Gold surges past $1,800 on dollar weakness and omicron fears

Both gold and silver had significant gains resulting from a combination of dollar weakness and continued fears regarding the economic effect of the Covid-19 variant omicron.

One simply needs to view both precious metals through the eyes of the KGX (Kitco Gold Index) to see the strong effect that dollar weakness had on the precious metals complex. As of 4:08 PM, EST spot gold is currently fixed at $1804.80, which is a net gain of $15.70 on the day. On closer inspection, we can see that dollar strength contributed approximately half of today’s price search. Dollar weakness accounted for net gains of $7.90, and normal trading added $7.80, which resulted in gold surging past $1800 per ounce.

Spot silver pricing also benefited from dollar weakness today. However, in the case of silver, normal trading accounted for two-thirds of today’s net gains. The KGX showed that silver gained a total of $0.31 today and is currently fixed at $22.80. Unlike gold, silver gained $0.10 as the direct result of dollar weakness and $0.21 as the result of normal trading.

Gold futures basis the most active February 2021 Comex contract is currently up $16.50, or 0.92%, and fixed at $1805.20. Gold prices are currently very close to the intraday high of $1806.30, well off the intraday low of $1785.80.

One interesting aspect of the financial markets over the last few days has been traders focusing on the Covid-19 variant, omicron. It’s almost as if equity traders and precious metal traders have been oscillating between concerns that the variant will result in major economic contractions during the trading session or completely disregard concerns which was the case today. Traders in the U.S. equity markets disregarded any concerns regarding the variant, and precious metals chose to focus upon it.

It must be noted that we are trading during a pre-holiday period, which will continue to create volatility due to the thin volume. Concern about the spiraling level of inflation continues to be a forefront concern. However, for the most part, traders and market participants in both the equities and precious metals markets have now baked the increased amount of rate hikes expected from the Federal Reserve. Currently, market participants have factored in a total of six rate hikes, three interest rate hikes in 2022 as well as three rate hikes in 2023.

Our technical studies indicate that although gold solidly traded above the key psychological level of $1800, current pricing at $1804.70 puts it right at the 61.8% Fibonacci retracement level at $1804.60. Our studies also indicate major resistance that occurs at $1815. The first level of support is currently fixed at $1788.80 which is based upon a support trendline created from the compression triangle which occurred over the last three months (see gold chart). Below that the next support level occurs at $1784.90 which is based upon a 78% Fibonacci retracement. Major support currently resides at $1770.30 which is the 38% Fibonacci retracement based upon the longest data set used in our studies. This data set begins at the highs of $1920 that occurred during the first week of June down to $1678, the low that occurred the first week of August.
 

By Gary Wagner

Contributing to kitco.com

Buy Gold and Silver on Dips and earn monthly yields on holdings

David

Only gold and Bitcoin will protect against what's to come – Alex Mashinsky's 2022 survival guide

2022 will be a year of heightened volatility from growing fears of the latest Omicron variant, as well as rising inflation, and the chance of monetary tightening from the Federal Reserve, said Alex Mashinsky, CEO of Celsius Network.

The key is to look at which economic scenario is most likely to play out and act accordingly.

“If there’s a lot of volatility because inflation is out of control [and go into] the double digits then gold and Bitcoin are going to become safe assets. But, if we have single-digit inflation and the Fed is fighting it, then all assets are actually going to lose value because everybody is going to be hurting,” he said. “And, if the opposite…if the Fed decides that inflation is not an issue and they can accommodate longer, then all asset prices are going to go up. So, we have several scenarios here and we have to watch very carefully what happens with each print each month and make decisions based on that.”

For Mashinsky’s outlook on gold, Bitcoin, the U.S. dollar, and the future of technological innovations, watch the video above.
 

