Gold's advantage over bitcoin

Before gold went on a run earlier this month, company financings in the precious metal space picked up, said CEO of Oreninc Kai Hoffmann.

Hoffmann spoke to Kitco in mid-November at the Deutsche Goldmesse show in Frankfurt, Germany. Oreninc tracks financings for juniors and miners.

Early this month, two pieces of news propelled gold higher: headline inflation rose to 6.2%, and the $1 trillion U.S. infrastructure bill was signed into law. Gold had a solid breakout trading above $1,850 an ounce. Today, precious metals have dropped along with the broader equity index.

Hoffmann said the Oreninc index had a "bit of a rally" with an "uptick in the last three to four weeks. [Financings] have been front running the pop in the gold price."

Hoffmann also weighed in on gold versus bitcoin, noting that the latter is "very volatile."

"Themes we've been hearing [at the conference] is outflows from crypto into gold. Bitcoin [supply] … is limited and gold is not, meaning that bitcoin may pop. It's very, very volatile. Gold is more stable," said Hoffmann adding that gold may perform better in a black swan event.

 

By Michael McCrae

For Kitco News

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

David

Gold hit hard by profit taking as Fed Chair Powell stays

Gold and silver futures are sharply down in midday U.S. trading Monday, with gold notching a two-week low. The metals’ prices were under pressure overnight and then selling pressure accelerated when it reported early this morning that President Biden plans to keep Federal Reserve Chairman Jerome Powell for another term. December gold was last down $41.10 at $1,810.40 and December Comex silver was last down $0.421 at $24.36 an ounce.

The yellow metal slumped, the U.S. dollar index rallied to a 15-month high and U.S. Treasury yields rose when it was announced Biden chose Powell to continue in his position for another term. Speculation had been that Biden might choose the more monetary-policy-dovish Lael Brainard as Fed chair. With Powell remaining as chairman of the Federal Reserve, traders and investors reckon U.S. monetary policy will remain on its present course, compared to notions that Brainard as a new Fed chair would have leaned easier on U.S. money policies.

Sell stop orders were triggered in gold futures when prices dropped below several key near-term technical support levels this morning, which drove prices still lower.

It can be argued that the Powell news was just an excuse for the shorter-term gold and silver futures traders to ring the cash register and take profits after recent good price gains. Reason: The marketplace generally expected Powell to be reappointed and gold should not have reacted the way it did. Nothing has changed for the metals markets, fundamentally, from last Friday’s closes. No significant chart damage was inflicted in gold or silver today and their near-term price uptrends remain in place. The metals markets are likely to continue to be supported by the inflation trade—meaning the metals will continue to be sought out as a hedge against rising and even problematic price inflation.

Global stock markets were mixed in overnight trading. The U.S. stock indexes are mixed at midday. It may be a quieter rest of the trading week in the U.S. as the Thanksgiving holiday is on Thursday, with an abbreviated trading session Friday being historically one of the lowest-volume days of the year. European traders and investors remain worried about Covid lockdowns as infections in Europe and Asia are on the rise. The world is also keeping a wary eye on the buildup of Russian troops near the Russia-Ukraine border.

The key outside markets today saw the U.S. dollar index higher and hitting a 15-month high. Nymex crude oil prices are up and trading around $76.50 a barrel. Oil prices hit a six-week low overnight and it appears a market top is in place. The 10-year U.S. Treasury note yield is presently fetching 1.605%.

Technically, December gold futures bulls still have the overall near-term technical advantage. Prices are in a seven-week-old uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at today’s high of $1,850.40. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at $1,825.00 and then at $1,839.00. First support is seen at today’s low of $1,810.90 and then at $1,800.00. Wyckoff's Market Rating: 6.0

December silver futures bulls still have the slight overall near-term technical advantage amid a seven-week-old uptrend in place on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at the November high of $25.49 an ounce. The next downside price objective for the bears is closing prices below solid support at the November low of $23.045. First resistance is seen at $24.75 and then at $25.00. Next support is seen at today’s low of $24.25 and then at $24.00. Wyckoff's Market Rating: 5.5.

