Gold prices stuck in no-mans land holding support at $1,850 on quiet U.S. holiday

Gold prices have dropped from their overnight highs but continue to hold support above $1,850 an ounce; Commodity analysts note that the market generally lacks conviction in any direction as U.S. markets are closed for the Memorial Day long weekend.

Spot gold prices are trading in neutral territory Monday morning, last trading around $1,856 an ounce.

Analysts note that the precious metal is trading in the middle of its broader long-term range. Although gold prices continue to benefit from a weaker U.S. dollar, rising risk sentiment, helping to boost equity markets, is taking some shine off the yellow metal's safe-haven allure.

However, some analysts have said that the jump in the S&P 500 last week was a classic bear market. Analysts have said that rising fears of an impending recession will continue to weigh on equity markets.

"There could still be more pain to come," said Craig Erlam, Senior European Market Analyst at OANDA. "But at these levels, it's only natural that the vultures are circling. There isn't a huge amount to be excited about on inflation, interest rates and the economy but that doesn't mean there isn't value out there."

Friday, commodity analysts at Bank of America warned that oil prices, being driven by Russia's invasion of Ukraine, could push the global economy into a 1980s-style recession.

"For next year, we believe oil demand could approach pre-Covid levels but only if Russian liquids production holds near 10mn b/d and OPEC+ supplies increase. With our $120/bbl Brent target now insight, we believe that a sharp contraction in Russian oil exports could trigger a full-blown 1980s style oil crisis and push Brent well past $150/bbl," said Francisco Blanch, Global Research head of global commodities and derivatives research at Bank of America Securities.

Market analysts have said that these fears will continue to support gold prices.

"Recent data has shown that the world's largest economy is cooling rapidly, raising fears of a hard landing in the near term. This situation has led traders to price in a less aggressive tightening cycle over the forecast horizon, pulling down Treasury rates of late," said Diego Colman, Market Analyst, in a note published Saturday.

"In terms of technical analysis, gold is stuck between support at $1,840 and resistance at $1,870. A decisive move outside of these levels is required for near-term guidance, but if prices break out on the topside, buyers could become emboldened to launch an attack on $1,895," he added. "If XAU/USD resolves to the downside and breaches the $1,840 area, where the 200-day simple moving average is currently located, selling pressure could accelerate, paving the way for a drop towards $1,785."

However, not all analysts are convinced that gold prices are ready to move higher or that the U.S. dollar has peaked.

In a recent note to clients, Bart Melek, head of commodity strategy at TD Securities, said that he still prefers to sell rallies in the gold market.

"Given that [gold's] positioning is still tilted to the long end of exposure, any signs that inflation will remain stubbornly high, or data pointing to a steadfast economy due to higher wages and the spending of savings, as seen today, Fed Funds estimates could easily move back to the highs seen at the start of Mayor even higher," he said. "…Repositioning could easily force gold to trend down to $1,840/oz and then to just below $1,800/oz. It should be noted that specs have plenty of room to take on new short exposure and reduce long positions."
 

By Neils Christensen

For Kitco News

Time to buy Gold and Silver on the dips

David

If gold is not the best inflation hedge, then what is? Nancy Davis

Gold and oil are not ideal investments for those seeking inflation hedging, according to Nancy Davis, Founder and Managing Partner of Quadratic Capital Management. Davis spoke with David Lin, Anchor and Producer at Kitco News.

Stock and Bond Market

Davis commented on the recent stock market selloffs. She attributed the fall in prices to companies facing higher costs.

“This is a little bit of a wakeup call,” she said. “…Investing is risky and, you know, especially when you’re buying corporate securities, whether it’s their stocks or their bonds, if that corporation has higher costs, maybe in the form of labor costs, more supply side disruptions in the form of, you know, all the things that are happening around the world from a geopolitical and COVID perspective, coupled with consumer confidence in this country is at lows from 2008.”