By David Lin

For Kitco News

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David

Gold trades under pressure back below $1800 as investors focus on Fed

As of 4:10 PM EST gold futures basis, the most active February 2021 Comex contract is currently fixed at $1789.80 after factoring in today’s net decline of $15.10 (-0.84%). Gold opened at $1800.20, traded to a high of $1804.60, and is currently trading $0.90 off the intraday low of $1789.

U.S. equities were dragged down today by concerns of the new Covid-19 variant “Omicron.” The Dow lost 433 points (-1.43%), the S&P 500 gave up 1.06%, and the NASDAQ composite declined by 1.17%. However, it seems that market participants who trade and invest in gold did not have the same concerns as in the U.S. equities markets.

Instead, market participants continue to focus upon the Federal Reserve’s plan to accelerate the tapering timeline of their asset purchases and implement rate hikes next year. According to the most recent information from the Federal Reserve, their likely course of action will be to implement three rate hikes in 2022 and an additional three rate hikes the following year in 2023. Although the rate hikes the Federal Reserve will implement will be subtle and small steps of 25 basis points (1/4%) these hikes would raise the Fed funds rate to 1 ¾ % by the end of 2023.

Our technical studies indicate strong resistance at $1815 per ounce. This is based upon intraday highs that occurred in mid-October, the end of November, and last Friday. On Friday, gold traded to an intraday high of $1815 and closed at the 61.8% Fibonacci retracement of the November rally. During the November rally gold traded from a low on November 3 of $1758 to a high of $1870.60 on November 16. These technical studies confirm that $1815 is the current level of strong resistance. The next level below that occurs between $1804.60 (the 61.8% retracement point) and $1800 per ounce, a key psychological level.

Silver experienced a strong decline today, giving up 1.17%, or a total of 26.3 cents which takes the most active Comex contract to $22.27. Our technical studies indicate support at $21.50. This is based upon two significant lows that occurred first on September 29 and then on December 15. We currently see major resistance at $23. This is based upon the 78% retracement from a data set that begins at the highs achieved in silver of $28.88 that occurred on May 17 of this year to the double bottom we spoke about at $21.50.

With the holiday season underway, we would expect to see light volume and the choppy market as we get closer to the beginning of the Christmas holiday season commencing. Then between Christmas and New Year’s we expect to see very light participation from major traders as they celebrate the holiday season.
 

By Gary Wagner

Contributing to kitco.com

Buy Gold and Silver on Dips and earn monthly yields on holdings

David

Can gold price keep its post-Fed gains?

In a surprising year-end move, gold rose to three-week highs after the Federal Reserve meeting. Is the tide turning for gold or is it another bull trap? Here's a look at Kitco's top three stories of the week:

 

3. Gold price hits daily highs as Powell explains 'real-time' policy making, inflation and maximum employment

2. Gold price rallies amid keener risk aversion Friday

1. Tide will turn for gold price in 2022 as real yields remain low despite Fed rate hikes

By Anna Golubova

For Kitco News

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David

Is gold price in a bull trap? 'December is the hardest month to trade' – analysts

The gold market has responded very well to a more aggressive Federal Reserve tightening stance, rising around $40 since Wednesday. But what's next will be critical, according to analysts.

After the precious metal breached the $1,800 an ounce this week, the next important signal will be what gold does at this strong resistance level.

Gold rose post-Fed announcement, which saw its tapering schedule accelerated and three potential rate hikes priced in for 2022. Analysts said most of that was largely priced in.

"The environment leading up to the FOMC decision has been difficult for gold. The precious metal needed to have Wall Street come into agreement as far as what that tightening policy will be like over the short term. Once the markets were able to process Fed's accelerated tapering, which was well telegraphed, Wall Street knew about the massive shock you are going to see when Fed is done buying assets," OANDA senior market analyst Edward Moya told Kitco News. "For gold, once you saw that knee-jerk selloff towards $1,750, that was the time the majority of gold's short-term weakness was priced in."

Now, the market could be shifting into more of a safe-haven mode, with many remaining unconvinced that the Fed could pull off three rate hikes next year.

