Both gold and copper have had two months of stellar performance

With extremely different fundamental events influencing both gold, a precious metal, and copper, an industrial metal, both metals in terms of percentage gains had absolutely stellar performances over the last two trading months.

In an odd way, the core root behind the massive upside moves in both copper and gold are a byproduct of the same event. The massive recession and economic contraction, which began in March 2020 led to extreme actions by both the Federal Reserve and other central banks worldwide. These actions continue to this day and are one of the primary reasons we see an end to the recession as countries worldwide begin to reopen as their economies rebuild.

It is inflationary fears and massive fiscal stimulus creating huge national debt that is a major component of dollar weakness and exceedingly strong gold pricing, which is now back over $1900 per ounce.

In the case of copper, its price surge is a direct result of stimulus programs both in the United States and China as well as other major Western economies rebuilding their economies through major infrastructure projects and for use in manufacturing.

Although China is the largest global producer of copper, internally it does not produce enough to satisfy its needs. According to the United States International Trade Commission, “China is the largest global producer of copper, even though it mines a limited supply of copper ores. This is explained by the fact that China imports significant quantities of copper ores and waste/scrap for smelting and refining into pure forms of copper to sell on domestic and international markets.”

As countries worldwide moved to create cleaner energy production, the use of copper in both solar and wind farms requires massive amounts of copper to integrate the systems. In the United States, part of the current administration’s new infrastructure proposal will require increased amounts of copper to reach their goal of cleaner energy production
 

Copper Pricing

At the beginning of 2021 copper was trading at approximately $3.50 per pound. At the beginning of April copper had risen to $3.98 per pound and closed on the last trading day of May at $4.67 per pound. That means that copper has gained roughly $0.69 over the last two trading months, a gain of 17.34%. To a futures trader that represents a sizable gain as the contract size of copper is 25,000 pounds. Traders who were long copper over the last two months were able to glean $17,250 per contract, with the current margin requirement of $6000 per contract, which represents a substantial profit.

Even more impressive is the fact that the commodity strategists at Bank of America have forecast copper prices will rise to as high as $5.87 per pound. Commodity analysts at the CIBC bank are also predicting tremendous price increases anticipating that copper will rise to $5.25 a pound by the end of this year or the first quarter of next year.
 

Gold pricing

Gold prices have also had a stellar performance over the last two months gaining roughly $197 per ounce. That represents a net gain for the last two months of 11.55%. That also represents a tremendous gain for the futures traders who were wise enough to be long gold over the last two months. Since the contract size of a Comex futures contract is 100 ounces, traders who were long over the last two months would’ve realized a profit of $19,700 per contract.

By Gary Wagner

Contributing to kitco.com

 

Kinesis Money the cheapest place to buy/sell Gold and Silver with Free secure storage

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Golds gains over $100 this month

With only one more trading day in the month of May, gold futures have precariously clung just below $1900 per ounce. Today gold futures basis the most active June 2021 contract traded to a high of $1906.50 and a low of $1890.80. With the first notice day occurring tomorrow there will be many who are long June gold either exiting the trade and taking profits, or rolling over to the next most active month which will be August 2021.

Gold pricing for the month of June had a spectacular price advance. At the beginning of the month gold futures opened at approximately $1771 and gained well over $100 per ounce with one trading day left for the month. The last time gold had such a strong monthly gain was in July with gold opening at approximately $1830, and settling at $2017 by the end of the month. Of course, the following month, August 2021, is when gold hit its all-time record high at $2088.

As of 5:35 PM Eastern Standard Time, the continuous contract of gold futures has now switched over to represent August 2021 pricing. Gold is currently fixed at $1899.40 after factoring in today’s decline of $4.40.

Although there was slight dollar weakness today, that weakness did not overcome fractional selling pressure coming from investors and traders. Currently spot or Forex gold is fixed at $1895.90. According to the Kitco Gold Index (KGX), today spot gold gave up $0.90 which can be broken down into a decline of $1.85 as a direct result of fractional selling pressure by traders with gains of $0.95 due to dollar weakness. The net result was that spot gold sold off by $0.90 on the day.