Davis also said that markets have “priced in” the Federal Reserve’s projected interest rate hikes. Fed Chairman Jerome Powell recently raised interest rates.

“Now I think it’s really important for investors to realize that the rate hikes from the Fed have already been priced in,” she remarked. “The Fed has only hiked 75 basis points so far, but the interest rate markets have moved with the Fed’s forward guidance. So… we have about six months left in the year in 2022, and the rates market has priced in 175 basis points. So, if the Fed does not hike 175 basis points, they’re actually going to be easing rates.”
 

Inflation and CPI

Davis said that the Fed has not lost credibility with investors.

“I know the Fed has gotten a lot of critics saying they’re not credible and all those things,” she mentioned. “I am not one of those. I think the Fed is doing the best job they can with the tools they have available… I think using the balance sheet more as a tool to fight inflation is prudent… [It] seems like they’re going to be using that in addition to hiking policy rates.”

Davis also said that the Consumer Price Index is not the only way to calculate inflation.

“The big problem I see with CPI alone is that a third of the index, approximately 33 percent, is what they call ‘shelter,’ and it’s actually owner-occupied rent,” she said. “… Year over year, rent increases are up about 1.5 percent, whereas home ownership prices are up closer to 20 [percent].”

Do Gold and Commodities Hedge Against Inflation?

Davis’s company, Quadratic Capital, has a fixed-income IVOL ETF that protects against inflation. According to Davis, “85 percent of the portfolio” is composed of Treasury Inflation-Protected Securities (TIPS).

“But then we try to fix the problems that exists with TIPS alone… [We] actually try to profit when long-dated yields move higher, which would likely happen in a stagflationary or inflationary environment… And the other really attractive thing in my opinion for investors is we own options. And whenever you own options… you’re long volatility on the underlying asset class… So we actually own fixed-income volatility, which is a nice potential diversifier.”

She added that real assets, such as energy and gold, are not the best inflation hedges.

“I personally think, you know, energy and gold and all these real assets may not be the best inflation asset because… they don’t pay any coupons so there’s no monthly distribution at all,” said Davis. “They do have carry costs… Gold is not an inflation hedge, in my opinion, it’s a currency trade. It has no yield, it has no carry.”

For more information on inflation hedging, watch the video above.

By Kitco News

For Kitco News

Time to buy Gold and Silver on the dips

David

Gold prices still holding $1,850 as PCE core inflation rises 4.9%, in line with expectations

The gold market continues to hold around the critical psychological level of $1,850 but according to some analysts, could struggle in the near-term as inflation pressures could have peaked.

On a monthly basis, the core Personal Consumption Expenditures Index, the Federal Reserve’s preferred inflation measure, increased 0.3% last month, the U.S. Department of Commerce said on Friday. The inflation data was in line with expectations.

On an annual basis, core PCE rose to 4.9% down from the 5.2% rise seen in March. This is the second month annual inflation measures have dropped after hitting 5.3% in February. The drop in annual inflation was also in line with expectations.

The gold market is taking the latest inflation data in stride. June gold futures last traded at $1,850.40 an ounce, up 0.19% on the day.

Some analysts have noted that gold could struggle to attract new bullish capital as the Federal Reserve continues to aggressively raise interest rates while inflation pressure fall. This would drive real interest rate higher, which would be negative for gold, a nonyielding asset.

Looking at headline inflation, the report said that the PCE Index rose 0.2% last month, down compared to March’s rise of 0.9%. For the year headline inflation rose 6.3%, down from the previous increase of 6.6%.

Along with easing inflation pressures, the report also showed consumers continuing to hold up well, despite the economic uncertainty.

The report said that personal spending rose 0.9% last month, up from March’s 1.1% increase. The data beat expectations as consensus forecasts called for a 0.7% rise.

However, the data also shows that consumers are tapping into their savings as income increased 0.4%, down from March’s increase of 0.5. Economists were expecting to see a 0.5% increase.

