Gold closes at its highest value this year, although traders bid it lower

Gold futures and spot pricing closed moderately higher today. However, traders and investors bid the precious yellow metal lower with dollar weakness accounting for all of today's gains. As of 4:40 PM EST gold futures basis, the most active February contract is currently up $5.80 or 0.32% and fixed at $1875.60. Concurrently, the dollar is trading 0.68% lower on the day with the dollar index currently fixed at 102.945. Simply comparing the percentage gain in gold (+0.32%) against the percentage decline in the dollar (-0.68%) reveals that there was selling pressure in gold futures today.

The same is true for spot or physical gold. According to the KGX, (Kitco Gold Index) spot gold is currently fixed at $1870.80 after factoring in today's gain of $5.10. However on closer inspection dollar weakness resulted in gains of $12.90 per ounce, and selling pressure took gold lower by $7.80 resulting in today's moderate gain.

A case can be made for the selling pressure in gold on a fundamental and technical basis. Reuters News reported a comment made by Mary Daily the president of the San Francisco Federal Reserve Bank who said, "The Fed should try to bring inflation down "as gently as we can," but it also "absolutely" needs to make sure high inflation does not become embedded."

This suggested that the Fed might raise rates by 50- bps, rather than 25 bps which was the anticipated rate hike that the Federal Reserve would enact at the next FOMC meeting (January 31 – February 1). During a webcast interview with the Wall Street Journal daily she left open that possibility. "I can give you arguments for either side."

She confirmed the current outlook by the Federal Reserve that ultimately interest rates need to go to between 5.00% and 5.25% and remain there to bring inflation to the Federal Reserve's target of 2%.

Traders and investors are viewing the potential for a 50-bps hike as reflected by the selling pressure in both gold futures and spot pricing. However, according to the CME's FedWatch tool, there is a 79.2% probability that the Federal Reserve will raise rates by ¼% and a 20.8% probability that they will raise rates more aggressively by 50 bps.

Market participants will look at the December reading of the CPI (Consumer Price Index) this Thursday to gain more insight into the Federal Reserve's 2023 monetary policy.

Technical studies also suggest that gold prices could correct

Today gold futures traded to an intraday high of $1886 before settling approximately $10 lower at the time of this writing. Our technical studies indicate that gold futures could find potential resistance at $1881 which is based upon a top that occurred at the end of June 2022. Gold futures did trade above that price point but closed below it suggesting possible resistance at the top created in June.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

Gold price surges back to 6-month highs on mixed U.S. data, focus shifts to inflation next week

The latest macro data out of the U.S. pushed gold back to six-month highs after the U.S. economy and employment showed signs of cooling.

The gold market was at one point just $25 away from its key $1,900 an ounce level on Friday, with February Comex gold last at $1,873.40, up 2.4% on the week.

The biggest macro event of the week showed that the U.S. job growth slowed modestly in December, with U.S. nonfarm payrolls rising by 223,000 last month. The November data was revised down to 256,000 positions added.

One of the gold-positive drivers from the report was wage pressures coming down, which is a sign that inflation is cooling. Year-over-year average hourly earnings rose 4.6% last month. This was below markets' expectations of 5% and followed November's downwardly revised gain of 4.8%.

"Overall [the report] showed an economy slowly moderating with inflation coming down and labor market still strong. There is simply nothing recessionary about this report, but it was also a mixed report that had something for everyone," said MKS PAMP's head of metals strategy Nicky Shiels.

Also, the U.S. service sector contracted for the first time in 30 months in December, with the Services Purchasing Managers Index (PMI) reading coming in at 49.6%. The 6.9 percentage-point decline surprised to the downside as market consensus calls were looking for the index to come in at 55%.

"While recent tracking suggests that GDP growth held up much better than expected in Q4 last year, this decline in the ISM services will raise concerns that the economy was losing momentum quickly and could have started 2023 on a soft footing," said CIBC Capital Markets senior economist Andrew Grantham.

Gold surged in response to both data releases, hitting a daily high of $1,875.20 — the highest level since June. "Gold knee-jerked higher," said Shiels. "The steep declines in business activity and orders that, if sustained, creates concerns about the demand outlook."
 

Next week's performance is key

What gold does next will be vital in determining whether the precious metal can sustain its rally, Shiels added.

"Depending on whether gold can hold its weekly gains (which is looking increasingly likely), it solidifies the offensive way gold has been trading since it established a mild bull trend since early November – always looking for reasons to rally," she said Friday. "There's a decent amount of bullish 'pent-up' demand that has been rolled over from last year and can get ignited on the right data point (CPI & PCE) will be far more telling," Shiels said.

