Gold futures consolidate forming a base at recent highs above $2030

The solid breakout that moved gold futures above $2000 to a high of $2043 yesterday, and $2049.20 today indicates a new level of support well above $2000 per ounce.

Currently, the most active June 2023 futures contract is fixed at $2037.10 a net decline of $1.1 or 0.05%. The fact that gold did not immediately sell off as it has in the past after hitting the highest price since gold hit $2077 last year indicates strong bullish market sentiment that continues to drive gold higher and more importantly hold those recent high prices.

Today’s fractional decline occurs with dollar strength which indicates that there are still traders bidding the precious metal higher although not enough to take gold futures higher on the day.

The same cannot be said for spot gold which is currently fixed at $2020 which is a net gain of $0.30. According to the Kitco Gold Index (KGX), today’s spot prices are a combination of investors bidding spot gold higher by $6.60 coupled with dollar strength taking gold lower by $6.30, thereby creating a fractional gain of $0.30. The dollar is currently up 0.30% and the index is fixed at 101.57.

The force that propelled gold well above $2000 yesterday was weaker U.S. economic data. The data suggested that the Federal Reserve could certainly consider slower rate hikes and a pause of rate hikes sooner. According to the CME’s FedWatch tool, there is a 55.9% probability that the Federal Reserve will not raise rates at the May FOMC meeting and begin to pause raising rates as they assess whether their former rate hikes indicate that their actions have put inflation on a firm trajectory towards their target of 2%.

The next key event that will shape the Federal Reserve’s decision will be Friday’s jobs report. This is because the Federal Reserve is laser-focused on the extremely robust labor market as a strong higher inflationary component.

On a technical basis, there is no resistance until $2069 the highest closing price for gold futures on record. With a short-term bias, you can use today’s low of $2026 as a potential solid support level.

By

Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

Breakout in gold takes futures to a high of $2043.40 in striking range of record high

A solid breakout in gold moved futures pricing well above $2000 in trading today. Currently, the most active June 2023 contract is trading up $39.10 or 1.94% and fixed at $2039.40. That puts gold within striking range of the all-time high of $2088 as well as the record closing price for gold futures at $2069.40.

Dollar weakness contributed roughly 25% of the gains in gold today but it was market participants actively bidding the precious yellow metal higher that caused this current rally to accelerate. The dollar is currently down 0.53% and the dollar index is fixed at 101.25.

The primary fundamental event that propelled gold well above $2000 was weaker U.S. economic data. This data suggests that the Federal Reserve could certainly consider slower rate hikes and a pause of rate hikes sooner.

For the first time since May 2021, available new job positions have dropped below 10 million. Today CNBC reported that "Job openings fell below 10 million in February for the first time in nearly two years, in a sign that the Federal Reserve's efforts to slow the labor market may be having some impact. Available positions totaled 9.93 million, a drop of 632,000 from January's downwardly revised number, the Labor Department reported Tuesday in its monthly Job Openings and Labor Turnover Survey."

Because the Federal Reserve has been laser-focused on the extremely robust labor market as it uses its tools to reduce inflation today's report confirms that recent action by the Federal Reserve is beginning to have an impact as seen in the contraction of job openings.

The probability that the Federal Reserve will not raise rates at the May FOMC meeting has increased dramatically. According to the CME's FedWatch tool, there is a 58.7% probability that the Federal Reserve will leave its terminal rates of 4.75% to 5% and beginning a period of pausing rate hikes. However, there remains a 41.3% probability that the Fed will raise rates by ¼% in May.

There is no technical resistance in gold futures until $2069 the highest closing price for gold futures on record. There is solid support for gold at $2013 which is the 38.2% Fibonacci retracement of the most recent leg of the rally. In other words, there is a high probability that gold futures will not only hold above $2000 but challenge the all-time record close.

By

Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

David

Gold price sees triple-digit gains in March, but can it set record highs in April?