According to economists, the savings rate fell to 4.4%, the lowest level since 2008.

By Neils Christensen

For Kitco News

Time to buy Gold and Silver on the dips

David

Gold, silver near steady amid conflicting daily inputs

Gold and silver prices are not trading too far from unchanged in midday action Thursday. Bearish for the metals is a stabilization of the U.S. stock indexes this week, after hitting 12-month lows last week. Rising bond yields at midday are also a negative for the metals. However, sharply higher crude oil prices and a weaker U.S. dollar index are working in favor of the metals market bulls on this day. June gold futures were last down $1.50 at $1,844.80.July Comex silver futures were last up $0.065 at $21.93 an ounce.

The metals showed no significant or lasting reaction to a weaker-than-expected revision to U.S. first-quarter GPD today, which came in down 1.5%, year-on-year.

Gold price still on pace to push above $2,000 as stagflation, recession risks rise – In Gold We Trust

The key outside markets today see Nymex crude oil futures prices sharply higher and trading around $114.50 a barrel. Meantime, the U.S. dollar index is weaker in early trading and is well down from the May 20-year high. The yield on the 10-year U.S. Treasury note is fetching 2.781%.

Technically, June gold futures see a 2.5-month-old price downtrend in place on the daily bar chart. Bears have the firm overall near-term technical advantage. Bulls' next upside price objective is to produce a close above solid resistance at $1,900.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the May low of $1,785.00. First resistance is seen at today’s high of $1,852.80 and then at this week’s high of $1,869.10. First support is seen at today’s low of $1,836.30 and then at $1,830.00. Wyckoff's Market Rating: 3.0

July silver futures also see a 2.5-month-old price downtrend in place on the daily bar chart. The silver bears have the firm overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $23.00 an ounce. The next downside price objective for the bears is closing prices below solid support at the May low of $20.42. First resistance is seen at this week’s high of $22.215 and then at $22.50. Next support is seen at this week’s low of $21.645 and then at $21.50. Wyckoff's Market Rating: 2.5.

July N.Y. copper closed up 35 points at 425.80 cents today. Prices closed nearer the session high today. The copper bears have the firm overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 445.00 cents. The next downside price objective for the bears is closing prices below solid technical support at the May low of 403.70 cents. First resistance is seen at 430.00 cents and then at this week’s high of 435.50 cents. First support is seen at today’s low of 420.35 cents and then at 415.00 cents. Wyckoff's Market Rating: 2.5.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

David

Gold, silver sell off amid rebound in USDX, uptick in bond yields

Gold and silver prices are lower in midday U.S. trading Wednesday, with gold suffering solid losses. Corrective pullbacks from recent good price gains are featured at mid-week. A rebound in the U.S. dollar index and rising U.S. Treasury yields are negatives for the precious metals on this day. June gold futures were last down $22.30 at $1,843.10. July Comex silver futures were last down $0.228 at $21.84 an ounce.

Traders were awaiting the U.S. data point of the week: this afternoon’s release of the minutes from the last meeting of the Federal Reserve’s Open Market Committee (FOMC). The marketplace will be looking for further guidance on the timing and pace of the Fed’s monetary policy tightening cycle, and on inflation prospects. Trading could become more active in the immediate aftermath of the 2:00 p.m. EDT release of the FOMC minutes.

Global stock markets were mixed overnight. U.S. stock indexes are pointed toward narrowly mixed openings when the New York day session begins.

The coming recession will be mild; the U.S. economy could boom if Republicans win elections – Mark Skousen

The key outside markets today see Nymex crude oil futures prices slightly higher and trading around $110.00 a barrel. Meantime, the U.S. dollar index is higher on a corrective bounce from recent strong selling pressure. The yield on the 10-year U.S. Treasury note is fetching 2.75%.