The dynamic events which have been the undertones to move gold pricing higher have been due to a number of factors. The massive amount of fiscal spending over the last two years to help the U.S. economy recover, as well as the extremely dovish monetary policy that is the current mandate of the Federal Reserve being the main reason. Recently a new element has been rising inflation as judged by the CPI. The last report stated that our current annual inflation rate has swelled to 4.2%.

However, Friday will contain even more important inflation numbers which are preferred inflation measures according to Carsten Fritsch, a commodities analyst at Commerzbank.

“On Friday, investors will get the important personal consumption expenditure deflator, the Federal Reserve’s “preferred inflation measure. Recently a number of Fed representatives …had hinted that a discussion about tapering is drawing ever closer. If the aforementioned data turn out to be robust, the debate could gather pace, strengthening the dollar and yields, and thus precluding any further rise in the gold price.”

On top of all of these extremely relevant issues is the fact that cryptocurrencies which were moving at such a fast and parabolic rate to new all-time highs are in a corrective period. That means that many traders have moved chunks of capital out of digital currencies and into the safe-haven asset gold.

Barron’s recently reported that “J.P. Morgan strategists have also found that investors have been shifting away from Bitcoin and moving back into gold over the past month, reversing a trend of the previous two quarters. The reasons for that aren’t clear, said the team of strategists led by Nikolaos Panigirtzoglou, in a May 18 note discussing gold and Bitcoin.”

Our technical studies indicate that if gold is able to close effectively above $1900 per ounce, the next level of major resistance is at $1965.
 

By Gary Wagner

Contributing to kitco.com

Kinesis Money the cheapest place to buy/sell Gold and Silver with Free secure storage

 

David

Gold breaks above $1900, before breaking back below $1900 after NYC close

Yesterday gold futures closed at $1899.90 after trading to an intraday high above $1901. As trading resumed in Australia, it seemed that gold prices were trying to form a base above that elusive key psychological level. The high in trading last night took gold futures basis the most active June 2021 contract to $1913.30. However, those gains would be short-lived as the market moved back below $1900 as it traded in New York.

 

The rally that began at the end of March 2020 began at $1680 and reached an apex last night of $1913. In New York, the dollar traded fractionally higher but off the intraday high realized in overseas trading once the dollar began to trade in positive territory, even with the 10-year Treasury note, which traded lower and finally settled at 1.552% on Wednesday. As of approximately 10 PM, EST gold futures are currently trading down two dollars on the day and fixed at $1896.

However, any correction might be shallow and short-lived at best as the major fundamental drivers who have taken gold substantially higher are absolutely still in play. Traders and market participants continue to focus upon the recent uptick in inflation. The last CPI report indicated that our annualized inflation rate is now around 4.2%. Even though the Federal Reserve’s current mandate is allowing inflation to run hot and there is the perception that Fed actions will continue its dovish and extremely accommodative monetary policy for some prolonged period of time.

 

The question that market participants and investors are pondering is whether or not the Federal Reserve’s belief that any uptick in inflationary pressures is transitory and temporary, or that inflationary pressures will continue to run hot in a more sustained and systemic manner than the Fed is currently anticipating. The other major factor that has been taken gold higher has been dollar weakness which has been in a defined downtrend since the end of March 2020, which is the concurrent timeline that gold began the last leg of this current rally.

Our technical studies indicate that there is still solid support for gold between $1849 (the current fix of the 200-day moving average) and $1851, the 61.8% Fibonacci retracement. The data set used for the Fibonacci retracement begins at $1952 and ends at $1671. However, we do see a new support level coming into play which is $1879.60, based on the high trading prices achieved at the end of January 2020. It also must be noted that we did get a golden cross between the 50- and 100-day exponential moving averages. The last occurrence of a golden cross between these exponential moving averages was at the beginning of 2019. Using the same data set, the resistance we currently see occurs at $1898, which is the 78% Fibonacci retracement level.

 

Above that is the key psychological level of $1900 per ounce. Last night it seemed highly probable that an effective close above $1900 would make that price point a floor (support) rather than a ceiling (resistance). However, as of writing, $1900 remains a key and critical resistance area as it was not effectively able to hold a price point above that level for an extended period of time, in this case, less than 24 hours. It must be noted that this was the first attempt to break above $1900 since January of this year, and while it did not have the sustained bullish market sentiment to keep gold prices above that level, it does not mean that market forces will not take gold prices back above $1900. However, it does indicate that, at least for now, $1900 per ounce remains its next level of resistance to conquer if it is to continue on an upward trend.

