Gold trades slightly lower at the EU open

After bouncing off the lows during yesterday's session gold and silver are back in negative territory on Wednesday. The yellow metal trades 0.22% lower at $1734//oz, while silver trades around flat.

After inheriting a negative tone from Wall Street bourses in the Asia Pac area turned it around to push higher. The Nikkei 225 (0.51%), ASX (0.82%) and Shanghai Composite (1.95%) all closed in the black.

FX markets were a bit flat overnight, the dollar index traded just under flat and the biggest mover was GBP/USD which moved higher by 0.19%. Looking at some of the other commodities, copper trading half a percent in the red but oil has pushed higher once again by 0.85%.

There was lots of data to digest overnight, Caixin Services PMI (Feb) 51.5 m/m (prior) 52.0, this shows that the services sector in the nation is still in expansion.

Australia GDP for Q4 2020 +3.1% q/q (expected +2.5%), Australia AiG Construction PMI for February 57.4 (prior 57.6), Australia, Markit Services 53.4 and Composite 53.7 PMI for February (final)

In New Zealand, ANZ Commodity Price index for February +3.3% m/m (prior +3.6%) and New Zealand Building Permits for January +2.1% m/m (prior +5.1% m/m)

There were reports overnight that Goldman Sachs has forecast a jump for US inflation, but to subside by year-end. Many analysts are predicting a rise in inflation as commodities prices soar but interestingly the investment bank feel like it could subside earlier than some other forecasts.

In China, the financial press reported that the PBOC may (targeted) cut the RRR this month. The PBoC have stated they could use rates rather than QE to ease policy so maybe this is one signal towards that change.

Today is the UK budget and it has been reported that UK chancellor Rishi Sunak will extend the furlough for UK workers through the summer, to the end of September. Big questions remain about if the chancellor will raise taxes.

Looking at developments with the coronavirus, US President Biden says every American can get vaccinated by the end of May. Sticking with COVID-19, German Chancellor Angela Merkel proposed a four-step lockdown easing strategy

Looking ahead to the rest of the session highlights include services and composite PMI's from the major nations, OPEC meeting, EU PPI, US ADP NFP, weekly DoE's and comments from RBNZ's Orr, ECB's Schnabel, de Guindos Panneta, Fed's Bostic, Evans, BoE's Tenreyro and German Buba President Weidmann.

By Rajan Dhall

For Kitco News

 

Try Kinesis Money System Exchange Gold, Silver and CryptoCurrency

David

Gold and silver struggle leading into the EU open

Gold and silver have moved lower overnight into pretty bearish territory. After a good start to the session yesterday, both precious metals closed lower and leading into the EU open gold trades at $1719/oz.

All of the major bourses in the Asia-Pac area are in the red as risk sentiment was poor. The Nikkei 225 closed down 0.86%, the ASX moved 0.40% lower and the Shanghai Composite is 1.21% in the red.

In the FX markets, the dollar traded higher against most of its major counterparts. Out of the major pairs, NZD/USD was the biggest movers trading 0.50% in the red. In other commodities market, the negative sentiment hit spot WTI (-0.19%) and copper (-0.32%) too.

Lots of news from central banks overnight but first up, ECB's de Guindos said "If the yield rise has a negative impact on financing conditions, we are open to recalibrate.".

China's banking regulator Chair says China to reduce leverage, for a while China had been pumping liquidity into the markets it seems as if there could be a pause. On the other end of the scale, further stimulus could be coming from South Korea as they announce an extra budget.

We also heard from RBNZ's Hawkesby who said the bank can cut cash rate if needed, can increase bond purchases if needed.

It was also the Reserve Bank of Australia meeting overnight, the RBA decided to maintain the current policy settings. The board does not expect tight labour market, high wages growth until 2024 at the earliest. On the positive front, the Australia economic recovery well underway, stronger than was earlier expected.

