Considering dollar strength gold’s fractional gains were more than respectable

After factoring in two days of dramatic price declines in gold resulting in a loss of just under $90 per ounce, the fractional gains were significant. The significance is in the fact that gold (futures and spot) pricing advanced at all with such a strong dollar.

The dollar gained 0.71% and the dollar index is currently settled at 103.485. As of 5:48 PM EST, gold futures basis the most active April contract is currently fixed at $1880.20 after factoring in today’s gain of $3.60. Spot gold according to the Kitco gold index (KGX) is currently fixed at $1867.40, a net gain of $3.10.

The best way to illustrate how today’s fractional gains were significant is to look at the effect of dollar strength and normal trading in spot pricing. Physical gold gained $3.10 in trading today and that does not tell the complete story.

Dollar strength caused gold to decline by $11.75. Normal trading without factoring in dollar strength or weakness actually took gold $14.85 higher. This is why a fractional gain of three dollars does not fully disclose the significance of gold’s upside move today.

Silver did have a slight decline losing $0.14 to dollar strength, losing nine cents due to normal trading and five cents due to dollar strength with spot silver currently fixed at $22.25.

Because today’s price advance in gold was accomplished in light of major headwinds the result of dollar strength we can say that gold effectively rebounded today even though it’s not evident by just looking at the price change. However, the gains in gold regardless of dollar strength could have been due to simply short covering with traders pulling profits on short-term trades rather than the initial accumulation of long positions. In other words, it is too early to tell if gold prices witnessed the first signs of prices pivoting back into a bullish demeanor.

Gold has gained so much value since November 3 that the two-day price decline of $90 last week was long overdue. The question of whether or not it has found a bottom and this correction concluded at a 38.2% Fibonacci retracement level, or has more downside potential will be revealed over time. The fact that we didn’t see a sharp decline today was welcome news for gold bulls and time will tell whether or not the current price correction has concluded or not.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

Gold's massive $50 daily drop is just a 'speed bump' in the 2023 outlook but be aware of more profit-taking next week – analysts

The gold market saw significant losses Friday as the precious metal dropped $50 on the day following a shockingly solid employment report out of the U.S.

The U.S. economy added a staggering 517,000 jobs in January as the unemployment rate dropped to 3.4% — the lowest level since 1969. This took many by surprise as market consensus calls were looking for just 185,000 new positions.

On top of that, the U.S. service sector beat expectations in January, rising to 55.2% after a contraction in December, according to the latest data from the Institute of Supply Management (ISM).

"Today's data irked the Federal Reserve, which was fairly confident about inflation trends. This service sector is still too strong. And it is going to keep wage pressures elevated," OANDA senior market analyst Edward Moya told Kitco News.

After raising rates at a slower pace of 25 basis points on Wednesday, Fed Chair Jerome Powell talked about disinflation progress. "It is gratifying to see the disinflationary process now getting underway," he said. "We can now say, for the first time, that the disinflationary process has started. And we see it really in goods prices so far."

However, Powell did acknowledge that the service sector is yet to feel a slowdown in inflation.

Before Friday's employment report, the markets were looking for the Fed to potentially end its hiking cycle in March, but that is now changing, and gold is reacting to that, noted Moya.

"This is very disruptive for the gold trade. The markets thought we were very close to the end of Fed tightening. And now, there is the question of when this economy will really weaken. This employment report was shockingly strong, and that suggests that wage pressures are not coming down any time soon," Moya added.

Gold plummeted Friday, with April Comex futures dropping to $1,875.70 an ounce, down $55 on the day and looking to close the week down 3.7%.

"There is a lot of data for markets to digest. And not just the employment report but the Fed's tone. The market wants to interpret Powell as dovish. But the Fed's reaction function will be difficult to predict. That's the main reason why gold has gone down," Gainesville Coins precious metals expert Everett Millman told Kitco News.

After the best start to the year since 2012, gold was due for some profit-taking, and with the latest developments, analysts said there might be more selling next week.

"The path of least resistance for gold is to move lower," said Millman. "Expect us to spend more time consolidating and trading sideways. Gold spent so little time trading between $1,800-$1,900 before this selloff. It quickly moved from $1,700 to $1,900. This is why gold will be testing a lot of these levels in $1,800s before the market has strong conviction again."

The immediate support for gold is $1,870 an ounce. If that doesn't hold, gold will test $1,850 and then $1,800, Millman pointed out.