 

By Gary Wagner

Contributing to kitco.com

Kinesis Money the cheapest place to buy/sell Gold and Silver with Free secure storage

David

Gold surges past $1900 in trading Yesterday

Forces and events which have taken gold to higher pricing since the end of March are still dominantly in play. The two primary forces are dollar weakness and data indicating an uptick in inflation. These two factors greatly affect Treasury yields, and in turn, lower Treasury yields increase the bullish sentiment in gold. Recently the U.S. Labor Department showed that the consumer price index jumped to 4.2% in April. It is up 2.6% from the numbers revealed in March.

According to a CNBC article titled, Gold hits 4 ½ month peak as dollar, U.S. yields weaken, "Gold prices scaled a more than four-month peak on Tuesday, as the dollar and U.S. Treasury yields slipped amid expectations that the U.S. Federal Reserve will keep its monetary policy accommodative. U.S. gold futures settled up 0.7% at $1,898. Data showed a U.S. consumer confidence index for May eased to 117.2."

CNBC's article also quoted Edward Meir, of ED&F Man Capital Markets analyst, saying that "markets are getting a sense that inflation is more deeply embedded than what the Fed is currently expecting … this is leading to money going into inflation hedges like gold. Gold has a good chance of getting to $2,000 during the second half of this year."

The slight decline in U.S. consumer confidence as traders and market participants become convinced that the Federal Reserve will maintain its highly accommodative monetary policy for a longer period of time. This was just the news that would fundamentally ignite gold, taking the futures contract briefly over $1900 per ounce.

As of 5:00 PM EST, the most active June 2021 Comex contract of gold futures is fixed at $1899.90 after factoring in today's net gain of $15.40 (+0.82%). Gold traded to a high in New York of $1901.20 and at the close of trading was very near today's high.

Although dollar weakness contributed light tailwinds to today's dramatic rise, it was predominantly traders and investors bidding the precious yellow metal higher. Currently, the dollar index is fixed at 89.67%, which is a decline of 18 points, or -0.20%. The dollar index has been in a defined downtrend since the end of March, which correlates directly to the second bottom of gold pricing, which occurred at the same time.

Our technical studies indicate that there is still solid support for gold between $1849 (the current fix of the 200-day moving average) and $1851, the 61.8% Fibonacci retracement. The data set used for the Fibonacci retracement begins at $1952 and ends at $1671. However, we do see a new support level coming into play which is $1879.60, based on the high trading prices achieved at the end of January 2020. It also must be noted that we did get a golden cross between the 50- and 100-day exponential moving averages. The last occurrence of a golden cross between these exponential moving averages was at the beginning of 2019. Using the same data set, the resistance we currently see occurs at $1898, which is the 78% Fibonacci retracement level. Above that is the key psychological level of $1900 per ounce.

 

By Gary Wagner

Contributing to kitco.com

 

Kinesis Money the cheapest place to buy/sell Gold and Silver with Free secure storage

David

What's next for gold price after 'game-changing' week?

This week was a "game-changer" for gold as prices climbed towards the $1,900 an ounce level while the rest of the markets saw chaotic trading, according to analysts.

After a massive selloff in the crypto space, gold's appeal is back on the radar for many investors, including new institutional money, OANDA senior market analyst Edward Moya told Kitco News.

"This was one of those weeks that was a game-changer for many traders. The crypto bubble popped. And even though cryptos are not going away anytime soon, the argument that bitcoin is a good inflation hedge, which has been attracting a lot of institutional money, has been questioned," Moya said. "Going forward, people will be much more aware and concerned about bitcoin volatility. This is leading to waves of money coming back into gold. The gold-backed ETF selling has now stopped as well. I'm bullish on gold."

After a very decent April and May, gold is on a cusp of trading significantly higher, said TD Securities head of global strategy Bart Melek.