The FT reported overnight that the Brazilian variant of the coronavirus evades natural immunity and the current vaccines could be less effective.

Looking ahead to the rest of the session highlights include German employment data, EU CPI, Canadian GDP and we are also set to hear from Fed's Daly, Brainard, ECB's McCaul, Panetta,
 

By Rajan Dhall

For Kitco News
 

Try Kinesis Money System Exchange Gold, Silver and CryptoCurrency

David

Losing streak – Gold price down nearly $200 since start of the year, what's next?

Gold is looking at its second month of losses in 2021 as markets wrap up February, and analysts warn of more downside action with the precious metal testing critical support levels.

After kicking off the year around $1,912, the precious metal touched a fresh eight-month low of $1,714 on Friday — down nearly $200 since the start of the year.

And if gold price fails to hold $1,725 or $1,700 next week, the selloff might not be over, analysts told Kitco News. At the time of writing, April Comex gold futures were trading at $1,729.10, down 2.61% on the day.

"Gold broke through recent lows and all the weekly averages," said LaSalle Futures Group senior market strategist Charlie Nedoss. "We could test $1,700 next week."

The main downward triggers for gold have been the rising U.S. 10-year Treasury yields, which hit a one-year high of 1.6% overnight, and a stronger U.S. dollar.

Friday's selloff was also accelerated by technical selling after the metal fell below the 200-day moving average, Kitco Metals global trading director Peter Hug said.

"Right now, you got computer selling accelerating the move lower," Hug said. "When we spoke last Friday, we were looking for an upward move in gold. But when we got to $1,817 on Monday, the 10-year yield was around the 1.20% range, now it is north of 1.50%."

This advance is important in how it compares to the rise in yields in other countries, Hug pointed out. "It is significant in the sense that European rates and Japanese rates are still at zero. You have to compare yield returns between countries. This is why you would expect the dollar to be stronger than where it is right now based on yields rising," he explained.

Investors are also starting to exit equities and turn to cash, which is bad for gold, added Hug. "In the context of equity markets, they are starting to take it on the chin with higher yields. Some people are exiting the equity market and moving into cash. This is why you have weakness in commodities as well," he noted.

Next week, the $1,660 level is very much a possibility, said TD Securities head of global strategy Bart Melek.

Markets are more optimistic, noted Melek, pointing to stimulus progress and quicker-than-expected vaccine deployment. The growing concern now is stimulus money accelerating inflation and steepening the yield curve.
 

Fed, yields and inflation

Until the Federal Reserve can successfully reassure the markets that it won't be raising rates sooner-than-expected and maybe even signal that it might consider looking at yield-curve control, anxiety will persist.

"As long as there is that ambiguity, they can say that they will allow inflation to run hot, but as long as the curve steepens, gold will have a concern that the Fed is not committed to its ultra-loose policy," Melek said. "This is why gold could settle down even lower before bouncing higher."

Equities are starting to tank every time yields are going up, as investors are worried that the Fed is underpricing inflation.

"If U.S. Treasury Secretary Janet Yellen or Fed Chair Jerome Powell come out and maybe even allude to higher inflation expectations and say that they will keep the yields down, gold will take off," said RJO Futures senior commodities broker Daniel Pavilonis. "But it might take for yields to rise to 2% before any response from the Fed."

The Biden Administration wants to continue to see the easy monetary policy, more stimulus, and a strong stock market. "But the more stimulus they get out, the more yields are going higher. They need to admit to the problem and continue with the stimulus," noted Pavilonis.

Longer-term, it is a whole different story as the U.S. economy will have to deal with massive dislocation in terms of businesses being closed, requiring low interest rates.

"Eventually, we should see gold better, especially with the record debt and equity market is risk-off sentiment," Melek stated. "Once we settle and it becomes apparent that the U.S. economy is not that wonderful, there will be a rebound in gold. The market will get around to that idea, and gold will start to move up. We could see this at the start of the second quarter."