December N.Y. copper closed down 30 points at 440.55 cents today. Prices closed nearer the session high today. The copper bulls and bears are on a level overall near-term technical playing field. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 460.00 cents. The next downside price objective for the bears is closing prices below solid technical support at the November low of 419.15 cents. First resistance is seen at today’s high of 442.35 cents and then at last week’s high of 448.90 cents. First support is seen at today’s low of 435.20 cents and then at 430.00 cents. Wyckoff's Market Rating: 5.0.
 

By Jim Wyckoff

For Kitco News

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

David

Gold closes under pressure following a statement by Fed Governor Waller

Gold is trading under pressure, which will certainly result in gold closing lower on the week. As of 5 PM EST gold futures basis, the most active December 2021 Comex contract is down $13.80 (0.74%) and fixed at $1847. What sparked today’s selling pressure came out of multiple components, but the majority stems directly from a speech by Federal Reserve Governor Christopher Waller.

He spoke to the Center for Financial Stability and expressed a more hawkish tone than any Fed member has in the past few months. While acknowledging that the spiraling level of inflation is much less transitory than first believed and will remain much longer than assumed.

Federal Reserve Governor Waller addressed the current level of inflation and described it as a “big snowfall that will stay on the ground for a while, rather than a one-inch dusting.” His statements highlighted the intrinsic and mounting concern by Federal Reserve members that inflationary rates have gotten way out of hand and added, “When snow is expected to be on the ground for a week, you may want to act sooner and shovel the sidewalks and plow the streets.”

He expressed the need to adjust the tapering process and speed up so that the Federal Reserve can react to inflationary pressures earlier than June, which is when tapering was expected to conclude.

“To me, the inflation data are starting to look more like a big snowfall that will stay on the ground for a while, and that development is affecting my expectations of the level of monetary accommodation that is needed going forward.”

While Waller is a voting member of the Federal Reserve, he is only one member. He is in the more hawkish camp in a divided Federal Reserve. The more dovish Fed members continue to express the current monetary policy of the central bank in regards to his tapering policy should remain intact, thereby waiting until the end of June before adjusting their monetary policy.

Add to that is the uncertainty as to whether or not Federal Reserve Chairman Jerome Powell will be appointed to a second term. President Joe Biden has acknowledged that he will make a decision public as to who will head the Federal Reserve within the upcoming days. Also, President Biden might need to fill as many as four more new Federal Reserve members at the central bank’s seven-member board of governors.

Typically, uncertainty is a solid fuel that will move gold in a bullish manner. However, uncertainty about the voting members of the Federal Reserve and the number of upcoming changes that might occur is unsettling to market participants because a large and dramatic change of voting members creates ambiguities as to how they will proceed with their current monetary policy and plans to normalize interest rates as the economy in the United States rebuilds.

Because their dual mandate and necessary criteria to begin to raise rates is based upon maximum employment and in inflationary rate approximately at 2%. It was the recent shift putting maximum employment as a priority in place of inflationary rates that has backed the Federal Reserve into a corner. Because the only tool in their toolbox that they have available to decrease the inflation that is not transitory is by raising rates.

The Fed will have its last FOMC meeting in mid-December, and before that the PCE inflationary index for last month will be released on November 24. These two events will be critically important in determining the sentiment of the Federal Reserve in regards to its current monetary policy.

By Gary Wagner

Contributing to kitco.com

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

David

Is Fed making a mistake? Big market risk ahead as gold looks to $1,900 – analysts

ccording to analysts, with all eyes on the U.S. President Joe Biden's Federal Reserve Chair pick, gold is waiting for its next catalyst to take it to $1,900 an ounce, with markets eyeing year-end volatility.

Gold is wrapping up this trading week down 1%, with December Comex gold futures last trading at $1,848.60, down 0.69% on the day.

One of the main events the market is watching very closely is Biden's Fed Chair pick, which could be announced as soon as this weekend. According to PredictIt.org, the current Fed Chair Jerome Powell is leading the race, with Federal Reserve Governor Lael Brainard in the second top spot.

