Financial markets and precious metals meltdown, as U.S. dollar trades higher

As of 4:00 PM EST the equities markets are closing for the day and still settling. Today’s market action can best be described as brutal, with all three major indices and the entire precious metals complex trading dramatically lower. Currently the Dow Jones industrial average is trading 510 points lower, and currently fixed at 27,147.24. The Dow was down well over 800 points before slightly recovering in the last couple hours of trading.

The Standard & Poor’s 500 and the NASDAQ composite also lost value today. The S&P 500 gave up 53 points (-1.59%) and is currently fixed at 3267.09. The NASDAQ composite traded lower on the day but sustained the smallest percentage drawdown of all three indices. Currently the tech heavy index is down 39 points and fixed at 10,754, this is a decline of approximately -0.36%.

The precious metals also sustained major drawdowns with gold, silver, platinum and palladium all trading lower today in the futures and spot markets. Gold futures basis the most active December contract is well off of its lows achieved earlier in trading today, but still sustained damage to the tune of a – 2.23% decline in value. December futures are currently fixed at $1918.30 which is a net decline of $43.70 on the day. However, in trading today gold actually went to an intraday low of $1885.40 before recovering and moving back above $1900 per ounce.

Dollar strength was only a small component of today’s massive decline in gold pricing. Spot gold is currently fixed at $1912, which is a net decline of $36.90 on the day. On closer inspection according to the KGX (Kitco Gold Index) only $11.30 is the direct result of dollar strength. The remaining decline of $25.60 was the result of traders and market participants bidding the precious yellow metal lower.

Platinum futures lost approximately -5 ½%, taking that precious metal to $886.60, after factoring in today’s decline of $51.90. Palladium futures lost -3 ½% in trading today, this resulted in a decline of $83.80 taking that precious metal to $2,297 per ounce.

The largest percentage drawdown for the precious metals occurred in silver futures, with the most active December contract trading – 8.38% lower on the day. After factoring in today’s decline of approximately $2.26 silver futures are currently fixed at $24.86. According to the KGX, spot silver lost $2.07 in trading today with dollar strength accounting for only $0.15 of todays losses, and the remaining drawdown of a $1.92, the direct result of selling pressure.

According to analysts and reported by Kitco News there were three basic factors which took the precious metals dramatically lower today. These factors were pandemic fears, U.S. dollar strength, and uncertainty about the upcoming presidential election in the United States. In an article penned by Neils Christensen, Editor of Kitco News, he said,

“A perfect storm is brewing that has pushed gold and equity markets down nearly 3% on the day, analysts said. The two markets are seeing their fortunes tied to stimulus measure expectations, which have significantly declined in the last few days.”

On a technical basis gold did sustain major chart damage as it traded and closed below the 50-day moving average for the first time since June of this year, when prices moved below the 50-day moving average for a total of two trading sessions.

The question gold and silver traders must ask is whether or not today’s dramatic selloff in both gold and silver are signaling lower pricing ahead? And whether today’s selloff will allow traders an opportunity to buy the dip? Considering that gold traded to an intraday low of $1,885, there were certainly market participants buying the dip at the intraday lows. With the 50-day moving average currently at $1,940, we would need to see gold rise by approximately 22 ½ dollars before prices would have moved back above the 50-day moving average.

 

 

By Gary Wagner

Contributing to kitco.com

 

 

David

Gold price begins the week in positive territory as analysts eye new U.S. election risk, dollar, and Fed speakers

The yellow metal is beginning the trading week holding above $1,950 an ounce as analysts eye new U.S. election risk, the U.S. dollar and a slate of Federal Reserve speakers.

Last week, gold was able to eke out a nearly 0.5% gain while largely trading in a range between $1,950 and $1,975 an ounce. This marked a second consecutive weekly gain since the end of July.

At the time of writing, spot gold was at $1,954.20, up 0.25% on the day.

“From a technical perspective, it is hard to get excited about gold at the moment as it continues to chop between $1,900 and $2,000, and it has not seen the extremes in a month. It is near the middle of the range,” said Bannockburn Global Forex chief market strategist Marc Chandler.