Data to watch

There is a number of Fed speakers to watch next week, especially as analysts question whether the Fed will address the sudden rise in yields.

"The week will see a whole host of Fed speakers, including Fed Chair Powell, providing the Fed with an opportunity to slow the Treasury decline by at least starting to express some concern – which has been notably lacking so far," said ING FX strategists.

Fed's Powell is scheduled to speak about the U.S. economy on Thursday at The Wall Street Journal Jobs Summit. The event will be live-streamed.

In terms of macro data, there will be the U.S. ISM manufacturing PMI on Monday, the ADP nonfarm employment change and ISM non-manufacturing on Wednesday, jobless claims and factory orders on Thursday, as well as the biggest event of the week — nonfarm payrolls on Friday.

Market consensus is calling for the February employment report to show an addition of 165,000 jobs and for the unemployment rate to stay at 6.3%.

 

By Anna Golubova

For Kitco News
 

Try Kinesis Money System Exchange Gold, Silver and CryptoCurrency

David

Markets have reached multi-year high after ‘epic recovery’ – Gareth Soloway

The equities markets have reached a top and are due for a pullback by about 15% – 20% in the New Year, said Gareth Soloway, chief market strategist at InTheMoneyStocks.com.

“We’re now getting to a point where we have such inflated valuations that if you don’t get this monstrous beyond 35% earnings growth [that some analysts are forecast] then markets are going to sell-off pretty sharply,” Soloway said.

While the S&P 500 has broken out above its multi-year trendline, history suggests that every time this has happened in the last few years, a correction follows, Soloway noted.

“While you inched above [the trendline recently], this is what I would call the lighter holiday volume traffic, where if you have less participants in the markets, things can overshoot just a bit, I’m not sold that this is breaking out to the upside just yet. To me, this is still waffling around the trendline and very likely should break down coming into January,” he said.

Importantly, market gains usually coincide with high levels of unemployment.

“When unemployment was maximum in March, 2009, we actually got a big market move, percentage-wise, during that period. As unemployment comes down, you actually see the market gains coming down, so the idea here is that the market is always forward-thinking. The more it looks into the future and factors in good news, it goes up really quickly, but as that period actually arrives, it doesn’t have much more in it because it’s already factored that in, so I think that’s iwhat’s going on here,” he said. “That’s why I think you could be in a multi-year high.”

 

By David Lin

For Kitco News

Kiness Money

 

David

Gold prices reach $1911, the 100-day moving average then corrects to close lower

Based on the optimism that the House and Senate had reached an agreement in regards to the revised bipartisan fiscal stimulus bill on Sunday, gold futures traded to an intraday high of $1912 overseas last night in London. This price point is exactly $0.40 above gold’s current 100-day moving average which is currently fixed at $1911.60.

However, at roughly 3:30 AM EST gold futures had already sold off from the intraday highs of $1912 and was trading just below $1900 before trading sharply lower. Over the next hour of trading, between 4:30 and 5:30, AM EST gold pricing dropped from $1897 to $1859 as news surfaced about concerns that the Covid-19 virus had mutated creating a new variant of the novel strain of coronavirus.

According to MarketWatch, “Worries about increased lockdown procedures in London and other parts of the world drove investors to the perceived safety of dollars and compelled some traders to momentarily sell some of their bullion holdings… Bullion has tended to slide, at least momentarily, as worries about the virus have caused broader selling in risk assets and prompted some flight to cash and out of precious metals.”

The article cited a research note on Monday written by Edward Moya, Senior market analyst at Oanda who said, “Today’s price action for gold reminded traders of the panic selling that occurred in March.”

The news of a new coronavirus mutation dampened the optimism that the House and Senate had finally reached an agreement. The $900 billion bipartisan aid bill was voted upon today and passed in both legislative branches. This took gold prices off of their intraday low, with the most active February 2020 Comex contract currently fixed at $1881.70, after factoring in today’s decline of $7.20. However, the current price is $30 below the highs achieved overseas.