"Looking to next week, we are going to get Biden's decision. Two months ago, Powell was the likely choice. But we got the trading scandal among Fed members and progressives got upset with how Powell handled the regulatory side," OANDA senior market analyst Edward Moya told Kitco News. "Now, it seems that Powell's renomination might not be a foregone confusion. If we do get a surprise and Brainard becomes the next Fed Chair, it will have a dramatic shift in short-term yields. That's a big risk ahead. Key factor what happens with yields early next week."

If Biden were to choose Brainard, gold would climb higher as the initial reaction would see those Fed rate hike expectations pushed back even further, Moya explained. However, if Powell is renominated, it doesn't necessarily mean gold would sell off dramatically. "Risk is still to the upside," he said.

Choosing Brainard will represent uncertainty for the markets, said Pepperstone's head of research Chris Weston.

"As the well-used term goes, markets hate uncertainty – and a Brainard appointment, at a time of impending monetary policy change, represents a small rise in uncertainty that many in the market could do without – well, except for those who like volatility which is most short-term traders," Weston said. "Still, my base case is we are headed into a period of higher volatility regardless, with a wild December ahead of us. Where we see the U.S. Treasury exhausting measures by mid-December and the U.S. debt ceiling potentially becoming problematic, just as the FOMC meeting sees the central bank likely announce they are accelerating the pace of tapering from $15b to $20-$25b."

Next week's other potential hurdle is holiday trading, with markets winding down to celebrate the U.S. Thanksgiving holiday. "Trading activity will be thin, and we could have some exaggerated moves here. We are not going to see any new trends emerge next week unless we get the Brainard surprise. Otherwise, gold could be stuck in that consolidation pattern," Moya said.

Gold will see choppy trading as the market tries to determine how dovish the Fed will end up being next year as inflation pressures build, he added.

"The price action is pretty much warranted to be choppy whether we wait to see whether or not the Fed will have to bow to inflationary pressures. Waiting for next few months of pricing reports to get a better handle on it," Moya noted. "Until we have a firmer handle on what the near-term outlook is for the central bank, it will be a choppy environment for gold."

Any pullback in gold price is likely to be viewed as a buying opportunity. "While headwinds could re-emerge, downside risks to growth, plus elevated inflation and our expectations for the USD to weaken and real yields to remain deeply negative, suggest price dips are likely to be viewed as good buying opportunities," said Standard Chartered precious metal analyst Suko Cooper.

If gold drops below $1,840 an ounce next week, the precious metal could be at risk of a further selloff, said strategists at TD Securities.

"The yellow metal [is] vulnerable to a deeper consolidation if prices fail to hold above the $1,840/oz region. After all, while the yellow metal remains an ideal hedge against rising stagflationary winds, the tug-of-war between high inflation prints and market pricing for central bank hikes hasn't definitively concluded," they wrote.

Next week, gold is likely to remain between $1,840 and $1,890 an ounce, Moya said. "I would not be surprised if we tested the $1,890 area and came back to where we are right now. If we see some broader weakness on gold, there should be fairly strong support at $1,840-$1,850."

Also, bitcoin below $60,000 might be good news for gold. "Risk of further weakness for bitcoin is still there. If we do see another decline in bitcoin, that in itself could be great news for gold," Moya noted.

As 2021 wraps up, traders will shift their attention away from rate hikes and focus more on growth. "The Fed could be making a mistake in removing this monetary accommodation. That's a big risk. Leading up to January, the inflation report will be a big one. Gold should see strong support here," Moya stated.

Over the next month, gold is bound to make a move to $1,900 an ounce as investors come back to bullion for inflation hedges amid a flight to safety with some additional concerns coming from Europe's COVID flare-up and the dovish European Central Bank. "Gold will see some underlying support there. And the holiday season will provide some underlying support," Moya added.

On the radar next week

The big day to watch next week is Wednesday, with the FOMC meeting minutes, the U.S. GDP release, personal spending, durable goods, PCE price index, and new home sales all scheduled to be released.

"The Thanksgiving holiday in the U.S. means a short week with the data flow concentrated on Wednesday. The highlight may well be the minutes to the November 3rd FOMC meeting when the Federal Reserve announced the start of QE tapering," said ING chief international economist James Knightley. "In terms of the data, we expect a modest upward revision to 3Q GDP growth, but the October personal spending will be more significant as it tells us how the fourth quarter started."
 