All eyes will be on the Federal Reserve speakers this week after the media embargo has been lifted.

“Brainard speaks Monday, followed by Evans and Barkin Tuesday. Chair Powell appears before the House Financial Services Panel with Treasury Secretary Mnuchin Tuesday, appears by himself before the House Panel on Covid-19 Wednesday, and appears with Mnuchin again before the Senate Banking Committee Thursday. Mester, Evans, Rosengren, Quarles, and Daly all speak Wednesday, followed by Bullard, Evans, and Barkin Thursday and then Williams Friday,” summarized said BBH Global Currency Strategy’s Win Thin and Ilan Solot.

New U.S. election risk in also on the table with the death of liberal Supreme Court Justice Ruth Bader Ginsburg on Friday.

“News of Judge Ginsburg’s passing is an incredibly important political factor in the US election, especially if we see the conservative Amy Coney Barrett getting the job,” Pepperstone head of research Chris Weston said on Sunday.

This biggest impact will likely be on risk assets, Weston added. “The markets may struggle to price this accordingly and cleanly understand whether this plays into a greater prospect for Trump, or simply brings out more votes for the Democrats as many of the more moderate swing voters change to prior allegiances,” he wrote.

The U.S. dollar is likely to remain under pressure this week, which should help gold remain well supported, according to some analysts.

“DXY traded Friday at the lowest level since September 10 and a break below the 92.478 area is needed to set up a test of the September 1 low near 91.746,” said Thin and Solot. “The weak dollar trend should continue this week as we remain negative on the dollar due to the now-familiar combination of an ultra-dovish Fed and softening U.S. economic data.”

The U.S. dollar index was last trading flat at 92.84, down 0.09% on the day.

A number of datasets this week could also have an impact on gold prices, especially the U.S. durable goods orders scheduled for Friday.

“Durable goods orders will be preliminary and anything modestly below expectations will likely mean the market will believe that the Fed will do more,” TD Securities head of global strategy Bart Melek told Kitco News on Friday.

Other reports to pay attention to is Tuesday's existing home sales, Wednesday's manufacturing PMI as well as Thursday's jobless claims and new home sales numbers.

Analysts have warned to keep close tabs on a potential rush to cash as the U.S. November election approaches.

“One of the primary catalysts of the metals market until we get a little closer to the election is going to be the equity market,” said Kitco Metals global trading director Peter Hug.

The valuation in the equity space is concerning considering the economy is still in the beginning stages of its recovery, Hug noted.

“When only 30%-40% of the economy is open of pre-COVID levels, the valuation is as if the economy is at full guns. Something is not balanced here and if the market takes a big hit, people might be moving into cash ahead of the election,” he said.

Also, the possibility that the November election of being contested is adding another layer of complexity, said Melek. “This is potentially very problematic," he explained. “Political uncertainty tends to benefit gold. But if we have a full rout liquidity crisis, it is not going to be good for anything. People will go back into cash.”

 

By Anna Golubova

For Kitco News

 

 

David

Advice for gold investors – go on holiday

There is relatively little exploration activity in Latin America compared to Canada and U.S., said Paul Harris, Kitco's special correspondent, on Friday during Kitco's podcast.

Harris was joined by editor Neils Christensen and mining audiences manager Michael McCrae. Special guest was Nathan Tribble, VP of exploration at Gatling Exploration (CVE:GTR). Gatling owns the Larder high-grade gold project in Northern Ontario. Larder is host to three high-grade gold deposits along the Cadillac-Larder Lake Break.

At Beaver Creek conference last week, which was covered by Harris, he noted lots of exploration news from Quebec, Yukon, Nevada, Idaho and Alaska–all North American jurisdictions.

"There seems to be very little activity in Latin America, although the geology is there. There can only be two factors: political risk and the incredible advantage Canada has with the flow-through financing," said Harris.

 

Harris was also struck by Ross Beaty's advice to the crowd at the conference. The founder of Pan American Silver and Equinox Gold told the audience not to worry about all the market gyrations. Just go on holiday, check your gold holdings and in a year from now all will be higher, said Beaty.

