Gold decline continues after last week’s strong weekly price drop

Gold decline continues after last week’s strong weekly price drop

Prices of both spot and futures gold declined between 0.30% and 0.40% today, a direct correlation to dollar strength and higher U.S. Treasury yields. The dollar gained 0.35% in trading today taking the index to 103.05. After last week’s dramatic decline in gold, the first trading day of the week is indicating a continuation of the down-trend based on the most recent economic data.

Economic strength and continued inflation will result in a “No Landing” scenario

Last week, data showed that the U.S. CPI (Consumer Price Index) rose moderately in July. But because producer prices increased slightly more than expected, members of the Federal Reserve are expressing concerns that their fight against inflation is not over and as a result could keep rates higher for longer.

The most recent economic data shows that the economy in the United States is strong and resilient and for the most part has led the Federal Reserve and economists to believe that a recession is not likely. The new acronym for the end game from the aggressive monetary policy of the Fed is no longer a “hard landing” or a “soft landing” but a “no landing”.

The meaning behind this acronym is that economic growth that is too strong to allow inflation to fall to the Fed’s target of 2% easily, suggesting that the Fed will need an additional rate hike to secure the proper path to their 2% target.

However, according to the CME’s FedWatch tool that will not occur at next month’s FOMC meeting with an 88.5% probability that the Federal Reserve maintain its current interest rate of between 5 ¼% and 5 ½%. Investors are awaiting the next important event the release of last month’s FOMC meeting minutes on Wednesday.

As of 3:35 PM EDT, gold futures basis the most active December contract is currently trading down $6.70 or -0.35% and fixed at $1939.80. This after breaking below a key technical price level the 50-day simple moving average last week. Spot or Forex gold is currently trading -0.27% lower and fixed at $1907.80.

Dollar strength is entirely responsible for gold’s price decline today. It was certainly the major component moving gold lower. The dollar is currently up 0.32% and the index is fixed at 103.015.

On a technical basis, we could see continued downside pressure in both gold and silver as dollar strength continues to dominate price fluctuations in the precious metals. If gold prices continue to fall look at the current major support level which is between $1888 and $1906.

Gary S. Wagner

Time to Buy Gold and silver

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Gold and silver move lower heading into the European open Gold and silver have moved lower overnight. The yellow metal is trading -0.20% lower at $1809/oz while silver lost around -0.40% to trade at $25.29/oz. In the rest of the commodities complex, there

Gold and silver move lower heading into the European open

Gold and silver have moved lower overnight. The yellow metal is trading -0.20% lower at $1809/oz while silver lost around -0.40% to trade at $25.29/oz. In the rest of the commodities complex, there is pretty much weakness across the board. Copper is -0.31% lower while spot WTI has also moved -0.68% in the red.

After a mixed close on Wall Street, it was pretty much a negative bais in Asia. The Nikkei 225 (-0.50%), ASX (-0.23%) and Shanghai Composite (-0.71%) all traded in negative territory. Ahead of the cash open in Europe futures markets are painting a mixed picture. The FTSE and EuroStoxx are negative while the CAC40 and DAX look firm.

In FX markets, the antipodeans were firm as both NZD and AUD strengthened against the U.S. dollar. There was also a mild bout of JPY strength as USD/JPY moved -0.18% lower. In the crypto space, BTC/USD declined again and now trades at $38,316.

Looking at the major stories from overnight, the RBA left its cash rate unchanged at 0.10% in the August monetary policy decision. The central bank announced no change to its QE/tapering plans for the time being, brushing aside the recent virus outbreak by saying that if it gets contained then the economy would be able to bounce back quickly.

China market regulator launches investigation on auto chip distributors.

Japanese officials say the COVID-19 hospital bed situation has become severe.

Fed's Waller concedes a tapering announcement could come in September.

Gaming stocks were hit in China as the government announced a crackdown on firms.

The RBNZ is now considering tighter lending as the housing market prices are above a "sustainable" level.

Wuhan city will now be conducting city-wide COVID-19 tests as some infections were found.

Looking ahead to the rest of the session highlights include EU PPI, Canadian manufacturing PMI, U.S. factory orders, and comments from Fed's Bowman and Clarida. SEC Chairman Gary Gensler, who has said he's no cheerleader for digital assets, is scheduled to speak about cryptocurrencies at the Aspen Security Forum.
 

By Rajan Dhall

For Kitco News
 

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