By Anna Golubova

For Kitco News

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

David

Gold has gained over $100 in November but now has entered a period of price consolidation

Since November 11 gold began to consolidate after completing the current leg of the most recent rally that began on November 4. The rally started one day after the conclusion of the November FOMC meeting. They announced that they would begin to taper their $120 billion asset accumulation later in the month. They announced that they would have a monthly reduction totaling $15 billion and continue the reduction until they are at a net-zero. Concurrently they indicated in unison with the ECB and Bank of England to keep interest rates extremely accommodative.

The Federal Reserve has been actively providing liquidity to aid in the economic recovery which was a direct result of a global pandemic. The last occurrence of massive asset accumulation by the Federal Reserve was during the economic recovery from the 2009 recession, a direct result of the banking crisis in the United States. During the first occurrence of “quantitative easing,” the net result of which was that the Federal Reserve with a balance sheet of roughly $4.5 trillion.

In approximately 2013, as they completed their tapering process, the Federal Reserve began to reduce their balance sheet taking their assets down to $3.7 trillion before they stopped reducing their assets. At that time, they believed that a further reduction would have a detrimental effect on the economic recovery which had taken place.

However, compared to their asset accumulation during the 2009 recession the current strategy of quantitative easing by the Federal Reserve has resulted in an asset balance sheet that has swelled to $8.6 trillion. Roughly double the size of their assets that they accumulated in 2009. At the current rate of a $15 billion monthly reduction, it will take at least until June 2022 before they complete the process.

While there is much uncertainty about when the Federal Reserve will begin to normalize rates, and at what pace that rate normalization will take place, what is certain is that at some point most likely in 2022, but at the latest in 2023, they will begin the process of lift-off in which they will slowly ratchet the Federal funds rate currently in essence at 0% back to normalized rates of around 2.5%.

The net result of the massive asset purchases by the Federal Reserve coupled with extensive expenditures by the administration in terms of fiscal stimulus has seriously impacted the current inflationary rate. While much of the current inflationary pressures are temporary, based upon applied chain bottlenecks and labor shortages which has greatly hindered companies in supplying the surge in demand of goods and services. Collectively these issues had taken the current rate of inflation to a level not seen since November 2009 when CPI inflationary index was at 6.2%.

The Federal Reserve has let inflation run hot instead of focusing on achieving maximum employment, one-half of their dual mandate. The other component of this dual mandate is to keep inflationary rates at approximately 2%. It is the spiraling rate of inflation that has been the primary undertone taking gold higher from $1770 on November 4 to $1880 on November 16. In other words, over the first two weeks of November gold prices increased by over $100 per ounce due to inflationary concerns. However, the price search in gold only took five trading days, or one week before gold pricing began to consolidate which is what is currently occurring. Typically, after a commodity has a dynamic rally, it will either have a correction in price or have price consolidation. The current price consolidation in gold indicates that the precious yellow metal is potentially forming a base at this new higher level and awaiting the set of next fundamental events.

Over the last six trading days since November 11, we have had gold open and close within a defined price range with the lows at $1851 and the highest closing price which occurred yesterday at $1870.

The recent price increase of over $100 was in direct response to rising inflationary pressures. However higher inflation contains a double-edged sword because the Federal Reserve has one primary tool in their toolbox to make inflation lower and that is to raise interest rates. Higher rates will pressure gold lower which makes forecasting the future price of gold a difficult read.

Our current assessment is that if we can get an effective close in gold above $1880, it has a clear path to challenge $1900 and possibly even trade as high as $1920, the high seen in June 2021. If the Federal Reserve raises rates immediately after the conclusion of tapering, we could see gold at that point come under significant pressure. However, that timeline still allows for inflation to continue to rise, and gold to gain value at least until June 2022.

 

By Gary Wagner

Contributing to kitco.com

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

David

Gold continues to attract market participants as a primary tool of wealth preservation

Market participants are once again focused upon the real threat that faces global economies, spiraling inflation. Today the United Kingdom reported that inflation has now hit a 10-year high. In the United States, the current level of inflation is at a 31-year high coming in at 6.2%. Mexico currently has an inflation rate of 6.24%, and many South American countries are running double-digit inflationary levels such as Argentina (52.1%), Brazil (10.67%).