The panel also discussed Canadian nickel junior Giga Metals moving higher off rumors that the company may be in talks with Tesla, and Northern Dynasty getting a lift when Trump tweeted earlier this week that there will be "no politics" in the mine review process.

 

By Michael McCrae

For Kitco News

 

David

Gold price is flashing a 'very good sign' – Peter Hug

It's a "very good sign" that gold has consolidated between a support level of $1,925 oz and $1,975 an ounce for the better part of two weeks, said Peter Hug, head of Kitco’s precious metal division.

"The fact that people are not selling into a market that isn't as frenetic as it was a month or six weeks ago indicates to me that this market is setting up for the next leg higher," Hug told Kitco News on Wednesday.

Yesterday, the Federal Reserve announced they were keeping interest rates at current levels through 2023 as they look for economic growth to pick up. The Fed Chairman Jerome Powell gave a press conference regarding the central bank's decision.

Hug said Fed officials seemed nervous about the economic recovery "…and the legs this economy is going to have".

"[About] three Fed meetings ago they indicated they would hold rates at pretty much zero through the end of 2021. They've extended that by an additional year. Some analysts are expecting that they will keep rates at zero right through 2024."

Hug said that with the Fed "…being a bit more accommodative on inflation indicates to me, it's a very positive environment for hard assets in general."

Regarding physical supply of precious metals, Hug noted that the stability has led to more inventory.

"I see this market as running sideways as long as we don't get another rush into the buying side from the retail investor. In another two- to four-weeks, there'll be reasonable inventories on the market," said Hug.

 

By Michael McCrae

For Kitco News

 

David

Gold prices to average above $2,000, Silver to average above $30 through 2024

Gold and Siver’s imp[resive rally this summer is just the start of the precious metal bull market, according to one Canadian Bank.

In areport published Tuesday, commodity analysts at CIBC upgraded their gold and silver forecasts for the rest of the year into 2021. The analysts said that they see gold prices averaging the third quarter around $1,925 an ounce. The average goes up to $2,000 for the fourth quarter, the analysts said.

Looking ahead, CIBC sees gold prices averaging $2,300 an ounce in 2021, $2,200 an ounce in 2022, $2,100 in 2023 and $2,000 an ounce in 2024.

“The outlook for continued low real interest rates, increasing government debt burdens coupled with geopolitical uncertainty arising from the upcoming U.S. election are all supportive of further significant price appreciation,” the analysts said.

Looking at silver, the Canadian bank sees the precious metal averaging $25 in the third quarter; in the fourth quarter the average price is expected to rise to $28 an ounce.

Looking ahead, CIBC sees silver prices averaging $32 an ounce in 2021, $31 an ounce in 2022, $30 in 2023 and $28 in 2024.

“Even though the commodity has already performed well year-to-date, this metal has potential to provide investors with even more torque given the relatively smaller market for silver vs. gold,” the analysts said.

The analysts said that gold investor should continue to watch real interest rates as a critical factor to drive prices in the long-term. They added that they also expect to see central banks inject more liquidity to support financial markets.

“While we appear to be in the midst of another round of QE with significant uncertainty surrounding the magnitude and length of a global recession, real rates below 2% are here to stay in the near term,” the analysts said. “The gold and silver price has already reacted favorably to fundamentals, but could still have room to move higher if history repeats itself.”

The bank also sees further weakness in the U.S. dollar as another important factor to support gold and silver prices.

“The USD remains under pressure with COVID-19 far from being under control and some pandemic stimulus measures set to roll off over the coming months. The USD’s period of dominance is likely over for some time as the country struggles under a heavy debt load, high unemployment, and continuing trade war uncertainty,” the analysts said.

 

By Neils Christensen

For Kitco News

David

Gold to outperform silver into year-end, $4K gold price not ruled out by 2023 – Bloomberg Intelligence

Gold is looking to outperform silver into year-end, according to Bloomberg Intelligence, which is not ruling out $4,000 gold by 2023, noting that the gold bull rally is just beginning.