Technically, June gold futures saw a corrective pullback after recent good gains. A 2.5-month-old price downtrend is in place on the daily bar chart. Bears have the firm overall near-term technical advantage. Bulls' next upside price objective is to produce a close above solid resistance at $1,900.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the May low of $1,785.00. First resistance is seen at $1,850.00 and then at this week’s high of $1,869.10. First support is seen at today’s low of $1,838.70 and then at $1,830.00. Wyckoff's Market Rating: 3.0

July silver futures see a 2.5-month-old price downtrend in place on the daily bar chart. The silver bears have the firm overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $23.00 an ounce. The next downside price objective for the bears is closing prices below solid support at the May low of $20.42. First resistance is seen at $22.00 and then at this week’s high of $22.215. Next support is seen at this week’s low of $21.645 and then at $21.50. Wyckoff's Market Rating: 2.5.

July N.Y. copper closed down 600 points at 424.60 cents today. Prices closed nearer the session low today. The copper bears have the firm overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 445.00 cents. The next downside price objective for the bears is closing prices below solid technical support at the May low of 403.70 cents. First resistance is seen at 430.00 cents and then at this week’s high of 435.50 cents. First support is seen at today’s low of 422.30 cents and then at 420.00 cents. Wyckoff's Market Rating: 2.5.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

David

Gold, silver rally as stock markets, bond yields drop

JGold and silver prices are solidly up in midday U.S. trading Tuesday, boosted by another sell off in the U.S. stock indexes, falling U.S. Treasury yields and by the recent sharp losses in the U.S. dollar index that hit another four-week low today. Risk aversion is keener in the general marketplace early this week, and that’s inviting safe-haven demand for the precious metals. June gold futures were last up $19.10 at $1,866.90. July Comex silver futures were last up $0.392 at $22.12 an ounce.

Global stock markets were mostly lower overnight. U.S. stock indexes are lower at midday and are in or near bear market territory, defined as 20% or more below their recent highs. Geopolitical and inflation worries are keeping equities market bulls squeamish. Fears of U.S. economic recession are rising after some downbeat U.S. economic data released today.

Hedge funds continue to sell gold but sentiment is shifting

Later today, Fed Chairman Jerome Powell will deliver remarks at an economic summit in Las Vegas.

The other key outside market today sees Nymex crude oil futures prices weaker and trading around $109.50 a barrel. Meantime, the yield on the 10-year U.S. Treasury note is fetching 2.749%.

Technically, June gold futures prices hit a two-week high again today. A 2.5-month-old price downtrend is still in place on the daily bar chart. However, more price gains this week could negate the downtrend. Bears have the overall near-term technical advantage. However, bulls have momentum on their side. Bulls' next upside price objective is to produce a close above solid resistance at $1,900.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at the May low of $1,785.00. First resistance is seen at $1,875.00 and then at $1,883.00. First support is seen at $1,850.00 and then at this week’s low of $1,843.30. Wyckoff's Market Rating: 4.0.

July silver futures see a price downtrend still in place on the daily bar chart. However, more price gains this week could negate the downtrend. The silver bears have the overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $23.00 an ounce. The next downside price objective for the bears is closing prices below solid support at the May low of $20.42. First resistance is seen at today’s high of $22.215 and then at $22.50. Next support is seen at today’s low of $21.645 and then at $21.50. Wyckoff's Market Rating: 3.0.

July N.Y. copper closed down 345 points at 431.05 cents today. Prices closed nearer the session high today. The copper bears have the overall near-term technical advantage. However, more gains this week could negate a price downtrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 450.00 cents. The next downside price objective for the bears is closing prices below solid technical support at the May low of 403.70 cents. First resistance is seen at this week’s high of 435.50 cents and then at 440.00 cents. First support is seen at today’s low of 425.65 cents and then at 422.50 cents. Wyckoff's Market Rating: 3.0.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

David

Extreme dollar weakness today overcomes sel
ling pressure in gold:

103.80 was and continues to remain an important price level of technical resistance for the U.S. dollar index. The dollar index has flirted with this price point on three occasions, first occurring at the end of 2016 and then again during the first quarter of 2017.