Some countries are running extremely tight economies and maintaining very low inflationary rates such as Japan, Saudi Arabia, and Switzerland. However, real concerns in the United States are mounting as the US government continues to spend dollars vis-à-vis fiscal stimulus with money it simply does not have. The United States continues to run yearly deficits well beyond the wealth it produces as seen through the GDP.

While the Federal Reserve has begun tapering its monthly asset purchases by $15 billion a month, it will continue to add to its enormous asset balance sheet at least until June of next year. With the current asset sheet of the Federal Reserve just north of $8.6 trillion, by the conclusion of their quantitative easing program, the Federal Reserve balance sheet will likely be north of $9 trillion.

Add to that the $4+ trillion in fiscal stimulus that was spent in 2020, and additional expenditures this year once again in the trillions, it is surprising to no one that the inflationary rate in the United States is out of control, now at a level not seen since November 1990.

But wait, there’s more! After passing a $1+ trillion infrastructure bill recently President Biden is now putting forth a new stimulus package that he has labeled “Build Back Better”. I think a more appropriate name for this stimulus plan might be “Build Inflation Quicker”.

While I think this bill has correctly targeted those Americans who are most in need, and is much more correct than spending checks to ALL Americans, as it did in the past, a government cannot continue to spend dollars that it must borrow to fund. Today the house was supposed to begin a debate on Biden’s Build Back Better bill, however, it has been postponed with voting that could begin as early as Thursday or Friday. This new bill being proposed by the current administration has a cost of approximately $1.75 trillion.

Expectations on inflationary pressures by the Federal Reserve continue to assume that the vast majority of these pressures are transitory. Many analysts do not believe that assumption and are adamant that much of the inflationary pressures will be “sticky” lasting well into next year and possibly longer than that.

Based upon our economic recovery occurring at a much more prolonged period than originally anticipated, and the vast amounts of government capital that have been used to aid in that recovery it is no wonder that market participants have once again focused upon the safe-haven asset that for hundreds of years as kept up with inflation; gold.

Gold traded to higher values for seven consecutive days which was followed by two days of price declines. The total decline from the onset of the rally that occurred the first week of November with gold trading at $1758, up to the intraday high yesterday just shy of 1880 was a net decline of 23%. This is a key Fibonacci retracement number for a shallow, but acceptable price correction or decline. Today gold recovered and as of 5:00 PM EST gold futures basis, the most active December contract is currently fixed at $1869.50 after factoring in a net gain of $15.40.

Unquestionably if the current administration continues down this road with tremendous expenditures that the government will have to borrow to pay for, the United States will advance our national debt. It is for the reasons we have spoken about above that I think that market participants continue to focus on gold to preserve their wealth. If this assumption is correct gold has nowhere to go but to higher pricing.
 

By Gary Wagner

Contributing to kitco.com

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

David

Strong retail sales and dollar strength take gold lower in trading today

Gold futures traded to a high of $1879.50 overseas last night but then fell sharply off of these highs as the U.S. Census Bureau announced the advanced estimate of retail and food services sales for October 2021. Concurrently, the Federal Reserve released its industrial production data for October. Both reports indicated robust production and spending which was cited as the primary explanation for gold selling off so briskly.

Retail sales in the United States increased last month coming in above estimates. Economists polled by the Wall Street Journal predicted that the report would indicate an increase of retail sales by 1.5%.

The numbers released by the U.S. Census Bureau indicated that monthly advance sales reached 1.7% year-over-year totaling $638.2 billion. This is just over double the growth of retail and food services in September, which came in at $627.5 billion, an increase of 0.8%.

The report retail and food services began with the following comments, “Advance estimates of U.S. retail and food services sales for October 2021, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $638.2 billion, an increase of 1.7 percent (±0.5 percent) from the previous month, and 16.3 percent (±0.9 percent) above October 2020.”

The Federal Reserve announced that “industrial production rose by 1.6% in October after falling 1.3% in September.” However, the Fed said that about half of the increase in industrial production reflected a recovery from the effects of Hurricane Ida.

One caveat to the numbers released today is that spiraling inflationary pressures greatly enhanced the amount of spending, which inflated the retail sales numbers that were reported today.