However, the overall bullish outlook remains intact despite the short-term downtrend, noted Millman. "No matter what the Fed ends up doing, gold will perform well through the rest of the year. This is a short-term speed bump rather than a fundamental change in gold's outlook," he said.

One driver to watch in the first quarter will be central bank gold buying after the official sector purchased 1,136 tonnes — the most since 1967 in 2022, according to the World Gold Council's (WGC) data.

"This is a major theme supporting gold as an investment. We haven't seen that level of interest since the last financial crisis. That is an important thing to watch," Millman pointed out.

 

Next week's data

The event to watch next week is Fed Chair Powell's appearance at the Economic Club of Washington.

"If he fails to push back meaningfully against the market reaction, the implication would be that the Fed itself is relaxed with what the market is doing, which risks it pushing further in the direction of pricing future interest rate cuts," said ING chief international economist James Knightley.

Tuesday: Powell speaks

Thursday: U.S. jobless claims,

Friday: Michigan consumer sentiment

By Anna Golubova

For Kitco News

Time to Buy Gold and Silver

David

Gold, silver pull back on profit taking and as USDX rebounds

Gold prices are lower and silver well down from its daily high in midday U.S. trading Thursday. Profit taking from the shorter-term futures traders is featured in both metals after gold hit a nine-month high and silver a four-week high overnight. A rebound in the U.S. dollar index today after its pounding Wednesday is also a bearish daily outside market element for the precious metals. Still, both gold and silver are in firm near-term technical control. April gold was last down $10.10 at $1,932.70 and March silver was up $0.036 at $23.65.

The marketplace Thursday was still digesting Wednesday afternoon's FOMC statement and Fed Chair Jerome Powell's press conference. The Fed raised the Fed funds rate range by 0.25%, as widely expected. However, Powell's remarks at his presser led the marketplace to believe the Fed is close to ending its string of interest rate increases. Powell said inflation is receding but needs to pull back farther. He mentioned the word "disinflation" as characterizing the present U.S. economic conditions. Most agreed that in the final assessment, Powell was not nearly as hawkish as he had been in recent FOMC press conferences and left the door open to a Fed "pivot" sooner rather than later.

Gold price gains as Fed Chair Powell talks disinflation but warns it's too early to declare victory

Today was the regular monetary policy meetings of the European Central Bank and the Bank of England, which saw both central banks raise their main interest rates by 0.5%. The moves were not unexpected.

Focus now turns to Friday morning's January U.S. employment situation report from the Labor Department. The key non-farm payrolls number is expected to be up 187,000 jobs, following a rise of 223,000 in the December report.

The key outside markets today see the U.S. dollar index higher but it hit a nine-month low overnight. Nymex crude oil futures prices are a bit firmer and trading around $76.50 a barrel. Meantime, the yield on the benchmark U.S. 10-year Treasury note is presently fetching 3.365%.

Technically, April gold futures prices hit a nine-month high early on today and then reversed course to score a bearish "outside day" down on the daily bar chart. Bulls still have the solid overall near-term technical advantage. A three-month-old uptrend is in place on the daily bar chart. Bulls' next upside price objective is to produce a close above solid resistance at $2,000.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,900.00. First resistance is seen at $1,950.00 and then at today's high of $1,975.20. First support is seen at $1,925.00 and then at this week's low of $1,915.50. Wyckoff's Market Rating: 8.0

March silver futures prices hit a four-week high early on today. The silver bulls have the overall near-term technical advantage. However, trading has been choppy and sideways at higher levels. Silver bulls' next upside price objective is closing prices above solid technical resistance at the January high of $24.775. The next downside price objective for the bears is closing prices below solid support at $22.00. First resistance is seen at $24.00 and then at last week's high of $24.415. Next support is seen at this week's low of $23.05 and then at the January low of $22.845. Wyckoff's Market Rating: 6.5.

March N.Y. copper closed down 35 points at 410.75 cents today. Prices closed near the session low and hit a three-week low today. The copper bulls have the firm overall near-term technical advantage but are fading a bit. A four-month-old uptrend on the daily bar chart has stalled out. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the January high of 435.50 cents. The next downside price objective for the bears is closing prices below solid technical support at 395.00 cents. First resistance is seen at 420.00 cents and then at this week's high of 424.90 cents. First support is seen at this week's low of 410.25 cents and then at 405.00 cents. Wyckoff's Market Rating: 7.0.

By Jim Wyckoff

For Kitco News

Time to Buy Gold and Silver

David