According to Investopedia, the U.S. dollar index (USDX) measures the value of the U.S. dollar relative to a basket of foreign currencies. The USDX was established by the Federal Reserve in 1973 after the dissolution of the Bretton Woods agreement. The index measures dollar strength or weakness against six primary currencies and was updated in 1999.

The chart above is a weekly Japanese candlestick chart of the dollar index. It begins at the end of 2016, with the dollar rising to a high just shy of 103.80. This is the first occurrence of dollar strength resulting in the index trading over 100 since the end of 2002.

This can be seen in a monthly Japanese candlestick chart of the dollar index below (chart 2). What followed after the dollar surged past 100 at the end of 2016 was a dramatic decline in value from 103.779 to a low of 88.08 during the first quarter of 2018. This represents a price decline of 16% during that year. From 2018 to the first quarter of 2020, the dollar index increased in value until it reached approximately 104, the second occurrence of the index reaching this level and then declining significantly immediately thereafter.

At the beginning of 2021, the dollar had fallen to approximately 89 before finding technical support and resuming a multi-year climb to a higher value. Dollar strength continued and breached this significant technical level 2 weeks ago. The dollar index traded to just above 105 during the week beginning May 9. However, last week the dollar index opened at approximately 104.70 and closed at approximately 103.20. Today the dollar index continued to spiral to lower pricing losing 1.04%. As of 4:55 PM EDT, the dollar index is currently fixed at 102.105.

The decline in the U.S. dollar over the last two weeks has given gold significant tailwinds moving the precious yellow metal higher. Gold futures basis the most active June 2022 contract is currently up $9.90 or 0.54% and fixed at $1852. Gains in gold value today were 100% the result of dollar weakness in conjunction with selling pressure from market participants. The screenprint of the Kitco Gold Index above was taken at 4:12 PM EDT and shows spot gold fixed at $1853, a net gain of $6.30. On closer inspection, dollar weakness contributed $17.20 in gains while selling pressure resulted in a decline of $10.90.
 

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

David

Gold's big $1,800 test on the radar next week as stocks' steep selloff intensifies

With the U.S. stock market still at risk, should gold be trading higher? Analysts see next week as an important test for gold as markets debate the effects of the Federal Reserve's oversized hikes.

Gold is ending the week with its first weekly gain in five weeks as the precious metal finally saw renewed safe-haven demand on concerns over inflation and economic growth. June Comex gold futures were last trading at $1,841.40, up 1.8% on the week.

Going into next week, the steep selloff in the equity space might not be over as the S&P 500 is now 20% below its all-time highs posted in January.

"During the last few weeks, we saw the stock market selling off and gold going along with it. But then we got a short-term peak in Treasury yields, which opened the door for gold to behave as a safe haven," OANDA senior market analyst Edward Moya told Kitco News. "The U.S. stock market is still at risk. We could see one last major plunge. And we'll probably see gold's safe-haven [properties] being tested once more. Selling exhaustion should be settling soon."

Markets are concerned whether inflation and growth can react quickly enough to the Fed's interest rate hikes, said CIBC World Markets chief economist Avery Shenfeld.

If that is not the case, the Fed would be forced to step up its already aggressive tightening schedule, Shenfeld noted. "That's the one-two punch that the equity market is now fretting over: higher rates that lower equity multiples, coupled with a recession that crushes earnings. If, instead, a smaller dose of Fed medicine, and consumer resistance to higher prices, brings an earlier cooling, the recession risks would be significantly diminished," he said.

2022's $1 trillion crypto wipeout: 'necessary cleansing' of excess speculation just like dot-com bubble – Bloomberg Intelligence

Expectations of steeper rate increases are again rising, warned DailyFX strategist Michael Boutros.