These reports and dollar strength were the forces that moved gold lower today as of 5 PM EST, gold futures basis the most active December contract is fixed at $1852 after factoring in today’s decline of $14.60, or -0.78%. Roughly 2/3 of today’s lower pricing is attributed to dollar strength. The U.S. dollar index gained 52 points, or 0.55%, and is currently fixed at 95.925. Because gold is a trading partner with an absolute negative correlation. When we subtract gold’s decline due to dollar strength a small portion 0.24%, came out of market participants being active sellers.

We created a Fibonacci retracement data set which begins at the lows of this rally that occurred on Wednesday, November 3, 2021, when gold traded to a low of $1758. The data set begins on November 16 at the intraday high of $1879.50. Gold traded to the 23% Fibonacci retracement level, which is fixed at $1851.50. A shallow correction can easily give up 23% before reversing to the primary direction of the current trend, which in this case is up. Below that price point is the 38% Fibonacci retracement that occurs at $1833.30. A break in gold below that price point I believe is highly unlikely. Market participants will see the updated PCE core inflation index for October when it is released on November 24, one day before the Thanksgiving holiday in the United States. This should be the next report that could highly influence gold pric
 

By Gary Wagner

Contributing to kitco.com

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

David

Gold prices to average $1,9450 in Q1 – Société Générale

The gold market has broken out after five months of consolidation, and commodity analysts at Société Générale see the potential for a significant rally through the first quarter of 2022.

In its latest price forecast, the French Bank said that U.S. monetary policy will continue to support prices as inflation pressures rise.

“The Fed seems to be reluctant to increase interest rates any time soon, this combined with high inflation create the perfect mix of negative real rates for gold,” the analysts said.

In its updated forecast, Soc Gen sees gold prices averaging around $1,950 an ounce during the first quarter of next year. The bank’s average price target represents a 4.5% gain from current prices. December gold futures last traded at $1,866.90 an ounce, relatively unchanged on the day.

Last week, gold prices saw their best price gains since May, pushing above $1,850 an ounce as U.S. Consumer Price Index saw an annual rise of 6.2%, its most significant increase in more than three decades.

While Soc Gen expects inflation to fall from current levels, the economics expect price pressures to remain above trend through 2022. The bank sees inflation rising 4.4% this year and 3.7% next year.

Although the bank is bullish on gold for the start of the year, the analysts said that prices should start to cool in the second half.

“Inflation is expected to retreat in the second half of next year while interest rates slowly increase. The U.S. real rates should turn positive again by the end of 2022 and see gold goldilocks moment passing,” they said.

The analysts said that on the upside, if inflation persists and economic activity starts to slow, gold prices could push above $2,000 an ounce by the second quarter and remain elevated through 2022.

The analysts reiterated that investment demand for gold-backed exchange-traded funds (ETFs) remains the critical component to unlocking the precious metal’s value.

“Our conviction is mainly pinned to our expectation that the ETF outflows will cease, and we will begin to see some moderate inflows by the end of the year and into the next one,” the analysts said. “For 2022, we expect a total 300t inflow into gold ETF, mostly focused on the first half of the year and inflation risk will still be in the spotlight. This will be enough to significantly drive gold price but also much lower compared to the 408t and 874t experienced in 2019 and 2020 respectively.”

Soc Gen added that they also see the potential for central bank gold demand to support gold prices.

“In a world becoming more multipolar and with the U.S. debt ballooning, the U.S. dollar as a reserve currency is losing credibility and central banks are keen to diversify away from it, building up gold reserves,” the analysts said.

By Neils Christensen

For Kitco News

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David

Gold prices jump into positive territory following drop in UoM consumer sentiment survey

After spending the morning in negative territory, gold prices are once again on the move higher, getting a boost following weaker than expected U.S. consumer sentiment data.

Friday, preliminary data from the University of Michigan showed consumer sentiment falling to 66.9, down from October’s reading 71.7. The data significantly missed expectations as economists were expecting to see a reading of around 72.5.

“This is the lowest in a decade and the University of Michigan noted that one-in-four consumcer cited inflationary reductions in their living standards. Half of households anticipated reduced real incomes next year,” said Adam Button, chief currency strategist at Forexlive.com.