Gold began to show signs of a bullish pattern in the fourth quarter of 2022 on expectations of a pivot by the Federal Reserve.

The next target that gold needs to breach is around $1,896.50, which is the 61.8% retracement of the losses since last March's peak near $2,070, Bannockburn Global Forex managing director Marc Chandler told Kitco News.

"I am not convinced it makes it up there as momentum indicators are getting stretched, and I think the risk is greater than the around 1-in-3 chance that the Fed funds futures are pricing in of a 50 bp hike at the FOMC meeting that concludes on Feb 1," Chandler stated. "That said, as long as the yellow metal holds above the $1,825-$1,830 area, the upside looks favored."

After Friday's data, markets started to price in a 74.2% chance of a 25-basis-point rate hike in February, according to the CME's FedWatch Tool.

Gold has been anticipating and pricing in a slowdown in rate hikes by the Fed, but the ETF investors still need some convincing before the rally can really kick off, said Commerzbank analyst Barbara Lambrecht.

"Its upswing is presumably due primarily to more optimism among speculative financial investors, who are generally more fickle," Lambrecht wrote Friday. "However, any lasting recovery of prices on the gold market will require, above all, a shift in sentiment among ETF investors, who are still exercising caution. They appear to be waiting for the U.S. rate hike cycle to come to an end. In the short term, we envisage, if anything, a risk of setbacks on the gold market."
 

Data to watch

Inflation is one of the key reports that gold will pay close attention to next week, especially after the Fed minutes from the December meeting showed that U.S. central bank officials feel that more work needs to be done to battle price pressures.

"Federal Reserve officials remain concerned that policy needs to be more restrictive and to stay restrictive for a long period of time to ensure that demand moves into balance with the economy's supply capacity and price pressures subside," said ING chief international economist James Knightley.

Market consensus calls are looking for the annual inflation number to slow to 6.5% in December from November's 7.1% print.

Tuesday: Fed Chair Jerome Powell speaks on 'Central Bank Independence'

Thursday: CPI, U.S. jobless claims

Friday: Michigan consumer sentiment

By Anna Golubova

For Kitco News

Time to Buy Gold and Silver

David

Gold moves lower temporally halting rally on Fed clarifications of inflation concerns

Breaking four consecutive days of gains, gold prices declined today by $20 as market participants reacted to data revealing that the U.S. labor market is tighter than previously perceived. A tight labor market raises the expectations that the Federal Reserve will maintain the elevated interest rates for a longer period. The expectations that the Fed will continue its extremely hawkish monetary policy throughout the entire calendar year have diminished the hope of easing by the Federal Reserve.

The vast majority of gold’s price decline today was directly attributable to dollar strength. The U.S. dollar index is currently up 0.85% and fixed at 104.91. Considering that gold is trading 1.11% lower indicates mild selling pressure combined with dollar strength led to gold’s first daily price decline this year.

Minutes released by the Fed earlier this week cemented sentiment by Federal Reserve officials who unanimously agreed that the central bank should slow the pace of rate hikes while maintaining the current elevated level. While there is very little hope that the Federal Reserve will reduce rates according to the minute's released rate hikes should be limited to their upper target of approximately 5.1% vis-à-vis its benchmark Fed funds rate.

As of 4:15 PM EST gold futures basis the most active February contract is currently fixed at $1838.50 after factoring in today’s decline of 1.10.%. Silver futures sustained a deeper decline giving up 2.48% with the most active March contract currently fixed at $23.37.

Price levels for gold

he two most recent tops occur at $1823 (August 2022) and $1791 (November 2022) which continue to be technical levels of support. Noteworthy is the fact that the support trendline covering recent lows from November to current pricing remains intact.

Major resistance still occurs at $1881.50 which is based on two tops that occurred in mid-November and mid-June 2022. However, yesterday’s intraday high of $1870 now becomes the next level of resistance for gold to take out.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

Gold continues 2023 rally amidst minutes revealing Fed remains hawkish

This afternoon the Federal Reserve released the minutes from last month’s FOMC meeting. Unanimously Fed officials agreed that the central bank should slow the pace of its aggressive rate hikes. This would allow them to continue to ratchet up the cost of credit to curb inflation. They continue to be worried that market participants have an inaccurate perception of hoping for rate cuts this year. However, they left the door open to tightening even more aggressively if inflation rises.

"Most participants emphasized the need to retain flexibility and optionality when moving policy to a more restrictive stance."