This indicates that there is major technical resistance at $1911. The inability for gold to hold pricing above $1900 also suggests that there could be more selling pressure as market participants await more clarity on the new variation of the coronavirus and its implications on whether or not the current vaccine will also protect individuals against this new variation.

We will focus upon the recent acknowledgment of the mutation of the coronavirus as well as discuss our outlook for the precious metals in greater detail tomorrow. At 4:00 PM EST Kitco news will stream their first live interview with David Lin and myself Kitco media’s first-ever live event. To view this event simply use this link, kitco.com/news/live to access the live stream.

By Gary Wagner

Contributing to kitco.com

 

Kinesis Money

 

David

How severe are COVID, Brexit impacts on gold bullion supply?
With lockdowns resuming in Europe, concerns rise that London, a major vaulting center, will face logistical challenges in transporting and servicing gold and silver bullion, similar to what happened in March that led to shortages of the physical precious metals markets.

Ruth Crowell, chief executive of the London Bullion Market Association (LBMA), said that vaults and service providers are more prepared this time around.

“This is something we talk about in terms of potential market disruptions, and part of our role in terms of being that point of contact for the infrastructure providers here in London is talking to the vaults and the carriers about how are you ready…for COVID challenges as well as Brexit challenges. I think the overwhelming response is that they’re very prepared,” Crowell said. “And in some ways having had the challenges of the pandemic in March and April has made the market more resilient to those challenges up ahead.”

 

 

Kinesis Money

 

David

Is gold price gearing up for a Christmas rally?

As this tumultuous year winds down, the gold price seems to be positioning itself for a year-end rally as markets bet on more stimulus next week, analysts told Kitco News.

Gold price attempted to push through the key psychological resistance level of $1,900 an ounce this week but ended up settling just below that on Friday. February Comex gold futures were last trading at $1,888.70, up 2.5% on the week.

Gold saw a nearly $70 gain this week as Federal Reserve Chair Jerome Powell stressed that the central bank would continue its asset purchases until "the job is well and truly done."

"We do have the flexibility to provide more accommodation," Powell added. "The issue is getting through the next four-six months. Clearly, there is going to be a need for help there."

Gold's target of $1,925 by Christmas is still within reach, said Kitco Metals global trading director Peter Hug.

"Powell made it very clear that they will keep their foot to the gas, and he didn't anticipate any type of tightening until 2023. That means at least two years of the Fed indicating easy monetary policy and flexible inflation targeting," Hug said on Friday.

Hug remains very constructive on gold until the global economy begins to normalize in the third quarter of next year.

"From the fiscal perspective and the central bank perspective, they will continue to be accommodative, which will balloon the deficits and hurt the U.S. dollar. In that context, you have to be constructive on precious metals," Hug said.

There are two key underlying triggers that are supportive of higher prices next week, said TD Securities commodity strategist Daniel Ghali.

"We are of the opinion that gold is trading cheap relative to real rates, and the precious metal will be playing catch-up. At the same time, the immediate impulse for higher prices is rather associated with a CTA buying program, in response to strengthening upside momentum," Ghali said. "The Fed's decision to tie QE to economic outcomes still supports the notion of a growth and inflation overshoot, which should provide macro tailwinds for gold in the longer-term."
 

U.S. stimulus and Brexit

The two key items on the agenda next week are U.S. fiscal stimulus and Brexit.

"Investors remain focused on whether politicians in Europe can drive a Brexit deal over the line and also whether Congress can avoid a government shutdown," said ING FX strategists. "We are biased towards progress on both and a continuation of this year's soft dollar environment."

Congress has just hours left to avoid a government shutdown and finalize the $900 billion coronavirus relief package. The federal funding lapses at 12:01 a.m. ET on Saturday."Over this weekend, we will know if the stimulus package will happen. $900 billion is already expected by the market. Any disappointment could be negative," Hug said.