Gold gained $150 in March — its best month since July 2020. And with analysts seeing markets contradicting the Fed's messaging, gold has a lot more upside, including testing and breaking record highs in April, according to analysts.

The gold market is wrapping up March just below $2,000 an ounce. This is up 7% on the month and 9% year-to-date — the best monthly performance since July 2020 and the best quarterly result since Q2 2020.

The collapse of Silicon Valley Bank three weeks ago triggered the banking crisis, which revised the markets' Federal Reserve outlook from more rate hikes to rate cuts.

"This could morph into a financial crisis. There's been a large decline in market values of assets on the books across the regional banking sector in a significantly tighter environment. Not only was there a loss of market value but also large outflows of deposits from less restrictive to more restrictive banks," TD Securities global head of commodity strategy Bart Melek told Kitco News. "The Fed is less likely to be overly hawkish as we move into 2023."

And even with turbulence subsiding, gold is still trading at higher levels. "Gold hasn't come back down very far even though banking fears are abating for the moment. This is a strong sign and is very encouraging for gold bulls," Gainesville Coins precious metals expert Everett Millman told Kitco News.

Even though the Fed has not signaled that it is debating a rate cut, markets are starting to price that in. "With the bank space turbulence and inflation pointing down, I suspect that the market is looking past a lot of the Fed's hawkish rhetoric and is calling for a pivot that is significantly ahead of the dot plots," Melek pointed out.

Investors should pay close attention to the incoming data as any weaker-than-expected number increases the chance of a rate cut this year.

"With the risk of a hard landing for the economy on the rise, this increases the chances that inflation will fall more quickly and allow the Fed to respond with interest rate cuts before the end of this year," said ING chief international economist James Knightley.

Next week, traders will be getting the March employment report. Market consensus calls are projecting for the U.S. economy to have added 240,000 jobs and for the unemployment rate to have remained at 3.6%.

Following March events, TD Securities is now projecting gold to average $1,975 in Q2, $2,050 in Q3, and $2,100 in Q4.

Gold's first week of April

The gold space could experience some losses in the short term, warned Millman. "There is some downside risk. A relief rally in equities can drive some money out of gold," he said.

A solid support level is around $1,900 and $1,850, and immediate resistance is at $2,000 an ounce and then $2,060-70, he said.

"When you look at the shorts vs. longs in gold futures, the sentiment is still fairly neutral. If you see some swing in public perception, what's happening with the dollar or the U.S. economy, it could swing sentiment, and gold would be the first to react to that," Millman noted.

Banking crisis

It is unclear whether the volatility in the banking sector is over. But all the extra lending overseen by the Fed is yet to slow down, said Bannockburn Global Forex chief market strategist Marc Chandler.

"The banking stress that roiled the markets this month has eased. However, the emergency lending by the Federal Reserve, via the discount window and the new Bank Term Funding Program hardly slowed in the past week ($152.6 bln vs. $163.9 bln)," Chandler said Friday.

Barclays warned that the banking crisis is likely far from over, as a "second wave" of deposit outflows is coming.

"We think the first wave of outflows may be nearly over … But the recent tumult regarding deposit safety may have awakened 'sleepy' depositors and started what we believe will be a second wave of deposit departures, with balances moving into money market funds," Barclays strategist Joseph Abate said in a note.

A second wave of outflows is likely to be triggered by "sleepy" depositors moving their savings from banks to money-market funds for better and safer returns, Abate clarified.

"It is too hard to shift balances or to establish a new relationship with another institution unless there is a large, convincing yield pickup. But some of it could reflect the fact that after 15 years of near-zero rates, depositors are not in the habit of paying much attention to the yield on their cash balances," Abate said.

 

Next week's data

Monday: ISM manufacturing PMI

Tuesday: U.S. factory orders

Wednesday: U.S. ADP nonfarm employment, ISM services PMI

Thursday: U.S. jobless claims

Friday: U.S. nonfarm payrolls

By

Anna Golubova

For Kitco News

Time to Buy Gold and Silver

David