After breaking $2,000 an ounce level, gold has been stuck in a trading range between $1,930 and $1,980 an ounce. But despite the several-week hiatus from major price action, gold will still do better than silver in the second half of the year, said Bloomberg Intelligence senior commodity strategist Mike McGlone.

“The done-deal nature of continued central bank easing is a solid foundation for gold, but less so for silver and copper prices. Industrial metals are dependent on more fiscal stimulus and a global economic rebound, yet increasingly vulnerable to normal stock-market mean reversion,” wrote McGlone in the latest monthly commodity update.

For silver to outperform gold on a continuous basis for the rest of the year, the market will have to see a combination of rising bond yields, a peak dollar, declining stock-market volatility and continued global economic expansion. In Bloomberg Intelligence’s view, this scenario is unlikely.

“Gold should continue appreciating into year-end, notably vs. silver, copper and base metals, which are more at risk to a wobbly stock market and slack global economic growth, in our view,” McGlone said. “If stock prices decline, gold's upper hand should accelerate as base metals come under pressure.”

Moreover, the gold’s bull rally is just beginning, noted the report. “Gold bottomed at about $700 in 2008 and peaked near $1,900 in 2011. A similar-velocity 2.7x advance from this year's low-close near $1,470 points toward $4,000 by 2023,” McGlone explained.

The stock market will play a big role in gold’s performance going forward, with fortunes turning towards the yellow metal.

“If history is a guide, equities will eventually experience a bear market. Stocks' rapid ascent the past few years has left gold by the wayside. Prospects appear to be increasing for an extended period of trading places for the asset classes,” McGlone noted.

Despite this optimistic view on gold, the report warned that $2,000 an ounce will prove to be a strong resistance level because the yellow metal looked overheated above that level. However, even though it might take gold some time to breach $2,000 an ounce on a sustained basis, in the long-term gold is heading much higher.

“The stair-step rally in gold is set for some leveling off, in our view. This is expected in a bull market, especially in early resumption days, but our graphic shows the propensity for gold to pull back and consolidate gains when reaching similar relatively extended levels in the past,” McGlone said. “It looks to us like gold's bullish run is just beginning.”

 

Some of the main drivers supporting gold into the year-end include central bank easing, uncertainty surrounding a V-shaped economic recovery, fiscal stimulus and stock-market volatility.

“Gold has the catalysts to maintain performance leadership into year-end, in our view,” McGlone wrote. “Central-bank rate easing and U.S. bond yields gravitating toward zero are solid underpinnings for gold, as is the potential for increased U.S. stock-market volatility approaching the presidential election. Less certain is global fiscal stimulus and an economic recovery, typically needed to buoy industrial metals.”

 

By Anna Golubova

For Kitco News

 

 

David

Gold/silver – all eyes on the Fed this week

It was a rangebound week for gold futures by remaining well inside the bullish "falling wedge pattern" while at the same time, major equity indices fell 10% off their contract highs led by an overheated tech sector. Remember, when markets go parabolic, volatility rises; therefore, you need to reduce your long positions from a tactical portfolio management strategy while increasing your short positions because we know a correction is just around the corner. Long story short, "do not overstay your welcome."

Reviewing the underlying themes for gold and silver in my notebook, this week, the ECB left its policy on hold while growth projections had increased, and they will monitor the impact of the euro on inflation. I suspect that ECB prefers to wait and see what the Fed will do this coming week. The Fed will most likely state that "the committee expects to maintain a target range until it is confident that inflation will run 2% for some time," while increasing QE buying.

 

Technical view of the gold market

Gold stalled at major three-star resistance last Thursday at 1973-1976.6 with a high of 1975.2. Despite Thursday's early strength, given the failure and overall consolidation, our momentum indicator continues to hold within previous resistance at 1955.5-1958, our Pivot, and a level in which gold spent quality time overnight. A close outside of 1973-1976.6 and 1928-1932 will encourage direction buying or selling.

I went back through 20 years of my trading strategies to create a Free New "5-Step Technical Analysis Guide to Gold," which you should print out. The guide will provide you with all the Technical analysis steps to create an actionable plan used as a foundation for entering and exiting the market. You can request yours here: 5-Step Technical Analysis Guide to Gold.

