Gold, silver bulls squelched by firmer U.S. dollar

Gold and silver prices are steady to slightly lower in midday U.S. trading Wednesday. A rally in the U.S. dollar index at mid-week kept the precious metals bulls at bay. August gold futures were last down $1.20 at $1,819.90. July Comex silver futures were last down $0.136 at $20.67 an ounce.

The marketplace was closely watching a central bankers’ forum in Portugal that began earlier today. Speakers included Fed Chairman Powell, ECB President Lagarde and Bank of England governor Bailey. However, the markets did not show any significant reactions to the central bank officials’ comments.

Today’s downbeat U.S. final first-quarter gross domestic product (GDP) estimate that showed contraction of 1.6% gave the gold and silver markets a brief boost but those gains could not be held.

Global stock markets were mostly lower overnight. U.S. stock indexes are mixed at midday. Trader and investor risk appetite has pulled back at mid-week, following downbeat consumer confidence readings out of the U.S. on Tuesday and out of the Euro zone today.

Gold prices trading near session highs as U.S. Q1 GDP drops 1.6%

The key outside markets today see Nymex crude oil prices near steady and trading around $111.75 a barrel. The U.S. dollar index is higher at midday. The yield on the 10-year U.S. Treasury note is fetching 3.108%.

Technically,August gold futures prices scored a mildly bearish “outside day” down on the daily bar chart today. Bears have the overall near-term technical advantage. However, the recent sideways and choppy trading action at lower price levels is suggesting a market bottom is in place. Bulls' next upside price objective is to produce a close above solid resistance at the June high of $1,882.50. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at today’s high of $1,834.90 and then at this week’s high of $1,842.80. First support is seen at today’s low of $1,810.70 and then at the June low of $1,806.10. Wyckoff's Market Rating: 3.0.

July silver futures were down $0.136 at $20.67 in midday trading today and nearer the session low. The silver bears have the solid overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at the June high of $22.565 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 $21.00 and then at Tuesday’s high of $21.355. Next support is seen at the June low of $20.545 and then at $20.42. Wyckoff's Market Rating: 2.0.

July N.Y. copper closed up 35 points at 377.75 cents today. Prices closed nearer the session high today. The copper bears have the solid overall near-term technical advantage. A four-week-old price downtrend is in place on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 400.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 350.00 cents. First resistance is seen at this week’s high of 384.30 cents and then at 390.00 cents. First support is seen at today’s low of 370.75 cents and then at the June low of 364.00 cents. Wyckoff's Market Rating: 1.5.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

 

 

David

An important bigger-picture perspective on gold

Editor's Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today's must-read news and expert opinions. Sign up here!

(Kitco News) – An examination of the monthly continuation chart for nearby Comex gold futures is a classic example of why it’s important to look at the longer-term charts, in order to gain a critical over-the-horizon perspective on where a market has been and where it may be heading.

The monthly gold chart shows prices are still not far below the record high of $2,078.80, basis nearby futures, scored in March of this year. Prices have pulled back from the record high, but not a lot, by longer-term historical standards. Technical analysts call this price action a “downside correction” in an overall longer-term price uptrend that remains in place. Gold market bulls still have the firm longer-term technical advantage.

By Jim Wyckoff

For Kitco News

Time to buy Gold and Silver on the dips

 

 

David

Market participant wait for two key reports this week; GDP and PCE

Analysts and investors are waiting for two critical government reports due out on Wednesday and Thursday of this week. On Wednesday the Bureau of Economic Analysis (BEA) will release its latest numbers on real GDP which will be followed on Thursday by the PCE for May 2022.

Concerns over a potential recession which will either be confirmed or negated by Wednesday’s GDP report. These concerns took both the dollar and gold lower today. As of 5:35 PM EDT gold futures basis, the most active August 2022 contract is trading $6.30 (-0.34%) lower and currently fixed at $1824 per ounce. The dollar lost 0.244 points today taking the dollar index to 103.715.