"The other item on the agenda is Brexit negotiations. Right now, there is a better than a 50-50 shot that the UK will leave EU without a trade deal, and that will be positive for the metals next week," he added.

A no-deal Brexit would create fear and uncertainty and boost gold, Hug explained. "There could be a financial dislocation between London and Europe. It creates fear, and Europeans would then turn to buy gold."
 

Price levels

Hug is expecting to see resistance at $1,900 next week as gold might attempt to get to $1,925.

Ghali is carefully eyeing the $1,920 level next week, which he describes as "the essential baseline level" that needs to be breached before the consolidation period is over. On the downside, he was optimistic that the $1,850 level could hold.

"The algos are looking for prices to remain above the $1,880/oz range for the buying flow to be sustained. Gold bugs are also looking for a break north of the $1920/oz range, which would technically represent the end of the consolidation period with prices breaking away from the bull flag. Given gold's relative cheapness and the ongoing algorithmic buying flow, we could imminently see a breakout," he said.

LaSalle Futures Group senior market strategist Charlie Nedoss highlighted $1,914 as a strong resistance level next week. Nedoss also noted that if gold falls below $1,877 next week, it will go on the defensive.
 

Data to watch

On the data front, markets will be keeping a close eye on the final U.S. GDP Q3 numbers on Tuesday. Also on the agenda are existing home sales on Tuesday as well as house price index and new home sales on Wednesday.

Analysts will also be watching Wednesday's PCE price index and personal spending, as well as Thursday's jobless claims and durable good orders.

"The upcoming data flow includes personal spending, which is likely to be soft given weak retail sales numbers, but the manufacturing data suggests durable goods will be relatively firm," ING chief international economist James Knightley said.
 

By Anna Golubova

For Kitco News
 

Kinesis Money

David

Gold and silver are now in a perfect storm scenario

Sadly, the events that began in March when the Covid-19 epidemic officially became a global pandemic has led to the current state of the economy. Actions by the Federal Reserve and the U.S. Treasury have resulted in a perfect storm of events that have taken gold to its highest price ever in August 2020.

The fundamental events that have led to the series of massive rallies in gold and silver are still very much with us. The announcement that multiple pharmaceutical companies have completed their third stage trials and are now being granted emergency use by the FDA could not have come soon enough.

However, the timeline for the vaccines to become available to the general public is still many months away. This means that the economic contraction which has affected millions of Americans leaving them unemployed, and the millions of Americans that we're able to stay in their homes due to the moratorium on eviction are still in an extremely fragile and tenuous situation.

It is for these reasons that the current proposal of a financial aid package costing approximately $748 billion is almost certain to pass both the House and Senate and be enacted before the end of the year. Once the proposal has been voted upon and passed it will address extending the unemployment benefits to those who would face additional hardship as their benefits were set to expire on December 26. It will also extend the eviction moratorium set to expire on December 31.

For the first time since the pandemic began global citizens have hope as they can see a conclusion to the most devastating virus, the world has known since the Spanish flu. However, this light at the end of the tunnel although visible is still 3 to 6 months away.

Globally to date over 74 million individuals have contracted the virus, and the world has lost over 1.6 million souls. The most recent data indicates that the last few weeks have produced the largest daily death toll since the pandemic began. On Wednesday of last week, the United States reached the highest daily death toll of this crisis when over 3,000 people had died in a single day with their deaths directly attributable to the virus. ICU beds in hospitals across the country are filled to the highest level since the pandemic began. According to Dr. Fauci, the central federal architect of the virus response has warned us that daily infections will continue to rise until the vaccine is available to the general public.

This means that the fundamentals which have been at the root of recent gains throughout the year in gold remain fully intact at least until the beginning of the second quarter of 2021. More alarming is the fact that once the vaccine is available and enough individuals have created a herd immunity, the economic fallout that will occur will continue to grow, and the financial repercussions that this will cause will continue.