"The $,1900+ gold levels are in the cards in the not too distant future. We will see how aggressive the Fed is on tightening. I don't think it will be. Inflationary expectations will move higher as we conclude that the Fed is quite happy and ready to allow inflation to move above target," he said.
 

Is Fed's tapering a risk for gold?

One risk that remains is tapering by the Federal Reserve, which could trigger another surge in the U.S. 10-year Treasury yields, Moya said.

"The movement in the bond market is likely to provide the primary risk for gold. The surging Treasury yields story is kryptonite for gold. But the Fed is locked in, and it can't just flip and start to normalize policy. That will trigger too much chaos," Moya said.

And despite the comments in the Fed's April meeting minutes that some officials would be ready to start talking about tapering at "upcoming meetings" depending on economic progress, the Fed is still likely to be one of the last central banks to tighten. And this is an excellent environment for gold.

"Due to the risks that are brewing, gold will benefit as an inflation hedge and a safe-haven asset. Other central banks will be in the tightening mode a lot sooner than the Fed. And that means weaker dollar," Moya added.

When the minutes were released on Wednesday, gold managed to hold and look past the tapering comments, said Melek. That was partly due to markets shifting their expectations from a robust recovery to a slightly slower one.

"The expectation is that the data cycle is going to disappoint with the markets adjusting downwards. Even though we will get tapering at some point, I don't envision an environment where real interest rates advance very much. This is a supportive environment for gold," he told Kitco News.
 

Levels to watch

With the $1,900 an ounce on the horizon, markets might not have to wait too long to see that breached.

"We are likely to see gold still move past the $1,900 mark. When you look at the gold flow from last week, we were firmly around $1,820-30. Now we are at $1,870, and we passed the 200-day moving average," Melek said. "Short positions in gold are also unwinding. There's plenty of room to go higher."

Gold's outlook is bullish in the short and medium-term, Moya stated. "We are going to see a couple of more attempts at $1,900 next week. I will not be surprised if we take that level out soon."

Gold is definitely in an uptrend, but the precious metal needs to make sure it holds the $1,846 as a support level, Phoenix Futures and Options LLC president Kevin Grady told Kitco News.

"I remain neutral on gold. We could get a pullback. For me, a big number is $1,846. It is a really big support level. If we re-test it next week, it needs to hold. If we don't, the next level of support for gold is $1,808."

 

Key data next week

There are a few important data releases to watch next week, especially Tuesday's CB consumer confidence, Thursday's U.S. Q1 GDP and durable goods orders numbers, as well as Friday's personal income and the PCE price index.

"Consumer confidence is quite important here even though it is a lagging indicator. Also, the releases to watch are the durable goods orders and personal income," said Melek. "Weaker-than-expected data will end up being positive for gold. The market will conclude that despite what we saw in the minutes, there is no particular urgency to start tightening in any way."

Other data to keep an eye on include house price index and new home sales on Tuesday and jobless claims with pending home sales on Thursday.

 

By Anna Golubova

For Kitco News

 

Kinesis Money the cheapest place to buy/sell Gold and Silver with Free secure storage

David

Bitcoin price loss is gold's gain and that is good for junior explorers too – David Erfle

Once again, the gold market has regained its luster as investors moved back into the precious metal and out of volatile cryptocurrencies. With gold price ending the week above $1,850 an ounce, junior explorers should start to see price movements, according to David Erfle, founder of juniorminerjunky.com.

This week on Kitco Roundtable, Erfle said that the slow start to the year for the gold market was just a consolidation period after hitting all-time highs above $2,000 an ounce. He added that the move back above $1,850 an ounce was a major technical breakout and the price appears to be ready to resume its long-term uptrend.

Efrle added that further volatility in bitcoin will continue to benefit gold prices and the junior explorer sector.

"cryptocurrencies are in a bubble. Bitcoin went from less than a thousand dollars continue to $65,000 in just four years later. When bubbles pop, they usually go down to their fundamental, inherent value," he said. "What is the fundamental value of a Bitcoin? Who knows where this is going to end and how it's going to end, but I think it's going to hurt a lot of people."

With gold prices on the way up, Erfle said that it's only a matter of time before the junior exploration sector starts to regain new bullish momentum.

Erfle added that senior producers are already sitting on a pile of cash and starting to put that money to work. The only difference is that the companies learning from the mistakes of 2011 are doing things right.