According to a report by Dr. David Kelly, Chief Global Strategist at J.P. Morgan asset management, “1Q22 Real GDP showed the economy contracted at a 1.5% annual rate in 1Q22, a deceleration from the boomy 4Q21. Weakness was primarily led by volatile trade and inventory data. Trade subtracted 3.2% from overall GDP growth as exports fell sharply and imports soared.”

The report also said that first-quarter 2022 earnings have held up better than expected. However, inflation continues to far exceed the FOMC’s 2% target with the May CPI report indicating hotter than expected inflation despite hopes by the Federal Reserve that it would moderate.

He concluded the following; first, the Federal Reserve could push the economy into a recession if it over-tightens in response to supply-driven inflation. Secondly, heightened geopolitical tensions with Russia could result in continued energy shortages, low consumer confidence, and dampening growth. Lastly, he concluded that markets may remain depressed and volatile until investors receive clarity on inflation and the Fed.

The other key report which will be released on Thursday is the PCE price index for May. The PCE for April revealed a slight uptick in core inflation increasing by 0.2% month over month. However. This was a decrease from the increase in March which came in at a 0.9% increase in MoM.

Although we will have to wait until Thursday for the official PCE price index from the BEA, last week they reported that “The U.S. current-account deficit widened by $66.6 billion, or 29.6 percent, to $291.4 billion in the first quarter of 2022, according to statistics released today by the U.S. Bureau of Economic Analysis. The revised fourth-quarter deficit was $224.8 billion. The first-quarter deficit was 4.8 percent of current-dollar gross domestic product, up from 3.7 percent in the fourth quarter.”

August gold opened at $1839.60 today and traded to a high of $1842.80. Today’s high was $1.10 below the 200-day moving average which is currently fixed at $1843.90. This puts the first level of resistance in gold at the 200-day moving average. Above that, there is resistance at $1850.40, the highest value gold achieved in trading last week. Our technical studies indicate that major resistance is currently at $1882 which corresponds to the highest value of gold achieved this month on June 13.

Strong support for gold does not occur until $1805 with major support at $1786.20. Both levels of support are based upon recent price lows.
 

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

 

 

David

Gold’s price floor has gone up – What this means for Newmont, the world’s largest gold miner – Tom Palmer

Tom Palmer, CEO of Newmont, said that gold’s price floor has increased considerably over the past decade, making mining more lucrative as a result.

“We think, fundamentally, that the floor for gold has changed,” he said. “You typically have seen it sitting, probably for the last decade, at around $1,200 as a floor. I think the events of the last couple of years have changed that: the level of fiscal and monetary stimulus, the factors that are happening around Russia’s invasion of Ukraine. Gold is more comfortably, I think, sitting with a floor of maybe $1,500 or $1,600.”

Palmer spoke with David Lin, Anchor and Producer at Kitco News, at the PDAC 2022 Convention in Toronto.

Newmont’s Costs and Revenues

Newmont’s cost guidance this year is $1,050 per ounce of gold. This assumes an $1,800 price per ounce of gold.

“Built into that [cost guidance] number are the higher taxes and royalties that you pay at that higher price,” Palmer explained. “If gold’s price were to come down, then you’re paying less taxes and royalties, so they’re coupled to each other.”

U.S. inflation was 8.6 percent in May, and Newmont is taking this into consideration, said Palmer.

“We’re starting to see some additional cost pressures coming into our business,” he said. “And we talked about it being about 5 percent over and above that number we guided to. We continue to watch that carefully… If we look further into the future, in probably 2024 we would see inflation coming down to long-run levels of about 2 to 3 percent.”

In terms of higher oil prices, Palmer explained that Newmont’s base assumption is $60 per barrel, and that every $10 increase per barrel reduces his company’s cash flow by $15 million.

However, he added that, “every $100 increase in gold price above the assumption that we make, means we generate $400 million of free cash flow every year… I talked earlier about our $1,800 assumption. [Gold] has spent a lot of this year at $1,900 to $1,950.”
 

Drivers of Gold Price

Palmer identified key supply and demand factors behind gold’s price.