"There is some skepticism about whether the Fed will be able to follow through on what the FOMC and Powell indicated this week. Three rate hikes could be unlikely. There is an idea that the Fed is setting itself up to fall short of those expectations," said Gainesville Coins precious metals expert Everett Millman.

That's the classic playbook for the Fed — try to use rhetoric and public communications to influence market behavior without having to change monetary policy. And that's what might be happening with the three rate hikes. "That's the ideal situation for the Fed," Millman said. "And by anchoring everyone's expectation on hawkishness for next year, gold is up because there is still some market resistance."

Markets are also cautious as the COVID-19 Omicron variant continues to spread. "There are many risks next year, where the Fed could walk back this hawkishness and have very legitimate reasons to say that they're going to keep stimulus in place or they're not going to raise interest rates. So the possibility of that is part of why gold is up," Millman added.

There is a growing concern around how strong the economic recovery will be next year due to the Omicron variant and higher rates.

"When you look at the Treasury curve, the long end is not rallying. Yields are not going higher," Moya said. In 2023, we are back to around 2% growth and we still have several risks to the outlook. You already have a lot of people talking about potential recessions in 2023-24. That is something that will be supportive for gold."

Post-Fed is the time for gold price to take the reigns, says Standard Chartered

Tough December trading

December is one of the toughest months to trade, and with volatility extremely low starting next week, gold prices could be in for a wild ride.

"December is the hardest month to trade. The usual correlations can be thrown out the window. I would refrain from high-frequency data as it would not necessarily lead to a clear-cut reaction for gold. The rest of this year will be rather difficult. But risks to the outlook will attract inflows for gold because people will want that protection. Any hint of unbalanced economic recovery or delay in the tightening cycles would be supportive for gold," Moya noted.

Moya is neutral on gold for the rest of the year because of the thin market conditions noticeable starting next week. "One thing that could trigger a strong move in gold is if we see Omicron jitters settle in, could trigger panic selling. Traders might resort to selling gold," he said.

Millman warns of a potential bull trap for gold next week, citing timing. "We're at the end of the month, end of the quarter, and approaching the end of the year. I expect very low trading volumes next week with the holiday coming up," he said. "Gold could pull back below $1,800 just because there's going to be low volumes in volatility."

Once January begins, Millman is more bullish but does point out that gold could still be stuck in its trading range between $1,850 and $1,750 an ounce. "That will continue, but I'm leaning more toward gold holding its head above the $1,800 level," he said.

 

Data to watch next week

Next week, the releases to keep a close eye on are the U.S. Q3 GDP, PCE price index, and durable goods orders.

"The last couple of weeks of 2021 will see the release of durable goods orders, which are rebounding impressively. The core figure, which strips out volatile defence and aircraft orders, points to a very positive outlook for capital expenditure in the first half of 2022 while robust personal income numbers should allow consumers to continue spending aggressively," said ING chief international economist James Knightley.

 

Here's the schedule:

Wednesday — U.S. GDP Q3, existing home sales

Thursday — PCE price index, jobless claims, durable good orders

 

By Anna Golubova

For Kitco News

 

David

Gold is unable to hold $1800 after trading to a high of $1815

For the better part of the last 24 hours of trading, gold pricing has managed to trade above $1800. Gold futures traded to an intraday high today of $1815.70. However, with only 45 minutes left in Globex trading (New York trading has already closed) gold futures basis, the most active February 2021 Comex contract is trading up by $0.70 (+0.04%) and fixed at $1798.90.

Over the last two trading days, gold has challenged $1800 but has not effectively closed above that key psychological price point since mounting a strong rally yesterday, which took gold's close yesterday to $1798.10. Today gold opened at $1801.50 and traded to a low of $1796.50.