"Markets are having to reprice Fed's outlook on rates. There is doubt that 50bps at this level of inflation would be enough. If the Fed's 75bps hike is readjusted again, it will be a headwind for gold. Gold is stuck sideways as we wait for that story to flash out," Boutros told Kitco News.

The idea that the Fed is making a policy error by acting too slow is becoming more common, he added. "They need to slam on the break and accelerate rate hikes even faster. At this point, they are already late," Boutros stated.

This is why gold is in a tough spot and could be at risk of a further selloff below the $1,800 an ounce level, especially if there is a close below the $1,791 level.

"With what we are seeing in the equity market, you would expect gold to catch a bid. We did this week, but the rally was unimpressive. From a technical standpoint, we are at risk of testing the lows. The $1,781 level or deeper is still on the table," Boutros noted.

Investors should gear up for a sideways price action until gold can move above the $1,895 an ounce level, he pointed out.

Moya was more optimistic looking further out, with economic growth concerns remaining one of the main stories for the rest of the year. This narrative should weigh on the U.S. dollar index, which has been recently trading near 20-year highs and limiting gold's upside.

"We've seen weaker economic data in the U.S. this week. Even jobless claims went up. All expectations are for data to deteriorate. There should be some pullback for the dollar," he said. "It should be good news for gold. We should see gold hold $1,800 through the next week. But more downside movement in equities could break that."

Moya sees the Fed slowing down once financial conditions tighten enough and credit spreads widen. And this should not be too far out in the future.

"That's starting to happen. If the stock market drops another 5% lower, volatility will spike higher, and credit markets will force the Fed into a less hawkish stance of 25-basis-point hikes. And that's not too far away. It should be good news for gold," Moya said.

Next week's key data releases are flash PMI and personal spending. "Consumer spending is projected to weaken. The FOMC minutes are likely to be dated as we already heard Fed Chair Powell and other FOMC members after the May meeting. Flash PMI will be important, especially if we start to see if data get closer to contraction territory," he outlined.

Next week's data

Monday: U.S. manufacturing PMI

Tuesday: U.S. new home sales

Wednesday: U.S. durable goods orders, FOMC meeting minutes

Thursday: U.S. GDP Q1, initial jobless claims, pending home sales

Friday: PCE price index
 

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

David

Markets at risk of ‘waterfall event’, this is how gold would perform – Lobo Tiggre

Lobo Tiggre, of The Independent Speculator, claimed that the market selloff is not yet over, and that gold will do well in this environment. Tiggre spoke with David Lin, anchor and producer at Kitco News.

“My concern about a near-term ‘waterfall event’ in the broader markets… is higher now than it has been since 2021,” said Tiggre. “I don’t want to be putting any more cash at risk right now… I sold everything.”

When it comes to gold, Tiggre suggested that the precious metal is resilient in the face of bond-buying and a stronger U.S. dollar.

“People are dumping stocks, they’re buying bonds, even though the Fed is going to be selling because there’s fear in the air,” he explained. “So to see gold still holding 1,800 [USD] in the face of these headwinds tells you something.”

He also commented on the U.S. dollar’s recent performance against gold, “The reality is that the dollar only appears strong. The mayor is still in the glue factory, the dirty laundry hamper is still the dirty laundry hamper. Anybody going to the store, anybody paying rent, they know that their dollars are worth less on their way to perhaps being worthless… [To] the degree that, you know, gold is trading more directly with the dollar, I’m actually a dollar bear.”

Tiggre’s macroeconomic outlook is grim. He said that uncertainty, high inflation, and an economic slowdown will affect markets.

“Nobody really knows what’s going to happen, not even me,” he admitted. “We could be in a recession right now with high inflation… And to think that the Fed can just, you know, raise rates and cure inflation so easily, I think it’s a fantasy. It’s not going to happen.”

To find out Tiggre’s outlook for gold mining stocks and uranium, watch the above video.
 

By Kitco News

For Kitco News

Time to buy Gold and Silver on the dips

David