“For gold, there are less discoveries taking place, so there’s less gold that’s going to be produced going forward,” he said. “And then there’s demand. One of the big demands for gold is jewelry in China and India. A growing middle class in both of those countries leads to greater demand for gold… I think you’ve also seen more of a move to gold as a safe haven, as a result of the volatility over the last couple of years.”

To find out Newmont’s plans for explorations and discoveries, and its ESG strategy, watch the above video.
 

By Kitco News

For Kitco News

Time to buy Gold and Silver on the dips

David

Gold holds above a key support level in light of rising interest and yields

Gold continues to trade in an extremely narrow range as the precious yellow metal reacts to two opposing forces; rising interest rates and inflation. However, the recent price declines in gold have been shallow and short-lived at best. Most importantly, gold prices have held above a key support level which is Fibonacci based. The data set used for this Fibonacci retracement set contains a long period of data. It begins at $1678 which is the low created in August 2021, up to this year’s highest value of $2077. This data set covers a price range of approximately $400.

Chart number one is a daily chart of the continuous contract of gold futures. It currently is representing the most active August 2022 contract. After hitting this year’s high in March what followed was a deep correction moving gold from $2077 to $1785. Gold dropped a total of $292 or 15.12% in approximately 2 ½ months. This correction was directly attributable to market participants' focusing on dollar strength the result of rising interest rates and yields.

What followed after gold hit $1785 was an initial rally up to $1881 finding resistance at the 50-day moving average and then correcting to approximately $1807 before forming a base and regaining some value.

Chart number two is a daily candlestick chart of gold which has been enlarged to detail the most recent price activity. Today gold traded to a low of $1830.70 which is $0.10 above the 61.8% Fibonacci retracement. It is widely recognized amongst technical traders that a deep acceptable correction will typically go to the 61.8% Fibonacci retracement and begin to move higher reigniting the rally which occurred before the correction.

If gold can hold above the key support level of $1830 it will find minor resistance at the 200-day moving average which is currently fixed at $1843.20. Above the 200-day moving average, the next resistance level gold could encounter if it continues to rise from this price point is approximately $1860 which is the high achieved on both Thursday and Friday of last week. Major resistance is currently fixed at $1872.60 which is based upon the shortest term 50-day moving average.

If gold futures can hold $1830 it will either form a foundation at this price point and consolidate, or start a new rally from this base. With the next FOMC meeting scheduled for the end of July, market participants will prioritize their focus on inflation. If inflation continues to run hot, we can expect to see gold move to higher pricing. However, if inflationary pressures begin to abate, we could expect to see gold continues to be pressured resulting in lower prices. I believe that inflation will continue to run hot and continue to be not only persistent but elevated.

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

 

 

David

Crypto weekend meltdown: Bitcoin price touches $17k, Ethereum below $900 as renewed selloff sends prices spiraling

The crypto space faced another sharp selloff during the weekend as Bitcoin plunged below $18,000 and Ethereum dropped below $900.

The overall crypto market cap plummeted to $847 billion, down nearly 10% on the day. Bitcoin touched $17,677, the lowest level since November 2020, and Ethereum fell to a low of $893, the level last seen in January 2021.

"Bitcoin appears to be hanging on for dear life as cryptocurrencies remain in meltdown mode. The worst week since the early days of the COVID pandemic has widespread crashes across Bitcoin, Ethereum and Dogecoin," said OANDA senior market analyst Edward Moya.

At the time of writing, Bitcoin was at $18,633, down 74% from its November all-time high of $69,000, and Ethereum was at $948, down 81% from its November all-time high of $4,878. 

The initial trigger behind the massive crypto drop in June was the macro environment. First, a surprising hot inflation number from May caught markets off guard, followed by a 75-basis-point hike from the Federal Reserve on Wednesday – the biggest rate increase since 1994.

The dramatic shakeout in crypto also garnered steam following contagion risks from within the crypto community itself after a lending company Celsius said it was halting all transactions on its platform. To learn more about that, click here.

After failing to hold several key support levels, analysts now watch a price area below the $14,000 mark.