Currently, gold is being supported by several factors. First, there is risk-off market sentiment in regards to U.S. equities. All three major indices closed lower on the day, with the Dow Jones industrial average declining by 1.46%, the NASDAQ composite closing fractionally lower off by 0.07%, and the Standard & Poor's 500 declining by 1.03%.

Secondly, there is uncertainty in regards to an economic contraction based upon the recent surge of Covid-19 daily infections as well as the impact of the new variant "Omicron." The Delta variant accounts for the majority of new daily infections globally. However, according to the World Health Organization's Director-General Tedros Adhanom, Ghebreyesus 77 countries have now reported cases of the new variant "Omicron is spreading at a rate we have not seen with any previous variant. We're concerned that people are dismissing Omicron as mild. Surely, we have learned by now that we underestimate this virus at our peril."

Lastly, there are still concerns about inflation which is still at a 40 year high. In an interview with MarketWatch, Colin Cieszynski, chief market strategist at SIA Wealth Management, said that there is "increasing concerns about inflation," which was enough to push the Federal Reserve and European Central Bank to accelerate tapering of bond purchases and the Bank of England to raise interest rates."

Pressuring gold today was a solid gain in the dollar. The dollar index gained 60 points today (0.62%) and is currently fixed at 96.615. According to the Kitco Gold Index as of 4:10 PM, EST spot gold was trading down by one dollar and fixed at $1798.30. Although gold had a net gain of $11.20, dollar strength more than compensated for today's gains resulting in gold losing $12.20 in value.

Our technical studies indicate that the current resistance levels occur first between $1800 and $1804.60 (the 61.8% Fibonacci retracement), with major resistance at $1818 (the 50% retracement level). Additionally, the first level of support for gold occurs at $1758.30, with major support at $1732.60.

 

By Gary Wagner

Contributing to kitco.com

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David

Gold, silver sharply up as USDX sinks, oil rallies, bond yields stable

Gold and silver prices are posting strong gains in midday U.S. trading Thursday. The metals market traders on this day reckoned rising inflation prospects are bullish, as is shown by market history. A lower U.S. dollar index today, higher crude oil prices and stable U.S. Treasury yields are also friendly for the precious metals bulls. The safe-haven metals rallyied today despite upbeat trader and investor risk appetite late this week. Trading in the metals markets this week is a prime example of the old trading adage, "markets can remain illogical longer than traders can remain solvent." February gold was last up $34.00 at $1,798.50 and March Comex silver was last up $0.955 at $22.50 an ounce.

Traders and investors Thursday were still digesting the U.S. Federal Reserve FOMC meeting results. The FOMC statement somewhat surprisingly said three interest rate increases are likely in 2022, and that U.S. inflation is rising but suggested it will back off in the coming months. The FOMC is accelerating its monthly asset purchases tapering, which will end in March. The marketplace correctly expected a hawkish lean from the FOMC, but the better clarity on timing and actions of the Fed appeared to assuage traders of many markets, as evidenced by the rally in U.S. stock indexes, stable bond yields and a weaker U.S. dollar index.

The pandemic never seems to stray too far from the front burner of the marketplace. Bloomberg today reports "the lockdown mentality turning London into a ghost town is starting to feel like the real thing as Europe resurrects stiff border controls and another Christmas looks set to be lost to the virus."

Post-Fed is the time for gold price to take the reigns, says Standard Chartered

The key "outside markets" today see Nymex crude oil prices solidly higher and trading around $72.50 a barrel. The U.S. dollar index is solidly lower today but still not far below its recent high. Meantime, the yield on the U.S. Treasury 10-year note is presently fetching 1.43%.