Button noted that the U.S. dollar has fallen in reaction to the report, which is also helping to support gold prices.

The gold market has jumped back into positive territory following the data. December gold futures last traded at $1,868.40, up 0.24% on the day.

The data also shows that consumer inflation expectations continue to move higher. The report said that consumers expect annual inflation to rise to 4.9%, up from the previous estimate of 4.8%.

Investor fears that inflation is rising out of control picked up significantly this week after the Consumer Price Index showed an annual rise of 6.2% last month, the highest increase since 1990. The latest inflation data would not be reflected the currenty survey, so some economists suggest that sentiment could get even worse.

Michael Pearce, senior U.S. economist at Capital Economics, said that the latest consumer sentiment data does not bode well for future economic growth.

“The unexpectedly large drop in the University of Michigan consumer confidence index in early November reflects the impact of broadening inflation fears, suggesting any rebound in real consumption over the coming quarters will be relatively muted,” he said.

By Neils Christensen

For Kitco News

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

David

This gold price level to spark even a bigger rally – analysts

After a solid breakout above $1,850 an ounce, gold could be ready for even bigger gains. But first, the precious metal must breach this level, according to analysts.

Inflation accelerating to three-decade highs in the U.S. has pushed investors towards gold, with the precious metal up nearly 3% on the week and December Comex gold futures last trading at $1,865.90.

"It is all about inflation. The market is starting to embrace the fact that inflation will be longer-lasting. It will take years to fix the supply chain issues due to pandemic, all the stimulus, and tons of pent-up demand," RJO Futures senior market strategist Frank Cholly told Kitco News.

All eyes will be on the $1,835-$1,875 trading range for gold. A move below would indicate the end of the current rally, while a move above could trigger a move towards $2,000 an ounce.

"What's going to be critical to sustaining this breakout is that the market can hold $1,835. We want to be able to keep the prices above there," he said. "On the other hand, a close above $1,875 would spark a secondary rally to $1,900-25. I do think we may see $2,000 by the end of this year."

This is how technical buying works, Cholly explained. If the upper-trading range is taken out, people will start to feel the fear of missing out, which will trigger more buying.

"Most of the commodities, especially energies, had been very strong lately and gold has been stuck in a sideways market for the past five months," he said. "Gold is coming to terms with the idea that it needs to be an inflationary hedge."

The path towards $1,900 is very clear now, said Walsh Trading co-director Sean Lusk. "Gold below $1,800 was seen as a good buying opportunity. We have to watch if banks try to come in and hedge this thing. Prospects for the first couple of months of 2022 are good. We see a year-end rally that carries through into January and February," Lusk told Kitco News.

There is a good chance that gold could take a bit of a breather before moving higher next week, said TD Securities head of global strategy Bart Melek. Gold would have to move above $1,875 an ounce to attempt a run at its 2020 record highs of above $2,000.

"We have about two more months before the Federal Reserve has to switch to a more hawkish narrative. In the meantime, we could see significant levels in gold as more people begin to say that the Fed is behind the curve. We could attempt to reach all-time highs in early 2022," Melek said.

Once the Fed does turn more hawkish and will begin raising rates, gold's initial reaction would be to go lower. However, longer-term, gold can still post gains as Fed continues to tighten slowly, Melek noted.

"If the Fed's funds rate moves up by 25 basis points and inflation is running at 4.5%, that's is still a very accommodative policy," he said.

Data to watch

The two most significant macro events to watch next week will be Tuesday's retail sales and industrial production reports.

"The October retail sales and industrial production reports are next week's highlights and both should be strong. Retail sales will be lifted by the 6% MoM increase in new vehicle units sold – the first increase since April – while gasoline station sales will be boosted by the surge in gasoline prices," said ING chief international economist James Knightley. "Industrial production should see good manufacturing growth based on the ISM report already released."

Monday: N.Y. Empire State Manufacturing Index

Tuesday: Retail Sales, Industrial Production

Wednesday: Housing Starts and Building Permits

Thursday: Jobless Claims, Philadelphia Fed Manufacturing Index
 

By Anna Golubova

For Kitco News

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

David