"Bitcoin is sharply lower today after having accelerated to the downside following the breakdown from its consolidation phase. It is currently down about 14%, bringing its month-to-date loss to about 44%," said Fairlead Strategies founder and managing partner Katie Stockton. "The breakdown is unconfirmed (it has not spent enough time below to make it decisive), but it shows the risk inherent to risk assets right now. If we see consecutive weekly closes below $18.3K, risk would increase to next support below $13.9K."

Stockton added: "We do not recommend counter-trend positions, however, noting momentum is strongly negative."

 

During the first two weeks of June, investors have continued to position themselves defensively, and crypto's upside potential remains limited until stagflation fears subside, said Bank of America's global crypto and digital asset strategist Alkesh Shah.

"Although painful, removing the sector's froth is likely healthy as investors shift focus to projects with clear road maps to cash flow and profitability vs. purely revenue growth. The digital asset ecosystem is an emerging high-growth speculative asset class with tokens that are exposed to similar risks as tech stocks. The upside is likely capped until risks associated with rising rates, inflation, and recession are fully discounted," Shah said.

By Anna Golubova

For Kitco News

David

Gold is doing 'spectacular job' but price drop to $1,800 not ruled out, here's why

Gold surprised this week with its resilience and steadiness after an oversized 75-basis-point hike from the Federal Reserve and massive volatility across many markets. But analysts don't see a major rally developing in gold in the short-term, and they are not even ruling out a move back to $1,800.

The precious metal's reaction to the Fed's decision to raise rates by 75 basis points — the biggest increase since 1994 — has been very encouraging. Fed Chair Jerome Powell also signaled that another 75bps is possible in July, adding that the so-called 'softish landing' will now depend more o external factors like commodity prices.

After digesting the information, the stock market saw a sharp drop, while gold rallied around $40 on Thursday. However, the rally was short-lived as August Comex gold futures retreated to 1,841.70 an ounce Friday, down 0.44% on the day.

"Gold's current relative stellar performance is surprising, as it usually tracks the Fed's policy rates and real interest rates intently," TD Securities global head of commodity strategy Bart Melek. "And, the market hiked its year-end Fed Funds expectation from 2.7% in mid-May to 3.6% now. At the same time, the 10-year real rate, which is the usual driver, jumped well over 50bps from a month earlier to 0.69% and some 180 bps higher from the start of the year."

The performance of gold versus that of other markets stands out, said Gainesville Coins precious metals expert Everett Millman. "Other markets you look at, even some safe havens like the U.S. dollar, have been remarkably volatile. Gold has had relatively low volatility. It is a sign of strength and gold doing its job — holding steady even amid turmoil across other assets," Millman told Kitco News.

Year-to-date, gold is largely flat, up 0.5%. Yet, Millman pointed out that this resilience does not mean a rally is just around the corner.

"We've seen gold rally nice and then pull back. I expect that to continue up until the next Fed meeting in July. Gold will be range-bound and stuck trading sideways until we find out whether the Fed will go through with another large rate hike," Millman said. "Rate hikes are supposed to be bad for gold. But when inflation is this high, it will take many rate hikes for the Fed to get to where the real rate of interest rate is neutral. And that is what gold cares about. Maybe next year, they will get there."

What's next for crypto after 'perfect storm' crashes prices? Ethereum's market cap is 'orders of magnitude higher' than Bitcoin — Messari

Throughout the summer, Millman sees gold between $1,800 and $1,900, with $1,840 flipping from support to resistance and vice versa.

He added that even though inflation remains one of the primary drivers for gold, growing recession risk could encourage some additional gold-buying if investors continue to fear losses in other assets.

Gold has been doing "a spectacular job," described Melek. But that doesn't mean the precious metal doesn't correct here and returns back towards $1,800. "It won't be a rout but a modest correction," he said.

The thinking behind Melek's projection is a persistent Fed, which won't give up aggressive rate hikes at the first sign of economic trouble. "My suspicion is that the Fed won't change its mind any time soon," he said. "It is very likely there will be many more aggressive hikes in the face of strong inflationary forces, which will likely send gold back to the May lows."

