Gold, silver rally on inflation worries

Friendly charts Gold and silver prices are solidly higher near midday Wednesday. Concerns about rising inflation are prompting buying interest in the hard asset metals. Also, the technical postures for both precious metals have turned more bullish recently. December gold futures were last up $13.80 at $1,784.20.December Comex silver was last up $0.202 at $24.10 an ounce.

Global stock markets were mostly higher in overnight trading. The U.S. stock indexes are higher at midday. The U.S. stock indexes have made impressive recoveries from their October lows and are now in position to challenge the record highs scored in September. Mostly upbeat corporate earnings reports are presently trumping worries about inflation and slowing global economic growth.

In other news Bitcoin prices pushed well above $64,000 and hit a record high Wednesday, after a U.S. exchange traded fund on the crypto-currency debuted on Tuesday.

The Eurozone September consumer price index was reported up 0.5% from August and up 3.4%, year-on-year. Those numbers were right in line with market expectations and not deemed too hot. However, there remain growing notions that inflationary pressures will become stronger in the coming months. There are increasing reports of supply shortages for some critical raw commodities, such as copper, while at the same time shipping bottlenecks are keeping many supplies from reaching their destinations. Respected commodity trader Paul Tudor Jones said on CNBC today that inflationary pressures are not just transitory, adding that he believes the long side of commodity markets will be in keener favor in the coming months. Indeed, this situation is very likely to draw significantly more speculators to the long side of raw commodity futures markets, including the metals.

The key outside markets today see the U.S. dollar index weaker. Crude oil prices are higher and trading around $83.50 a barrel. Meantime, the 10-year U.S. Treasury note yield is presently fetching 1.65%.

Technically, December gold futures bulls have the overall near-term technical advantage amid a three-week-old price uptrend in place on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at the October high of $1,801.90. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the September low of $1,721.10. First resistance is seen at today’s high of $1,789.60 and then at $1,800.00. First support is seen at $1,775.00 and then at this week’s low of $1,760.30. Wyckoff's Market Rating: 6.0

December silver futures prices hit a five-week high today. The silver bulls have the overall near-term technical advantage. Prices are in a three-week-old uptrend on the daily chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $25.00 an ounce. The next downside price objective for the bears is closing prices below solid support at $22.50. First resistance is seen at $24.50 and then at $24.75. Next support is seen at $24.00 and then at today’s low of $23.615. Wyckoff's Market Rating: 6.0.

December N.Y. copper closed down 15 points at 470.15 cents today. Prices closed nearer the session high today. The copper bulls have the solid overall near-term technical advantage. Prices are in a steep four-week-old uptrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the May high of 487.05 cents. The next downside price objective for the bears is closing prices below solid technical support at 440.00 cents. First resistance is seen at this week’s high of 482.30 cents and then at 487.05 cents. First support is seen at today’s low of 459.35 cents and then at 455.00 cents. Wyckoff's Market Rating: 7.5.

By Jim Wyckoff

For Kitco Newsupside price objective is pushing and closing prices above solid technical resistance at the May high of 487.05 cents. The next downside price objective for the bears is closing prices below solid technical support at 440.00 cents. First resistance is seen at this week's high of 482.30 cents and then at 487.05 cents. First support is seen at today's low of 466.85 cents and then at 460.00 cents. Wyckoff's Market Rating: 8.0.

By Jim Wyckoff

For Kitco News

David

Ground Control to Chaiman Powell

A soft countdown of the initiation of tapering the Federal Reserve’s $120 billion monthly expenditure has begun. The Federal Reserve began dramatically infusing liquidity and money into the capital markets beginning in 2020. The initial effect was to temper or slowed down the rate at which the recession was expanding and morphed into a technique used to aid in the economic recovery that was a direct result of the economic hardship caused by the recession.

This dramatic action by the Federal Reserve has only occurred two times in history. The first time the Federal Reserve used quantitative easing to ease a deep financial crisis was in 2009. This recession was a result of a banking crisis and resulted in a deep depression. During that period, the gross domestic product contracted at the fastest rate seen in 50 years and concurrently the economy was losing hundreds of thousands of jobs every month. This program began after the Federal Reserve already reduced interest rates to near zero. However that action was not enough to temper the expanding recession let alone aid in the economic recovery. From 2008 through 2015 the Federal Reserve began accumulating massive amounts of assets which they added to their balance sheet.

Prior to initiating this new technique labeled “Quantitative Easing,” the Federal Reserve’s asset balance sheet stood at approximately $900 billion. Over the next seven years, from 2008 through 2015 the Fed would continue to accumulate assets swelling their balance sheet from under $1 trillion to $4.5 trillion. This process occurred in four distinct steps labeled QE1 through QE4. Members of the Federal Reserve contended that this unconventional monetary policy was a major component that saved the United States from a crisis worse than the great depression.

However, this program was not without costs. CNBC reported that “The Fed’s low-interest-rate policy made it inexpensive for the government to continue to borrow and spend. U.S. public debt is near $20 trillion and some fear that bubble could burst as the Fed steps out of the government market.” This untested experimental monetary policy was unwound first by tapering or lessening the monthly purchases of assets which were followed by a reduction in assets as the Fed would let billions of dollars of securities each month mature and not reinvest in them. They took the $4.5 trillion balance sheet and reduced it to $3.7 trillion before they made the decision that further reduction would hurt the economy.

So, what does Quantitative Easing have to do with tomorrow’s jobs report

In 2020 the Federal Reserve for the second time in history reignited this monetary policy of massive asset purchases as it did to temper the recession in 2008 and aid in an economic recovery. Beginning with a balance sheet of just under $4 trillion in just under two years they have swelled their asset balance sheet to $8.4 trillion. While the Fed had acknowledged that at some point, they would begin to normalize their extremely accommodative monetary policy there was no concrete timeline. The Federal Reserve maintained that it would unwind this process when the data supported that the economy was recovering and that labor was returning to maximum employment. During Chairman Powell’s most recent speech which occurred at a press conference following the last FOMC meeting he said that the discussion to begin tapering has begun and that they will begin to unwind the process “soon.”

More recent comments by Chairman Powell and other Fed members have suggested that tapering could begin as early as November, October or December if the data continues to support growth in employment.

It is for that reason that so much attention will be paid to tomorrow’s jobs report issued by the Labor Department. Forecasts from economists polled range from tomorrow’s numbers indicating an additional 400,000 to 500,000 jobs being added in September. However, forecast by analysts have really been hit or miss. For example, the forecast for the number of jobs added in August was about 700,000 new individuals being added to payrolls, and the actual numbers came in and a tepid 243,000 new jobs. July 2020 unquestionably had the most robust increase of jobs being reported just shy of 1 million and that report came

Byin well over expectations.

This month’s report for September jobs is critical because it will give the Federal Reserve the necessary information to make a concrete decision as to the timeline to begin to taper.

Geary Wagner

Contributing to kitco.com

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