Technically, February gold futures prices hit a two-week high today. Bulls have regained the overall near-term technical advantage with today's big gains. Bulls' next upside price objective is to produce a close above solid resistance at $1,840.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at this week's low of $1,753.00. First resistance is seen at $1,811.40 and then at $1,819.30. First support is seen at $1,785.00 and then at today's low of $1,775.70. Wyckoff's Market Rating: 6.0

March silver futures saw short covering featured after prices hit another nine-week low Wednesday. The silver bears still have the firm overall near-term technical advantage. Prices are in a four-week-old downtrend on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $23.00 an ounce. The next downside price objective for the bears is closing prices below solid support at $21.00. First resistance is seen at $22.635 and then at $23.00. Next support is seen at $22.00 and then at this week's low of $21.41. Wyckoff's Market Rating: 2.0.

March N.Y. copper closed up 1,225 points at 430.55 cents today. Prices closed nearer the session high today and saw short covering after prices hit a nine-week low on Wednesday. The copper bears have the overall near-term technical advantage. Prices are in a two-month-old downtrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the November high of 451.15 cents. The next downside price objective for the bears is closing prices below solid technical support at the August low of 397.05 cents. First resistance is seen at today's high of 432.15 cents and then at this week's high of 433.30 cents. First support is seen at today's low of 422.10 cents and then at 420.00 cents. Wyckoff's Market Rating: 4.0.

By Jim Wyckoff

For Kitco News

Buy Gold and Silver on Dips and earn monthly yields on holdings

David

How high can gold & silver go in 2022? Rates to rise, here's the impact on markets – Gary Wagner

The Federal Open Market Committee has announced a doubling in the pace of asset tapering on Wednesday.

The Dot Plots indicate that there will be an average of three rate hikes in 2022, three more in 2023, and two in 2024, all in increments of 25 basis points.

Gary Wagner, editor of TheGoldForecast.com discusses with David Lin, anchor for Kitco News, the impact that monetary policy next year will have on financial markets.

“I think that the Fed got it wrong. They underestimated the pace at which inflationary pressures would grow and how persistent they would be. Now that they’re acknowledging that we have persistent inflation, and taking out the word ‘transitory’, they are in my mind chasing inflation. In other words, they’re reacting to the inflationary level rather than being proactive about it. That to me, is not what the Federal Reserve is supposed to do,” Wagner said.

Wagner projects that gold will outperform silver in 2022.

For gold and silver’s price levels to look out for, watch the video above.

 

By David Lin

For Kitco News

Buy, Sell Gold and Silver, with Free Storage and Monthly Yields

 

David

Gold prices moving higher after U.S. CPI rises 6.8%, biggest jump since 1982

Gold prices are pushing higher, following a stronger-than-expected rise in U.S. consumer prices.

Friday, the U.S. Labor Department said its U.S. Consumer Price Index rose 0.8% in November, after a 0.9% rise in October. The data beat consensus forecasts as economists were forecasting a 0.7% rise.

For the year, the report said that headline inflation rose 6.8%. The report said this is the "largest 12-month increase since the period ending June 1982."

Annual inflation rose in line with expectations. Some economists were bracing for inflation to rise above 7%.

Meanwhile, core CPI, which strips out food and energy costs, increased 0.5% last month, up from a 0.6% increase in October. The data was in line with expectations. For the year, core CPI is up 4.9%.

The gold market moved into positive territory in an initial reaction to the firm headline number. February gold futures last traded at $1,779.50 an ounce, up 0.18% on the day.

SocGen sees gold prices at $1,900 in Q2, no rate hikes until second half of 2022

Looking at some of the components of the report, consumers continue to feel the pinch of rising energy prices. The report said that the gasoline index increased 6.1% last month, pushing the energy index up 3.5%. For the year, energy prices are up 33.3%.

Food prices also increased, rising 0.7%. For the year, the food index is up 6.1%.

The report said that the rise in food and energy prices is the most in 13 years.

Katherine Judge, senior economist at CIBC, said that with inflation hitting another multi-decade high, the Federal Reserve could be on track to raise interest rates by June 2022.

