Gold, silver see gains following mixed U.S. inflation data

Gold, silver see gains following mixed U.S. inflation data

Gold, silver see gains following mixed U.S. inflation data teaser image

Gold and silver prices are firmer in midday U.S. trading Tuesday following a U.S. inflation report that saw hot headline numbers, but the internals and revisions to the report were cooler. June gold was last up $10.70 at $2,353.70. July silver was last up $0.157 at $28.60.

Tuesday morning’s U.S. producer price index for April came in hot, at up 0.5%, month-on-month, versus expectations for up 0.3%. The “core” PPI rate (excluding food and energy) was also up 0.5% in April versus expectations for up only 0.2%. However, the March PPI number was revised to down to minus 0.1% from the originally reported up 0.2%. The April PPI report would have fallen squarely into the camp of the U.S. monetary policy hawks, who want to see the Federal Reserve hold off on any interest rate cuts. However, the big downward revision to the March PPI apparently mitigated the larger-than-expected jump in the April PPI.

The consumer price index comes on Wednesday. CPI is seen up 0.4%, compared to the March report showing a rise of 0.4%. The annual CPI April reading is seen up 3.6% compared to up 3.8% in the March report.

Federal Reserve Chairman Jerome Powell today spoke in Amsterdam to a banking group. Powell said inflation has been higher for longer than the Fed had expected and it looks like it will take longer for the Fed to become confident that inflation is coming down to 2% annually. He said the Fed will keep its restrictive monetary policy in place until inflation recedes to the Fed’s satisfaction. Powell’s comments came as no surprise to the marketplace and markets showed little reaction.

Asian and European stock indexes were mixed to weaker overnight. U.S. stock indexes are mixed near midday.

The key outside markets today see the U.S. dollar index weaker. Nymex crude oil prices are lower and trading around $77.75 a barrel. The yield on the benchmark 10-year U.S. Treasury note is fetching around 4.5%.

Technically, June gold futures bulls have the firm overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at $2,400.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $2,300.00. First resistance is seen at this week’s high of $2,370.80 and then at last week’s high of $2,385.30. First support is seen at this week’s low of $2,337.60 and then at $2,330.00. Wyckoff's Market Rating: 7.0.

July silver futures bulls have the firm overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at last week’s high of $29.00. The next downside price objective for the bears is closing prices below solid support at $27.00. First resistance is seen at last week’s high of $29.00 and then at $29.25. Next support is seen at this week’s low of $28.185 and then at $28.00. Wyckoff's Market Rating: 7.0

July N.Y. copper closed up 1,525 points at 491.85 cents today. Prices closed near mid-range and hit another contract high. The copper bulls have the strong overall near-term technical advantage. Prices are in a three-month-old uptrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 515.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 460.00 cents. First resistance is seen at today’s contract high of 502.60 cents and then at 505.00 cents. First support is seen at 485.00 cents and then at 480.00 cents. Wyckoff's Market Rating:

Kitco Media

Jim Wyckoff

Time to Buy Gold and Silver

David

Currency risks will drive gold and silver sky-high by year-end â BMO Capital Markets

Currency risks will drive gold and silver sky-high by year-end – BMO Capital Markets

While gold and silver prices may continue to consolidate in the near term, the rally in the precious metals sector is only getting started, according to commodity analysts at BMO Capital Markets.

In a report published Wednesday, the Canadian bank announced a significant upgrade for its gold and silver price projections for the next three years, with the high-water mark in the final quarter of 2024. The bank’s commodity analysts see gold prices averaging this year around $2,169 an ounce, up 11% from its previous forecast.

At the same time, they see gold prices averaging next year around $2,100 an ounce, a 12% increase from December’s estimates. Gold prices are expected to average around $2,000 an ounce in 2026 and $1,950 in 2027, an increase of 8% and 3%, respectively from the December estimates.

Looking at silver, BMO sees the white metal averaging around $25.60 an ounce this year, up 13% from the December forecasts. The price is expected to average around $25.30 an ounce next year, up 11% from the previous estimate. Finally, prices are expected to average $24 in 2026 and $23.50 in 2027, an increase from the previous estimate of 8% and 3%, respectively.

This year, BMO sees gold prices averaging around $2250 an ounce in the fourth quarter, a 13% increase from the previous estimate. At the same time, silver prices are expected to average the final quarter of the year around $28 an ounce, a 22$ increase from December’s forecast.

June gold futures last traded at $2,214 an ounce, up 0.67% on the day.

The commodity analysts said that gold’s consolidation near its recent all-time highs is an indication that the precious metal is forming a new base and investors are getting comfortable with higher prices.

They added that they remain bullish on the precious metal as a hedge against rising currency risks worldwide, and noted that gold’s all-time highs also coincide with Bitcoin’s move to record highs above $73,000 per token.