Our strategy on gold

If you did not get our recommendation before 1910 hit, you might want to adjust your initial entry to 1930. Otherwise, if you have been working with us and you were and are looking to position in gold for the long run; we suggested that our clients consider using FOUR Micro 10 oz December Gold contracts per $25,000 and buying TWO at 1910 and TWO at 1855, with a stop at 1790. Doing such would ideally risk $3,700. We would look to a gold target of 2275/oz, which would allow for a profit of $15,700. If you would like to be up to date on the developments of our strategies in the futures and commodities markets, please register for a Free two-week trial by clicking on the link here: The Blue Line Express Two-Week Free Trial Sign up.

 

By Phillip Streible

Contributing to kitco.com

 

David

Mining's biggest face-to-face goes virtual

With PDAC 2021 announcing an all virtual show due to COVID-19 concerns, juniors and miners will have to learn to adapt.

The Kitco podcast discussed the impact of PDAC's annual convention, the industry's biggest yearly get-together, on going virtual. Oreninc CEO Stephen Stewart joined special correspondent Paul Harris; editor Neils Christensen; and mining audiences manager, Michael McCrae, to record a podcast on Friday.

"Well first and foremost, it's a shame. I'm sad that the PDAC is not going to be in person, and while I see the value in Zoom calls…it's just not the same. I think that's such an important aspect of the PDAC is these face-to-face interactions with your colleagues and friends," said Stewart.

"You know, the collision…that tends to occur at an event where you get 25 or 30 or 5,000 people in the same space from all over the world. There's just no way you can recreate the magic that occurs at the PDAC."

Restrictions on social interactions forced PDAC organizers to make the change.

"As the COVID-19 pandemic continues to affect travel and major gatherings, we recognize that staying connected is more important than ever for members, exhibitors, sponsors, attendees and numerous partners. The decision to move forward with a virtual event offers a safe and innovative solution for the industry to access our outstanding programming, investment and networking opportunities," wrote the PDAC in a news release.

The convention will be held March 7-10. Exact dates and scheduling are pending. Kitco News will be a media partner.

"PDAC is one of the top industry shows. For the past 12 years, Kitco News has enjoyed covering the event, connecting with newsmakers, exhibitors, attendees and sponsors. In support of the decision to go virtual, Kitco is a committed PDAC media partner will provide extensive virtual coverage of the event," said Kitco's media director, John Dourekas. "During these challenging times, we will take the opportunity to use technology and innovation to find new ways that allow people to connect online."

The panel also discussed Rio Tinto resignations over the destruction of a culturally significant Indigenous site. In May a 46,000 year-old rock shelter was detonated by Rio Tinto to expand its iron ore mine in Western Pilbara. Paul Harris weighed in on the impact of the C$78 million bought deal investment by billionaire Eric Sprott in First Majestic Silver.

 

By Michael McCrae

For Kitco News

David

Upcoming influencers for gold pricing

Market participants and investors will focus on two primary factors which could have a profound impact on market sentiment. The two factors are the upcoming FOMC meeting scheduled to begin next week, and the Treasury Department’s report that this year’s budget deficit is nearly triple when compared to last year.

The United States Treasury Department reported today that the federal budget deficit in the United States is now above $3 trillion with one month remaining for fiscal 2020. This is more than double the federal budget deficit for 2019. In August alone expenditures created an additional $200 billion in debt.

According to the Associated Press, “The U.S. budget deficit hit an all-time high of $3 trillion for the first 11 months of this budget year, the Treasury Department said Friday. The ocean of red ink is a product of the government’s massive spending to try to cushion the impact of a coronavirus-fueled recession that has cost millions of jobs.”

The Associated Press report also said that with one month to go in the 2020 fiscal year, the deficit could go even higher. The Congressional Budget Office is forecasting the deficit for this year will reach a record $3.3 trillion.

Considering that the budget deficit last year came in at $984 billion, the capital expenditure allocated by the U.S. Treasury Department to fund the ‘cares act’ has in essence tripled the budget deficit from 2019. In fact, this year’s budget deficit is more than double the record deficit of $1.4 trillion which occurred in 2009.