"While December will see some relief from lower energy prices on omicron, causing total inflation to decelerate, there is scope for supply chain issues to prop up core goods prices again as omicron spreads globally and disrupts production," she said. With inflation at a lofty pace, the Fed is set to accelerate its QE tapering timeline at the December meeting, to finish in the early spring, and to allow for a rate hike in Q2 2022, when the winter wave of Covid could be behind us."
 

By Neils Christensen

For Kitco News

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David

Market participants await the November CPI inflation numbers

Tomorrow the U.S. Bureau of Labor Statistics will release the inflationary numbers vis-à-vis the CPI index. This report will be a critical component that the Federal Reserve will review before releasing its adjusted monetary policy. On Wednesday of next week, the Federal Reserve will release the statement including the revised dot plot and a press conference by Chairman Jerome Powell.

Bob Haberkorn, senior market strategist at RJO Futures said, “The stronger-than-expected jobless claims numbers along with a firmer dollar are pulling down on gold, but there are also traders waiting for the CPI data. If inflation numbers are going to be high, then gold will bounce right back up and make a move towards $1,800.”

Inflationary pressures have been spiraling out of control for months. Inflation rates edged higher beginning in June when the CPI came in at 5.4%. Inflation remained right around this level in July, August, and September. However, that all changed in October when the CPI projections indicated a major uptick to 5.8%. But the actual numbers came in well over the projections at 6.2%, the first occurrence of inflationary pressures at this level since November 1990.

Up until October the Federal Reserve maintained an adjusted mandate to let inflationary pressures run hot in place of maximum employment. They based their assumption on the belief that the current inflationary pressures will be transitory and will quickly move back down to acceptable levels.

Recently Chairman Powell acknowledged that that assumption was incorrect by removing the word transitory from the Fed’s vocabulary. However, his explanation was the whole truth, when he said we would remove the word transitory because “transitory means different things to different people.”

The report is expected to indicate a record level for inflation. Market participants, as well as Federal Reserve, will be intently focused upon tomorrow’s report. Currently, economists polled by various new sources are forecasting for yet a higher level of inflation predicting that inflation will increase by 0.7% taking the year-over-year number to 6.8%. If the economists are correct that would be a level not seen since the 80s.

Today’s decline in gold futures was not a reflection of the anticipated report tomorrow but rather based upon dollar strength and a report indicating strong jobs data in the United States. As of 5:35 PM EST gold futures basis, the most active February contract is fixed at $1775.90, a net decline of $9.60.

To get a better understanding of why gold could enter a major rally tomorrow if the inflationary numbers come in as forecasted or above, we need to look at what caused the record level of inflation in 1980 and what effect that had on the economy. In the early 1980s, countries worldwide including America, experienced one of the most severe economic recessions since World War II.

As Wikipedia puts it, “The early 1980s recession was a severe economic recession that affected much of the world between approximately the start of 1980 and early 1983. It is widely considered to have been the most severe recession since World War II. A key event leading to the recession was the 1979 energy crisis.”

In 1980 the inflationary pressures were between 12.52% to 14.76%. By January 1982, the CPI index fell to 8.39%. It took roughly three years from 1980 to 1983 before inflationary pressures normalized. This brings us to our current dilemma, for the Federal Reserve to effectively bring down inflationary pressures will not occur overnight and, in fact, could well be a long multiyear process. Historically, inflationary pressures at the current levels are the outcome of unique geopolitical or economic circumstances. Because there is an underlying force that drove inflation to these high levels, it is not possible to reverse that trend over a short period.

It is because of those factors that I believe if the CPI report tomorrow indicates higher inflationary pressures than the previous month, it will be clear that the Federal Reserve has a multiyear task to bring inflation back to normal levels. During that multiyear period, gold could experience one of the more dynamic rallies’s witnessed in our lifetime possibly even trading to a new record high based on the time necessary to normalize inflationary rates.

 

By Gary Wagner

Contributing to kitco.com

Buy, Sell Gold and Silver, with Free Storage and Monthly Yields

 

David