Most importantly they continued their stern doctrine to raise interest rates to just over 5% by the end of this year. "No participants anticipated that it would be appropriate to begin reducing the federal funds rate target in 2023,"

Gold prices maintained the morning gains following the release of last month’s FOMC meeting minutes at 2:00 PM EST. Gold futures opened today at $1845.20 and traded to an intraday high of $1871.30. As of 2:45 PM EST, the most active February 2023 contract is fixed at $1857.40 after factoring in today’s price gain of $11.60.

Silver futures basis the most active March contract opened at $24.17, traded to a low of $23.745, and is currently fixed at $23.92 after factoring in today’s $0.316 decline.

Levels to watch in gold futures for Q1 2023

It is a fact that market sentiment for gold had a major price reversal from exceedingly bearish to bullish beginning in November 2022. Our technical studies indicate that the current level of major support is $1831. This support is based on yesterday’s low. Resistance occurs at $1881.50, based on two tops that occurred in mid-November and mid-June 2022.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

Steady-weak price action in gold, silver as 2022 winds down

Gold and silver prices are not straying too far from unchanged levels in quieter early U.S. trading Friday. Many traders are on holiday this week, making for lighter trading volumes and thin conditions. Traders will hit the exit doors early today, ahead of the three-day New Year holiday weekend. February gold was last down $2.40 at $1,823.60 and March silver was down $0.21 at $24.035.

Global stock markets were mixed to weaker overnight. U.S. stock indexes are pointed toward slightly lower openings when the New York day session begins. The marketplace is quieter this week following the Christmas holiday and just ahead of the new year

The marketplace in the new year will continue to closely monitor China’s battle with Covid. Broker SP Angel this morning reports in an email dispatch:

“Chinese Covid rates are going to have a substantial impact on the ability of factories to produce, transporters to deliver, builders to build, and on finance companies to finance. This could stall the Chinese economy for a few months, though we suspect China’s authorities will do their best to keep the wheels on. The authorities are already telling Covid-positive people to go to work, a policy which is likely to spread the infection faster than in any other nation. The narrative seems to be that Omicron is milder than Delta and presents a lesser risk to nation. China is also asking families to sign Cremation forms saying: “I guarantee that the deceased XXX did not die of #COVID, and I will be fully responsible for any false claim.” (The Telegraph). Chinese covid deaths have risen to 9,000 a day, around double last week’s mortality rate, according to U.K. research firm Airfinity, the world's first dedicated COVID-19 health analytics and intelligence platform. (Reuters). Airfinity also reckons cumulative deaths reached 100,000 over the past 30 days with some 18.6 million infections using modelling based on data from Chinese provinces before recent changes on reporting cases. The research group expects China's Covid infections to reach their first peak on Jan. 13 with 3.7 million cases a day and for Covid deaths to peak on Jan. 23 around 25,000 a day with cumulative deaths reaching 1.7 million by end-April. China has officially reported just 10 COVID deaths since 7th December.”

With the lack of fresh, major business news this week, let’s look at some news headlines Friday morning from the Dow Jones Newswire.

“This was a terrible year for stocks; next year could surprise—positively”

“China’s Covid easing and policy pivots brighten outlook for stocks”

“Small businesses find some relief from hiring woes”

“Copper set for first annual decline in four years”

“What a crazy year: a bear market (stocks), oil’s pop, and those bond yields”

“Higher rates threaten U.S. renovation boom”

“(U.S.) mortgage rates log biggest yearly rise”

“Dollar rally loses some steam”

“Crypto went 12 rounds with Mike Tyson in 2022; now, Bitcoin whales are buying”

The key outside markets today see the U.S. dollar index weaker. Nymex crude oil prices are slightly lower and trading around $78.75 a barrel. Meantime, the yield on the benchmark U.S. 10-year Treasury note is presently 3.854%.

U.S. economic data due for release Friday is light and includes the Chicago ISM business survey.

Technically, the gold futures bulls have the firm overall near-term technical advantage. Prices are in a seven-week-old uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close in February futures above solid resistance at $1,900.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,775.00. First resistance is seen at $1,836.90 and then at this week’s high of $1,841.90. First support is seen at the overnight low of $1,819.80 and then at Thursday’s low of $1,811.20. Wyckoff's Market Rating: 7.0.

The silver bulls have the solid overall near-term technical advantage. A choppy, four-month-old uptrend is in place on the daily bar chart. Silver bulls' next upside price objective is closing March futures prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at the December high of $24.525 and then at $25.00. Next support is seen at this week’s low of $23.645 and then at $23.00. Wyckoff's Market Rating: 7.5.

By Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David