One huge factor which will temper this tremendous debt is that the government’s interest cost to finance is actually down 10% this year, currently at $484 billion when compared to the cost of interest payments the government incurred last year. This is do to interest rates currently being near zero.

Beginning next week, the Federal Reserve will convene for the September FOMC meeting. Current consensus expects that the Federal Reserve will continue its current monetary policy. This policy which has set the Fed funds rate near zero, with quantitative easing allocating purchases of approximately $120 billion per month, as the Fed adds mortgage backed securities, treasuries and corporate bonds to their asset balance sheet is weighing heavy on traders’ minds.

According to Magnify Money, “The Fed also extended the life span of its loan and liquidity facilities, recognizing the recovery may take longer than originally planned. Still, the Fed continues to call for further fiscal support from Congress and the Department of the Treasury to avoid long-lasting economic and societal damage.”

It is expected that during next week’s meeting Federal Reserve members will focus on its main framework to achieve its dual mandate of maximum employment and controlled inflation, although more emphasis is currently being put upon the employment side. It is highly unlikely that the Federal Reserve will raise interest rates.

Both factors, the expanding budget deficit and next week’s FOMC meeting should be supportive of the bullish sentiment that has existed in the safe-haven asset class, i.e. gold.

Gold futures basis the most active December 2020 Comex contract sustained moderate losses today giving up approximately 8/10 of a percent, and is currently fixed at $1948.10.

 

By Gary Wagner

 

 

David

AM-PM Roundup

Gold, silver firmer amid weaker greenback

Gold and silver prices are modestly up in midday U.S. trading Thursday, supported in part by a weaker U.S. dollar index on this day and by the overall bullish chart postures for both metals. Prices are well their daily highs, however. October gold futures were last up $8.50 at $1,955.30 and December Comex silver was last up $0.157 at $27.245 an ounce.

Global stock markets were mostly weaker overnight. U.S. stock indexes are weaker at midday. Traders and investors are wondering if the rebound in the U.S. stock market will continue, following solid gains posted in the stock indexes Wednesday. The months of September and October can produce serious turbulence in the stock and financial markets. New turmoil in the stock markets should benefit the safe-haven gold and silver markets.

The regular monetary policy meeting of the European Central Bank was Thursday. The ECB did not make any significant changes in policy, as expected, and said rates will remain low until inflation hits its target rate of around 2% annually.

The important outside markets today see the U.S. dollar index slightly weaker but well up from its daily low, following decent gains posted earlier this week. Nymex crude oil prices lower and trading around $37.75. The yield on the U.S. Treasury 10-year note is trading around 0.7% today.

Technically, October gold futures bulls have the firm overall near-term technical advantage amid recent choppy trading. Prices are still in a five-month-old uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close in October futures above solid resistance at the September high of $1,992.50. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,900.00. First resistance is seen at today’s high of $1,966.60 and then at $1,972.40. First support is seen at today’s low of $1,942.80 and then at $1,925.00. Wyckoff's Market Rating: 7.0

December silver futures bulls have the firm overall near-term technical advantage amid a five-month-old price uptrend still in place on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at the September high of $29.235 an ounce. The next downside price objective for the bears is closing prices below solid support at $25.00. First resistance is seen at today’s high of $27.755 and then at $28.00. Next support is seen at Wednesday’s low of $26.565 and then at this week’s low of $25.985. Wyckoff's Market Rating: 7.0.

December N.Y. copper closed down 535 points at 299.80 cents today. Prices closed nearer the session low today. The copper bulls have the solid overall near-term technical advantage as prices are in a 5.5-month-old uptrend on the daily bar chart. However, the recent higher volatility at higher price levels is a warning signal that a topping process could be occurring. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the September high of 309.45 cents. The next downside price objective for the bears is closing prices below solid technical support at the August low of 279.60 cents. First resistance is seen at today’s high of 305.90 cents and then at 309.45 cents. First support is seen at today’s low of 298.15 cents and then at last week’s low of 295.35 cents. Wyckoff's Market Rating: 7.5.

 

By Jim Wyckoff

For Kitco News

 

David