Last week major miners like Rio Tinto and BHP announced strategic investments in exploration companies. Rio invested $25 million in Western Copper and Gold's Casino project in Yukon. Meanwhile, BHP announced a $17 million farm-in deal in Encounter's Elliot copper project in Northwestern Australia.

"[Senior producers] are doing it right this time. They're taking strategic placements," he said. They take a chunk now with the possibility of taking the rest of it out later and they do it with cash."

Efrle added that with the global economy starting to recover from the COVID-19 pandemic, he expects to see a lot more merger and acquisition activity in the mining space. He added that he expects instead of high premiums for projects, a lot more cash deals will be made.

"I love cash deals because it's an instant payday. I've got no interest in owning shares of a major," he said.

 

By Kitco News

For Kitco News

 

Kinesis Money the cheapest place to buy/sell Gold and Silver with Free secure storage

David

Gold and silver are trading higher leading into the European open

Both gold and silver are trading higher leading into the European open. The yellow metal is 0.19% up trading at $1873.90/oz while silver has pushed 0.25% higher to trade at $27.78/oz. In the rest of the commodities complex, copper is 0.82% higher and spot WTI is trading just over half a percent in the black. Decent manufacturing numbers so far but the U.K. shines brightest

The manufacturing PMI's across the world have been pretty good so far but there does seem to be a slight struggle to keep up with the numbers from the last month (accept the U.K.). We must remember that a number above 50 still represents expansion so overall the news has been very positive. It could have also been expected that the number may have been slightly lower in comparison to the ones seen in April as that was the month that most countries started to come to terms with the move out of the pandemic.

As we know many goods and products are sent out of Asia. India is currently in the midst of a massive rise in cases and deaths. Some raw materials suppliers have been struggling with getting products out of India and this is adding to woes as shipping costs have risen too.

Delving deeper into the German number, IHS Markit said “While the demand picture for manufacturing remains positive, we are getting more reports from businesses of supply shortages curbing production levels and weighing on new orders due to forced downtime at customers. On top of this, there is also the issue of an associated surge in costs, with supply shortages pushing up factory input prices in May at a rate that easily surpasses anything seen before in the manufacturing survey’s 25-year history. Inflationary pressures are increasingly spreading to services as well, pushing the overall measures of input costs and output prices both to record highs.”.

The overall number beat expectations with some good results from some of the member states. The report confirmed this as it said "it the rest of the region where the strongest increase in business activity was recorded in May, with growth outside of France and Germany hitting the fastest since the start of 2018 thanks to a record jump in manufacturing output and the largest increase in service sector activity since February 2018.".

The report added that the Eurozone economy revives as demand surges at the fastest rate for 15 years. Factories also reported that new order growth waned slightly for a second month running, but remained the third-highest in the survey’s history and strong enough to generate a new record rise in uncompleted backorders for a third straight month. With raw materials prices rising it seems that the market needs to keep a close eye on inflation figures moving forward.

In the U.K., the private sector has signaled the fastest output growth for more than two decades. Business expectations for the next 12 months edged up to a new record high during May. The manufacturing PMI number reached its highest level since the survey began in January 1992. The report also said new orders increased at the strongest pace since data collection began almost 30 years ago (index at 69.1 in May), exceeding the previous record that had stood since July 1994. Seem like the U.K. is in an economic boom coming out of pandemic lockdowns. Is this what we could expect from other areas in the world?.

 

Australian Manufacturing PMI 59.9 vs previous 59.7

Japanese Manufacturing PMI (May) 52.5 vs previous 53.6

French Manufacturing PMI (May) 59.2 vs expected 58.5 previous 58.9

German Manufacturing PMI (May) 64.0 vs expected 65.9 previous 66.2

EU Manufacturing PMI (May) 62.8 vs expected 62.5 previous 62.9

U.K.Manufacturing PMI (May) 66.1 vs expected 60.7 previous 60.7

Later on U.S. Manufacturing PMI (May) is expected to hit 60.2 with the previous reading at 60.5
 

By Rajan Dhall

For Kitco News
 

Kinesis Money the cheapest place to buy/sell Gold and Silver with Free secure storage

David