainesville Coins precious metals expert Everett Millman told Kitco News. "The Fed will drive the gold market for the next few months. And higher for longer rates would be negative for the price. Gold's current reaction means that either all rate hikes are not priced in yet or maybe markets' expectations do not match reality."

The Fed is still planning on hiking rates at least twice this year, with market expectations for the July meeting pricing in a 96% chance of a 25-basis-point increase. The second rate hike is yet to be priced in, which is why analysts remain cautious about gold in the short term.

"If anything, people want to go bullish on gold on any feeble pretext, including the hope that the Fed will go accommodative quickly and end the tightening program," TD Securities global head of commodity strategy Bart Melek told Kitco News. "At this point, it is too early to get overly bullish."

Even though the inflation narrative is starting to look better, it is not a done deal, especially considering the spike in energy prices. "We have recently seen a significant rise in oil prices as OPEC continues to reduce supply. The big benefit we received from cheaper energy may reverse to some extent in the months to come," Melek warned.

Plus, it is not likely that the Fed will be quick to change its hawkish rhetoric as it impacts its credibility going forward. "I doubt that the Fed starts easing us as quickly as the market thinks. Data could surprise to the upside, and the Fed sticks to its guns. And that could be a problem for gold," Melek noted.

What the Fed does next is still a big mystery, Millman said, noting that it is difficult to predict how some of the lagging effects of such aggressive monetary policy tightening will affect broader markets.

The key question for markets is not by how much the Fed is yet to hike, but for how long will the rates remain elevated before the Fed starts to cut, Millman added.

"If they turn around and cut rates at the end of this year or beginning of next year, markets will have a strong reaction," he said. "It is important to know what the next step is — how long rates will stay high and when is the rate cut coming. That's what's keeping gold in place."

Based on previous statements, the Fed is likely to err on the side of tightening, which would mean rates will remain higher for longer, Millman noted. With inflation being elevated for 18 months above 2%, Fed Chair Powell believes markets need time below 2% to balance that out.

Gold price levels to watch

Melek described the latest move in gold as likely short-lived, with short-covering driving prices higher. "That is going to reverse to a great extent. The rally is too premature, and there are significant risks of unwinding," he said.

The immediate resistance is at $1,966 and $1,970, and support is at $1,930, $1,900, and then $1,896 an ounce, Melek added.

Millman said he is also not ready to move into the bullish camp yet. He sees the next big resistance at $1,975-80 and support at $1,900.

Next week's data

Monday: NY Empire State Manufacturing index

Tuesday: U.S. retail sales, U.S. industrial production, Fed Vice Chair for Supervision Barr speaks

Wednesday: U.S. hosting starts and building permits

Thursday: U.S. jobless claims, Philly Fed manufacturing Index, U.S. existing home sales

Anna Golubova

For Kitco News

Time to Buy Gold and silver

David

Gold, silver see mild safe-haven demand after Russia revolt

Gold and silver prices are higher, with silver solidly up, in midday U.S. trading Monday. Some safe-haven buying is featured following an aborted insurrection in Russia over the weekend that has left the nuclear armed nation’s military destabilized and has the rest of the world wondering what happens next. August gold was last up $5.50 at $1,935.20 and July silver was up $0.521 at $22.875.

Geopolitics is back on the front burner of the marketplace following the weekend coup attempt in Russia that has at least temporarily been averted. Still, risk aversion is a bit higher to start the trading week. It’s apparent to most that Russian President Putin has seen his once-powerful authoritarian grip on his country loosened significantly, which has likely destabilized the Russian military. The marketplace will continue watching this situation very closely as its geopolitical implications are huge.

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

The key outside markets today see the U.S. dollar index slightly weaker. Nymex crude oil prices are firmer and trading around $69.75 a barrel. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 3.719%.

Technically, August gold futures were up $6.30 at $1,936.00 in afternoon trading and near mid-range. Short covering was featured after prices hit a 13-week low last Friday. Bears have the slight overall near-term technical advantage. Prices are in a six-week-old downtrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at $2,000.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,900.00. First resistance is seen at $1,950.00 and then at $1,960.00. First support is seen at last week’s low of 1,919.50 and then at $1,910.00. Wyckoff's Market Rating: 4.5.

July silver futures were up $0.523 at $22.88 at midday and near the session high. Short covering was seen after prices hit a three-month low last Friday. The silver bears still have the overall near-term technical advantage. A choppy, six-week old price downtrend is in place on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $24.00. The next downside price objective for the bears is closing prices below solid support at $21.00. First resistance is seen at $23.00 and then at $23.23. Next support is seen at today’s low of $22.435 and then at the June low of $22.14. Wyckoff's Market Rating: 4.0.

July N.Y. copper closed down 215 points at 378.20 cents today. Prices closed nearer the session low today and hit a two-week low. The copper bulls have lost their overall near-term technical advantage. A four-week-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 410.00 cents. The next downside price objective for the bears is closing prices below solid technical support at the May low of 354.50 cents. First resistance is seen at today’s high of 383.60 cents and then at Friday’s high of 389.10 cents. First support is seen at today’s low of 376.30 cents and then at 373.00 cents. Wyckoff's Market Rating: 5.0.

Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Gold, silver traders tread water ahead of U.S. debt talks, CPI

Comex gold and silver futures prices are not straying too far from unchanged levels at midday Tuesday. Precious metals traders are very tentative ahead of important government and economic developments in the U.S. that will soon come into play for the marketplace. June gold was last up $0.80 at $2,034.00 and July silver was down $0.059 at $25.775.

President Biden later today meets with House Speaker Kevin McCarthy and other congressional leaders to discuss raising or suspending the U.S. debt ceiling. U.S. Treasury Secretary Janet Yellen told lawmakers last week the U.S. could default on its debt as early as June 1 if Congress does not raise or suspend the debt limit before that time. No progress at today’s meeting would likely cause at least a bit of marketplace anxiety.

The U.S. data point of the week is Wednesday morning’s April consumer price index report, which is expected to come in at up 5.0%, year-on-year, which would be the same as reported in the March CPI. The April core CPI is forecast up 5.5% versus up 5.6% in the March report. A Federal Reserve banking lender survey released Monday showed bankers have curtailed loans to customers, which is likely to help tame inflation.

Gold's recent push near all-time highs was just a test run as Citigroup's Morse sees prices hitting $2,400

Global stock markets were mixed overnight. U.S. stock indexes are weaker at midday. Trading has turned choppy and sideways in the stock indexes.

The key outside markets today see the U.S. dollar index higher. Nymex crude oil prices are lower and trading around $72.00 a barrel. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 3.52%.

Technically, June 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 the record high of $2,085.40. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,980.00. First resistance is seen at $2,050.00 and then at $2,063.40. First support is seen at this week’s low of $2,022.00 and then at last Friday’s low of $2,007.00. Wyckoff's Market Rating: 8.0

July silver futures bulls have the solid overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $27.00. The next downside price objective for the bears is closing prices below solid support at $24.00. First resistance is seen at $26.00 and then at the April high of $26.435. Next support is seen at today’s low of $25.57 and then at $25.25. Wyckoff's Market Rating: 8.0.

July N.Y. copper closed down 345 points at 389.50 cents today. Prices closed nearer the session low. The copper bears have the overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 408.00 cents. The next downside price objective for the bears is closing prices below solid technical support at the January low of 372.45 cents. First resistance is seen at this week’s high of 395.95 cents and then at last week’s high of 400.50 cents. First support is seen at this week’s low of 387.65 cents and then at the April low of 381.65 cents. Wyckoff's Market Rating: 4.0.

Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David

Gold consolidates but remains on a ‘golden cross path’ higher – NDR’s Tim Hayes

Gold consolidates but remains on a 'golden cross path' higher – NDR's Tim Hayes

The gold market could continue to consolidate around $2,000 an ounce as the Federal Reserve prepares to raise interest rates one last time and then hold the line until inflation is under control, according to one analyst.

However, even this new holding pattern doesn't dimmish gold's potential. In a recent interview with Kitco News, Tim Hayes, chief global investment strategist at Ned Davis Research, said the trend in gold is clearly higher. He noted that in his Gold Watch report, nine of the 16 indicators he watches are flashing bullish signals.

Hayes' bullish outlook for gold comes as prices continue to trade on either side of $2,000. June gold futures last traded at $2008.20 an ounce, up 0.42% on the day. Hayes explained that the gold market benefits from solid tailwinds as commodity prices remain elevated and bond yields and the U.S. dollar continue to struggle.

"If we see continuing signs of the economy slowing, and the bond market continues to anticipate that the Federal is going to hold interest rates, then yields are going come down and that would help gold break out and regain its momentum," he said.

According to the CME FedWatch Tool, markets see an 80% chance that the Federal Reserve will raise interest rates one last time by 25 basis points next week. At the same time, markets are pricing in a potential rate cut after the summer.

Although market expectations of a rate cut this year might be premature, Hayes said that just the Fed holding interest rates should be enough to support gold as other tailwinds drive the precious metal.

Along with real and nominal yields, Hayes said that gold investors must keep an eye on the U.S. dollar. While the Federal Reserve appears to be on the cusp of ending its tightening cycle, the Bank of England and the European Central Bank are ramping up their rate hikes.

Hayes said the narrowing divergence in global monetary policy will continue to hurt the U.S. dollar and support gold prices.

"As long as the dollar is under downward pressure, that will be solid support for gold," he said.

Gold remains well positioned to protect investors from further market turmoil – MarketVector's Yang

As for how long gold's current consolidation phase could last, Hayes said prices have a long way to go before the uptrend is significantly damaged.

Looking at gold's technical picture, Hayes said its bullish uptrend was confirmed in January when the 50-day moving average moved above its 200-day moving average, creating a "golden cross pattern."

At roughly around the same time, the U.S. dollar saw its 50-day moving average fall below its 200-day, forming a "death cross."

"We are nowhere near testing gold's 50-day moving average, but that has to start rolling over to signal that the uptrend has finished," he said. "I think what is probably more like is that we're pausing at these record levels, consolidating and maybe the market kind of works off some of the optimism and then the trend continues – gold's on a solid golden cross."

Neils Christensen

For Kitco News

Time to Buy Gold and Silver

David