This is why I believe that we currently have a perfect storm scenario in which gold pricing will continue to rise, and over 2021 will trade to a new record high, as the U.S. dollar’s value will continue to diminish.

 

By Gary Wagner

Contributing to kitco.com

Kinesis Money

David

Gold pushes higher leading into the EU session

Gold has moved half a percent higher leading into the EU session and taken out the previous wave high at $1875.28. Silver is also trading well and has moved past $25.50 to trade 1.60% higher overnight. The general risk sentiment overnight in the Asia Pac area is positive with the Nikkei 225 (0.18%), ASX (1.16%) and Shanghai Composite (1.13%) all moving in the right direction. The dollar index has taken another dive falling 0.57%.

The FOMC last night didn't throw up too many surprises. There was no change to the composition of stimulus and rates remained unchanged as expected. The Fed said it will maintain its huge bond-buying program until "substantial" progress is seen in employment and inflation. One notable point was the fact that the Fed refrained from extending the weighted average maturity of its purchases.

Germany has given its support to Chinese tech firm Huawei on the 5G network. High profile countries like the UK and Australia have notably rejected to use the Chinese telecommunications firm for their 5G rollout.

Stocking with Australia, their latest jobs numbers impressed overnight. Australian employment change for November came in at 90.0K vs the expected reading of 50.0K. The Australian dollar is one of the outperformers this morning and trades 0.63% higher against the dollar. GDP in NZ also beat expectations to print at 14.0% Q/Q for Q3 vs the consensus of 13.5%.

In the crypto space, Bitcoin hit an all-time high and the euphoria kicked in. Scott Minerd the chief investment officer for $5.3bn Guggenheim Macro Opportunities Fund even stated his team feel that BTC us undervalued and could hit $400K.

Looking ahead to the rest of the session highlights include the SNB rate decision, BoE rate decision. EU CPI, US building permits, Philly Fed data and comments from ECB's de Guindos, Schnabel, BoE's Broadbent, Bailey and Fed's Broadbent.

Kinesis Money

David

Gold and  silver lose ground heading into the EU session despite some USD weakness

Gold and silver trade marginally lower heading into the EU session on Wednesday despite some weakness in the USD overnight. Risk sentiment was generally positive as the ASX (0.72%) and Nikkei (0.26%) closed higher and the Shanghai Composite was the laggard closing just under flat. Platinum (0.50%), palladium (0.54%) and copper (0.20%) are all trading in the black this morning as it seems that only gold and silver could not take advantage overnight.

The main story from late in the US session was more optimism about a US fiscal coronavirus deal. Senator Mitch McConnell said significant progress on COVID-19 relief is being made, while House Minority Leader Kevin McCarthy says COVID-19 relief negotiations moving in the right direction.

There was also some data overnight, Japanese preliminary manufacturing PMI for December printed at 49.7 vs the analyst consensus of 48.9. Their services PMI was a touch lower than last months reading of 47.8 at 47.2. The Australian readings were positive as manufacturing PMI came in at 56.0 vs expected 55.8 and services PMI hit 57.4 vs the expected reading of 55.1.

On the Brexit front, there was some optimism from the Irish PM. He said he was hopeful that a deal could be reached by the weekend. He also stated "I would like hopefully by the weekend that we would have clarity around this and certainly it's important that we do get some clarity so that we can then get any deal that might come over the line ratified"

Looking ahead to the rest of the session highlights include PMI's from the major nations, UK CPI, EU wages, EU trade balance, Canadian wholesale sales, Canadian security purchases data, NZ GDP and the Fed rate decision. We are also set to get comments from Fed Chair Powell, ECB's Schnabel, ECB's De Guindos, ECB's Enria and German Buba Vice President Buch.
 

By Rajan Dhall

For Kitco News

 

Kinesis Money

 

David