“Given no politician is likely to be elected by promising to spend less in a year loaded with elections across key democracies, there is certainly a chance that later in the year we may see further currency concerns supporting precious metal performance as a new era of elevated fiscal spending across global economies gathers traction,” the analysts said in the report. “While we see some consolidation in the current range through mid-year, we expect further sequential gains in H2 as the U.S. rate cut cycle starts to gather pace and geopolitical tensions rise as the U.S. election nears. This could be one of the rare years where both macro and retail investors increase exposure to precious metals.”

While gold regains its luster as a risk hedge, BMO also said they expect the market to remain well supported by “price-insensitive central banks.”

The bank also reiterated its call for Chinese demand to dominate the marketplace.

“China’s households accumulated strong savings over the pandemic, and even over the past two years ~35trn RMB was added. However, these households have had somewhat of a dilemma as to where to put this money, something often termed the ‘ugliness contest’ for Chinese investors,” the analysts said. “Historically, money might have been invested in property as a default position; however, as has been widely discussed this sector continues to face major structural issues which are impacting buyer confidence. With this, gold exposure has become a necessity for Chinese portfolios, as they continue to expect disinflation and income uncertainty.”

Meanwhile, BMO explained that silver will remain well-supported by industrial demand and weak supply growth.

“Historically, money might have been invested in property as a default position; however, as has been widely discussed this sector continues to face major structural issues which are impacting buyer confidence. With this, gold exposure has become a necessity for Chinese portfolios, as they continue to expect disinflation and income uncertainty,” the analysts said in the report.

“Recent weeks have seen vast lay-offs at the world’s largest solar manufacturer, Longi Green Technology, while there have been a number of news articles around poor utility return on solar installations in Europe,” they added. “This has led to some fears of a wider solar industry slowdown; however, we see this as a cyclical element of overinvestment and higher interest rates.”

Kitco Media

Neils Christensen

Time to Buy Gold and Silver

David

Gold price above $2,100, the market is just getting started – Jess Felder

The gold market is seeing solid follow-through buying activity following last week’s record closing price. The precious metal has pushed above $2,100 an ounce, and according to one market analyst, it has room to run.

In an interview with Kitco News, Jess Felder, founder of the Felder Report, said he has been looking for gold to break to the upside as the price action has generated some very bullish technical patterns.

“Gold is forming consistent bullish flag patterns. The price spikes higher, consolidates for a period and then we see another price spike higher. Gold has been looking to break higher for a while now. From a purely technical standpoint, it looks to me like there's a projected target of a couple hundred dollars higher for gold in the short term, but longer term, we're looking at $2,700, $2800, perhaps over the next year or two. Technically, gold just looks very, very good.”

Along with gold’s technical outlook, Felder said that the precious metal has a robust fundamental outlook as he does not expect the Federal Reserve will be able to bring inflation down to its 2% target.

He added that persistently higher inflation could cause investors to lose faith in the U.S. central bank, weakening the U.S. dollar and making gold an attractive asset. At the same time, Fleder said that a weakening economy will force the Federal Reserve to at least reintroduce quantitative easing as it maintains its restrictive monetary policy.

“If you had both of those things at the same time, that would be the ultimate bull case for gold,” he said. “If it turns out the Fed hasn't done enough to sustainably bring inflation back down, that's going to worry people that way. The whole soft landing narrative is based on the idea that inflation comes down so the Fed can lower rates without a recession. But if inflation doesn't come down and they can't lower rates, that will impact the economy.”

At the same time, Felder noted that credit conditions within global financial markets continue to deteriorate. He added that sooner or later, the Federal Reserve is going to have to pump more liquidity into the market.

As good as gold looks, miners look even better

It’s not just the precious metal that looks good. Felder said that he is extremely bullish on precious metals miners as this sector hasn’t been this beat up since the bear market lows in 2015

However, Felder pointed out that the negative sentiment is not aligned with the sector’s solid fundamentals

“To me, this is a very powerful sentiment signal; it suggests that this is about as bearish as investors can get,” he said. “It’s the ultimate irony: miners are trading as if gold is in a major bear market, but gold is holding near record highs.”

As to what will entice investors back into the mining space, Felder said that he expects a rally in gold to create a lot of new interest. At the same time, he said that a correction in the broader equity market could push some funds into miners.

“There are interesting dynamics in the markets right now. Investors are avoiding commodities, generally, because they're worried that if a recession hits, demand for commodities is going to tank. However, they're obviously not avoiding equities. Personally, I would be more worried about equities because corporate profits in a recession fall a lot faster than demand for commodities.”

As to where he sees value in the sector, Felder said that with higher gold prices, major producers like Barrick, Newmont, and Agnico Eagle will benefit from increased cash flows. He added that these companies also represent less risks for generalist investors.

Newmont, the world’s largest gold producer, has recently attracted particular attention after its share price dropped to a five-year low. The company’s share price has since bounced off those lows, currently trading at $32.91 per share.

“Senior producers are about as dirt cheap as they can get,” he said.

Kitco Media

Neils Christensen

Time to Buy Gold and Silver

David