And that means a return to the $1,824-$1,808 range in the near term. "Still think we can go below $1,800 by the end of the year. It is too early to say that the Fed will flake at the first sign of trouble. Could be in a situation where growth starts to slow, but we won't see a significant move in inflation until September or October."

Data to watch next week

Out of all the macro data on the docket for next week, housing will be a vital element to keep a close eye on. The key thing to watch is the impact of the Fed's higher rates on the economy, including the housing market, said ING chief international economist James Knightley.

"With the Federal Reserve signaling it has a strong stomach for the fight against inflation, we have to expect further significant interest rate hikes in coming months. But by going harder and faster into restrictive territory, there is a greater risk of a hard landing and a potential recession," Knightley said in a note Friday. "The housing market is particularly vulnerable given prices are up nearly 40% nationally since the start of the pandemic due to stimulus-fuelled demand vastly outstripping the limited supply of properties for sale."

Another event to monitor will be Powell's testimony before the Senate Banking, Housing, and Urban Affairs Committee on Wednesday and the House Financial Services Committee on Thursday.

Tuesday: U.S. existing home sales (May)

Wednesday: Fed Chair Powell testifies

Thursday: Fed Chair Powell testifies, U.S. jobless claims, U.S. manufacturing PMI

Friday: U.S. new home sales
 

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

David

A tug-of-war takes gold lower, then higher, and finally lower on Friday

Gold traders experienced extreme price volatility beginning with a $70 drop on Monday and Tuesday, higher prices on Wednesday and Thursday, and a final price decline on Friday. This tug-of-war shifted market sentiment causing market participants to concentrate on either spiraling inflation or higher interest rates. The shift between these two opposing forces resulted in dramatic price increases and declines.

Last week’s CPI report which revealed that the current level of inflation is at 8.6% created bullish undertones moving the market higher during the middle of the week. However, the focus shifted to the Federal Reserve's revision of its forward guidance announcing a rate hike of 75 -basis points (3/4%) on Wednesday taking fed funds rates to 1.5% – 1.75%. This was the largest single rate hike since 2009.

Based on a weekly price decline in gold of approximately $40 the clear winner of this tug-of-war is the interest rate hike enacted by the Federal Reserve on Wednesday.

Wednesday’s rate hike was followed by rate hikes from other central banks. On Thursday with the Bank of England raising rates by 25 basis points, the SNB (Swiss National Bank) raised its interest rates by 50 basis points. This follows last week’s announcement by the ECB (European Central Bank) of a 25 basis point rate hike in July and a potential 50 basis point hike in September.

According to Bloomberg News, “June 2022 will certainly be a month to remember in central banking. Global monetary policy makers have laid out the most powerful tightening campaign since the 1980s, with a number of central banks embracing interest-rate increases of a size unimaginable at the start of the year.”

As of 5:10 PM EDT gold futures basis, the most active August contract is currently fixed at $1841.90 after factoring in today’s decline of eight dollars or 0.43%. Today’s price decline in gold was also the net result of dollar strength. The U.S. dollar gained just over 1% (1,01%) taking the dollar index to 104.46. The dollar also closed higher on the week.

Today’s price decline took gold just below its 200-day moving average which is currently fixed at $1843. Our technical studies indicate that current short-term support for gold occurs at $1830 which is the 61.8% Fibonacci retracement. Major support for gold occurs at $1765.50 which is based upon the 78% Fibonacci retracement. The data set used for this retracement begins at the lows and double bottom that occurred at $1680 up to the yearly high of $2078.

These studies also indicate that the first level of resistance occurs at $1860 which is based upon the highs of Thursday and Friday. Major resistance starts at $1878, the 50-day moving average, and $1889.70 which is based on the 100-day moving average.

Gold prices have fluctuated based on the primary focus of market participants. The tug-of-war between focusing on inflation levels or interest rate hikes will continue to be a primary force affecting gold prices through the remainder of this month.

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

David